In order to have project contracts that are legally enforceable, they should be in writing. It is very difficult to enforce a contract that is verbal or unclear. While you can sue someone over a verbal contract, it is difficult to prove your case and receive an award for damages. The best way to protect yourself and your assets is to have a written contract.
While you will have multiple conversations with your contractor during the planning stages of the contract, the Parol Evidence Rule, upheld by all courts, states that anything that was discussed prior to the written agreement and not included in the final contract is not enforceable. You’ll explore many possibilities with your construction team, but anything you that you know you want done must be in writing in the final contract.
Before signing a contract, make sure it has these important components so the contract will be legal and enforceable:
- Project details- The contract must include the entire scope of the work, who determines when the work is complete, payment procedure, and who is responsible for specific tasks. Any alterations to this original plan should be made in writing through a change order. This results in a detailed plan that everyone understands and the workers will have a road map for project completion.
- A price or formula for determining the price- For some projects, it’s impossible to give a final price before the work starts. Regardless, the contract should state how the total will be calculated, including the labor and equipment rates. The more detailed the contract, the less room there will be for future conflict.
- Exchange of value- While it may seem redundant, a valid contract must show that there is an exchange. The professionals will provide you with materials, time, labor, and expertise. In exchange, you are offering monetary compensation. An enforceable contract must show that both parties are giving something in the agreement. An itemized break-down of the expenses will provide a solid foundation for the project.
- Intent to bind- This is just a legal term for signatures. You will often be asked to sign the end of the document as well as initial each page. This is the symbol that you are agreeing to be legally bound by this contract. Your contractor will do the same. Keep a copy of this contract for future reference.
Despite your best efforts, some actions will invalidate the contract. Any of these circumstances will make a contract unenforceable:
- Duress- Any time one party pressures or threatens another, the contract becomes void.
- It becomes impossible- If there is something beyond your control that was not accounted for in the contract, such as a natural disaster, it will invalidate the contract.
- Misrepresentation- If there was a false claim or one party hid a fact that affected the terms of the contract, the contract does not need to be followed.
- Unconscionable- If the terms are unfair to one party, a judge can rule that the contract is unenforceable. The court would also have the ability to rewrite the terms that are deemed unfair.
Understanding your construction contract before signing is essential to the success of the project. Take the time to read it and ask any questions. Make sure that your contract is clear, and both parties understand and agree so you know it is fair and enforceable. If the contract is well-written, there will be no surprises in expectations or how to deal with extenuating circumstances.