Construction Agreements
Construction agreements are used whenever a landowner hires a contractor to facilitate the construction or renovation of a property. Not only does it specify who will be involved in the process, but it will also specify the date that the construction will take place. Usually, it’s between the owner and the contractor, but other parties might be involved as well.

Chicago Construction Agreement Process
Importance of a Construction Agreement
The purpose of this type of arrangement is rather obvious. It legally binds the owner to a contractor and the services that he or she provides. It also sets the terms by which he or she will get paid. The purpose of a construction agreement is to help both parties understand the scope of the work that is being done, and it offers a schedule for the completion of each phase of the project.
As a rule, a construction agreement must:
- Be in writing
- Be clear in defining the services being rendered
- Have a policy for the cancellation or termination of the contract
- Be clear in defining how the money will be handled, as well as how the contractor will be paid
Remember that construction agreements are legally binding contracts to which both parties are obligated to fulfill.
Types of Construction Agreements
As you might have expected, there are different types of construction agreements, and all of them are suited for different sets of circumstances.
Here is a list of some of the more common types.
Express contract agreement
This type of contract clearly defines the purpose and scope of the project, and each part should be understood by both parties.
Executed contract agreement
This type of contract is designed to protect one party if something were to go wrong during the construction process. One situation where this would apply is if the contractor made a defective or incorrect installation.
Conditional contract agreement
This type of agreement sets the conditions if the contractor is unable to perform certain actions. It typically sets an alternative date for the services to be rendered if certain conditions are met.
Parts of a Construction Agreement
There are several different parts of a construction agreement, and each one will present a specific piece of information – all of which become legally binding once the contract is signed.
Here is a list of the different parts of a construction agreement:
- Contract price – Not only will it specify the amount of money that will be awarded to the contractor, but it will also specify how the funds will be handled. Plus, it will outline any additional costs or deductions that are related to the project.
- Payment basics – This sets the terms by which the contractor will be paid (whether it’s monthly or some other method).
- Construction schedule – This sets the number of days that each phase of the project should take. It can be set in either calendar days or business days.
- Contract document list – This outlines any documents related to the construction agreement.
- Construction scopes – This has a description of all the activities that will be performed throughout the construction process.
Each of these parts must be outlined clearly so both parties can understand what their obligations are.
Finding a Real Estate Attorney
Because of the nature of construction agreements, it’s important to get it right. After all, it will become a legally binding document once it goes into effect. It’s always a good idea to consult a real estate attorney before you sign an agreement. He or she will be able to evaluate the contract to see if it will suit your interests.
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