What Should Be in a General Contractor Contract?

The following five items are essential for inclusion in a construction agreement:

  1. Contractor and owner contact information, including the contractor license number and the legal description of where the construction will take place.
  2. Description of work, with job-related details attached.
  3. An exact or estimated construction completion date.
  4. Costs are usually fixed-price, lump-sum, or cost-plus. Cost-plus is the cost of materials plus labor, where the plus is a percentage that allows for job uncertainty.
  5. Payment terms, including installment amounts, dates, and payment methods.

The following two sections of the general contractor’s agreement ensure that both sides are providing appropriate access and meeting legal requirements:

  1. Inspection and access. Clarify when the owner can inspect the property and allow the contractor unlimited property access.
  2. Construction requirements. Contractors must have proper and mandated licenses, permits, and insurance based on the work outlined in the contracts.

Construction doesn’t always go according to plan. To ensure that both parties are protected, you need to address the following four areas in the contract:

  1. Change orders. Describe situations that allow for contract deviation and how each party must agree via written and signed documents.
  2. Unforeseen circumstances and acts of God. Explain what happens in the event of a hurricane, flood, earthquake, or unavailability of materials.
  3. Termination of contract conditions, such as financing falling through.
  4. Breach of contract remedies. Typically, each party can sue for breach of contract. You must list the state where the lawsuit would be filed.

It’s better to negotiate what to do about a problem before it happens. By touching on all these topics in your general contractor’s contract before the work begins, both the owner and contractor have staved off most potential misunderstandings before the project gets underway.

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