Construction Contract

Construction Contract

A construction contract is a legally binding agreement between an owner and a builder. It settles the builder’s compensation for the amount of work done. Sounds complicated, right? It’s supposed to be. If contracts were simple, you wouldn’t be here, looking for advice.

Construction contracts are an essential part of the building process. If you plan on dabbling in infrastructure, you must understand every aspect of construction contracts. 

They determine everything about the building process, from the general cost of construction to the projected completion date. Written agreements exist to solidify all construction details. 

Creating a contract may seem daunting. You may even feel the need to seek professional help, but once you know the basics, it’s easy to get the hang of. 

In this article, we’ll break down the basics so you won’t be scratching your head and blindly signing when the time comes.

Purpose of a Construction Contract 

Purpose of a Construction Contract

A standard construction contract settles the ins and outs of cost, quality of products, and time needed for the building process. It’s a concrete plan drawn out to map the direction of construction. 

It clarifies the project’s budget, how long the builder has to complete the project, and many other details along the way. It’s wise for each party to be familiar with every inch of the agreement, and if there are any disputes, you can hash them out through negotiation, preferably with a real estate lawyer present. 

  • For example, the builder and the owner will settle on a projection date on which construction should be complete.
  • Some arrangements offer more flexibility than others.
  • It’s best to do your research to find the best template that will work for you and move forward from there, making adjustments as needed.
  • A construction contract may be rough when drawing it up, as builders and contractors have different owners’ goals.

Types of Construction Contracts 

Types of Construction Contracts

Now that we’ve got a basic understanding of what a construction contract agreement is, it’s time to move on to the finer details. There are quite a few options when choosing the right arrangement to suit your project and meet your demands.

There’s almost an endless list of ways to plan out your written agreement. Some are more popular than others, and below, we’ve included a few of the most commonly used options.

  • Consider seeking a real estate lawyer to help you draw out your construction contract.
  • Contracts can also vary based on location — for example, places like Ontario have different construction laws from those in Alberta. 
  • These construction contract agreements are some of the most common and are open to customization based on your needs.

Types of Construction Contracts

Lump-sum/fixed-price contract

Fixed-price for all construction

Time and Material contract

Flexible, basing the payment hourly or daily if the completion projection is unclear

Construction Management contract

Includes a construction manager in charge of supervising construction on the owner/principal’s behalf

Unit Pricing Contracts

The contract supplies the unit price so that the owner won’t be charged inflation


 “…it is prudent to have the agreement reviewed by your lawyer to ensure that your interests are protected.”

—Diamond & Diamond Lawyers

Following a Template 

While you could draw out your contract from scratch, that’s a long and arduous process, and you may leave something out. Thankfully, there are a plethora of templates available to ensure that you cover every aspect of construction. 

Templates serve as a guideline for your construction contract. They do not need to be followed to the letter, as each project will have different standards to meet. 

  • Every location has different building guidelines, so try to find one, such as a construction contract template for Ontario.
  • If you’re unsure about your municipality’s building guidelines, be sure to visit your city’s website or city hall for clarification.
  • Everything you want to be done should be in writing. If it’s not in writing, there’s no way to solidify that the builder will do it to your specifications.
  • Having a lawyer with you during contract negotiations may help things go more smoothly.

If you need assistance in drawing up a construction contract, talk to a real estate lawyer from Diamond & Diamond Law today.


You’re the best person to judge your needs and your contract with your builder. This article was meant to guide you in deciding which contract to use and how to go about drawing it up. 

Written agreements not only make your building plan clear but they clarify your needs to the builder. It may not be smooth sailing initially, but the arrangement will bring you and your builder to a compromise, and you’ll both be satisfied with the result. 

Construction Contract FAQs

What type of construction contract is best for my needs?

You’re the only one that can truly determine which type is best for your needs. If you’re not even sure where to start when choosing a contract, it’s best to research and get an idea of what your options are before settling on one definitively. I know this sounds like a lot of work, and it is, but you’ll thank me for the result.

What is a construction contract?

A construction contract is a written agreement between a builder/contractor and an owner/principal. It ensures that both builder and owner agree on the standards, deadlines, budget limitations, and anything else that may come up during negotiations. 

Do I need to read a construction contract all the way through?

Yes. If you don’t read it all the way through, there may be something that you disagree with, particularly if you are the owner/principal. If you miss something and sign the contract without reading it, something will arise that you “didn’t sign up for,” and “not reading the contract” doesn’t hold up in court. 

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