The contract agreement is a legally binding contract which binds the parties of the agreement together, setting out their obligations and rights. Unfortunately, some agreements are one-sided which offer little protection to one of the parties or places undue risk on them. Contract agreements should be fair, assigning risks to the party that best controls them, while offering protection to both parties should the other party not fulfil their obligations. If this document is poorly worded, inconsistent, or incomplete, you may find that you have little protection should the contractor fail to deliver the project or not meet all their contractual obligations, possibly causing you additional expenses and leading to protracted legal arguments.
The contract must be appropriate for the type of work. Construction projects vary, from ones that only have one trade and are worth a few hundred dollars, to contracts to construct the complete house, which could be worth several hundred thousand dollars. Clearly the project worth a few hundred dollars shouldn’t warrant a contract document more than a few paragraphs. While the contract for a complete house is usually a more complex document.
The contract can take many forms and it may be a simple one page document, or a weighty, lengthy legal document. However, care should be taken with lengthy documents that there aren’t conflicting clauses, and that the document doesn’t contain so many specifics that by implication what’s not mentioned becomes an exclusion. The contract document normally doesn’t have to be hugely lengthy – less than a dozen pages should suffice. It’s also not necessary to be using extravagant legal language. Simple everyday language is normally sufficient. Terminologies and abbreviations used in the contract documents must be used with consistency and explained in the contract document so there’re no misunderstandings. Contracts must avoid confusing and ambiguous language and there should be no contradictory clauses.
For a contract to exist there must be a formal offer which must be accepted in an unequivocal way. Usually acceptance and offer are confirmed by both parties - the contractor and the owner - signing the contract.
The contract can be verbal which can be as legally binding as a written agreement, though a verbal agreement is often problematic since it’s difficult to prove what was said and agreed. Stay clear of verbal contracts and be cautious that you do not agree to something verbally. It will be your word against theirs!
Next week we discuss what should be included in the contract document.
This is an extract from 'An Introduction to Building and Renovating Houses: Volume 1' written by Paul Netscher.
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Paul Netscher has written 2 easy to read books 'An Introduction to Building and Renovating Houses - Volumes 1 and 2'. An Introduction to Building and Renovating Houses Volume 1 deals with Hiring Contractors, Managing Construction and Finishing Your Home. and Designing your ideal home Volume 2 deals with Finding Your Ideal Property and Designing Your Dream Home.
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I’m a construction professional, author of several successful construction management books, and a home owner. I’ve made mistakes in construction management, I’ve seen others make mistakes, but importantly I’ve had multiple successful construction projects and I’ve learned from the mistakes. I want to share these lessons and my knowledge with you.
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