A construction contract is a binding legal document, and any oversight in reading it can cost you significant time and money. Here are the key clauses to focus on:
First, the Scope of Work. The contract must specify exactly what the contractor will deliver — materials, quantities, specifications, and quality standards. Anything discussed verbally should be added in writing.
Second, the payment schedule. The golden rule: never pay more than 10-20% upfront. Tie payments to actual milestones, and release any payment only after a physical verification of the completed work.
Third, timeline and penalties. The contract must specify a clear start and end date, and the penalties for delay (typically 1-2% weekly, capped at 10% of the contract value).
Fourth, change orders. Any change to the scope must have prior written approval, and must be priced separately.
Fifth, warranties. Make sure the contract includes a defect liability period (typically one full year) and separate warranties on equipment and installations (5-10 years).
Sixth, dispute resolution. The contract must define the path you'll take in case of a dispute: mediation first, then arbitration, then courts.
Don't hesitate to have the contract reviewed by a specialized lawyer. The cost is small compared to the protection it offers.
