Provisions In A Construction Contract

by Mark Zinman, Zona Law Group

As an owner or investor of real estate, it is inevitable you will eventually need a contractor to fix issues at your home. We strongly suggest always using licensed contractors, to ensure that the work is done properly and to provide protection from liability if there is a problem in the unit. It is very easy for a resident to point blame when big renovations are completed at a property, which cause injury, and the owner doesn’t use a licensed contractor. It’s possible that over the years, many AZREIA members have signed numerous different contractor’s contracts, but not thought twice about what actually is required to be in one.

The basic principles of contract law require that there be an offer, acceptance and consideration to be a contract. Also, case law requires that there be enough definite terms, so that it is clear the parties are agreeing on the essential elements. This means that for numerous different areas of the law, a contract could be as simple as words written on a napkin, as long as those words are specific enough to lay out the obligations of both parties and the consideration (what is being exchanged by the parties). These minimal requirements are necessary so that, if there is a dispute, a court can determine whether the parties intended to be bound by a contract and what are the essential elements of the contract.

When it comes to contractors, not only are they governed by the foregoing principles, but they are also governed by the applicable statutes for licensed contractors, as well as any regulations from the Registrar of Contractors. A.R.S. § 32-1158 provides: Any contract in an amount of more than $1,000 entered into between a contractor and the owner of a property to be improved shall contain in writing at least the following information: 1. The name of the contractor and the contractor's business address and license number; 2. The name and mailing address of the owner and the jobsite address or legal description; 3. The date the parties entered into the contract; 4. The estimated date of completion of all work to be performed under the contract; 5. A description of the work to be performed under the contract; 6. The total dollar amount to be paid to the contractor by the owner for all work to be performed under the contract, including all applicable taxes; 7. The dollar amount of any advance deposit paid or scheduled to be paid to the contractor by the owner; 8. The dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract.

In comparison to generalized contract principles, the contract requirements for a licensed contractor are much higher. This is beneficial for both the customer as well as the contractor, so the parties can avoid needless confusion.