While each construction contract must be customized for the particular circumstances and details of the project, there are key terms that should be considered for most construction contracts. The following is a thumbnail list of some of them (please note that this list is not exhaustive, and each item has its own details):
1. Scope of the project. Owners will want to add that the contractor shall furnish and transport all necessary labor, materials, and equipment and complete the project in a first class and workmanlike manner, free of mechanics liens and defects, with minimal disturbance, to the owner’s satisfaction, and in strict compliance with the plans, industry standards, and applicable law.
2. Who (contractor or owner) will obtain and pay for any needed permits.
3. Permissible work hours and days.
4. Work schedule, including commencement and completion dates of the project as a whole and of each phase if the project is to be conducted in phases. Contractors will want an exemption for delays that are beyond their control.
5. In multi-unit complexes and if warranted by the duration of the project, the contractor’s periodic reports on the progress with notice to each unit to be affected by the next phase.
6. Owners may want a daily or weekly penalty for the contractor’s failure to complete the project on time. Contractors may want reciprocation by means of a bonus for early completion.
7. The contractor’s acknowledgment that the construction plans are sufficiently complete and detailed to permit the contractor to complete the project for the contract price.
8. Performance and payment bonds, if the contract price warrants the cost of the premiums, and who pays for them.
9. The contractor’s fee structure (e.g., fixed price, cost plus fee, or guaranteed maximum) with a specific schedule for progress payments.
10. Conditional lien releases with each payment request, followed by unconditional lien releases after each payment.
11. The owner’s retention of a portion (typically 10 percent) of each payment until full completion of the project.
12. The contractor’s assignment of all manufacturers’ warranties.
13. If any sub-contractors or suppliers are not paid timely, the owner’s right to subtract the unpaid amount from the amount owed to the contractor and/or make payments by checks payable jointly to the contractor and the subcontractor or supplier.
14. The owner’s right to terminate the contract if the Contractor does not comply with the construction schedule, fails to supply sufficient materials or workers for a specified period of time, or does not in good faith carry out the terms of the contract.
15. The contractor’s warranty.
16. The contractor’s insurance.
17. All sub-contractors must be licensed and insured, and the sub-contracts should incorporate the contract and explicitly name Owner as a third party beneficiary.
18. In multi-unit complexes, Contractor’s proper treatment of residents and direct reporting to management of problems with them.
19. Indemnity by the contractor.
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