A construction contract sets the backdrop for the entire project, and signing one is one of the most consequential things a project owner does. Doing the homework first, on the contractor, the scope, the money, and the terms, is what gives the project a solid base.
Why due diligence matters
Due diligence is detailed, thorough research done before signing a building contract. It isn't just good practice; it's necessary. Reviewing every detail carefully protects your plan, your money, and your interests, and it sets the project up to succeed.
The key components of due diligence
- Contractor evaluation. Learn the contractor's history and track record. Check credentials, background, and past work, and talk to former clients about how satisfied they were.
- License and insurance verification. Confirm the contractor carries the insurance and licenses required to operate safely and legally. This is essential to working with a reliable professional.
- Project scope and specifications. Define and document the scope, including design plans, quality standards, materials, and specific requirements, and make sure it matches your goals.
- Budget and payment terms. Review the budget, the payment schedule, and any contingencies. The financial terms should be clear and within your means.
- Timelines and deadlines. Set realistic schedules with specific start and end dates. Clear deadlines prevent needless delays and make progress easy to track.
- Dispute resolution mechanisms. Confirm how disagreements will be handled, whether through negotiation, mediation, arbitration, or the courts, and get it written into the contract before you sign.
- Quality assurance. Set the standards the work and materials have to meet, and how the results will be inspected and accepted, so “done” means the same thing to both parties.
- Change orders. Understand the process for handling changes to the project. Agree on change orders in writing and document them to prevent scope creep and unexpected costs.
- Termination clauses. Review the conditions under which either party can end the agreement. Knowing these terms tells you what your options are if the project goes off course.
The role of legal counsel
Given the legal complexity and the risks involved, get advice from a construction law attorney. A lawyer reviews the contract to make sure it aligns with your interests, protects your rights during the project, and provides counsel on the legal details. It's a proactive step that gives your project more security and lets you handle any legal complications with confidence.
The most important thing you can do before signing a construction contract is thorough research: vet the contractor, verify licenses and insurance, get legal advice, and understand the project's specifics. Every project needs a precise, organized contract, and doing your due diligence is how you get a strong start.
Frequently Asked Questions
What should you check before signing a construction contract?
The contractor's track record, their licenses and insurance, the project scope and specifications, the budget and payment terms, the schedule, the dispute resolution and quality standards, the change order process, and the termination clauses.
Why should change orders be in the contract?
A defined change order process, with every change agreed in writing and documented, prevents scope creep and unexpected costs during the project.
Do you need a lawyer to review a construction contract?
It's strongly advised. A construction law attorney reviews the contract against your interests, protects your rights during the project, and helps you navigate the legal complexities and risks.
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