Before any construction project can begin, team leaders, investors, and prospective construction companies will need to discuss the project’s important details that may pertain to budget and projected start and end dates. Many times, these initial conversations are verbal, and agreements may be made, but that doesn’t mean they can take the place of a contract.
The Case Against Verbal Contracts
When it comes to verbal contracts, the issue is not with what was said but the details that go undiscussed. Contracts are designed to address situations before they arise, and verbal contracts leave way too much uncertainty.
Written contracts spell out the finer details of the project, including:
- If the project takes longer than anticipated or materials fluctuate in price, are there agreed-upon terms in which the contractor can request or negotiate payment?
- Has a lump sum payment been agreed to? If not a lump sum payment, when are payments due for the project? Have payment terms been agreed upon?
- Is there an agreed-upon project timeframe? Who is responsible for delays?
- What is the scope of the project? Can the scope change or be adjusted? What is the protocol for renegotiating the scope of the project?
- How will disputes be resolved?
- Can the contract be terminated for any reason? What happens if one of the involved parties wants to terminate the contract outside of the agreed-upon terms?
Written Contracts Clearly Spell Out Responsibilities of All Parties
Think of a contract as the road map for any construction project. Almost all conversations and relationships have some form of contract agreement involved in the decision-making process, but it’s not always a written agreement. Written agreements allow multiple parties to mutually agree upon, negotiate, and prepare themselves for situations that may arise during the project.
The key to creating a construction contract agreement is working with an effective contract drafter. Contract lawyers have seen it all when it comes to contract disputes gone wrong, so they can best prepare you for questions and situations that may arise throughout your construction project.
In simplest terms, contracts clearly articulate which party is responsible for what. If one of the parties fails to deliver on their obligations within the agreed-upon time frame, the contract will also provide detailed information about the next course of action. In addition to the clearly outlined duties and responsibilities, contracts are designed to protect involved parties.
If a contract is breached, the non-breaching party may be entitled to financial compensation, or they may be able to pull out of the contract without penalty. Many business owners become limited liability companies (LLC) to protect themselves in contract agreements. By becoming an LLC, your business becomes its own entity, and it can help protect your personal assets during a potential contract breach.
At Garibian Law Offices, our team has extensive experience representing clients in business litigation throughout Pennsylvania, Delaware, New Jersey, and New York. If you want to find out more information about LLC formation, the differences in LLC formation in DE vs. NY, or the nuances of contract law, our knowledgeable team of construction lawyers in Delaware is here to help. We even offer a free consultation!