Five Tips for Creating a Contractual Agreement
Agreements are made every single day. It may be tempting to use a letter or even a handshake agreement when performing construction work on a small project. However, the harsh reality is oral agreements are difficult to prove in court and letter agreements often lack essential terms to deal with nuanced issues such as insurance, dispute resolution and contract termination.
Given this, contractors must ask themselves why they would put their company at risk for any given project. Using the right contract can enable parties to rely on contract provisions that have been tested in courts of law for more than 100 years. To make crafting agreements easier, following are some contract dos and don’ts.
- Make certain that the entire contract is read and signed. An agreement is all in the details and provisions. Don’t assume that if you are used to doing a project one way, that every contract will have you do the work the same way.
- Make sure to use the final contract. During the contractual negotiation phases, there are numerous drafts generated by each party. Make sure both parties know and agree to one particular final contract. No one wants to be taken aback by an integration clause.
- When tackling what provisions need to be in a contract, start with the basics and add provisions that deal with common occurrences including changes in time, pay and work. This way, all parties can accommodate to these changes.
- Include provisions that account for the time the contractor has to finish the work. For example, under what circumstances or conditions is the contractor allowed additional time, and are there liquidated damages for delays? Take a look at Article 8 of A201™-2017, General Conditions of the Contract for Construction for more information on this type of provision.
- Make a plan for project changes. A201-2017, General Conditions of the Contract for Construction includes a provision for the fact that a project may change all together. Article 7 allows for the owner and contractor to agree to changes in the work and price changes.
The most important aspect of crafting an agreement is looking into the details and not glossing over specific provisions that can make or break a project.