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Top 10 Clauses For Every Construction Contract

By Corey B. Stern, Esq., Chitkowski Law Offices

1) Payment Terms: Identify the amount and the date or construction event when each payment is due.  Additionally, confirm that the Owner has the funds to complete the project or if financing is being used.  

2)  Explain Allowances vs. Furnished Items by Owner:  The amount and description of the allowances and items furnished by owner should be specifically identified.  Attach an exhibit, plans or specifications, if available.  

3)  Change Order Process: Provide the procedures to be used when any of the following tems are changed: materials, construction schedule, or contract price. Additionally, attach a sample change order to the contract, identifying who has authorization to sign the change order from both parties. 

4)  Timeframe for the Construction Work:  Identify the date when the construction shall begin (i.e.: 7 days after receiving permits) and when the construction should be completed (i.e.: 4 months after receiving permits or after 90% of the contract price has been paid).  

5)  Unforseen Site Condition Clause: Whether new construction or remodeling, there should be a procedure in place when the contractor discovers work or an issue that was not previously known at the time the contract was entered into.  

6) Photos and Videos:  State that you are entitled to use photos and videos of the work you are performing for marketing purposes without compensation to the Owner.  

7)  Warranty:  A limited warranty should be provided stating what you will and will not cover; and the Implied Warranty of Habitability should be specifically waived by the owner or upper tier contractor. This provision along with the Remedy clause will limit your liability in both duration and costs. 

8)  Insurance Clause:  Identify the type (CGL/WC) and amounts/limits of insurance the contractor and owner/upper tier contractor should have.  Moreover, every owner should be required to obtain Builders Risk Insurance.  

9)  Dispute Resolution:  At the very least, every contract should require mediation before a claim is filed in Court or arbitration proceedings begin.  The selection of a mediator should be identified in the contract.  

10)  Remedy and Termination Clause:  Provide for a procedure in the event either the Owner or Contractor materially breaches a contract term (lack of payment, construction schedule, performance of work); and allow for the party time to cure the default, in the event the breach is not an emergency.  

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