4 Crucial Elements Of A Construction Contract
When it comes time for you to draft a construction contract, there are certain tasks and considerations that you need to be cognizant of to protect you from any unnecessary challenges. Some of these things include:
- you are a registered contractor under the law
- identifying whether you do private or public work
- identifying whether you are working to alter or repair a structure
Additionally, you want to account for these four parts in the construction contract.
1. Workmanlike manner
The law in Idaho is simple when it comes to construction contracts. Under § 45-501, the law provides the right to lien for a person who performs labor or uses materials furnished for construction work to alter or repair any structure. Most importantly, the work must be private work rather than “public,” or work given by governmental entities.
The courts have stipulated that any construction not done in a workmanlike manner is not “substantially performed, and the contractor is not entitled to mechanic’s lien.” Therefore, one of the most crucial provisions to include in a construction contract is that the labor is performed in a “workmanlike manner.” Additionally, this “workmanlike” manner carries an implied warranty of fitness; this implied warranty of fitness typically does not require parties to construct a building, structure, and other dwellings free of defects.
2. Registered Contractor
A contractor for a lien claimant who is not registered under Idaho law as a contractor will not be able to have the rights to the lien. Additionally, Idaho Code Sections 54-201 through 54-5218 requires that “any person or entity doing business as a construction contractor within the state of Idaho is required to be registered as a contractor by law.” If a contractor is not registered and does not display their contractor registration number, they fail to meet this requirement and should not be trusted.
3. Demands (including payment)
As you prepare to draft your construction contract, make sure to include a list of demands. This includes the specificity of the work to be altered, repaired, fixed, or built by the contractor. Additionally, you should include a description of labor, the materials provided and required, and any additional services you are providing as the contractor.
4. Damages
Generally, breach of a construction contract based on damages is measured by the difference between the value of the work actually done and the value it would have had if it had been properly done under the construction contract.
In some instances, the courts have granted damages to owners when the builder defaults on a construction contract; the owner can mitigate their own damages by taking possession of the work that was to be done by the builder and complete it themselves or find someone else to do it and charge the builder for the necessary expenses.
The law in Idaho allows an owner (or contractor) to receive certain payments not exceeding five percent (5%) from contractors for the construction improvement of any private work as retention. However, this requirement does not apply when the improvement of the private work is for a residential real property with one to four units occupied or to be occupied by the owner.
Subsequently, the retention proceeds to be withheld by the owner will be reduced to less than one hundred fifty percent (150%) of the estimated value of work that is needed to be completed under contract; unless the owner retains the proceeds, then it will not exceed more than five percent (5%). This will happen within thirty-five (35) days from the date the work of improvement was substantially complete as agreed to under contract.
Call Johnson May for guidance on drafting and reviewing your construction contracts. Our services are designed to help put your mind at ease by limiting potential pitfalls.
Tags:
