The Importance of Construction Contracts: Clarification and Prevention

A family has hired a contractor to redo their kitchen. They request nicely finished oak cabinets, expensive tile flooring and brand new, properly installed, stainless-steel appliances. However, when the project is completed, the cabinets were left unfinished, the tile flooring was the wrong color, and the appliances remained in their boxes.

The parties turn to the service contract for clarification, but unfortunately for both, the contract is unclear on whether the cabinets were to be finished, the color of the floor and whether installation was included.

Scenarios such as this occur daily in America, and the resulting disputes can be both costly and burdensome to resolve. To prevent these disputes, it is extremely important to draft a proper construction contract to clarify the details of a job, its costs, the timeframe and the expectations of both parties.

What Should Be Included In the Construction Contract?

A well-drafted construction contract should cover all details from the beginning of performance until the project's completion. Examples of terms both parties should include are:

  • The name, addresses and contact information of all the parties
  • Description of the customer's property
  • Insurance requirements for the project
  • Starting date of contract performance
  • Liquidated damages (pre-determined damages in case either party breaches the contract)
  • Dispute resolution or arbitration clause in the event a dispute occurs
  • Detailed description of the work to be performed

This list is by no means exhaustive and significantly more information will be required depending upon the size and scope of a particular construction project.

Drafting Contract Terms

Each word and every punctuation mark is of utmost importance when drafting contract language. Often what one party understands a clause to mean can actually be read in multiple ways. For this reason, among others, it is very important for both consumers and businesses to consult an experienced business law attorney to ensure every aspect of a contract is clearly and concisely written.