General Contractor and Sub-Contractor Agreement Guidelines
If you accept a bid, your agreement will be formalized by the signing of a contract. A contract that is clear about who does what and who pays for what and when, should smooth relations with a contractor. At a minimum, the contract should contain the following language:
- The location of the house to be built, along with the approximate dimensions. This should be accompanied by a legal description of the property with a sketch showing the sitting of the house, setbacks and the like as appropriate.
- A detailed description of the work to be performed. Plans and specs should be included as an addendum to the contract and signed by both parties to the contract.
- A construction schedule detailing when work is to begin and when it is scheduled to be completed.
- Expect clauses allowing for weather delays and other problems beyond the control of the builder. Some contracts have a clause that call for a monetary penalty against the builder if certain deadlines are not met; some builders, however, will not sign such contracts.
- A site conditions clause. If site conditions vary from those assumed in the contract (high water table, bedrock, etc.), then a procedure for handling plan changes and associated expenses should be included.
- A fee and payment schedule that spells out the construction milestones and the payment amounts for completing each. The final payment is usually withheld until final approval of all work, by the owner, and the receipt of a certificate of occupancy from the local building department.
- A statement indicating who is responsible for obtaining and paying for all permits, licenses and other fees, along with sales or use taxes. This is commonly the responsibility of the general contractor.
- Procedures for change orders. Each one should specify the work to be done, the cost and the effect on the completion schedule. The responsibility for changes due to the builder’s error and any resulting costs should be outlined. If there is a disagreement on this issue, procedures for resolving disputes should be agreed to that won’t interrupt the progress of the job. There is, also, usually a clause absolving the builder responsibility for flaws in the design, plans or specifications that were not supplied by his company.
- The contract should indicate any of your agents, such as architect, as well as the role and liability this person will assume.
- Site improvements, such as grading and drainage, and who will create them.
- Who pays for taxes, utility bills and the like during construction?
- Who owns the plans and specifications?
- Warranties: Warranty documents, walk-through procedures and the service policy should be attached to the contract. It should be clearly stated who is responsible for what. Though manufacturers’ warranties will cover many items in a new home, the protection rarely extends to their installation.
- Arbitration or mediation procedures to settle disputes. All complaint notification procedures and time limits should be detailed.
- Under what conditions the contract can be terminated and how much this will cost the owner.
- Bankruptcy issues should also be addressed.
- Liability and insurance issues need to be laid out. Who pays for the builder’s risk? For example, the builder should provide for your inspection, certificates of insurance for builder’s risk, workers’ compensation and any other insurance forms customary in your locality.