What Should Be Included in a Texas Construction Contract?

A well-drafted construction contract does more than describe the work to be performed. It establishes expectations, allocates responsibilities, addresses payment, provides procedures for unexpected problems, and gives the parties a framework for resolving disagreements before they jeopardize the project.

Whether you are a property owner, developer, general contractor, subcontractor, supplier, architect, engineer, or other construction professional, understanding what should be included in a Texas construction contract can help reduce uncertainty and protect your interests.

Construction agreements can vary considerably depending on the project. A residential remodeling contract may require different provisions than an agreement for a large commercial development. Because seemingly minor contract language can have significant financial consequences, having an attorney review or prepare an agreement before it is signed can be valuable.

Patout, Fontana, and Dellis PLLC assists clients with construction contract drafting, negotiation, review, enforcement, and disputes in Houston and throughout Texas. The firm's construction law practice represents owners, contractors, subcontractors, suppliers, and design professionals across residential, commercial, industrial, and other projects.

Why Is a Written Construction Contract Important?

Construction projects involve money, deadlines, materials, labor, multiple businesses, and numerous opportunities for unexpected issues to arise.

A detailed written agreement creates a common reference point for the parties. Instead of relying on conversations or assumptions about what someone agreed to do, the contract can establish the project's requirements from the beginning.

A properly prepared construction contract can address questions such as:

• What work must be performed?
• What work is excluded?
• How and when will payments be made?
• Who is responsible for obtaining permits?
• Who supplies materials?
• How are changes approved?
• What happens if construction is delayed?
• What insurance must each party maintain?
• What happens when one party fails to perform?
• How will disputes be handled?
• Under what circumstances can the contract be terminated?

The answers should reflect the actual project and business relationship rather than simply relying on generic contract language.

Patout, Fontana, and Dellis PLLC works with construction clients to develop agreements based on their projects, objectives, and potential risks. The firm also assists with negotiating and enforcing construction agreements when problems arise.

1. Identification of the Parties

A Texas construction contract should clearly identify everyone entering into the agreement.

Depending on the project, that may include an owner, developer, general contractor, subcontractor, supplier, architect, engineer, or other entity.

The agreement should accurately state the legal names and relevant contact information of the contracting parties. If a business entity is entering into the contract, the agreement should correctly identify that entity rather than creating uncertainty about who has assumed the contractual obligations.

Clearly identifying the parties may seem straightforward, but precision at the beginning of the agreement can help prevent unnecessary disputes later.

2. A Detailed Scope of Work

The scope of work is one of the most important components of a construction contract.

It should clearly explain what work will be performed and, when appropriate, what work is excluded.

Depending on the project, the scope may address:

• Labor
• Materials
• Equipment
• Plans and specifications
• Installation requirements
• Project phases
• Deliverables
• Quality requirements
• Responsibilities of individual contractors or subcontractors
• Cleanup and closeout responsibilities

A vague scope can create disagreements over whether particular work was included in the original price or constitutes additional work.

Patout, Fontana, and Dellis PLLC identifies a well-defined scope of work as a key construction contract provision. Having the firm's construction attorneys review the scope before execution can help clients identify ambiguity before it becomes a costly project dispute.

3. Contract Price and Payment Terms

Construction contracts should clearly address how much will be paid and when payment becomes due.

Depending on the agreement, payment provisions may cover:

• The total contract price
• Deposits
• Progress payments
• Payment applications
• Milestone payments
• Retainage
• Reimbursable costs
• Allowances
• Final payment
• Documentation required before payment
• Procedures for disputed amounts

The payment structure can also depend on the type of construction contract being used. Patout, Fontana, and Dellis PLLC works with agreements including cost-plus, design-build, guaranteed maximum price, lump-sum, time-and-materials, unit-price, and other construction contracts.

Clear payment provisions can reduce confusion and provide the parties with a defined process when payment issues arise.

4. Project Schedule and Completion Requirements

Construction contracts should establish expectations for when work will begin and when it should be completed.

