What homeowners need to know before signing a construction contract

Before starting any home renovation project, legal experts say homeowners should take the necessary legal precautions to avoid costly disputes. That starts with a solid construction contract.

“A construction contract is a legally binding agreement between the parties of a construction project, which can include property owners, contractors, subcontractors, architects, etc,” said Attorney LaShandra Peoples-Johnson with Johnson Cephas Law in Tulsa.

Peoples-Johnson outlined four common types of construction contracts:

1. Fixed price: A set amount agreed upon for the entire project.
2. Cost plus: The contractor is reimbursed for expenses, plus a fixed fee or percentage.
3. Time and materials: Payment is based on hours worked and materials used.
4. Unit price: Costs are calculated based on the quantity of completed units or phases.

What To Include in a Contract

Peoples-Johnson stressed the importance of including key terms in any construction agreement:

1. Scope of work: A detailed explanation of tasks and responsibilities.
2. Timeline: Start and end dates, as well as milestone deadlines.
3. Payment terms: When and how payments will be made.
4. Change orders: Procedures for modifying the original plan.
5. Warranties and guarantees: Promises on work quality and materials.

"Everything you say verbally, make sure it’s also in writing," she said.

She added that documenting conversations, agreements, and changes is critical.

Avoiding Legal Disputes

When drafting a contract, homeowners are encouraged to anticipate potential issues, be clear and specific with terms, and seek legal advice before signing.

“You’d rather pay an attorney up front to review it than deal with a financial mess later,” Peoples-Johnson said.

If a project goes wrong, a contract can be terminated in several ways:

1. Breach of contract: When a party fails to meet its obligations.
2. Insolvency: When a party cannot meet its financial commitments.
3. Mutual agreement: When both sides choose to end the project.

Legal disputes over construction contracts are typically handled in civil court.