Be sure to avoid these 3 common contract mistakes

Contracts are important. In fact, they are probably the single most important component to have when starting a project. And we mean any project – building a home, working on a remodel or taking a specialty job. Sometimes referred to as a building agreement, the contract between you and your client is a legally binding document that protects both parties with detailed sections outlining items such as scope of work, financials and construction schedule, etc.

When building a construction contract, there are many components to consider. To help ensure you make the best decisions and choose the best components for your contract, we went to our in-house legal expert, Nick Knihnisky. See what he has to say about the top three common contract mistakes and how to avoid them.

1) Not knowing your contract inside and out

Presenting a contract without reading the content is like buying a used car without knowing its history. It may look great but will end up costing you money and a whole lot of frustration that could have been avoided.

“We hear too many stories of contractors pulling a template from NAHB, AIA, or AGC and using it with no knowledge of the actual content,” said Knihnisky. “A template is supposed to serve as a starting point that you revise to the realities of your business.”

Using a pre-written template from the internet is an acceptable way to learn the issues and guide your own agreement, but it’s important to take the time to read through it and make the necessary adjustments to fit your business.

“Downloading a contract and presenting it to your client as is, is a recipe for disaster,” Knihnisky said. “Not only is it a poor reflection on your business, but an unedited template can create significant liability if you are committing to responsibilities that you do not intend to meet. You should know the ins and outs of your building agreement and be prepared to discuss the obligations with your client.”

2) Not staying up to date on state laws

Knowing your state laws is crucial when developing your construction contract. All states have different guidelines and rules that can be critical for you and your business.

“Along the same line of unedited templates, far too many construction contracts do not accommodate the specifics of state law,” said Knihnisky. “For instance, many states have laws governing your lien waiver rights, which can often be a contractor’s most valuable tool in obtaining payment. While most lien waiver laws prevent the waiver of lien rights within the contract, some states have unregulated lien laws that can have a significant effect on your right to payment.”

Staying up to date on the laws and consulting an attorney in your area will prepare you for the unexpected, save you money in the long run and keep your business on the path of success.

“You need to ensure that you are aware of your state laws and documenting them within your contract,” Knihnisky said. “You should speak with a local attorney about the specifics of your state’s construction laws to avoid disastrous contract situations.”

3) Not including change orders in your contract

Do you include language about construction change orders in your current contract? If not, you should and here’s why.

“A change order is nothing more than an amendment to your contract,” Knihnisky said. “We often hear of contractors informally negotiating change orders, leading to a later dispute with the homeowner. Your change order process should be documented within your contract, and you should follow it. Buildertrend offers a great change order tool that we highly recommend to draft, execute, and store the change orders on your project.”

Control your contracts with Buildertrend

Did you know you can build, format and manage your client contracts within Buildertrend, so they’re all organized and readily available in one place? Well, it’s true! And for added convenience, once you customize your contract the way you want it, you can save it as a template that can be used for future lead opportunities and new jobs.

To get started using contracts with Buildertrend, reach out to your account executive or onboarding specialist. They’d be more than happy to help you get everything set up! Not yet a Buildertrend user? Schedule a demo with us today to see how you can control your contracts with Buildertrend.

DISCLAIMER: The information contained in this blog is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this blog without seeking legal or other professional advice.