Depending on the project, the contract may address:

• Start dates
• Substantial completion
• Final completion
• Project milestones
• Scheduling responsibilities
• Extensions of time
• Notice of delays
• Excusable delays
• Consequences of unexcused delays

Construction schedules frequently change because of weather, material availability, design revisions, owner-directed changes, site conditions, labor issues, and other circumstances.

A strong agreement should anticipate the possibility of delays and establish procedures for addressing them rather than leaving the parties to determine their rights after the project has already fallen behind.

5. Change Order Procedures

Changes are common during construction. What matters is having a clear process for managing them.

A construction contract should explain how changes to the scope, price, materials, schedule, or other project requirements must be requested and approved.

A change order provision may address:

• Who can request a change
• Who has authority to approve it
• Whether approval must be in writing
• How additional costs are calculated
• How schedule impacts are addressed
• What documentation must be submitted
• Whether work can begin before final approval

Without a defined process, disagreements can arise over whether additional work was authorized and whether additional payment or time is owed.

Patout, Fontana, and Dellis PLLC handles construction matters involving change orders, scheduling, delays, and related contract disputes. Consulting the firm before a project begins can help businesses create procedures designed to reduce those disputes.

6. Insurance Requirements

Construction involves significant risk, making insurance provisions another important part of many contracts.

The agreement may specify the types and amounts of insurance particular parties are required to maintain during the project.

Depending on the circumstances, the contract may also address proof of coverage, additional insured requirements, and responsibilities for maintaining insurance throughout construction.

Patout, Fontana, and Dellis PLLC lists insurance requirements among the key provisions parties should consider when preparing construction contracts.

Because insurance provisions can interact with other risk-allocation language, they should be reviewed as part of the contract as a whole.

7. Warranties and Standards for the Work

Construction contracts should clearly address applicable warranties and expectations concerning the quality and performance of the work.

Warranty provisions may specify:

• What work is covered
• The duration of applicable warranties
• Procedures for reporting problems
• Obligations to correct defective work
• Applicable exclusions
• Responsibilities for warranty repairs

Clearly defined warranty terms can help both sides understand their responsibilities after work is completed.

Patout, Fontana, and Dellis PLLC assists clients with construction matters involving workmanship, warranties, and defect claims, in addition to drafting and reviewing construction contracts.

8. Responsibilities for Permits, Inspections, and Compliance

A construction agreement should establish which parties are responsible for obtaining required permits, arranging inspections, and addressing applicable project requirements.

Leaving these responsibilities unclear can create delays and disagreements.

Depending on the project, the contract may also allocate responsibility for correcting work that fails an inspection or does not conform to contractual requirements.

9. Procedures for Delays and Unexpected Conditions

Not every construction problem can be predicted, but a contract can establish procedures for dealing with unexpected events.

For example, an agreement may address circumstances involving:

• Severe weather
• Material shortages
• Unforeseen site conditions
• Labor disruptions
• Owner-caused delays
• Contractor-caused delays
• Design changes
• Government actions
• Other circumstances beyond a party's control

The contract should explain when additional time or compensation may be available and what notice must be provided.

These provisions can become particularly important when a delay has significant financial consequences.

10. Default and Termination Provisions

What happens when one party fails to perform its contractual obligations?

The agreement should address default and establish the rights and responsibilities of the parties if performance breaks down.

Depending on the circumstances, these provisions may cover:

• Events constituting default
• Written notice requirements
• Opportunities to cure a default
• Suspension of work
• Termination for cause
• Termination under other contractual circumstances
• Payment following termination
• Completion of unfinished work
• Responsibilities concerning project materials and documents

Termination can have substantial consequences for construction companies and project owners. Patout, Fontana, and Dellis PLLC handles construction default matters involving payment disputes, default notices, termination, and completion issues.

If you are considering terminating a construction contract—or have received a default or termination notice—speaking with the firm before acting can help you understand the agreement and your legal options.

11. Dispute Resolution Provisions

Even carefully planned projects can result in disagreements.

