Navigating the world of contract agreements with your general contractor is a necessary evil of doing good business!
A clear and defined general contractor agreement protects you and your contractor if something changes with the project - be it scope adjustments, price adjustments, or subcontractor changes.
While this may sound complicated - it doesn’t have to be! We’ve put together a detailed and cohesive guide to general contractor agreements.
Why Do You Need A General Contractor Agreement?
As we have briefly touched upon, a clear and easy-to-understand contractor’s agreement is essential. It’s the next step in the process once pricing and design are approved before work can commence.
A general contractor agreement form is a legal document. In Canada, the standard is based on the Canadian Construction Documents Committee Forms (CCDC), which are considered the industry standard for construction documents, from surety bid bonds to detailed consulting agreements.
However, bear in mind that these are standard forms. These templates include particulars regarding terms and conditions meant to prevent unnecessary re-negotiation if you have a longstanding project, but will not include project scope, cost, or time frame details. Your contractor should add those terms.
A written agreement between you and your contractor outlines critical aspects of the project, such as a detailed project description and the cost. It also solidifies who is responsible for damages or repair should anything go wrong.
Basic General Contractor Agreement Inclusions:
A general contractor agreement form does not have to be long to be correct. Contracts should be free of excessive industry jargon, easy to read, typed professionally, and reviewed by your legal team.
Remember - if something feels off, trust your gut.
Here are some basic contract inclusions you can expect to see from all reputable contractors:
- Name and contact information of the contractor. This should include the contractor’s license number and GST/HST Number if applicable.
- Property description where the job to be done will take place. Provide the address and property description (for example, the contract should clearly indicate whether the property is a retail location or restaurant).
- Subcontractor specifications. This section is critical if your general contractor regularly hires subcontractors to complete plumbing or electrical work. This section will outline their payment terms and release you from liability if they’re unpaid or the work project ends abruptly.
- Project scope. This portion should state, in very clear terms, what the job to be done is. Supplier specifics and building materials should be spelled out as well as state who is responsible for securing permits or inspections.
- Project cost. Not only should this be as exact as possible, but it should also be broken down into as much detail as possible, with any down payments and payment schedules clearly stated, with dates for each listed.
- Relevant dates. The contract should list progress milestone dates, as well as the start date and projected completion date.
- Insurance. The contract should briefly outline their liability insurance limits, and a separate certificate of insurance should be provided as well.
- Warranty period. Most reputable contractors will provide a warranty for their work. Be sure this is outlined in detail.
- Bonding and Workers Compensation. If your project requires bonding, be sure the bonds are free of errors and reflect the correct amounts. Verify that the contractor is enrolled in your province’s Workers’ Compensation program.
Types of Contracts:
There are generally four different types of general contractor agreement forms - specifically as it concerns payment. The type your contractor and you select will be outlined in your contract, but it may not describe it further.
Fixed-price contracts - Also referred to as lump sum contracts, these agreements lay out the total price of the project. The total cost can include labour and materials, equipment, and coordination fees. Taxes may or may not be included, but this should be clearly outlined.
These are favourable for smaller contracts that have fewer variables.
Cost-plus contracts - These agreements reflect the actual price paid for the project upon completion, plus a fee for time management and coordination - usually a percentage. The project budget will usually be capped at a certain amount and estimates provided.
This contract style is good for large projects that are easily subject to change.
Time and material contracts - Similar to cost-plus contracts, time and material contracts are set up so that the client pays the contractor on a daily or hourly basis - with no fee for time management and coordination. The project budget can also be capped for this style of contract.
Unit-pricing contracts - This style is typically used for projects based on standard rates per unit of measurement or a specific price per task.
This contract is ideal for federal or municipal projects that use significant resources for repetitive tasks.
Are you looking for a reputable general contractor? Contact Southwest and Midwest Design & Construction today!