Construction Basics for Owners: Importance of the Contract

By Susan Van Bell, Esq., AIA Contract Documents Consultant

February 1, 2022

Welcome to Construction Basics for Owners! This series of articles will discuss elements of the construction process, terminology, and issues that owners should know about when involved in a construction project. Are you are a property owner who wants to have a house designed and built? Or perhaps you want to have a kitchen remodel in your existing home. Maybe you are an owner of a small business looking to have a commercial property developed. If so, this series is for you!

Construction is a unique world unto itself and there is a lot to learn to work with an architect or contractor in order to achieve a successful project. This series will help you become familiar with some of the fundamentals. We will address topics such as different delivery methods and the pros and cons of each for the owner; what to expect when working with an architect or contractor; responsibilities of each party; time and changes in work; payment processes; insurance; and dispute resolution. We will also explore some terminology that is unique to construction, such as what is an allowance or substantial completion?

Many of these topics will be addressed in your written agreements with your architect or contractor, which should be tailored to the size and scope of the project. It is essential that you read the agreements carefully. Ask the architect or contractor to explain any terminology or language in the agreement that you don’t understand. Don’t be shy! You don’t want to agree to something without a clear understanding of what it means. This will help your project to go more smoothly by minimizing misunderstandings or other serious issues.

It is also advisable to have a local attorney who is knowledgeable about construction review your agreements. There may be local statutory requirements that need to be addressed. This is particularly true in the area of residential construction, which is viewed in something of a consumer protection framework. Some jurisdictions have requirements in place for the protection of the homeowner.

Whether you are a homeowner or a business owner, there is going to be a certain amount of emotion inherent to your construction project. Your family home or your restaurant are near and dear to your heart. Your contracts help to separate the emotion from the project and provide the framework you need to view it as a businessperson. The responsibilities set out in your contracts, if clearly delineated, manage everyone’s expectations to keep the relationships and the project going smoothly. Having a clear and comprehensive contract not only helps to educate you, the client, but it can help diffuse some of the emotion if things get bumpy. A contract provision that addresses the problem is very helpful. This article series will help you to learn about the issues that should be addressed in your agreements.

Article 2 will look at the two delivery methods that are most used in residential or small commercial projects: design-bid-build and design-build. We will explain the basics of these methods and the pros and cons of each from the owner’s perspective. As a preview, in the design-bid-build method, you will hire an architect and a contractor. In addition to performing design services, the architect will help you with administration during the construction of the project. In the design-build method, you will only hire one entity, the design-builder, who will provide both the design and construction services. Learn more about these two options in our next article: Construction Basics for Owners: The Design-Bid-Build and Design-Build Delivery Methods .

Susan Van Bell, Esq. was Senior Director of Content for AIA Contract Documents for over ten years. She is currently a consultant.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.