A Guide to General Contractor Agreements
Reading the Fine Print on General Contractor Agreements
When it comes to high-end construction projects, you need to know what to look for in your general contractor agreement to be sure that your best interests are protected. In fact, before any home improvement, renovation, or remodeling tasks can begin, you should have everything in the document clearly explained and agreed-on with the contractor you’re working with.
Let’s take a look at the essential components of any general contractor agreement, while also exploring the differences between standard contract documents and custom contract documents.
Standard Contract Documents vs. Customized Contract Documents
What to Know About Standard Contract Documents
In the world of luxury construction projects, you should know that standardized agreements are more or less essential for protecting yourself and your investments. On the other hand, contract documents that deviate from the standard are something that customers should generally be wary of. While some companies may insist on offering up custom contracts, you’ll find that standard contractual agreements are a much more foolproof way to ensure that your best interests are at heart. But how do you know whether you’re looking at a standard agreement?
For starters, you can get familiar with the major industry groups who produce standardized contracts. One of the most dependable and well-known is the American Institute of Architects (AIA).
Like other industry groups, such as the Associated General Contractors of America (AGC) and the Engineers Joint Contract Committee (EJCDC), the AIA drafts entire series of standardized contracts which cover all aspects of general contracting, construction management, subcontracting, and other industry essentials.
In addition, these standardized forms are all given a unique number to help identify them within any series. They also all have their own forms for pay applications, change orders, and other essential documents used for construction projects.
Most customers can take comfort knowing that agreements based on AIA, AGC, or any other industry groups’ standards will have provisions that are fair, law-abiding, flexible, and easy to interpret. As a result, standardized agreements make it easier for clients to understand the contractor’s obligations, as well as various other facets like the general scope of the work, predicted total costs, estimated completion date, and so on.
Finally, it’s also worth noting that a standardized agreement will thoroughly address any unexpected issues that may arise during a construction project, adding an extra layer of protection for the client. In addition, standardized agreements are adaptable and can be applied to virtually any type of construction contract, including the cost-plus and lump-sum pricing methods.
What to Know About Custom Contract Documents
Thanks to the dependability of standardized AIA, AGC, EJCDC, and other contracts created by well-known industry groups, any discerning homeowner would do well to be cautious if a construction company insists on using a customized agreement.
While it’s not always the case, a custom contract can be viewed as a red flag that the agreement might not be as weighted in your favor as a standardized agreement. So, if you find yourself negotiating with a company that insists on using a custom contract, it’s likely a good idea to have an attorney on your side to help review the document before signing.
With that said, all customers are encouraged to review their contracts – whether they be custom or standard – but as a general rule, the contracts created by the AIA and other industry groups offer a much more trustworthy route to take. Therefore, these standardized options are always the agreements of choice for general contracting firms with a client-first approach.
Here’s What Your Construction Contract Should Cover
Now that we’ve discussed the differences between standard contract documents and custom contract documents, let’s review some of the basic components that every construction contract should cover.
A Timeline for the Completion of the Work
Any thorough construction contract should contain a rough timeline outlining how long your construction project is projected to take. Think of this as an estimate: while it won’t break down the day-by-day schedule just yet, it will give you a broad idea of how long the contractor’s work will take to complete from beginning to end.
Of course, it’s worth keeping in mind that construction projects often take longer than expected for a variety of reasons, whether due to eletective change orders, unforeseen/hidden conditions, issues with subcontractors, or any number of other variables, which means the most important thing here is simply having an expected date for the completion of the project in writing.
The Scope & Description of the Work
From a contractor’s point-of-view, there are innumerable things to account for and micromanage throughout a project. As a result, as many of these things should be addressed by the construction agreement as possible.
In fact, writing everything down before work begins is the best way to get all parties on the same page early on, even if there isn’t a day-to-day breakdown of the schedule just yet. After all, a construction project is essentially a succession of problem-solving procedures for the contractor; that is, it’s one big problem (i.e., the construction project as a whole) which breaks down into thousands of smaller problems, all of which have to be put together like a puzzle to reach the completion of the work.
These puzzle pieces can include everything from managing unexpected change orders to covering value additional costs for the client if subcontractors make a mistake. To put the whole puzzle together while protecting your best interests, the various provisions of this agreement between homeowner and contractor should account for all of these pieces.
Not only will this protect you from unexpected additional costs, but it will also set a reasonable time for the project to be finished by, effectively helping to hold your contractor accountable.
A Detailed Overview of Insurance Policies & Exclusions
Any reputable contractor should have a full suite of insurance policies in place to cover claims, lawsuits, and judgments against them for potential personal injuries caused to other people during their operations. These insurance policies should be clearly outlined in the contract documents so the client is also aware.
A Few Other Things That Your Construction Contract Should Contain…
In addition to a rough timeline for the completion of the work, a broad scope and description of the work, and a detailed list of exclusions, all construction contracts should contain:
- The Contractor’s Contact Information: Every construction contract should include the contractor’s legal entity name along with a phone number, email address, company address, and any other essentials that will make it easier for the client to make contact.
- Clear, Easily Understandable Language: All construction contracts should be understandable to all parties. This means documents should avoid jargon or opaque legalese. Instead, the agreement should clearly state the expectations that you, the client, and the contractor are agreeing to over the course of the project.
- Payment Schedules: The preferred payment schedule for your project should always be outlined in the agreement. Some contractors might ask for half of the total payment up front (check your state to see if it has a deposit limit, as some states have limits for deposit); others will stagger out payments at selected intervals throughout the project. Whether it’s a lump-sum payment, cost-plus payment, or any other type of payment schedule, make sure it is laid out in full within the document – all the way from the first installment to the very final payment.
- Project Cleanup Details: While it’s easy to get wrapped up in the excitement of starting off a new project, don’t neglect to consider the end of the project, as well. For example, a seemingly smaller detail which can make a big difference is an agreement on how the work area will be cleaned up. Your contractors should work out details with you such as the need for workers to clean up at the end of each day, as well as the end of the project. Also, consider things like, Who is responsible for removing the debris from the workspace? and What is deemed sufficient removal?
- Access to Your Home & Its Facilities: Another seemingly small detail that might become a larger talking point, later on, is access to your home and its facilities. Your agreement should spell out whether or not workers can use your home toilet, store food in your refrigerator or freezer, or do any other activities within your home that you feel might need clarification.
Work With One of New England’s Leading General Contractors
We’ve built our entire reputation on 25+ years worth of high-quality service to our customers. Because of that, we always follow the construction industry’s most rigid standards when it comes to working with our customers to make agreements that are clear, easy to understand, and written with their best interest at heart.
We encourage all clients to ask for clarity on any aspect of a construction agreement that they don’t have complete confidence in. We are more than happy to elaborate on even the most minute-seeming details. After all, the contractor agreement should be tailored to meet your specific requests before our work begins.
Contact us to learn more about our client-first approach to construction contract agreements, or learn more about the benefits of working with one of the leading general contractors in Massachusetts.