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
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
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.