July 01, 2019 CONSTRUCTION LAW 101

Anatomy of a Standard Form Construction Contract

Luke J. Farley

The Basics of Standard Form Agreements

In the construction industry, there are as many different contract forms as there are contractors. Some contractors use custom manuscript agreements drafted from scratch (or mostly scratch) by their hardworking construction lawyer who wrote, re-wrote, and tweaked the language until it fit the idiosyncrasies of their client’s business like a good piece of PPE. On the opposite end of the spectrum is the standard form agreement, the staid workhorse of construction contracts. These standard form contracts are ubiquitous and are a lingua franca for the construction industry, covering the same basic provisions which most of the industry has come to expect in their agreements. Since standard forms are so common, every construction lawyer needs to be familiar with their basic structure. This article explains the anatomy of a standard form construction contract.

Standard form agreements are typically drafted and promoted by one of the major industry groups, like the American Institute of Architects (AIA), the Associated General Contractors of America (AGC) or the Engineers Joint Contract Document Committee, comprised of the National Society of Professional Engineers, American Society of Civil Engineers, and the American Council of Engineering Companies (EJCDC). These industry groups draft entire series of contracts covering general contracting, design services, construction management, subcontracting, subconsulting, joint venturing, etc. (Collect ‘em all!) Standard form documents are given a number to identify them within their series (i.e., AIA A101-2017, ConsensusDocs 200, EJCDC C-625). The AIA, AGC, and EJCDC also each have their own forms for pay applications, change orders, payment bonds, and other documents used on a construction project. For the sake of simplicity, though, this article primarily focuses on the AIA standard form contracts between owners and contractors and notes differences with other document series where relevant.

“Contract Documents”: The Critical Concept

The key to understanding the anatomy of a standard form construction contract is the concept of the “Contract Documents.” You might be inclined to think of a contract as a single document signed and dated by the parties on the last page. But if you want to understand your client’s legal obligations under a standard form construction contract, you need to think of “the contract” in broader, more holistic terms. A standard form construction contract isn’t just a single document. It’s comprised of many different documents and parts which, when read together, constitute the entire set of obligations undertaken by the parties. These documents are collectively (but unimaginatively) called the “Contract Documents,” a term which is defined to include not just the basic agreement between the parties but also the general terms and conditions, drawings, specifications, amendments, and addenda—each of which is its own separate document. Once you include all of the Contract Documents, a standard form construction contract can easily span hundreds or even thousands of pages. 

The Agreement

The first of the Contract Documents is the “Agreement.” Ordinarily, the terms “contract” and “agreement” are synonymous, but when dealing with standard form contracts, “Agreement” becomes a term of art. It refers to a short document signed by both parties that sets out the most essential terms of the deal between the owner and contractor, like the price of the work and payment terms. Notably, the Agreement doesn’t give a detailed description of the work the contractor has agreed to perform; that’s reserved for the “Drawings” and “Specifications” (discussed below). Both the AIA and EJCDC document series have a standalone Agreement, while ConsensusDocs has integrated the agreement and general terms and conditions (discussed below) into a single document. After reviewing the Agreement you might be tempted to think your work is finished. But it’s critical to understand that the Agreement is not the entire contract. Recall, it’s just one of the many Contract Documents. If you only reviewed the Agreement, you’d be missing the vast majority of what constitutes the contract.

The General Conditions

If the Agreement contains the most essential, substantive terms of the deal between the owner and the contractor, then the “General Conditions of the Contract for Construction” spell out in detail the parties’ procedural rights and how they will interact with each other throughout the course of the project. The General Conditions are a separate document and must be read in concert with the Agreement. Many of the most important contract terms are found not in the Agreement but in the General Conditions, including changes in the work, the one year corrective period (a.k.a. the “warranty”), and the procedures for progress payments. The General Conditions also explain how the contractor and the architect will interact with each other on important matters like the review and certification of the contractor’s pay applications and rejection of work. Since the contractor and architect generally don’t have a direct contract with each other, the General Conditions are the primary law setting out how they should work together.

The Supplementary Conditions

Sometimes the parties want to amend the General Conditions, but instead of revising an electronic version of the text they draft a standalone set of amendments called Supplementary Conditions. Supplementary Conditions are most common when dealing with institutional or public owners, who buy a lot of construction work and have a set way of doing business. These added conditions cross-reference the sections in the General Conditions and can tweak existing language or add whole new provisions. Drafting Supplementary Conditions should be done with “careful coordination” between the new language and the other Contract Documents. You must always review the Supplementary Conditions in conjunction with the General Conditions, because they could substantially modify the General Conditions; such a modification wouldn’t be apparent on the face of the General Conditions. While creating a separate set of Supplementary Conditions is fine as a matter of contract law, it’s not a best practice. The AIA, for instance, assumes parties will take advantage of the electronic versions of their documents and type changes directly into the AIA A201-2017 instead of creating a new document.

The Drawings & Specifications

While the Agreement, General Conditions, and Supplementary Conditions, if any, establish the business relationship between the owner and the contractor, the “Drawings” and “Specifications” describe exactly what the contractor is supposed to build, that is, the contractor’s scope of work. In many ways, the other Contract Documents merely set the stage for the successful completion of the scope of work established by the Drawings and Specifications. The Drawings—also informally called the “plans”—are the “graphic and pictorial portions of the Contract Documents showing the design, location, and dimensions” of the work. The Specifications are “written requirements for materials, equipment, systems, standards and workmanship.” Each component of the work—earthwork, concrete, electrical, plumbing, etc.—has its own section in the Specifications. The Drawings show you the work while the Specifications tell you how it should be done. Often times the Drawings and Specifications conflict with each other (if they didn’t, we construction lawyers would have a lot less to do). In the event of a conflict, should a contractor follow the pictures or the words? If your contract includes an “order of precedence” clause the Specifications will typically control over the Drawings based on the rationale that words can better capture the design intent than drawings.

Conclusion

A standard form construction contract is a whole greater than the sum of its parts. Each of the Contract Documents plays its own role in establishing the rights and duties of the contractor and the owner. Some are focused on the business relationship between the parties while others define the scope of work, but together they’re a single, unified contract. Understanding how these parts fit together is critical to drafting or litigating over any standard form agreement.

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Luke J. Farley

Ellis & Winters LLP, Raleigh, NC, YLD & Division 7 (Liens, Bond, and Insurance)