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Colorado Construction Contracts Guide & FAQs

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Colorado Construction Contracts Overview

Colorado Construction Contracts

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A construction contract outlines each party’s obligations, rights, and remedies on a project. But although the language in specific contract clauses is typically negotiable, Colorado has certain rules that govern what the agreement must include — and what is prohibited.

Keep in mind that, while Colorado’s rules for construction contract terms are written into state law, the courts determine how strictly those laws should be interpreted — and those interpretations can change.

On this page, you’ll find resources, legal information, and answers to frequently asked questions about Colorado’s construction contract and payment terms requirements.

Colorado construction contract provisions

While Colorado generally allows construction parties to set the terms of their agreement, there are some laws that regulate specific types of contract provisions. Any contract clause that contradicts the law is invalid and unenforceable.

“No lien” clauses

Colorado’s mechanics lien law specifically prohibits the use of “no-lien clauses.” Any term in a construction contract that attempts to waive or impair a party’s claims or liens, shall be void and unenforceable.

Contingent payment clauses
There are two types of contingent payment clauses: pay-if-paid and pay-when-paid, both of which are enforceable under Colorado law.

In order to have a valid pay-if-paid clause, the provision must explicitly and unequivocally state that the party will only be paid when the paying party received payment from the higher tier, and the risk of nonpayment is being shifted. If the provision fails to meet these requirements, then it will be treated as a pay-when-paid clause. Such clauses only require payment to be made within a reasonable time, the party is still obligated to pay whether payment has been received or not.

• See: Colorado Pay-if-Paid & Pay-When-Paid Clauses

Payment timing clauses

Colorado’s prompt payment laws only apply to public projects, private projects are generally unregulated. Therefore, on private projects, the timing of payments and interest penalties will be set forth by the terms of the contract.

On public works projects in Colorado, the prompt pay laws require progress payments to be made by the public entity at the end of each month (or soon thereafter as “practicable”); final payment within 60 days of completion and acceptance. All other payments down the contracting chain must be made within 7 days of receipt. The only aspect of the prompt pay laws that may be changed by the contract is the interest rate for late payments to subcontractors and suppliers. Interest accrues at a rate of 15% per year, or the rate stated in the contract; whichever is higher.

Retainage limits

Currently, Colorado does not have any retainage limits on private construction projects, so the amount that can be withheld and the interest penalties will be determined by the terms of the contract.

• Note: Colorado recently enacted retainage laws for private projects capping the amount at 5%, the law is expected to be effective on 9/10/21

On public projects in Colorado, the amount of retainage withheld is also capped at 5%, and cannot be modified by an agreement between the parties.

• See: Colorado Retainage Law | A Guide to Public Projects

Colorado construction contract requirements

Colorado doesn’t have any specific, statutory requirements for construction contracts. Generally, there are always certain provisions that should be included in a contract, such as a price, schedule, the scope of work, etc.

• See: A Guide to Common Construction Contract Parts

However, there are some specific requirements for residential roofing contracts under Colo. Rev. Stat. §6-22-103. This includes provisions outlining the scope of services and materials, approximate cost based on damage known at the time of contracting, the owner’s right to rescind the contract, and the contractor’s surety and liability coverage insurer, to name a few.

Construction Contracts FAQs in Colorado

Construction contracts and payment terms are highly regulated in Colorado. It can be confusing to figure out when payments must be made, how to make them, and how to best protect your company from expensive problems. Here are some frequently asked questions that come up with construction contracts and payment terms on Colorado jobs

Colorado Construction Contracts FAQs

Can you waive lien rights by contract in Colorado?

Yes, Colorado is one of just a few states that specifically allows parties to waive lien rights in their contract (so-called “no lien clauses“) prior to performing any work on the project. – Colo. Rev. Stat. §38-22-119

Accordingly, construction participants in Colorado must pay close attention to their contract language, and make sure they understand what it is that they are signing, and how it may affect their payment.

Do I need a written contract to be able to file a Colorado mechanics lien?

Yes, under C.R.S. §38-22-101(3) if the contract is valued at over $500, the contract must be in writing to be eligible for mechanics lien rights in Colorado.

