After researching for a good general contractor and compiling a list of likely candidates, meet with each individually. Make sure that general contractor license school or other general contractor license requirements are met. Note: general contractor license requirements differ, state to state. Check online to determine what your state requirements are. And contact the Secretary of State to make sure the general contractors are registered and can legally conduct business in that state.
Also check to ensure contractors insurance is up-to-date, skill and experience level meet your expectations, and references check out. You will also want to go over the project plan outline and touch on projected labor and construction material costs. Note: while certification from a general contractor license school might sound more impressive than on-the-job training, don't be fooled. Hands on experience can be every bit as instructive as formal education. And don't forget - all general contractors must pass a comprehensive exam before being issued a general contractor license.
Next, weed out all general contractors that don't meet your criteria; formal general contractor license school certification, for instance. Obtain a formal bid for construction costs and a rough project plan outline from each remaining general contractor. And written proof of contractors insurance and general contractor license certification. Note: even after selecting a general contractor, for your own protection check at intervals to ensure general contractor license and contractors insurance requirements remain current for the duration of the project. Notation of this requirement should be included in the general contractors contract.
Verify skill and level of training; whether from a formal general contractor license school or on-the-job experience. (For instance, diplomas, certificates, and testimonials or references from previous employers and clients). Also closely inspect each general contractors work portfolio; ask questions for clarification.
Once you have made a final selection from prospective general contractors, schedule another meeting. This time to make final arrangements, pinpoint every detail of the project plan outline, and draw up a formal agreement. Whether a simple work agreement, a unique contract, or using pre-printed general contractor contract forms.
If the project plan outline is relatively simple, a signed work order or work agreement might suffice. However, nearly all projects requiring the services of a construction management professional such as a general contractor is complicated or extensive enough to warrant a formal general contractors contract.
Contractor contracts represent a binding legal agreement. Instead of simply going over the project plan outline, they should clearly define all aspects of the project; including project scope, construction costs (labor plus construction material costs), a materials list that includes building material prices, work schedule, material and workmanship warranties, etc.
A written and signed work agreement or general contractors contract is more than a good idea; it is critical. Any verbal contract law you think would offer security in the event of a dispute would, at best, put you on shaky ground.
There are a host of reasons why oral agreements - even when “protected†under the verbal contract law - are a bad idea:
- Verbal contracts are difficult to prove.
- Disputing verbal contract issues is always time consuming, energy draining, and unnecessary. Note: free general contractor contract forms are readily available, and self written contractor contracts relatively easy to develop.
- Under the verbal contract law, contract dispute outcome is a toss up. Testimonies from witnesses (who may not even remember the point in question), convincing arguments, effective legal representation, and who the judge deems most convincing all determine who will win the dispute. And not necessarily the person in the right.
- Relying on the verbal contract law runs the risk of loosing hundreds of thousands of dollars - for developer and general contractor.
- Due to the financial expense (property development, construction material costs, permits, labor, construction management, architect, subcontractor, and crew wages, legal representation, etc.) signed, written documentation is essential. Relying on the verbal contract law when such a high investment is at stake would be reckless.
- Aspects of a verbal agreement made before a project starts can be hard to recall three or four months into construction. Even when both parties are trust worthy, an issue could easily arise where both developer and construction management team were sincere, but in total disagreement.
So you see, the verbal contract law is of little value compared to a written general contractors contract. Each opposing side would have to try and convince a judge as to the agreed upon terms, under the verbal contract law. Whereas signed contractor contracts leave little room for dispute.
Be suspicious of general contractors who hem and haw at signing contractor contracts. And a general contractor who insists the verbal contract law makes oral agreements equivalent to written contractor contracts are to be mistrusted and avoided at all costs. In fact, the role of a general contractor is not only to help develop the project plan outline, organize project details, budget expenses, hire designers, subcontractors, and crew members, and then supervise all aspects of construction. General contractors are also supposed to manage contractor contracts. By ensuring each aspect of the contractors contract is adhered to by all parties.
Reputable construction management service providers will not only oblige a developer's request for a signed general contractors contract. They will insist upon it!
Contractor Contracts
Once the general contractor develops a detailed project plan outline (usually with the help of a designer or architect) and all aspects of the project have been agreed upon, a general contactors contract should be drawn up. The contract can either be self composed, or pre-printed general contractor contract forms can be used.
General contractors should go over details of contractor contracts with developers. Both parties should thoroughly read, understand, and agree on the terms of the contract before signing it. Terms that are unclear or that could be misconstrued should be explained or revised.
Contractor contracts are not legal or binding until signed by the developer (project owner) and general contractor (service provider). Any subcontractors should also read and sign the general contractors contract.
Terms or clauses not included in the general contractors contract at the time of signing are not legally binding; vague references and verbal agreements, even if recognized under the verbal contract law, are worthless for construction purposes.
A good general contractors contract will be detailed and specific about all aspects of the project. Contractor contracts should include:
- Full names, addresses, and contact information of both the developer and general contractor. If the construction management service provider works for a company, include the full name of the company; including address and contact information.
- Physical address where the work will be done.
- Start and projected completion dates. Specify dates when significant stages in the building process should be completed. And include acceptable reasons for any delays. (Weather, material availability, shipping delays, etc.).
- General contractor work schedule; assurance that the contractor will be on site each workday to oversee each aspect of construction; ensuring contract terms and building code requirements are met. Note: developers should specify within contractor contracts that the general contractor will not take on a second (unrelated) construction management job until the project at hand is completed.
- Detailed project plan outline for the work to be completed.
