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Important considerations for your construction contracts

Book titled 'Construction Law' with construction tools nearby

It may seem like you have well-laid plans for your construction project but contractor estimates may need detailed consideration. At first glance, such agreements may seem comprehensive – addressing all major issues from pricing to fulfilment. But what does the fine print say? In the event of an unforeseen issue or change, are your best interests covered?

Here are some common issues to check for in your construction contract:

What is the actual project price?

Surprisingly, something as fundamental as pricing is often left somewhat ambiguous in construction agreements. A contractor will often provide a final cost estimate – which includes a breakdown of work and general conditions. The owner will then approve the estimate. It is possible at this point that no express provisions have been made for a project going over budget.

Having an official construction contract (not just a signed estimate or purchase order) will help to avoid this problem. A construction contract can explicitly state the pricing terms – which can prevent disputes once the project is underway.

Additionally, both contractors and owners will do well to understand a contractor’s obligations under the Consumer Protection Act not to exceed the estimate by a significant amount unless by consent. Preparing or requesting a revised estimate could potentially benefit both parties.

What happens if there’s a delay?

In some cases, a contract may not make it clear what ramifications the contractor will face if the project runs behind schedule. In other cases, the contract may have conflicting messages about what the consequences are. At what point might or should a contractor be responsible for the resultant costs of a delay and are their limits to that liability?

A good construction contract should specify exactly what should happen in the event of a project delay – including how damages will be calculated, whether there is a cap on damages, and whether covering out-of-pocket expenses are the only remedy for the delay.

What are the warranty terms?

Warranty provisions are relatively common in construction agreements, but they often lack essential details. For instance, a contractor may offer a one-year warranty for parts and appliances, but when does the timer start running? From the point of appliance purchase, or from the point at which the project is completed and handed over to the owner? In the event that a part is defective, is it the contractor’s responsibility to remove or replace it? Which party is responsible for return shipping? If repair work is required, does a new warranty period commence from that point?

A strong construction contract should address all of these eventualities.

Omission of seemingly minor details can put you in a disadvantageous position if things start to go wrong on a construction contract. It is important to consult a legal professional if you are an owner concerned about a major project, or a contractor who wants to estimate a project appropriately or wishes to have a construction contract that covers all bases.

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