• See: Does Colorado require a written, signed contract between the contractor and homeowner over the amount of $500?

How does Colorado treat pay-if-paid and pay-when-paid clauses?

Pay-if-paid clauses

Pay-if-paid clauses are enforceable in Colorado. However, in order to create a valid and enforceable pay-if-paid clause, the provision must:

unequivocally state that the subcontractor will be paid only if the general contractor is first paid by the owner and set forth the fact that the subcontractor bears the risk of the owner’s nonpayment.” (Main Elec., Ltd. v. Printz Servs. Corp.)

If the clause fails to meet those requirements, they will be treated as pay-when-paid clauses.

Pay-when-paid clauses

Colorado also enforces pay-when-paid clauses, however, these clauses only require payment to be made within a reasonable time; regardless of whether the party has been paid or not.

• See: Pay-if-Paid & Pay-when-Paid Clauses in Colorado

Are no-damages-for-delays clauses enforceable in Colorado?

The enforceability of no-damages-for-delay clauses in Colorado depends on the type of project.

Private projects

No-damages-for-delay clauses are enforceable in Colorado on private projects, but they are strictly construed. There are, however, some exceptions, such as delays not contemplated by the parties, unreasonable delays, or delays resulting from the owner’s fraud, bad faith, gross negligence, active interference, or abandonment of the contract. –Tricon Kent Co. v. Lafarge North America, Inc.

Public projects

As for public works projects in Colorado, such clauses are not enforceable. This is explicitly prohibited under Colo. Rev. Stat. §24-91-103.5:

Any clause in a public works contract that purports to waive, release, or extinguish the rights of a contractor to recover costs of damages, or obtain an equitable adjustment, for delays in performing such contract, if such delay is caused in whole or in part, by acts or omissions within the control of the contracting public entity or persons acting on behalf thereof, is against public policy and is void and unenforceable.

Can you contract around Colorado’s prompt payment terms?

Private projects

Colorado does not have a prompt payment act for private projects. Therefore, the timing of payments will be dictated by the terms of the contract.

Public projects

Public projects in Colorado are subject to prompt payment laws, and they cannot be modified by contract. Progress payments from the public entity are due at the end of each month (or soon thereafter as practicable). Final payments from the entity must be made within 60 days of completion and acceptance. All other payments must be made within 7 days of receipt of payment from the higher tier.

One aspect that can be modified by the terms of the contract is the amount of interest that will accrue on late payments to subs and suppliers. Interest will accrue at a rate of 15% per year, or the rate set out in the contract; whichever is higher.

Can you contract around Colorado's retainage requirements?

Private projects

Currently, there are no laws governing retainage on private projects in Colorado. Thus, the terms of the contract will govern the amount withheld and the timing of the release of retainage.

Note: Colorado recently passed legislation capping the amount of retainage on private projects over $150K at 5%, this is planned to go into effect in September 2021

Public projects

On public projects over $150K, the amount of retainage that can be withheld cannot exceed 5%, this cannot be increased through the terms of the contract.

Does Colorado have any specific requirements for construction contracts?

Colorado doesn’t regulate the form and contents of most construction contracts. However, there are specific requirements for residential roofing contracts under C.R.S. §6-22-103. Under these statutes, the contract must be in writing and contain the following information:

• The scope of services and materials to be used;
• Approximate costs of services based on damages known at the time the contract is executed;
• Contractor’s name, address, email, and telephone number;
• Name and contact information of the contractor’s surety and liability coverage insurer (if applicable);
• A rescission clause allowing the owner to rescind the contract and a full refund of the deposit within 72 hours of entering into the contract pursuant to C.R.S. §6-22-104;
• A written statement that if the owner plans to use proceeds of a property or casualty insurance policy, the contractor cannot pay/waive/rebate (or promise to) all or part of the deductible; &
• A statement in bold-faced type that the contractor will hold payment in trust until materials are delivered or a majority of the work has been performed.

How long do I have to bring a breach of contract claim for nonpayment in Colorado?

The statute of limitations (deadline) to file a breach of contract claim for nonpayment in Colorado 3 years from the date of the breach; regardless of whether the contract is oral or written. –Colo. Rev. Stat. §13-80-101

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