Construction Contracts
Almost every construction dispute is an argument about scope, schedule or payment. All three are decided by a document signed before anyone broke ground.
Construction is one of the few industries where a six figure commitment is routinely made on a two page proposal. The proposal describes the work in general terms, states a price, and says nothing about what happens if the work takes twice as long, if conditions underground are not what anyone expected, or if the owner decides midway to move a wall.
Those omissions are not neutral. When a contract is silent, the dispute gets resolved by argument about what the parties intended, which is expensive, unpredictable, and usually worse for both sides than a clause would have been.
What a construction contract has to settle
| Provision | The dispute it prevents |
|---|---|
| Scope of work | Defines what is included and, just as importantly, what is excluded. Most scope fights are about work one side assumed was covered. |
| Plans and specifications | Identifies which documents govern and which version controls when they conflict with each other. |
| Price and payment | Fixed price, cost plus, or time and materials, with a schedule of values and clear conditions for each progress payment. |
| Change orders | Requires changes in writing and priced before performance. Verbal change orders are the single largest source of payment disputes. |
| Schedule | Sets substantial completion, what excuses delay, and whether liquidated damages apply to a late finish. |
| Differing site conditions | Allocates who carries the cost of what is found in the ground or behind the walls. |
| Allowances | States budgeted amounts for undecided selections and how overages are handled and approved. |
| Retainage | Sets what is withheld, and the conditions under which it is finally released. |
| Warranty | Defines duration, what is covered, and the notice required before a claim. |
| Termination | Distinguishes termination for cause from convenience, and states what is owed in each case. |
| Dispute resolution | Chooses court or arbitration, the venue, and whether the prevailing party recovers fees. |
| Lien and waiver process | Sets the sworn statements and waivers required with each payment, protecting the owner from double payment. |
Work performed on a verbal instruction, then billed later, is the most common construction payment fight there is. A clause requiring written approval and a stated price before the work proceeds protects both parties, and it is enforced.
Owners and contractors want different things
An owner wants a defined scope, a firm price, a real completion date, meaningful retainage, and protection against liens from subcontractors who were never paid. A contractor wants a scope that cannot expand without compensation, prompt payment terms, protection against delays caused by the owner or by other trades, and a fair route to be paid for extra work.
Both sets of interests are legitimate and a well drafted contract addresses them together rather than loading all risk onto one side. The firm drafts and negotiates for owners and for contractors, though not for both on the same project.
How this work runs
- The project gets describedScope, delivery method, budget, timeline, financing and who else is involved. The structure of the project drives the document.
- Risk allocated deliberatelyUnknown conditions, delay, escalation and design responsibility each assigned rather than left to be argued about later.
- Drafting or markupA contract written for the project, or a redline of the one you were handed with the consequences of each term explained.
- Administration set upChange order forms, payment applications, sworn statements and waivers, so the paperwork during the job protects the position.
Questions about construction contracts
The contractor gave me a two page proposal. Is that a contract?
It may well be enforceable, and that is exactly the problem. It binds you without addressing change orders, delay, unknown conditions, retainage, warranty or lien protection. On a project of any size, the gap between a proposal and a contract is where the money is lost.
Is a cost plus contract better than a fixed price?
Neither is better in the abstract. Fixed price puts cost risk on the contractor, who prices that risk into the number. Cost plus can be cheaper but leaves the owner exposed unless there is a guaranteed maximum and real audit rights. The right choice depends on how well defined the scope is.
The contractor wants a large deposit. Is that normal?
Some mobilization or materials deposit is ordinary. A large payment far ahead of work performed is a genuine risk, because it removes your leverage and leaves you exposed if the contractor fails. Payments should track progress, verified against a schedule of values.
Can I use a contract from a previous project?
Only with care. Scope, delivery method, financing and the parties differ, and a reused document often carries terms that made sense on the last job and none on this one. It is usually less expensive to adapt it properly than to litigate the mismatch.
The contract is written before the dispute, not after.
[PHONE]Matters with a lien deadline, a filing deadline or a hearing already on the calendar are handled by phone.