Construction Contracts and Job Site Documentation

Construction Law Series

By Adrienne B. Haynes, Esq.

Managing Partner, SEED Law

Let’s face it, the handshake is never coming back, and neither should handshake deals.

Whether you focus on residential, commercial, or industrial construction, putting expectations in writing is key to developing solid relationships in your business. Business can move at a fast pace, and a contract is the most clear-cut way to make sure all parties have a “meeting of the minds”.

For SEED Law clients, we recommend that every relationship should be documented in writing, and for some, we review every agreement before it is signed. If you’re working with a client, partner, or vendor who you think would be offended by a contract or is unwilling to sign an agreement- run! That can be a hard lesson to learn but wanting a documented relationship should not deter business- in fact, it should do the opposite in good relationships. Putting your understanding in writing minimizes the guess work in conflict, making it easier to make and grow relationships.

When setting up and reviewing your contracts and job site documentation, be thorough:

Make sure your governing documents are in place.

Your key business documentation should be transitioned from your head as a founder or leadership team, and onto paper. Who owns the business? How are decisions made as a leader or leadership team? What happens to the business in the case of death or disability? When determining your choice of entity, there are key governing documents that should be developed and filed in your corporate records. Depending on your entity type, this could include operating agreement, buy/sell agreements, bylaws, vesting agreements, and financing or investor agreements.

A major part of this key documentation includes succession and exit planning documentation.

Know your KEY terms and provisions.

Contracts and documentation are important whether your business is typically signing or providing the documentation. In a construction business, there are typically client, vendor, subcontractor and materials agreements and each time you sign or send out another agreement for signature, it should be reviewed for key terms and provisions in advance.

If you’re providing the documentation, implement standard agreements that mirror the way you want to do business and the laws in your state. This is key because some rights, such as mechanics liens, are only preserved if certain notices and specific language is used.

If you’re typically signing agreements, make sure you read it before you sign it! Know that it’s ok to make edits and negotiate. You want to make sure it’s written in a way that leads to your success and effective performance. If the timelines or payment terms are unreasonable for you- say something in advance.

Get it in writing BEFORE you perform.

Once the relationship has begun, the contract usually only gets picked up again in the event that something’s not going quite right. Knowing what to expect before conflict or a triggering event and the solutions and remedies available make it easier to perform in compliance and trust the relationship that’s developing.

Contractors, let me tell you something, contractor to contractor. An invoice with no additional terms is not a sufficient contract. Once the estimate is agreed to, key terms and provisions should be communicated in writing and sealed with a signature. This is a part of building a firm foundation in your construction company, and makes it easier to get paid.

Be picky with your partners.

It’s common in construction to partner with other firms to complete the necessary scope of work. This can be done in a variety of ways, and is typically done through partnerships or joint ventures. Both partnerships and joint ventures can be entered into WITHOUT a writing, and great care should be taken to make clear the nature of the relationship.

A joint venture is an association of persons with the intent to engage in and carry out a single business venture for joint profit, for which purpose they combine their efforts, property, money, skills, and knowledge. Little formality is required to establish a joint venture and no specific or all-inclusive agreement need be proved. While partnerships can be imposed by law, courts use a case by case basis to determine the existence of a joint venture. A joint venture cannot be created or imposed by law, but can exist if the relationship is voluntarily assumed or documented in a contract.

If you decide to engage in a joint venture, make clear the scope and duration of the project, how the money will be handled, and the contributions, rights, and responsibilities of each party.

Document the job site.

Regardless of your scope of work, documenting what happens on the job site is essential in proper contract and record keeping. This documentation may include standard forms to track incidents, weather, work performed, safety topics, problems and delays, employee conflict, equipment usage, materials purchased, and other general management notes. When documenting your relationships and job sites, prepare a record with any understandings that may need to be later shared with your pro team or read out loud to a judge or jury in a court of law.

Lastly, even when you have all of your “i’s dotted and t’s crossed”, it’s important to have your agreements reviewed every 2–3 years to ensure that they are still consistent with the law and with the way you want to do business.

This article is an overview of contract and job site considerations, including governing documentation and key terms, and does not cover every legal right or obligation, consideration, exception, or restriction. These documentations and decisions are complex and should be well researched and discussed with a legal professional before being made.

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