Understand construction contracts and how to write them.

Discover construction contracts and contractor agreements, and learn how to use them to ensure construction projects run smoothly.

A contractor reviewing a house floor plan

What is a construction contract and who needs one?

A construction contract, sometimes referred to as a contractor agreement, is a legal contract created between a contractor providing construction services and the owner of the project. The contract could be between a homeowner, business owner, or a construction management company in charge of new construction work and the general contractor who is responsible for planning and carrying out the project. Or it could be between a general contractor and an independent contractor or subcontractor.

 

Whether it’s a simple home improvement contract or an enterprise-level business contract, this type of document is crucial in the construction industry and outlines all the details of the project to avoid conflict and confusion. It should make everything about the project clear, including pricing, payment terms, timeline, consequences for breach of contract, any necessary subcontracts, logistics for carrying out the work, and other important information.

When to use a construction contract.

Use a construction contract anytime you hire someone to conduct a construction job or anytime you’re hired by someone else to do construction work. Even when you work with friends or family, it’s a good idea to create a contract to make sure everyone gets a fair deal and is aligned on what the work will entail. Should there be any disagreements later that require arbitration, having a contract will be critical for dispute resolution.

A graphic of signing a construction contract on a laptop using Adobe Sign

Types of construction contracts.

 

There are five common types of construction contracts. Choose one based on the type of job and what works for both parties. 

  • Fixed price contracts:
    Also known as lump sum contracts, this simple and popular style of agreement specifies one fixed fee for an entire project.

  • Time and materials (T&M) contracts:
    If the scope of work is unclear, you may want to opt for a T&M contract, which outlines a daily or hourly pay rate for contractors and reimbursement for material costs.

  • Cost-reimbursement contracts:
    Also known as cost-plus contracts, this type of contract establishes that the contractor will be reimbursed for the costs they incur for the project in addition to an agreed-upon lump sum of money, often calculated as a percentage of the project costs.

  • Unit price contracts:
    Also known as measurement contracts or measure-and-pay contracts, these documents divide the project into separate tasks and specify a price estimate for each task.

  • Guaranteed maximum price (GMP) contracts:
    These are similar to T&M contracts, except that a cap is set for the total cost for the project or property owner. Should the actual cost of material or labor exceed the maximum amount, the difference is absorbed by the contractor.
A builder and a contractor reviewing a construction contract on a tablet device while on a job site

What to include in a construction contract.

The most important aspects of a construction contract are that it contains a clear description of the construction process about to happen, that it outlines general conditions for contract termination, and that it describes all financial terms in an unambiguous manner.

Common elements of a construction or contract agreement.

 

Consult with a legal professional knowledgeable on applicable laws to see which items you should include in your contract. They may consist of the following:

 

 

01.

 

Name and contact information of the project owner

 

 

02.

 

Name and contact information of the contractor

 

 

03.

 

Legal description of the property being worked on

 

 

04.

 

Detailed description of the work to be completed

 

 

05.

 

Completion date and date of final payment

 

 

06.

 

Terms for contract termination by either party

 

 

07.

 

Consequences of breach of contract by either party

 

 

08.

 

Terms for unforeseen accidents or “acts of God”

 

 

09.

 

Change orders or a policy for adjusting the contract

 

 

10.

 

Hold harmless clause outlining details of warranties, liability, and indemnification

 

 

11.

 

Required licenses, permits, and insurance

 

 

12.

 

Terms for access to the property and other necessary logistics

 

 

13.

 

Total contract price or terms for calculating construction cost and payment terms

 

 

14.

 

Right to withhold payment by the contract owner

 

 

15.

 

Terms for the condition of the property and disposal of items upon completion

 

 

16.

 

Signatures and date of signatures from both parties

A graphic of signing a construction contract on a tablet using Adobe Sign next to A graphic of signing a construction contract on a mobile phone using Adobe Sign

Create digital construction agreements with Adobe.

 

Once you identify which type of contract is perfect for your work, you can streamline the process by going digital. With Adobe Acrobat Pro DC with e-sign, you can make a construction contract template to edit and reuse for different clients and projects. 

1. Sign into Acrobat on the web.

2. Click Sign › Create a Template.

3. Name your template and upload a file to start from.

4. Click Preview & Add Fields. 

5. Drag fillable fields onto your document.

6. Click Save.

Do all this and more with Acrobat Pro DC with e-sign:

  • Easily send contracts for e-signature. Learn how

  • Fill out and sign contracts online. Learn how

  • Design a custom workflow for your contract signatures. Learn how

  • Set automatic reminders for signatures. Learn how

Save time and money when you go digital with your contracts.

 

After they adopted the e-signature tools in Acrobat Pro DC, our own Adobe Partner Connection (APC) Reseller Program was able to shorten its contract completion time from about 20 days to about 2 hours. Contracts can be completed quickly on any device, leaving more time for customer support and a 75% reduction in contract-related email traffic.

 

 

Manage legal documents with Acrobat Pro DC.

 

Always be sure to seek legal advice before you create or sign any legal contracts. Then get every contract created and signed in no time and keep business moving forward with Acrobat Pro DC. Save your templates, track your signatures, leave messages for signers, and more. 

 

Get started with Acrobat Pro DC with e-sign

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