Most Common Construction Contract Mistakes

Most Common Construction Contract Mistakes

No matter if you are the homeowner, contractor, or builder, you want to ensure that the construction project goes smoothly and that everyone is satisfied with the final product. For that to happen, you first have to make sure that the contract you are signing is properly drafted and protects you from possible problems down the line. With that in mind, here are the most common construction contract mistakes that you want to avoid.

Being vague in terms of timing

One important aspect of construction that has to be specified in the contract is the timing. It is best to avoid vague language and set expectations from the very start. In addition to deciding on the date when the construction will be completed, it’s also recommended to set a daily schedule that will ensure certain elements are completed by a particular date. Moreover, the contractor’s working hours should also be mentioned, which is very important if the client is paying a day rate.

Neglecting the consequences of delays

While setting an end date is important, it’s vital to keep in mind that projects often face delays due to a variety of reasons. Whether it’s the weather conditions or a late shipment of materials, the contract needs to specify what will happen if a contractor is unable to finish the project on time. Both parties need to agree on how the project will proceed. Will the price be lowered? Will the extra time be free of charge? What safeguards will be put in place to avoid delays in the first place? Will the contract be amended to include the delays and potential changes in schedule and price?

Not specifying if the price is fixed

Something else that should not be overlooked when drafting a contract is specifying the type of price. A very common type of contract is that with a fixed price as then homeowners know what to expect in terms of how much they will spend. However, it often happens that contractors provide clients with an estimate, which can, later on, be increased. To prevent this from happening, both parties should ensure the cost is mentioned in the contract and decide whether it is fixed or an estimate. Turning to professionals like construction lawyers from Sydney is always the best approach if you’re located in Australia, as they will ensure everyone’s rights are protected in the matter.

Poorly developed payment plans

Another money-related issue that can arise in construction is a poorly developed payment plan. For example, it often happens that homeowners pay a big portion of the price upfront and then might not be satisfied with the quality of the service or even be left with an unfinished construction. With that in mind, it’s always recommended to set a timeline for the payments in the contract. For example, if a down payment is made, the contractor can provide the homeowner with some sort of legally binding guarantee. Then, payments can be made once certain milestones are reached.

Forgetting insurance and warranty

Finally, no party can afford to neglect insurance. Homeowners should never accept to work with a contractor that offers no warranty on the project as that puts them at a huge risk. On the other hand, a contractor risks their reputation as well as legal action in case someone gets injured during construction. To stay protected, public liability insurance is a must to be covered if someone is hurt or if the property is damaged. Then, employers’ liability insurance is required by law for contractors to have. Lastly, developer insolvency insurance is not obligatory but is recommended as it protects homeowners in case a contractor closes down their company.

As there are many mistakes that can be made when drafting a construction contract, having an experienced attorney do it or go over it is always recommended. From timing and payment to warranty and insurance, it should all be included in the contract to avoid any problems or disputes down the line.