Construction contracts

Start from a standard form, not a blank page

Two contract families dominate commercial and association construction work. AIA's A101 is its "Standard Form of Agreement Between Owner and Contractor" for projects paid on a stipulated sum basis, paired with its A201 general conditions document, which most design-bid-build agreements incorporate by reference.

"[The A201] sets the rights, responsibilities, and relationships of the owner, contractor, and architect."

Source: A Series, Owner Contractor Agreements, American Institute of Architects

ConsensusDocs is the main alternative. Its 200 series owner-constructor agreement folds the general conditions and the construction agreement into a single document instead of two.

"[ConsensusDocs 200] is a standard prime construction contract...that conveniently integrates the general terms and conditions and the construction agreement terms into one document."

Source: ConsensusDocs contract catalog, ConsensusDocs Coalition

Neither form is required by law. The value of starting from one is that the rights and procedures a board would otherwise have to invent, who certifies payment, who can stop work, how disputes get resolved, have already been worked out and tested. A custom contract has to solve all of that from scratch.

What the contract has to lock down

Whatever form the board uses, the signed contract should nail down: the scope of work, the price basis and how progress gets paid, the schedule and completion date, the warranty period, and how a change order gets priced and approved mid-project. Leaving any of these to a verbal understanding is how a project turns into a dispute.

Two of these deserve their own attention once the contract is signed: how the association pays as work proceeds, and what happens to the money the association withholds until the work is done. Those are covered in Progress payments and Retainage. Warranty coverage that starts once the project is usable, not finished, is covered in Warranties.

The delay clause decides who pays for a late finish

Construction law splits a late project into two categories. An excusable delay is caused by something outside the contractor's control.

"Excusable delays are unforeseeable and beyond the control of the contractor" and protect the contractor "from default termination, liquidated damages, and actual delay damages."

Source: Excusable and Non Excusable Delays, Cohen Seglias Pallas Greenhall and Furman

A non-excusable delay is the opposite: it is "caused by or are within the control of the contractor or its subcontractors," and that is where a liquidated damages clause, a fixed dollar amount owed per day the contractor is late without excuse, can apply. Whether a specific liquidated damages clause actually holds up in court varies by state.

"In order to be enforceable, liquidated damages must be specifically stated in the contract and must reasonably estimate the actual or anticipated damages contemplated by the parties at the time of contracting."

Source: Liquidated Damages for Delayed Completion in Construction Contracts, Duane Morris LLP

A board cannot add a daily penalty after the fact. It has to be in the contract before anyone signs. More on how delay disputes actually play out in Managing delays.