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The importance of a good contract for construction businesses

On Behalf of | Dec 7, 2020 | Construction Contracts, Contracts

When preparing to launch a new construction business, owners should learn about the different ways that a well-drafted contract may benefit them.

Any relationship with a client may run into unforeseen problems and without a good contract in place, construction companies and contractors may run the risk of losing money and missing out on important future business opportunities.

Benefits of a good construction contract

As explained by Entrepreneur magazine, a contract offers a business owner some peace of mind that a conflict resolution path exists should a need for that ever arise. A good contract should detail the method of resolution and associated process. More than one conflict resolution option may exist based on the nature of a dispute.

In some cases, a contract may stipulate that a party utilize mediation or arbitration first before automatically pursuing litigation. Litigation, however, may remain a viable option should mediation or arbitration fail to lead the parties to an acceptable outcome.

Major and minor contract disputes

A dispute between a contractor and a customer may involve relatively minor issues that ultimately do not negatively impact the quality of the work or payments to the contractor. Levelset indicates these minor disputes contribute to non-material contract breaches. An example of a minor breach of contract involves a schedule delay in a job.

When a dispute involves alleged serious or substantial damage to one party, a material breach of contract may exist. One example of a material breach of contract involves when a customer refuses to pay a contractor anything even when the contractor performed all job duties per the contract.