The Construction Agreement

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The Construction Agreement is the controlling document for the actual construction of the residence.  It must include all of the understandings between the parties, and, to a large degree, anticipate how various problems which might arise will be resolved.

The Builder Resources Construction Agreement is an evolutionary document that has tended to grow as new issues have come up over the years.  

I have included the sections of the document below with notes regarding important clauses of each section.

Components of the Construction Agreement include:

  1. Purpose of the Agreement – Purchaser, as General Contractor, is employing the Company, as a subcontractor,  to oversee construction.  The relative responsibilities of the parties are established immediately.
  2. Responsibilities under the Agreement – Purchaser is the General Contractor.  Company is a subcontractor. A further clarification of the roles of the parties.
  3. Agreement documents – This Agreement, Floor plans and Elevations, Standard Specifications, Mold Disclaimer and Waiver, Builder Limited Warranty
  4. The Work – Nothing outside the foundation.  “Substantially in conformance” with designs and plans.
  5. What the Company is not responsible for – Includes items such as hauling debris, off-site utility trenches, concealed conditions.  Review this section on every job to add or delete per what has been agreed upon.
  6. Financing – Agreement is contingent on meeting payment schedule.  Start date contingent on satisfactory evidence that final payment can be made.
  7. The Agreement Price – From final budget
  8. How payments are to be made – 30%, 30%, 30%, 10% (or any other percentages that fit your schedule) at specific milestones.
  9. Acceptance and final payment – Three days to inspect, payment upon acceptance.  Assumption of acceptance if no inspection made.
  10. Commencement and Completion – Specific number of days, beginning after issuance of building permit.  Exclusions for Client acts, weather, concealed conditions.  
  11. Other Subcontractors and Employees – Client, as General Contractor, can hire others for which the company bears no responsibility.
  12. Selections – Specifications have a due date, after which The Company will make choices and Client approves such choices in advance.
  13. Substitution of Materials – Structural materials and generic items can be substituted as long as there is no decrease in quality.
  14. Substitution of Design Features – Company can change design features (door sizes, window sizes, etc.) as required by code or building process.
  15. Escalation Clause for Building Materials – If material prices increase after contract signed, the Client agrees to pay increase.
  16. Special Circumstances – Right of Termination – If the general prices increase more than a set percentage, Client can terminate contract with certain payment to The Company.
  17. Health Concerns Arising From Materials Used in Construction – Client may request samples of any building product to test for harmful effects.  Company gets copy of all test.  Absence of request equals acceptance of products.
  18. Permits, Fees and Tests – Defines which party pays for which permits, fees, and tests.
  19. Taxes – Defines which party pays for which taxes.
  20. Change Orders – Changes are expected and allowed.  Only accepted if written and signed.  Overhead percentage added to each change.  Evidenced by “Customer Instructions”.
  21. Insurances – Company will maintain necessary insurances.
  22. Purchaser Obligations – Purchaser will not obstruct construction process in any way.
  23. Concealed or Weather-Related Conditions – Company has not investigated site conditions on Client’s lot.
  24. Soil Engineer’s Report – Client’s responsibility to secure a soils report.
  25. Radon – Company has no responsibility for radon occurrences.
  26. Radon Disclaimer and Waiver – Large, bold all caps disclaimer and waiver.
  27. Disputes – Arbitration, Company reserves right to address deficiencies.
  28. Termination – Client has right to assume Project Manager duties, Company entitled to full project payment.
  29. The Limited Warranty – Limited warranty is the only warranty.
  30. Miscellaneous – Company signs on site allowed, unlimited use of photographs of project on Company website and in Company marketing.
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