Which payment schedule should I choose?

Milestone-based payments are most common for residential projects — you pay a percentage when specific work stages are completed (e.g., foundation, framing, rough-in, finish). Progress payments work well for longer commercial projects where monthly billing is practical. Payment upon completion is generally only suitable for small projects under $10,000. Avoid paying more than 10-20% upfront, and never pay the full amount before the work is complete.

What is a mechanic's lien and why does it matter?

A mechanic's lien is a legal claim against your property filed by a contractor, subcontractor, or material supplier who has not been paid. Even if you paid your general contractor in full, a subcontractor who was not paid by the general contractor can file a lien against your property. Lien waiver provisions in this contract require the contractor to provide proof that subcontractors and suppliers have been paid before you release each payment, protecting you from double payment.

Do I need to verify the contractor's license?

Yes, absolutely. Most states require contractors to be licensed, and hiring an unlicensed contractor can have serious consequences. In California, for example, an unlicensed contractor cannot sue to collect payment for their work. You can verify a contractor's license through your state's contractor licensing board website. The license number should be recorded in this contract.

What happens if the project goes over budget?

The change order provisions in this contract require that any additional work or cost increases be documented in writing and signed by both parties before the work proceeds. The contractor cannot unilaterally increase the contract price. If unforeseen conditions arise (such as hidden structural damage), the contractor should submit a change order with a detailed explanation and cost estimate for your approval.

How long should the warranty period be?

A one-year warranty is standard for most residential construction projects and is the industry minimum. Two years is appropriate for larger renovations or new construction. Five years is typically reserved for major structural work or new home construction. Note that the warranty in this contract covers workmanship and materials — manufacturer warranties on appliances, roofing, HVAC systems, and other products are separate and may be longer.

Free Construction Contract Template — Fill Out & Download Instantly

Free — No Sign-Up RequiredPDF & WordUpdated April 9, 2026

⚠️ Legal Disclaimer: This template is attorney-reviewed and built to US legal standards. It does not substitute for professional legal advice. For complex situations, we recommend consulting a licensed attorney.

Document Completeness29%

Governing State*

The state where the construction project is located

Dispute Resolution Method*

How disputes under this contract will be resolved

Licensed contractor performing the work

Contractor Name*

Full legal name of the contractor or contracting company

Contractor Address*

Contractor License Number*

State-issued contractor license number (verify with your state licensing board)

Property Owner Name*

Full legal name(s) of the property owner(s)

Owner Mailing Address*

Location, scope, and timeline of the construction project

Project Property Address*

Physical address where the construction work will be performed

Project Description*

Detailed description of all work to be performed

Project Start Date*

MM/DD/YYYY

Estimated Completion Date*

MM/DD/YYYY

Target date for substantial completion of the project

Total Contract Price ($)*

Total agreed-upon price for the construction project

Payment Schedule*

How and when payments will be made to the contractor

Change Order Process*

Describe the process for handling changes to the original scope and price

Materials, insurance, permits, warranty, and lien protections

Materials Responsibility*

Who is responsible for purchasing and supplying construction materials

Require Proof of Insurance

Permit Responsibility*

Who is responsible for obtaining required building permits and scheduling inspections

Warranty Period*

Duration of contractor's warranty on workmanship and materials

Include Lien Waiver Provisions

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CONSTRUCTION CONTRACT

This Construction Contract ("Contract") is entered into as of [Project Start Date] (the "Effective Date"), by and between:

CONTRACTOR:

[Contractor Name] ("Contractor")

Address: [Contractor Address]

License No.: [Contractor License Number]

OWNER:

[Property Owner Name] ("Owner")

Address: [Owner Mailing Address]

(Each a "Party" and collectively the "Parties")

RECITALS

WHEREAS, Owner is the owner of certain real property located at [Project Property Address] (the "Property"); and

WHEREAS, Owner desires to engage Contractor to perform certain construction work on the Property, and Contractor is willing and licensed to perform such work;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. SCOPE OF WORK

1.1 Project Description. Contractor agrees to furnish all labor, supervision, and materials, equipment, and supplies necessary to complete the following construction project at the Property (the "Work"):

[Project Description]

1.2 Standard of Work. All Work shall be performed in a good and workmanlike manner, in compliance with all applicable building codes, zoning regulations, and industry standards. The Work shall conform to the plans and specifications referenced in this Contract.

