Understanding Construction Contracts

Be sure to understand the contract you sign.


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Putting down in black and white the services that each member of the remodeling team will perform is an essential step in launching the project, even if the people you're hiring are relatives or close friends. Besides heading off misunderstandings, contracts offer protection against the cost of delays and other kinds of setbacks that sometimes occur during remodeling projects. Although the term "contract" may seem intimidating or overly formal, most construction contracts are relatively short, simple documents written in plain English. It's important to remember, however, that the blueprints (plans) and the specifications (lists of materials) are considered part of the official agreement between the homeowner and contractor and are therefore officially part of the contract. All three documents are legally binding, so any changes made after construction begins must be initialed by you and all other parties to the agreement.

Standard-Form Agreements
For the written portion of the document, most contractors supply a boilerplate text contract that includes provisions for the following: a work schedule and a payment schedule; statements designating liabilities and insurance coverages in the event of injuries, theft, or damage at the work site; statements that specify where materials will be shipped and who will be responsible for receiving, checking, and warehousing them; and clauses that say the builder cannot be held responsible for delays caused by weather and other forces beyond his or her control.

Even in a boilerplate contract, there should be places to write in various provisions that apply specifically to your project. If not, you should request that such information be attached and initialized by all parties so that you can state whether you'll be obtaining any products or materials yourself (contractors normally make all purchases at wholesale and collect a 15 percent markup) or doing any of the work yourself (for which the contractor will need to allow credit).

Don't assume that a standard-form text document is trustworthy simply because it looks official; if you're dealing with a stranger and there's any part of the document that you don't fully understand, have an attorney review it before you sign on the dotted line. Or ask your attorney to draw up a contract from scratch (if you don't mind paying a fee to gain the extra peace of mind this might provide).

Before studying contracts or talking to professional designers, builders, or subcontractors, you may want to bone up on certain terms that are used widely in the construction industry. Here's a sampling:

Broom Clean
A legal term that specifies removal of all construction debris from the job site upon completion of the project, including sawdust, packing materials, and leftover construction materials.

Allowance
The standard amount (usually a middle-market figure) that a contractor includes in his or her cost estimate for items that are to be purchased directly by the homeowner (example: lighting fixture allowance).

Structural
A term used to identify any element that is load-bearing, such as a wall, column, or beam. (Some elements that appear to be structural may be decorative.)

Punch List
Items noted by a contractor during his or her final walk-through of the project that need attention before the job can be officially completed.

Rough-In
The first stage of installing a system, such as plumbing or electrical wiring, after rough carpentry is completed.

Trim-Out
The final stage of installing a system, after interior finishes are completed. Trim-out includes installing fixtures and fittings and mounting cover plates and decorative trim.

Wet Wall
The wall that houses the main water pipes and waste line for a home's plumbing system.

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