Construction Contract: What to Include
Written by Law on Call Staff | Reviewed by Jeremy Green, Esq. | Last Updated June 23, 2026
Construction contracts define the rights, responsibilities, and expectations of everyone involved in a building project. Understanding their importance helps prevent disputes, reduce risk, and keep your project on track.
Whether you’re renovating a home, managing a commercial build, or working as a contractor.
Main Takeaways
- A construction contract is a legally binding document that sets clear expectations for work, cost, and timeline before a project begins.
- Contracts should define the type of work, payment terms, procedures for changing or updating the project, insurance requirements, and how disputes will be handled
- The more details you include in the contract, the fewer the questions about how a project will go.
What Is a Construction Contract?
Construction contracts are just like any other type of contract between two parties. They focus on clarifying the responsibilities, requirements, and expectations of everyone involved in the project. For example, if you’re hiring someone to build a deck in your backyard, a construction contract spells out exactly what’s being built, what you’re paying, and what happens if the project changes.
Why Construction Contracts Matter
A construction contract is a legally binding agreement between the client who ordered the work and the contractor who is performing it. They do more than describe the project. Construction contracts also help manage risks, establish payment expectations, and create procedures for handling changes or disputes.
A well-written contract can protect both parties and keep the project moving forward. If one party fails to meet their obligations, the contract gives both sides clear legal grounds to enforce the agreement or recover damages.
Know what you’re agreeing to before you sign.
4 Common Construction Contracts
Construction contracts aren’t one-size-fits-all. Each type handles payment and risk differently. Understanding those differences can help you choose the right contract and avoid trouble.
Popular Types of construction contracts
Not all construction contracts are the same. Below we break down the most common ones, and what they work best for:
| Contract Type | How It Works | Best For |
|---|---|---|
| Fixed-Price | Contractor completes the project for a set price | Projects with a well-defined scope |
| Cost-Plus | Owner pays actual costs plus a contractor fee | Projects where final costs are hard to predict |
| Time and Materials | Owner pays for labor hours and materials used | Projects where the full scope isn’t clear yet |
| Unit Price | Payment is based on measured units of work completed | Large projects like road construction |
What to Include in a Construction Contract
A construction contract is made up of several important sections. Each one helps explain the project, set expectations, and protect both the property owner and the contractor.
10 Most Important Contract Clauses
While the full contract may include additional details specific to your project, these 10 clauses cover the essentials every construction contract should address.
- Parties Involved and Property Information
The contract should clearly identify who is involved in the project. Include the names of the property owner, contractor, and any other parties to the agreement. It should also list the address where the work will take place. - Scope of Work, Plans, and Specifications
This explains exactly what the contractor will do, including the materials being used and anything that is not included in the project. Many construction projects also rely on plans, drawings, or written specifications, which should be attached to the contract or referenced in the agreement so everyone understands the project requirements. - Contract Price and Payment Terms
You’ll want to lay out how much the project will cost and when payments are due. It may include a deposit, mid-project payments, and the final payment amount. - Project Timeline and Delays
The contract should include a start date, expected completion date, and any important milestones to help track progress. It should also explain how delays will be handled, whether caused by bad weather, labor shortages, or material delays, and whether the project schedule can be adjusted as a result. - Change Orders
Sometimes a project changes after work begins. A change order clause explains how changes to the scope of work, project cost, or schedule must be reviewed and approved before the work is performed. - Licenses, Permits, and Insurance
The contract should explain who is responsible for obtaining permits and maintaining any required licenses. It should also address insurance coverage in case of accidents or property damage. - Warranties, Quality Standards, and Substantial Completion
This will explain the quality of work expected and any warranties provided by the contractor, which can help protect the property owner if problems appear after the project is finished. It’s also helpful to define substantial completion, meaning the project is finished enough to be used for its intended purpose, to help prevent disagreements about when the job is considered complete. - Dispute Resolution
If a disagreement happens, the contract should explain how it will be handled. This may include mediation, arbitration, or through legal means like retaining lawyers or going to court. - Liability, Indemnification, and Termination Rights
This explains who is responsible if someone is injured or property is damaged during the project, helping protect both parties from unexpected claims. The contract should also lay out when either party can end the agreement before the project is complete, and how payment will be handled if it ends early. - Signatures and Dates
In order to show that all parties agree to the terms before work begins, the contract should be signed and dated by everyone involved.
Frequently Asked Questions
Yes. A simple written agreement is always safer than a handshake deal, no matter the project size.
If a contractor fails to meet the terms of the agreement, the property owner may have grounds to withhold payment, demand corrections, or pursue legal action. Your dispute resolution and termination clauses are especially important in these situations.
Yes, but any changes need to be agreed to and signed by both parties. Verbal agreements to change the scope or price are hard to enforce and a common source of construction disputes.