7 Ground Rules for Contractor Contracts
A well-drafted construction contract cannot be changed unless both parties agree. Make sure that the terms are reasonable for you and, if not, negotiate better terms. Your contract should include a scope of work, indemnification, time, warranty, termination, price and payment, dispute resolution, insurance, and legal fees. Our contractor attorney in Mobile, Alabama has provided seven ground rules for a solid construction contract.
Get It in Writing
Make sure that your agreement is in writing. A handwritten, typed, or electronic (email or text) agreement authorizing the terms and conditions are all a valid contract between two parties. Be sure to document any additional agreements made verbally.
Understand the Contract
Make sure you read and understand the entire contract. If the contract doesn’t have your best interest, meet with a contractor attorney and change it to address your concerns. Trade organizations, like the American Institute of Architects (AIA), produce contract forms that you could use and improve. Get everyone on the same page. This way, one party isn’t held liable for work thought to be done by someone else.
Define the Scope of Work
You need to define what the scope of work is that you will be providing. Will you be responsible for materials, labor, or materials and labor? List the scope of work in your contract and the estimate of that work.
Understand the Change Order Process
When you have to perform extra work get written agreement via the change order. Make sure it’s signed with a change in scope, change in price, and change in time. Get it approved before you do the work.
Verify Project Schedule
Review the schedule and make sure that it is achievable. See whether or not the agreement has any penalties associated with timeliness.
Define the Dispute Resolution Procedure
Require that each party has a meeting within a week or two of any disagreement to try to resolve any dispute. If resolution doesn’t happen within the two-week window, then seek mediation. During mediation, both parties convene and split the cost of the mediator, who tries to facilitate a resolution. If no solution is reached at mediation, then the parties can proceed to arbitration or litigation.
Winner Gets Legal Fees
Recover legal fees by statute (i.e. the Alabama Litigation Accountability Act) or by contract. Legal issues can be lengthy and expensive, so be sure to include language in case a legal dispute arises to ensure you are able to recover legal fees.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.