What are Construction Contracts?

Just as contracts are binding agreements, enforceable by the law, construction contracts are legally binding agreements concerning the relevant parties in a construction project. The two parties involved are the contractor and the homeowner or client. Construction contracts generally contain multiple sections concerning the scope of the work, payment information, a financial calendar, the construction schedule, and expected deadlines. Contracts may also include arbitration steps if a disagreement arises with the contractor, and certain protocols for delays and setbacks of varying types. It’s important that your construction contract is comprehensive and unambiguous. A thorough construction contract can ensure that a project finishes on time and within budget.

The Importance of Construction Contracts

One of the essential and early steps in construction projects is the signing of the contract. A contract can protect both the homeowner and the contractor in a variety of ways, guaranteeing adequate work and fair payment. Having any standard contract isn’t enough though. It needs to be clear, well-written, and agreed to by both parties. A contract ensures that all participants are on the same page regarding the precise nature of the work involved. It should be used as a plan of-action moving forward in the construction process. The more comprehensive and detailed the contract, the more certain you can be of the cost and safety of the final product. Overall, a construction contract is a useful tool and can save you and the contractor a lot of time, money, and unnecessary stress.

Accountability is important in any binding contract, and construction contracts are no different. There are many facets to consider when drawing up and signing the contract, such as the timing of the project and potential defect management. It is very common to experience delays during any construction project. Inspections, supply shortages, and terrible weather (also called “Acts of God”) are just a few of the reasons why setbacks might be expected. A contract can set out terms for these delays, such as identifying which party is responsible and how the construction should move forward. You’ll have a projected finish date and peace of mind knowing that your investment is protected from accidents.

Construction contracts can guarantee the quality of the work provided by your contractor. It will ensure that safe and adequate materials are used. Forgotten permits will no longer be a concern. Standard, practiced construction methods will be used if the contract deems it so. Many construction contracts also include warranties. These warranty clauses can range from supplies to maintenance obligations. If defective materials are used, or if the quality of the work is lacking, you might be entitled to financial compensation from your contractor.

Contracts also provide you with a proof of improvements made to your home. You’ll understand the exact nature of what changes your house has undergone and the process behind those changes. A large part of construction ends up behind the walls of a structure, not visible to the naked eye. A written proof of improvements will detail every kind of alteration that’s been made. This can be very useful when you’re trying to resell or refinance your home, or if structural problems begin to develop later on.

A well-written contract also provides protection for both parties. The primary safeguards are usually regarding payments, but construction contracts can also dictate how to move forward if a dispute arises. The contractor will usually require a steady steam of finances to complete the project, and a contract can outline a workable pay schedule. This might include all subcontractor fees and liens. The final payment on your project is due upon “substantial completion”, which is typically outlined in your contract. It’s important to specify in the contract what that term means, whether it includes modern amenities and design choices. Arbitration and litigation may result if you and your contractor haven’t pre-defined “substantial completion”.

If a dispute does occur between you and your contractor, a construction contract can protect both of you by requiring arbitration rather than litigation. Arbitrations do not require court involvement, utilizing an arbitrator rather than a judge. Construction arbitrators are neutral third-party representatives who have been given the authority to issue a decision in the dispute. The two parties in question can establish the procedure for arbitration, but the arbitrator’s ruling is legally binding and final. The decision cannot be appealed. Arbitrations are still usually preferable to lawsuits as they are less expensive, and you can choose your arbitrator.

Before entering into any kind of renovation or construction project, you should make sure a contract is drawn up beforehand. It will protect your assets and your home. You shouldn’t be afraid to negotiate about the terms in your contract either. This is your home and your future. You’ll want to be as assured of the outcome as possible, and construction contracts are written with that benefit in mind. Although it is an extra stage in an already stressful process, drafting a broad and thorough contract will only save you time and money in the future.


Our contract was created and has undergone multiple revisions through different real estate and construction attorneys in the Los Angeles County. Throughout our countless years in this industry we’ve been able to produce a customized contract that caters specifically to our business and our clients. We like to exemplify honesty and integrity when we come together to sign the contract with you. That’s why we fully disclose all terms and conditions, ensuring that you are aware of every detail within the contract. We want you and every other customer to have the opportunity to ask any questions or voice any uncertainties before signing the document. However, prior to the signing, our company will email you a copy of the contract so you have the time necessary to read through the contract and express all concerns you may have. Although getting together with clients for contract signings is considered “old fashioned business”, we believe that it helps all parties start on the same page when we begin your project.

  • We like to use the contract to hold ourselves accountable, guaranteeing that the project is completed according to the written agreement, all subsequent amendments included in the final product. Each of our projects are unique and require different methods of execution.

  • The involvement of the client, the budgetary responsibilities on how funds are to be divided, the materials to be ordered, and the entire design process are just a few of the nuances that impact the project construction method. We are always looking for ways to improve our contract.

  • Client feedback regarding the contract or the signing experience is always welcome, and it offers us the most insight into how we can better serve our clients.

  • At BT Construction & Development Inc. we strive for perfection at every stage in the construction practice, on and offsite. You can count on us to be there for you.

Next – Preparing your project schedule

Contact us for complementary in home consultation (818) 274-2624