A construction contract should establish how disputes will be handled. Depending on the agreement, the process may involve:

• Direct negotiation
• Mediation
• Arbitration
• Litigation
• A combination of dispute resolution procedures

The contract may also establish procedures and deadlines that must be followed before a party can proceed to the next stage of a dispute.

Selecting dispute resolution provisions without understanding their consequences can affect how, where, and at what cost a future disagreement is resolved.

Patout, Fontana, and Dellis PLLC handles construction matters through negotiation, mediation, arbitration, and litigation and can help clients evaluate dispute resolution language before signing an agreement.

12. Indemnification and Risk Allocation

Construction contracts frequently contain provisions designed to allocate certain risks between the parties.

Indemnification provisions can be particularly significant because they may affect responsibility for claims, losses, or liabilities arising during a project.

These provisions should not be treated as routine boilerplate. Texas law can affect the enforceability and scope of certain risk-allocation provisions in construction contracts.

Having Patout, Fontana, and Dellis PLLC review these clauses before an agreement is signed can help businesses better understand the obligations they are accepting.

13. Project Closeout and Final Payment

The end of construction does not necessarily mean the end of contractual responsibilities.

A contract can establish what must occur before the project is considered complete and final payment becomes due.

Closeout requirements might include:

• Final inspections
• Punch-list completion
• Required documentation
• Warranties
• As-built drawings
• Releases or other payment documentation
• Delivery of manuals or project records
• Final payment procedures

Clearly defining closeout requirements can reduce disputes about whether the work has actually been completed and whether final payment is due.

Residential vs. Commercial Construction Contracts in Texas

The provisions appropriate for a construction agreement depend heavily on the type and scale of the project.

Residential contracts may involve homeowners, builders, remodelers, and subcontractors, while larger multifamily developments can involve considerably more parties.

Commercial projects often involve multiple contracts connecting owners, developers, general contractors, subcontractors, suppliers, architects, engineers, and other professionals. As the number of participants increases, coordinating contractual obligations becomes increasingly important.

Patout, Fontana, and Dellis PLLC assists clients with both residential and commercial construction agreements and tailors its approach to the particular project and parties involved.

Should You Use a Standard Construction Contract?

Standard or template contracts can provide a starting point, but no form automatically addresses every project's circumstances.

Construction projects differ in scope, price, scheduling, risk, insurance, payment structure, design responsibilities, and relationships between the parties. Using language from an old project or downloading a generic agreement without considering those differences can leave important issues unaddressed. A contract should reflect the actual transaction.

Patout, Fontana, and Dellis PLLC can review an existing construction agreement or assist in drafting and negotiating contract terms tailored to a particular project. Addressing potential problems before execution may be considerably easier than resolving a dispute after construction is underway.

Have a Texas Construction Attorney Review Your Contract Before You Sign

The best time to address an unclear construction contract provision is usually before it becomes the center of a dispute.

A construction attorney can review the agreement from the perspective of your role in the project and identify provisions that may warrant additional attention or negotiation.

That review may include issues involving:

• Scope of work
• Payment
• Scheduling
• Change orders
• Insurance
• Warranties
• Default
• Termination
• Delays
• Dispute resolution
• Risk allocation
• Project closeout

Patout, Fontana, and Dellis PLLC provides construction contract drafting, negotiation, review, enforcement, and dispute-related services for clients in Houston and throughout Texas. The firm represents owners, contractors, subcontractors, suppliers, design professionals, and other participants in the construction industry.

Contact Patout, Fontana, and Dellis PLLC About Your Construction Contract

A strong construction contract should provide clarity before the first problem occurs. Whether you are preparing an agreement for a new project, negotiating proposed terms, reviewing a contract before signing, or dealing with a dispute involving an existing agreement, Patout, Fontana, and Dellis PLLC can help you understand your rights and obligations.

Protect your business, project, and contractual interests before uncertainty turns into a costly dispute.

Call Patout, Fontana, and Dellis PLLC at 346-460-5528 today to schedule a consultation with a Houston construction contract attorney. The firm's Houston office serves clients throughout Texas.