Construction Law Overview
Construction Law Resources
Construction law governs all phases of the construction process, beginning with the initial construction contract and ending with the delivery of the finished product. It also covers all types of construction projects, ranging from the building of residential homes to the development of transportation infrastructure. Accordingly, local, state and federal laws may apply depending on the terms of the contract.
Construction Contracts
A construction contract sets forth the rights and liabilities of each party involved in a construction project. Construction contracts must be drafted and signed by all parties before construction may begin. Construction contracts typically include the following information:
- A plan for the project to be performed.
- A timeline for completion of the project.
- A description of penalties for failure to complete the project in a timely manner.
- A payment schedule, including a description of penalties for late payments.
- An agreed-upon method of dispute resolution.
Failure to comply with a construction contract may result in a legal action for breach of contract.
Construction Permits
Construction permits allow municipalities to regulate construction within their jurisdictions. Construction permits must be obtained before any new construction may begin. Permits may also be required for the repair or replacement of existing fixtures or electrical or plumbing systems. A city will grant a permit if the proposed project complies with federal, state and local building codes. Violation of a construction permit may result in fines and penalties, or an order that the property be returned to its original condition.
Express and Implied Warranties
Warranties, also known as guarantees, define a contractor's liability for construction defects. Warranties included in a construction contract are known as "express warranties," while warranties that apply to all construction contracts, regardless of whether or not they are set forth in the contract, are known as "implied warranties." Contractors may be sued for the breach of both express and implied warranties.
Express warranties may set forth specific promises or general guarantees of quality and good workmanship. For example, a plumbing contractor may warrant new pipes against leakage for a period of twenty years. Conversely, a construction contract may simply include a general warranty of quality. A warranty of quality ensures that a builder will proceed with the proper materials and will use due care in completing the specified project.
Implied warranties include the Implied Warranty of Accuracy and the Implied Warranty of Suitability. The Implied Warranty of Accuracy warrants the precision of information contained within a project's plans and specifications. The Implied Warranty of Suitability warrants that a project's plans themselves are proper and suitable to reach the project's agreed-upon goals.
Bonding
Those sponsoring large construction projects typically allow contractors and subcontractors to bid for participation in the project. Those with the lowest bids are generally chosen to provide their services. To protect against the risks inherent in construction projects, an owner may request that a contractor provide a surety bond. A surety bond is a guarantee by a surety company that a contractor will perform in accordance with the construction contract. A surety bond may take several different forms:
- Bid Bond. A bid bond assures the owner that the contractor placed his or her bid in good faith.
- Performance Bond. A performance bond protects the owner financially if the contractor fails to perform in accordance with the contract.
- Payment Bond. A payment bond assures the owner that the contractor will pay the project's subcontractors and suppliers.
- Maintenance Bond. A maintenance bond guarantees against poor workmanship or defective materials.
Contractors are screened thoroughly by a surety company before they are qualified to obtain a bond. Surety bonds may typically be secured for one-half to two percent of the contract price.