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What Terms Need to be in Your Residential Construction Contract, Part 1

residential construction contract terms
In the first of this two-part series, learn the terms to include in your residential construction contracts. A well-written, clear, and easy-to-understand contract is your best bet to manage the homeowner’s expectations and communicate what you are doing.

Your construction contract does not need to be full of legalese to be effective. The most effective contracts are written in plain English, where each party can fully understand what they are responsible for. The job of your contract is to manage expectations properly. If you do not have a contract clearly stating what is expected, things can go horribly wrong from the start. You and the homeowner are about to start your next project with preconceived expectations about how the project should go. Often, the homeowner’s expectations are not based on the actual reality of how a construction project runs. Failing to meet those unrealistic expectations will lead to attorneys needing to get involved. When construction attorneys get involved, everything gets expensive and nasty, so to avoid unnecessary drama, it’s imperative to have a contract that properly manages expectations.

Residential Construction Contract Terms: Start With Your Scope

What is included in a contract that properly manages expectations? The first must-have is a clear description of the work, or your scope of work. If the homeowner has drawings or something else describing the work they want to hire you for, you can reference those in the contract. It is also very important to put what is NOT included in your scope.

One of the biggest areas of dispute between contractors and homeowners is what is included in the work. The clearer you can be on your work, the less likely you will end up in a dispute over your scope. We tell our clients to imagine explaining what they were hired to do to 12 strangers who know nothing about construction. If you explain yourself that thoroughly in writing, you’ll save yourself from having to do it in front of a jury in real life.

Include the Construction Project Schedule and Be a Hero

The second most important thing to include is your project schedule. How long will the project take? Whether the work will take one day or many months, you need to be honest about the completion date in your contract. Your home is your most sacred place and doing remodel work is a disruption. Knowing when things will return to normal gives the homeowner a sense of security, not to mention time to plan when they can show off your awesome work to their friends and family. We tell clients to go long on the expected completion date because if you finish early, you are a hero—but if you finish late, you are a zero. This will provide an expectation for the homeowner, set you up for success when planning your project, and make the likelihood of delay damages significantly smaller.

Negotiate Better Construction Contracts

At The Cromeens Law Firm, we have extensive knowledge and understanding of construction contract laws and are licensed in Texas, Louisiana, Georgia, and California. We are often able to solve contract disputes for our clients through informal negotiations, mediation, or arbitration. Work with us to equip yourself with the ability to properly evaluate your risks before you sign and negotiate your next subcontract with greater confidence and ease.

Build Trust: Include Change Orders

Another essential topic that needs to be included in your contract is change orders. What happens if you uncover something unexpected during the project that will increase the cost? The possibility that there may be things that you uncover that may increase the cost needs to be communicated before work begins. Here is why this is so important: the owner hired you and believes you are an expert in your field. If something comes up that you didn’t plan for, which will cost them additional funds, they will think you are not as experienced as you originally claimed.

Being upfront about the possibility that something could be uncovered that would increase the project’s cost shows them how much of an expert you really are. It allows you wiggle room when facing uncontrollable or unforeseen circumstances. Additionally, informing them that once you find this unexpected factor you will let them know about their options and the increased cost develops trust between you and your client.

Prevent a Lawsuit

The Cromeens Law Firm is here to protect you and your business. Our hope is that you never get stuck in a legal battle because you were not adequately informed or prepared. Work with us to equip yourself with the knowledge you need to protect your business and your hard-earned money.

For example, when a roofer gives an estimate to re-roof a house, they have no way of knowing if there is any rot, plywood, or sheathing underneath the shingles. So, your contract needs to be very clear that, although you are an expert in the field, you do not have x-ray vision, and there could be additional costs once you take off the shingles. If the contract addresses that, once the contractor finds damage under the shingles, he will let the owner know about the extra cost and have them sign off in writing before doing the extra work, with little to no drama. Being upfront about these details makes all the difference in managing expectations and maintaining happy customers. This is why including change orders in your contract is a must.

In Conclusion

A well-written, clear, and easy-to-understand contract is your best bet to manage the homeowner’s expectations and communicate what you are doing. Protect your business on the front-end and contact one of our experienced construction lawyers at The Cromeens Law Firm to customize a construction contract to suit your needs and expectations. In the next article, we’ll go over some additional things that need to be addressed in your contract and how to handle the unexpected increase in material cost or potential labor shortages.

This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, please consult an attorney.

Karalynn Cromeens

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