As a contractor, the importance of establishing a professional working relationship with your clients cannot be overstated. A major part of forming a professional working relationship is drafting a contract that both parties will use as the point of reference during the project. Done right, a construction contract can safeguard each party’s rights and interests, manage conflicts and ensure that the construction project is successfully executed. But what makes a strong construction contract?
A construction contract is a binding document that is intended to protect both parties. Here are three crucial provisions that you need to include in a construction contract.
Cost of the project
The first clause you need to include in a construction contract is the agreed scope and price of the project as well as its payment terms. Of course, every project is unique. Sometimes, assigning a specific price at the onset of the project can be difficult. In such instances, the price clause should take change provisions into account. This clause should specify possible changes that are allowed during the scope of the project. As far as payments are concerned, it is important that you indicate whether the project will be paid in lump sum or installments.
While it is everyone’s dream that every project is completed without dispute between the parties involved, disputes are inevitable. As such, it is important that you include a dispute resolution clause to specify how conflicts will be handled.
Ideally, you want to settle conflicts in the most cost-effective and least time-consuming manner possible. A good resolution clause should mention arbitration as the primary conflict resolution mechanism.
A contract termination clause should clearly specify the circumstances under which either party may seek to end the contract and cease work on the project. Depending on the nature of the project (like one that involves ongoing work), you may include a Termination for Convenience clause that basically means that one or both parties can walk out on the contract at any time and for whatever reason.
A strong construction contract can set clear expectations regarding the workflow. It can also offer valuable protection should a dispute arise.