1.3 Cleanup. Contractor shall keep the Property reasonably clean during construction and shall remove all debris, tools, and temporary structures upon completion of the Work.

2. PROJECT TIMELINE

2.1 Commencement. The Work shall commence on or about [Project Start Date] (the "Start Date"), subject to timely issuance of all required permits and approvals.

2.2 Substantial Completion. Contractor shall use commercially reasonable efforts to achieve substantial completion of the Work by [Estimated Completion Date] (the "Completion Date"). "Substantial Completion" means the Work is sufficiently complete so that Owner can occupy or use the Property for its intended purpose.

2.3 Delays. The Completion Date shall be extended for delays caused by: (a) changes in the Work ordered by Owner; (b) acts of God, fire, flood, or other casualties; (c) labor disputes or material shortages beyond Contractor's control; (d) delays by Owner in providing access, materials, or approvals; or (e) government actions or permit delays. Contractor shall promptly notify Owner in writing of any anticipated delays.

3. CONTRACT PRICE AND PAYMENT

3.1 Contract Price. Owner agrees to pay Contractor the total sum of $[Total Contract Price ($)] (the "Contract Price") for the complete and satisfactory performance of the Work described in this Contract.

3.2 Payment Schedule. The Contract Price shall be paid in installments based on the completion of defined project milestones. Contractor shall submit a written payment application upon completion of each milestone, identifying the milestone achieved, the percentage of Work completed, and the amount due. Owner shall make payment within fifteen (15) days of approving each payment application.

3.3 Initial Deposit. Owner shall pay a deposit of ten percent (10%) of the Contract Price upon execution of this Contract. The deposit shall be credited against the final milestone payment.

3.4 Late Payment. Any payment not made when due shall bear interest at the rate of one and one-half percent (1.5%) per month, or the maximum rate permitted by applicable law, whichever is less.

4. CHANGE ORDERS

4.1 Change Order Process. No changes to the scope, quality, or price of the Work shall be made except by written Change Order signed by both Parties. The process for Change Orders shall be as follows:

[Change Order Process]

4.2 Price Adjustments. Each Change Order shall specify the addition to or deduction from the Contract Price and any adjustment to the Completion Date resulting from the change.

4.3 Unauthorized Work. Contractor shall not proceed with any changed or additional work without an executed Change Order. Owner shall not be liable for the cost of any unauthorized work.

5. MATERIALS AND EQUIPMENT

5.1 Contractor-Furnished Materials. Contractor shall furnish all materials, equipment, and supplies necessary for the performance of the Work. All materials shall be new and of good quality unless otherwise specified. Contractor shall provide material specifications and samples for Owner's approval upon request.

5.2 Substitutions. Contractor shall not substitute any specified material without Owner's prior written approval. Any approved substitution shall be documented in a Change Order if it affects the Contract Price.

6. PERMITS AND INSPECTIONS

6.1 Permits. Contractor shall obtain and pay for all building permits, licenses, and governmental approvals required for the Work. The cost of permits is included in the Contract Price unless otherwise noted.

6.2 Inspections. Contractor shall schedule and coordinate all required inspections with the applicable governmental authorities. Contractor shall promptly notify Owner of the results of each inspection.

6.3 Code Compliance. All Work shall comply with applicable building codes, zoning ordinances, and governmental regulations in effect at the time the permit is issued.

7. INSURANCE AND BONDING

7.1 Contractor's Insurance. Contractor shall maintain, at Contractor's own expense, the following insurance coverage throughout the duration of the Work:

(a) Commercial General Liability Insurance with minimum limits of $1,000,000 per occurrence and $2,000,000 aggregate;

(b) Workers' Compensation Insurance as required by the laws of the State of [Governing State];

(d) Builder's Risk Insurance covering the Work in progress for its full replacement value.

