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Ambiguity in your construction contract: 3 mistakes to avoid

It may seem like you have well-laid plans for your construction project. However, have you examined the agreements you have in writing? At first glance, such agreements may seem comprehensive – addressing all major issues from pricing to fulfilment. But what does the fine print say? In the event of an unforeseen issue or change, are your best interests covered?

Here are some common issues to check for in your construction contract:

What is the actual project price?

Surprisingly, something as fundamental as pricing is often left somewhat ambiguous in construction agreements. A contractor will often provide a final cost estimate – which includes a breakdown of work and general conditions. The owner will then approve the estimate – often by signing the estimate itself or submitting a purchase order. In this scenario, the agreement often does not explicitly state whether the contract is fixed price or cost plus. Who will pay for overruns if the project goes over budget?

Having an official construction contract (not just a signed estimate or purchase order) will help to avoid this problem. A construction contract will explicitly state the pricing terms – which can prevent disputes once the project is underway.

What happens if there’s a delay?

In some cases, a contract may not make it clear what ramifications the contractor will face if the fulfilment of the project runs behind schedule. In other cases, the contract may have conflicting messages about what the consequences are. For example, one clause may indicate that the contractor is responsible for liquidated damages if there is a delay, but there may be another clause that says the contractor is not responsible for paying any damages if there is no harm suffered by the owner as a result of the delay.

A good construction contract should specify exactly what should happen in the event of a project delay – including how damages will be calculated, whether there is a cap on damages and whether liquidated damages are the only remedy for the delay.

What are the warranty terms?

Warranty provisions are relatively common in construction agreements, but they often lack essential details. For instance, a contractor may offer a one-year warranty for parts and appliances. But when does the timer start running on this warranty period? From the point of appliance purchase, or from the point at which the project is completed and handed over to the owner? In the event that a part is defective, is it the contractor’s responsibility to remove or replace it? Which party is responsible for return shipping? If repair work is required, does a new warranty period initiate from that point?

A strong construction contract should address all of these eventualities.

As evidenced above, a construction contract is more than a simple written agreement. Omission of seemingly minor details can put you in a disadvantageous position if things go wrong. It’s important to have a legal professional help you draft and review any construction contract to ensure it covers all bases.