Do we need a Construction Contract?

“We’ve already worked with Bill, the contractor before, he was great.” said one of my clients recently. “Do we really need a written agreement, since we worked fine together just seven years ago?” continued my clients…”it seems overly cautious and will take a lot of time, which we really don’t have”

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“Yes” I answered, “… and here is why”

” Most General Contractors and Construction Managers are really a team of other teams-a typical residential job may have 10 subcontractors including: framers, masons, electricians, plumbers, sheetrockers, painters, tilers, tinknockers(hvac), trim carpenters, security /av installers etc. each sub in turn has several vendors that change from year to year”, I explained.

My client asked “So you are saying previous results are not always a good indicator of future results?”

“Certainly a good track record is helpful, but there are so many moving parts and players that it is better, safer and easier for everyone to have the basics written down-just to prevent future mis-understandings.” I suggested.  “We typically use a template that we modify from the American Institute of Architects ( http://www.aia.org/contractdocs/aias076742) and modify it to suite the project-since it is an industry standard and many builders are familiar with it…”

But if you insist, you can write your own agreement or use a construction  lawyer to cover what I consider the minimum 10 keys for an agreement:

1.State a cost.

2.How the cost will be paid (portions, percentage, time based, completion based)

3.Define as specifically as possible what the builder is building.(i.e. drawings or written scope of work)

4. State when the project will be complete.

5. Are there with-holdings (like a retainage) that are due at the end of the project?

6. What happens if both parties disagree?

7. Is any one checking the ongoing work?

8. Describe insurance requirements.

9. Describe permit and regulatory requirements.

10. What kind of warranty is enforceable, how long?

There are many other factors, but in this real world life, we understand “good is the enemy of perfect” and it is better to have a  one page emailed agreement with initials, than none at all.

really?