7.2 Proof of Insurance. Contractor shall provide Owner with certificates of insurance evidencing the required coverage prior to commencing the Work. Owner shall be named as an additional insured on the general liability policy.

7.3 Owner's Insurance. Owner shall maintain homeowner's or property insurance on the Property throughout the duration of the Work.

8. WARRANTY

8.1 Warranty Period. Contractor warrants that all Work performed under this Contract shall be free from defects in workmanship and materials for a period of one (1) year from the date of substantial completion (the "Warranty Period").

8.2 Warranty Repairs. If any defect in workmanship or materials is discovered during the Warranty Period, Contractor shall, at Contractor's own expense, repair or replace the defective work within a reasonable time after receiving written notice from Owner.

8.3 Manufacturer Warranties. The warranty provided herein is in addition to, and not in lieu of, any manufacturer warranties on materials or equipment installed as part of the Work. Contractor shall assign to Owner all manufacturer warranties upon completion.

8.4 Exclusions. This warranty does not cover damage caused by Owner's misuse, neglect, failure to perform normal maintenance, or modifications made by anyone other than Contractor.

9. MECHANIC'S LIENS AND LIEN WAIVERS

9.1 Lien Waivers. Contractor shall provide Owner with a conditional lien waiver with each payment application and an unconditional lien waiver upon receipt of each payment. Contractor shall also obtain and provide lien waivers from all subcontractors and material suppliers.

9.2 No Liens. Contractor shall keep the Property free and clear of all mechanic's liens, materialmen's liens, and other encumbrances arising out of the Work. If any lien is filed against the Property, Contractor shall cause it to be released or bonded within fifteen (15) days after receiving written notice from Owner.

9.3 Owner's Right to Pay. If Contractor fails to release a lien within the time specified, Owner may pay the amount necessary to obtain the release and deduct such amount from any payments due to Contractor.

10. TERMINATION

10.1 Termination by Owner. Owner may terminate this Contract at any time for any reason by providing Contractor with fourteen (14) days' written notice. Upon termination, Owner shall pay Contractor for all Work satisfactorily completed through the date of termination, plus the reasonable cost of materials ordered but not yet installed.

10.2 Termination by Contractor. Contractor may terminate this Contract if: (a) Owner fails to make a payment within thirty (30) days after it becomes due; (b) the Work is suspended by Owner or a governmental authority for more than sixty (60) consecutive days through no fault of Contractor; or (c) Owner materially breaches this Contract and fails to cure the breach within fifteen (15) days of written notice.

10.3 Effect of Termination. Upon termination, Contractor shall: (a) immediately stop the Work; (b) secure the project site; (c) deliver to Owner all completed and in-progress work, plans, and permits; and (d) remove all equipment, tools, and temporary structures from the Property within ten (10) days.

11. DISPUTE RESOLUTION

11.1 Mediation. Any dispute arising out of or relating to this Contract shall first be submitted to non-binding mediation administered by a mutually agreed-upon mediator in the State of [Governing State]. If the dispute is not resolved through mediation within thirty (30) days, either Party may pursue litigation in the state or federal courts located in the State of [Governing State].

12. GOVERNING LAW

This Contract shall be governed by and construed in accordance with the laws of the State of [Governing State], without regard to its conflict of laws principles.

13. GENERAL PROVISIONS

13.1 Entire Agreement. This Contract, together with any Change Orders executed hereunder, constitutes the entire agreement between the Parties with respect to the Work and supersedes all prior negotiations, representations, and agreements.

13.2 Amendments. This Contract may not be amended or modified except by a written instrument signed by both Parties.

13.3 Severability. If any provision of this Contract is held to be invalid or unenforceable, the remaining provisions shall continue in full force and effect.

