Suppose you’re ready to hire a builder to start work on a major addition to your home. The builder presents you with a contract that appears to be a pre-printed form. You conclude the form was professionally prepared; it may have a copyright logo of a known legal publisher. The builder says, “It’s the industry standard form. Everybody uses it. Go ahead and sign.”
If you are absolutely certain you have a reputable, dependable, solvent, and trustworthy builder and everything will work out well, or if you are feeling especially lucky, then go ahead and sign. On the other hand, if there is any doubt in your mind about your builder or if you simply prefer to sleep at night with both eyes closed, have a lawyer review the contract for you.
Pre-printed form contracts should be viewed as a starting point, not a final expression of the parties’ agreement to be signed just because it is presented as the “standard” or “customary” form. Not surprisingly, protection for the owner is non-existent or minimal in a pre-printed form contract. In addition, even assuming the builder is not trying to take advantage of you, no pre-printed form contract can be expected to cover all the particulars of the agreement between you and your builder.
In the construction industry, standardized sets of forms have been developed and are frequently used. The so-called “AIA forms” were developed by the American Institute of Architects. While sufficient to provide some protection to the owner, the forms generally favor the design professional. More recently, the “Consensus” form of documents were developed by a consortium of construction industry associations and are intended to be fair to all parties and fairly allocate the risk among those involved in the project. Whether the Consensus documents will become the standard remains to be seen.
The point is that the owner would be wise to have a conversation with his or her lawyer about the project and have the lawyer explain the owner’s rights and duties generally and under the proposed contract. The lawyer can suggest revisions to the contract that will better protect the owner’s interest, such as the inclusion of provisions relating to payment of the builder through a construction escrow in order to avoid mechanics’ liens claims, the timing of payments and completion, and the inclusion of a warranty for construction defects.
A reputable builder will likely suggest the owner have his or her lawyer review the contract, or at the least not object if the owner requests such a review. Having your lawyer review and negotiate changes to the pre-printed form may be the best money you spend on the project.
We regularly review construction contracts for our clients. If you are contemplating building a home or commercial building, an addition, or making substantial renovations to an existing structure, please call us to discuss your contract.