Construction contracts come in all shapes and sizes. For commercial projects, the parties often use pre-printed contract forms such as forms promulgated by the American Institute of Architects, the Associated General Contractors, and the Engineer’s Joint Contract Documents Committee. However, there are few generally-accepted contract forms applicable to residential projects, although pre-printed forms used for commercial projects may be modified for use on some residential projects. They may be particularly appropriate for large or complex residential projects.
Most residential contracts are “customized” forms drafted by the attorney for a party. Many disputes have arisen as a result of the failure of the builder to include in the contract all of the essential terms of the transaction or to express the intentions of the parties in clear terms. Other disputes have originated from the failure of the builder to incorporate by reference the plans and specifications that govern the technical aspects of the builder’s work or other documents that were intended to be a part of the deal.
That leads me to Rule #1: All construction contracts should incorporate by reference a set of plans and specifications prepared by an architect, engineer or designer. Where the plans and specifications are incorporated by reference, the builder is bound to comply with the requirements of the plans and specifications. And when the builder strictly complies with the requirements of the plans and specifications, the builder will not be liable for the consequences of defects in the plans and specifications.
Under the doctrine of “incorporation by references”, a separate document may become a binding part of a construction contract by virtue of an express reference to that document in the contract. It is not necessary to attach the incorporated document to the contract, but the referenced document must be in existence and must be reasonably described.
An example: “The Builder shall perform the Work in accordance with the plans and specifications identified in Schedule 1 to this contract.” By referring to the Schedule 1 plans and specifications, and then attaching that Schedule 1 to the contract at the time the contract is signed, the plans and specifications are considered by the law to be as much a part of the contract as if they were physically reproduced in the body of the contract.
“Builder beware”!
By J. Greg Easter