Important Items to Include in a Construction Contract
Construction projects require collaboration between multiple businesses from various industries to be completed successfully. Like any business transaction, having a well-written and thorough contract is essential when taking on a construction project. Construction contracts define the risks and liabilities of contractors, subcontractors, construction companies, and clients. Here are the main items to include in a construction contract.
In Florida, a lien warning is required for all direct contracts greater than $2,500 that deal with single or multiple-family homes up to four units. The disclaimer ensures property owners are notified that contractors or anyone who works on a property have the right to impose a claim on the property and sell it for parts, materials, and labor if they are not paid (which is called a lien). The notice also ensures homeowners are aware that they may be subject to a lien even if they paid their contractor in full, but the contractor failed to pay employees. Florida Statute 713.015 details the exact wording and requirements for the disclaimer. It must appear in 12 point font that is capitalized in bold on the first page of the contract or on a separate page. It must also be signed and dated by the property owner.
Another essential item in a construction contract is a detailed scope of work. The project description should include who will complete each part of the project. This section should also contain any relevant documents, such as blueprints or drawings, that will help accurately represent the scope of the work. An in-depth project description holds everyone involved with the project accountable and helps them understand the project’s goals.
Change order clauses
One common aspect of a construction contract is defining how change orders will be handled throughout the project. Change orders describe how the project will be revised if the scope of work alters due to unexpected challenges, timeline modifications, mistakes, and aesthetic changes.
Although changes may occur, a construction contract should estimate a relatively accurate timeframe of when the project should be completed. This section should also detail how to adjust the original timeframe if needed.
This section is a detailed overview of the techniques and materials used in the project. Specification sections can be very technical, which is why they should be formatted according to the Construction Specifications Institute (CSI) MasterFormat so that it is easy for contractors and subcontractors to understand.
Although it is nearly impossible to estimate the exact cost of a construction project, the contractor or construction company must understand all aspects of the project to provide an accurate cost estimate.
Another critical aspect of a construction contract is to include indemnities. Sometimes referred to as a “hold harmless” clause, indemnity helps manage the risk taken by the involved parties during the project. Indemnity is a payment made by one party to another that covers damages, injuries, or losses during the project due to the negligent acts of another party.
License and insurance information
Including your business license number and insurance information in a construction contract shows that you have the means to complete the contract and are covered in case of accident or injury. Florida requires contractors to hold a minimum of $300,000 in general liability coverage for bodily injury and $50,000 for property damage. Including your information shows your ability and credibility to complete the project.
Special considerations or conditions
Lastly, any considerations or conditions relevant to the project should be included in this section. Any details that will be helpful for the property owner, contractor, and subcontractors to know will assure the project scope is as clear as possible.
Boutty Law Firm: Central Florida construction attorneys
Construction contracts can be very complicated and have a significant economic impact if not written correctly. The Boutty Law Firm has 20 years of experience working with construction companies. We will ensure you create a construction contract that helps you get the job done and keeps your clients well-informed. Contact us at 407-710-0461 or get in touch using our contact form for assistance in creating your next construction contract.