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About construction & trades agreements

A construction & trades agreement defines the work to be built, the price and payment stages, who supplies materials and permits, and how variations and defects are handled.

Construction disputes concentrate around three points: extra work performed without a written change order, payment withheld at the end of the job, and defects appearing after the final invoice.

Construction work is subject to licensing, permit and lien rules that vary by state and by trade. Residential work in particular often carries mandatory contract terms and cancellation rights.

For contractors, builders and property owners

For contractors, subcontractors and project owners

For renovation contractors and homeowners

For licensed trade contractors and property owners

For architects, engineers, construction managers and project owners

For grounds maintenance contractors and property owners

For suppliers, manufacturers, distributors and resellers

Common mistakes in construction & trades agreements

  1. Doing extra work without a written change order. This is the single biggest cause of unpaid construction invoices. No written order signed before the work starts, no payment — enforce it from day one, including on small variations.
  2. No payment schedule tied to stages. Payment linked to identifiable milestones keeps cash flow aligned with cost. A single payment on completion means the contractor funds the entire job.
  3. Unclear permit responsibility. Unpermitted work can have to be opened up or removed at the owner's expense and can block a future sale. Name who applies and who pays.
  4. Ignoring lien rights and notices. Mechanics' lien rules impose strict preliminary notice deadlines. Miss the notice and the lien right may be lost regardless of how much is owed.
  5. No defined completion standard. Distinguish substantial completion from final completion, and tie retention release to the second. 'Finished' is not a standard.
  6. Skipping insurance verification. Ask for certificates before work starts, not after an incident. Confirm the cover is current and the limits are adequate for the site.

Construction & Trades questions

Does a contractor need to be licensed for this work?

Most states require a licence above a fairly low dollar threshold, and the threshold and trade categories vary. An unlicensed contractor may be unable to enforce the contract or recover payment at all in some states, so verify the licence before signing.

How should progress payments be structured?

Tie each payment to a completed, inspectable stage — foundation, frame, rough-in, finish — rather than to calendar dates. Hold a retention of five to ten percent until final completion so there is a financial incentive to finish the snag list.

Who is responsible if the work is delayed?

It depends on the cause. Contractor-caused delay usually falls on the contractor; owner-caused delay, such as late decisions or access, normally entitles the contractor to more time and sometimes to cost. Weather and other neutral events are typically handled by the force majeure clause.

What happens if defects appear after completion?

The warranty period governs. Most agreements provide twelve months for workmanship, with longer periods for structural elements, and many states add a statutory warranty on residential work that runs regardless of what the contract says. Report defects in writing as soon as you find them.

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