The Construction Contract: Who Is Responsible for What

The most common construction contract in the building industry

*The contractor agrees to provide labor, the necessary materials and/or subcontract services required to complete a project.

*In return, the owner agrees to make payment for the labor, materials and/or services.

But first, builders usually present the owner with a written estimate, sometimes called a bid. This document should include detailed specifications of the construction and a total price for all services, labor and materials.

The owner needs to carefully evaluate these documents to make sure that they address the complete scope of construction. It is also important to make sure that the document addresses all the expenses related to the owner-specified materials and products.

Once the owner has decided on a contractor, it is time to negotiate the contract.

The written estimate can stand alone as the contract, provided that it is signed and dated by the builder. However, there are many forms that a contract can take, and it is important for the owner to understand and fully comprehend what he/she is agreeing to.

The following are basic types of construction contracts that may be presented to you, the owner:

*Proposal – A standard contract which signed by both owner and builder.

*Time and Material Bids – a document that states the builder is doing the project on a time and materials basis.

*Labor Only Bids – a document that state that the builder is providing labor only, and the owner is purchasing all of the materials.

Many people accept the builders written estimate as the construction contract. However, some owners prepare their own contracts, and others have an attorney draw up a written agreement for them to present to a contractor.

Whatever form the written agreement takes, there are certain pieces of information that should be included; owners information, project information, contractors information, scope of construction, total contract amount, payment terms and draw schedule.

Contractor licensing and building regulations vary from state to state, and often times, local jurisdictions within a state. The following website offers state-by-state information on the local contractor regulatory offices: contractors-license.org. It is a good idea to do the research ahead of time to determine if there are any local government regulations that will affect your construction contract.