What's the best way to understand construction contract terms and conditions?

1 Know the basics

Before you sign or agree to any construction contract, you should know the basics of contract law and how it applies to your situation. A contract is a legally binding agreement between two or more parties that outlines their roles, responsibilities, expectations, and remedies. To be valid, a contract must have an offer, an acceptance, a consideration, a mutual intent, and a lawful purpose. You should also be aware of the different types of contracts, such as fixed-price, cost-plus, unit-price, lump-sum, and time-and-materials, and how they affect your risk and reward.

2 Read the fine print

One of the most important steps to understand construction contract terms and conditions is to read the fine print carefully and thoroughly. Don't skip or skim over any clauses, definitions, appendices, or attachments. Pay attention to the details, such as the scope of work, the payment terms, the change order procedures, the warranties, the indemnities, the dispute resolution methods, and the termination clauses. Look for any ambiguous, vague, or contradictory language that could lead to misunderstandings or conflicts. If you have any questions or concerns, ask for clarifications or revisions before you sign.

3 Consult a lawyer

Another way to understand construction contract terms and conditions is to consult a lawyer who specializes in construction law. A lawyer can help you review, draft, negotiate, or enforce a construction contract and advise you on your legal rights and obligations. A lawyer can also help you avoid or resolve any disputes that may arise from a construction contract, such as breach of contract, defective work, delay claims, lien claims, or arbitration. Hiring a lawyer may seem expensive, but it can save you money and hassle in the long run.

4 Use standard forms

A common mistake that contractors and clients make is to use non-standard or custom-made forms for their construction contracts. These forms may not comply with the applicable laws and regulations, may not cover all the essential terms and conditions, or may contain unfair or unreasonable clauses that favor one party over another. To avoid these problems, it's best to use standard forms that are widely accepted and recognized by the construction industry and the courts. Some examples of standard forms are the American Institute of Architects (AIA) contracts, the ConsensusDocs contracts, and the Engineers Joint Contract Documents Committee (EJCDC) contracts.

5 Keep records

The last tip to understand construction contract terms and conditions is to keep records of everything related to your construction project. This includes the original contract, any amendments, change orders, invoices, receipts, correspondence, meeting minutes, photos, videos, inspections, tests, reports, and certificates. Keeping records can help you track your progress, monitor your costs, document your performance, prove your claims, and defend yourself against any allegations. You should also store your records in a safe and accessible place, preferably in both paper and digital formats.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?