What a construction contract must include: 9 essential clauses

A good construction contract isn't paper signed for ceremony; it's a tool for controlling the job throughout the project. A loose contract leaves room for self-serving interpretations. Check that yours has all 9 of these

The 9 elements it must have

• 1. Detailed scope of work — Attach the construction drawings and BOQ as part of the contract, stating what's included and what isn't
• 2. Material specs with brand, model and grade — With the clause "any change of material requires written consent and must be of equivalent or better grade"
• 3. Total price and payment milestones — Each milestone tied to results, not dates, stating that payment follows a passed inspection
• 4. Start and finish dates with daily penalties — Penalties commonly used are around 0.01–0.1% of the contract value per day; specify acceptable grounds for extension (continuous heavy rain, owner-ordered design changes)
• 5. Additions and omissions (VO) — Every addition must have a documented price agreed before work starts, preventing bill shock at the end
• 6. Workmanship warranty — The general standard is a 5-year warranty on structure and 1 year on general work and systems; specify how quickly they must come to fix when notified (e.g. within 15 days)
• 7. Retention — Deduct 5–10% per milestone and hold it, returning it when the warranty period ends or when all defects are fixed. It's the only guarantee that brings tradespeople back after handover
• 8. Termination conditions — What breach by which party allows termination, and how completed work is valued. This is the most important clause when a job is abandoned
• 9. Responsibility for safety and third parties — Things falling onto a neighboring house, injured workers — who's responsible? It should be the contractor, with construction insurance

Before signing

Read every page, never sign a contract with blanks to fill in later, make sure the party is the same name that receives payment, and each keep an original. Bhoon Kharn has a construction contract drafting tool based on a standard template covering these clauses, editable for free under the "Draft a construction contract" menu