One of the duties of a residential construction project manager is to negotiate contracts, but you will still want to become familiar with the terminology used. There are several clauses that we want to focus on that set the expectations of the fulfilment of the contract as well as keeping a smooth relationship with the builder throughout the building process.
Contract Sum
This is arguably the most important clause in the contract and something you absolutely need to pay attention to during the negotiating process. Your guaranteed maximum price will be laid out in this section. This is a clause that caught a lot of people by surprise over the last two years, adding significant money to the final cost of the home. Homeowners were often coming to the closing table with a home that cost them $50,000 more than anticipated because they did not protect themselves against rising supply chain costs in this part of the contract.
The language in this particular part of the contact can get very confusing, which is where we come in. As your project manager, we will break down the language so you understand every aspect of the contract before signing off on it.
Payment Terms
This is where the payment process is clearly laid out in terms of what funds are due, when, documentation required, approval process, and the final payment. Each project is different and will have its own language on this front, but again, this is where your project manager comes in to explain everything clearly to ensure payments are made on time per the contract requirements.
Where things can start to get really muddy is when final payment is due. There are literally stacks of paperwork that must be completed, such as certification of completion, lien waivers, and insurance, just to name a few.
Changes in Work
We have yet to see a contract that did not require changes as it played out. This is just the reality of this business. Between labor shortages, supply chain issues, and unexpected challenges that arise, we will see unexpected changes occur during the building process. This section of the contract will determine how those changes are handled, from notification to implementation to conclusion. This will also include the party that has the final word, which is considered a change directive.
Claims
This is basically a dispute between the homeowner and the builder or contractor that cannot be settled among the parties involved. For instance, the builder may make a request for extra money or time during the project. This aspect of the contract will outline the process, timeline, and notice requirements for all claims. Claims are generally required to be in a written form to establish the timeline of the claim.
Dispute Resolution
This is the process that is used when the parties cannot come to a resolution on a filed claim. There are three general possibilities: arbitration, mediation, and litigation. We also offer a service specifically for this issue. To learn more about construction defects, click here.