- Assurance the general contractor will comply with all government agency regulatory requirements for construction site health, safety, and environmental standards.
- Construction costs bid in writing - not an estimate, which is subject to change.
- Detailed specifications on the materials list; including construction material costs and type: series, size, model, grade, etc.
- Details of construction costs; including itemized costs for labor, construction costs, and construction material costs. Also when payment is due; payment schedule dates.
- Assurance of full compliance with all building codes (if applicable).
- Aspects of the project contracted out to a third party. For instance, a subcontractor. Or, if an electric furnace is being installed the services of a licensed electrician might be required.
- Specification of any required permits; zoning, building, electrical, septic, plumbing grading, etc. And who is responsible for obtaining and paying for each. (Usually the construction management professional, who holds them until project completion and/or final payment).
- Proof that the general contractor has met general contractor license school requirements; has a general contractor license and contractors insurance, adequate for the nature of the project. Proof that crew members are insured and meet any license requirements. Note: it is the responsibility of the developer to contact the general contractors insurer, requesting proof of contractors insurance. The general contractor should obtain proof of insurance for all subcontractors and laborers. At the same time, the developer should review his/her own insurance policy; ensuring there is adequate coverage for accidents occurring on their property.
- Product warranty information, including those by a third party. Note: developers should be provided with all written warranties once work has been completed and payment made.
- Workmanship warranty information.
- Specification of who is responsible for cleaning up the site at the end of the workday.
- A clause protecting the developer against property liens from charges or debts incurred by the contractor. (i.e. failure to pay the subcontractor, or unpaid construction material costs.) Note: contractor contracts should state that lien waivers are to be signed by the general contractor, subcontractors, and suppliers at completion of significant stages of the project - also stated within the general contractors contract. Once the developer has made payment to construction management, the general contractor should pay subcontractors and suppliers. And then have waiver documents signed by all parties, before submitting them to the developer.
- Dispute resolution methods to be used by both the general contractor and developer should a problem arise. Also include a time limitation for dispute resolution. Wording should be precise; complying with state and federal laws and guidelines. Note: the usual process for resolving disputes is to first refer to the terms of the general contractors contract. The construction management service provider and developer should discuss the dispute amicably; in a private, distraction-free setting. In the event of an impasse, legal intervention is the norm. Contractor contracts should specify a third-party arbitrator to act as negotiator for disputes that remain unresolved.
- A clause describing how “change orders†will be handled. Unforeseen changes, additions, or deletions that occur after construction has begun. Contractor contracts should specify how such changes will be carried out. Change orders are usually discussed and added to the contract by mutual agreement, as a signed and dated amendment.
- The right to rescission; allowing the developer 36 hours from the date of signing to void the general contractors contract for any reason, without penalty.
Contractor contracts should be written in such a way as to protect the rights and concerns of both general contractor and developer. Clearly defining in detail the scope and limitations of the project plan outline. Although all general contractors should be adept at producing detailed contracts, obtaining the services of a third-party to review the wording and content of the contract might be a good idea.
A real estate lawyer familiar with building and remodeling laws and contracts, for instance can review the general contractors contract before you sign it. Making suggestions and necessary revisions. And advocating the most desirable contract possible; to protect you, your family or business, and your investment.
You may ask yourself, “If I genuinely trust my general contractor, why bring in a third-party to review the contractors contract?†The answer is simple. As the developer, you will be held legally and financially responsible for your project plan outline once it becomes a reality; after the contract has been signed and construction begins.
While you don't want an adversarial relationship with the general contractor just hired, you must ensure your best interests are covered. Protecting your investments - monetary and otherwise, is essential. A good construction management professional will recognize this and not be offended.
Unique Contractor Contracts VS. Pre-Printed General Contractor Contract Forms
Again, you can create your own general contractors contract, or use standard general contractor contract forms. One source for pre-printed general contractor contract forms is the American Institute of Architects. Free contractor contract forms can be downloaded from their web site at www.aia.org.
General contractor contract forms are fine for many types of construction endeavors. However, each construction project is unique, and agreed upon aspects will differ from one project to the next. General contractor contract forms usually require modification. Some aspects of the form may be irrelevant; certain features may have to be re-worded, omitted, or new features added. For instance, general contractors insurance requirements.
On the upside, general contractor contract forms are as legally binding as a contract drawn up by a general contractor or lawyer. As stated above, they can be downloaded free from multiple online resources, and pre-printed forms simplify contract development. Even though many developers prefer a unique contract, general contractor contract forms remain a viable option.
Whether unique or pre-printed, standard styles of general contractor contract forms include “lump sum†contractor contracts; specifying fixed construction costs general contractors agree to. Meaning, regardless of construction material costs or duration of project, the general contractor is paid a set price for construction management services.
“Cost-plus†(also referred to as “time-and-materialsâ€) contractor contracts specify payment for labor, construction material costs, and other construction related expenses. In addition to a certain percentage; usually between 10 to 25 percent of project cost. Dependant on the scope of the project plan outline, level of skill required, and time involvement.
If pre-printed general contractor contract forms are used, make sure every blank is filled in; leave no empty spaces. Any aspect not applicable should be filled in with “N/A†(does not apply). Strike out any clauses you don't agree with or that aren't relevant. Or write in any construction management or project plan outline clauses before signing it.
Remember - oral agreements under the verbal contract law are worthless when it comes to construction. Whereas detailed contractor contracts signed by both the general contractor and developer protects both parties.
Combined with the expertise and proficient construction management skills of the right general contractor for the job, contractor contracts help minimize the risk of work-related misunderstandings. And chances of smooth sailing for the duration of the project are much more secure!
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