While home improvement and new construction can be exciting for consumers and profitable for contractors, fine details are required in the documents that guide such projects. Contracts should set a roadmap for each project, identifying and allocating risks and setting clear milestones for project progress and payments. In the following article I will explore issues around construction contracts, laying out general principles, tips for contractors, and tips for consumers. Many of these principles can also apply to home service contracts in general.
From the gate, all residential service contracts with value in excess of $1000 must comply with Mass. General Laws Chapter 142, Section 2, which has baseline requirements.
Towns also have permitting and historic bylaws, which interplay with project timeline, conditions precedent, and design elements.
While boilerplate contracts are available online, more is not necessarily better in terms of effective drafting of construction contracts. However, certain terms, such as clear work timeline, allocation of risk, and attachments are key.
Parties should set a realistic timeline for project progression, allowing adjustments by mutual consent. Progress payments should be given similar care, allowing ample time for consumers to assure that progress merits payment. Automatic payment without progress verification is discouraged.
Allocation of risks is also a concern. What if financing or permitting falls through, extreme weather arises, or critical supplies are held up? Provisions must be in place. Where a construction project requires certain licenses, permits, and objects, parties can identify these as "conditions precedent" to performance on the contract.
Parties should take care to incorporate design drawings, plans, and key correspondence into their construction contracts, assuring that the contract wholly reflects those unique terms.
Tips for Consumers
Consumers should make sure their construction contract includes clear project milestone dates. A critical path/master schedule could be utilized. Where many construction contracts provide little detail as to periodic progress payments, consumers might push for a "pencil requisition" process instead, which allows the consumer more time to verify that the project has reached a stage of completion warranting a requested payment.
Consumers should also be wary that contractors might place liens on the real property underlying the contract. But consumers might insist on fulfillment of a "condition precedent" to periodic payments, where each time a payment is made on the contract a fresh waiver of liens is also signed by the contractor.
Tips for Contractors
Contractors should be sure that their contracts address issues such as mold, asbestos, lead paint, structural defects, unmarked utilities, and rodent infestation, just to name a few. Clear provisions should be in place to properly allocate those risks. Contractors might network to learn typical pitfalls from peers.
Scope of work is also a critical point, Contractors should be careful to specify exactly which services are included in the contract. It is also helpful, if desired, to specifically exclude items which consumers might otherwise expect to be part of the contract, such as fine finishing, window treatments, landscaping or outdoor fixtures.
Where contractors may ordinarily offer their own standard contract to consumers, one hazard of unilateral contract drafting is that any ambiguities that might appear in that contract are construed by the courts against the drafting party, most often the contractor. But contractors can include contract terms that shift that burden equally between parties instead.
Real Property is a most-valued asset, so when the time comes to build or rebuild careful contract terms are key. Consumers should look towards assuring performance, permitting, and proper payment. Contractors should look towards setting clear duties, and mitigating unplanned hazards in the work site and supply chain.
The above discussion does not constitute legal advice, nor create an attorney client relationship. Readers are urged to seek the advice of an attorney before making decisions of this sort. I am available for free consultation at [email protected]. Thanks for visiting this page!
Jonathan D. Mayo, Esq.
Attorney at Law