Gone are the days of handshake deals: Everyone in the construction business should be using written contracts. But there’s more to a contract than simply putting pen to paper. While there are several common types of construction contracts, each one is actually a variety of different documents that all work together to make up the entire agreement. Here’s a guide to common construction contract documents and what they contain.
What are construction contract documents?
On a construction project, contract documents are the group of documents that define the price, conditions, clauses, schedule and scope of the executed work, along with any other job-specific details. They can be both written and graphic, and act as a legal definition of the contract.
A construction contract is a legal agreement between contractors and clients that presents, in detail, the specifications and terms of a project. Unlike other industries, a construction contract isn’t one single document. Instead, it’s a collection of documents prepared by a number of different parties that present the specifications and terms of a project.
Managing all of these different contract documents — and different versions of each one — can be difficult. It’s important for contractors to establish a document management strategy to ensure that change orders and evolving specifications don’t fall through the cracks.
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The 9 essential contract documents
The value of having a good understanding of the contract terms is priceless when it comes to avoiding a breach of contract and ensuring successful performance. Here is a list of the most common construction contract documents, and what they include.
1. The Construction Agreement
The agreement is the most fundamental document in a construction contract bundle. This is basically “the contract,” a foundation that the rest of the project details are built upon. This document will set out the general purpose of the contract and the contract price.
The agreement can be a standard document, like those provided by AIA or ConsensusDocs, or customized to fit a particular project’s need. The form will vary depending on how the contract payment is set up.
The most common types of construction contracts include:
The agreement itself is just the beginning. Construction contracts need as much detail as possible to avoid mistakes, conflicts and delays, saving everyone on the project time and money.
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2. General Conditions
General conditions are essentially the framework of the construction contract documents. They provide the “hows” of the project.
Most importantly, general conditions establish all the rights and obligations of the contracting parties. Additionally, it will lay out the roles of every party and the responsibilities of each.
The general conditions provides the game plan to proceed in the event of any issues on the project, often within a group of detailed clauses. This includes the process for submitting change orders, approval of payment applications, and any notice requirements.
3. Special Conditions
Special conditions are typically an addition or amendment to the general conditions section. This document will detail the specific clauses and conditions for each task or project. For example, special conditions will include specific instructions that only apply to one job or portion of the build.
4. Scope of Work
A clearly defined scope of work, also known as a statement of work, is a crucial element of a construction contract. This document will describe, in detail, the precise tasks and objectives of each contractor.
The scope of work determines the amount of work the contractor needs to complete to fulfill their contractual obligations. The scope is a critical reference point when preparing change orders and punch lists.
Contractors and subs need to know what type of work falls outside their scope of work to avoid performing additional work without additional compensation.
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Every construction project should include a set of drawings or blueprints. Drawings provide a simple overview of the project as a whole. The architect or construction manager should present these to contractors before any construction activities begin.
This document informs the contractors what and how to build the structure. Construction drawings are a collaborative effort between the architect, the clients, and the contractor. Ideally, these are the most up-to-date versions of the drawings.
The section for construction specifications contains all the technical data and performance requirements. The specs should detail the materials and techniques the contractors must use on any given task. It will outline all the quality standards, acceptable materials, and any quality testing necessary to ensure compliance.
The architect or the engineer will prepare these, and the client will verify them. In turn, the client provides the specs to contractors who need to perform according to those details. However, any defective specifications might result in the client being liable to the contractor for increased costs they may have incurred due to the specs.
In some cases, the contractor may want to substitute one material for another for a variety of reasons. Contractors should always adhere closely to the specifications prepared by the architect or engineer. However, in the event that a change is necessary, it is important to follow the steps required to make a substitution request.
7. Bill of Quantities
A bill of quantities isn’t optional on some contracts, but it can be helpful. A bill of quantities is an itemized list of the various materials, parts, and labor required. This list is typically provided during the bidding process.
The purpose of this is to allow prospective bidders to be able to estimate their costs more accurately and simplify the evaluation process. Typically a quantity surveyor or building estimator prepares the bill of quantities.
A bill of quantities will often look similar to a schedule of values, to the point where some people use the terms interchangeably.
8. Construction Schedule
A well-formulated construction schedule requires close attention to detail. Any updates should be readily accessible to everyone on the project.
Construction managers develop schedules in a number of different ways, such as Critical Path Method, Gantt charts, a line of balance or any other schedule that meets the project’s needs. Schedules can be relatively simple outlines of the project.
However, the larger and more complex the project is, the greater the need for more formal, detailed approaches. Detailed construction schedules keep everyone aware and informed about the project status, which can reduce both conflicts and delays.
9. Schedule of Values
A schedule of values is provided by a contractor and lists all the work items from start to finish. It will allocate the entire contract sum among the various portions of the work. The schedule of values is also a useful management tool to form the basis for submitting and reviewing progress payments. This document can help keep the cash flowing and bills paid on time.
What happens when construction contract documents conflict?
A wide variety of project participants contribute to construction contracts, often leading to inconsistencies and conflicts between them.
Anytime there are conflicting provisions in a contract, there should be an established totem pole of priority to determine which provision in which document will prevail. Therefore, many contracts include an”order of precedence clause” that deals specifically with this issue.
A standard order of precedence will typically flow from highest priority to lowest priority:
- Change orders
- The agreement
- Special conditions
- General conditions
- Any other documents that form the contract documents