13.4 Assignment. Contractor shall not assign this Contract or subcontract any portion of the Work without Owner's prior written consent.

13.5 Notices. All notices required or permitted under this Contract shall be in writing and shall be deemed given when delivered personally or sent by certified mail (return receipt requested) to the addresses specified above.

13.6 Force Majeure. Neither Party shall be liable for any failure or delay in performing its obligations due to causes beyond its reasonable control, including acts of God, natural disasters, pandemics, war, government actions, or material shortages.

13.7 Counterparts. This Contract may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have executed this Construction Contract as of the Effective Date.

_________________________________

[Contractor Name]

Contractor

License No.: [Contractor License Number]

Date: _______________

_________________________________

[Property Owner Name]

Property Owner

Date: _______________

Document Completeness29%

Governing State*

The state where the construction project is located

Dispute Resolution Method*

How disputes under this contract will be resolved

Licensed contractor performing the work

Contractor Name*

Full legal name of the contractor or contracting company

Contractor Address*

Contractor License Number*

State-issued contractor license number (verify with your state licensing board)

Property Owner Name*

Full legal name(s) of the property owner(s)

Owner Mailing Address*

Location, scope, and timeline of the construction project

Project Property Address*

Physical address where the construction work will be performed

Project Description*

Detailed description of all work to be performed

Project Start Date*

MM/DD/YYYY

Estimated Completion Date*

MM/DD/YYYY

Target date for substantial completion of the project

Total Contract Price ($)*

Total agreed-upon price for the construction project

Payment Schedule*

How and when payments will be made to the contractor

Change Order Process*

Describe the process for handling changes to the original scope and price

Materials, insurance, permits, warranty, and lien protections

Materials Responsibility*

Who is responsible for purchasing and supplying construction materials

Require Proof of Insurance

Permit Responsibility*

Who is responsible for obtaining required building permits and scheduling inspections

Warranty Period*

Duration of contractor's warranty on workmanship and materials

Include Lien Waiver Provisions

What Is a Construction Contract?

A Construction Contract is a legally binding agreement between a property owner and a contractor that establishes the terms and conditions for a construction project. This contract defines the scope of work, project timeline, payment structure, materials responsibilities, insurance requirements, warranty terms, and dispute resolution procedures. Construction Contracts are essential for residential remodels, commercial buildouts, new home construction, additions, and any project involving licensed contractors.

When Do You Need It?

You need a Construction Contract whenever you are hiring a contractor for a building, renovation, or improvement project. Common situations include: hiring a general contractor for new home construction, engaging a contractor for a kitchen or bathroom remodel, commissioning a commercial buildout or tenant improvement, adding a room, garage, or deck to an existing structure, undertaking major repairs such as roofing, foundation, or electrical work, or any project where a licensed contractor will perform work on your property..

What's Included in This Template

Contractor and owner identification with license number
Detailed project description and property address
Project timeline with start and completion dates
Contract price and payment schedule options
Change order process and approval requirements
Materials responsibility assignment
Insurance and bonding requirements
Permit and inspection responsibility
Warranty period and coverage terms
Optional: Lien waiver provisions
Dispute resolution method selection
Governing law and signature blocks

How to Fill It Out

Select Your Governing State — Choose the state where the construction project will take place. This determines applicable contractor licensing laws, mechanic's lien statutes, and building code requirements.

Enter Contractor Details — Fill in the contractor's legal name, business address, and contractor license number. Verify the license is active and in good standing with your state's licensing board.

Enter Owner Details — Provide the property owner's full legal name and mailing address. For properties owned by a trust or LLC, use the entity's legal name.

Define the Project — Describe the construction project in detail, including the property address and a thorough project description. Be as specific as possible about the scope of work to minimize disputes.

Set Payment Terms — Enter the total contract price and select a payment schedule — milestone-based, progress payments, or payment upon completion. Clear payment terms help prevent cash flow disputes.

Configure Additional Clauses — Select materials responsibility, insurance requirements, permit responsibility, warranty period, and whether to include lien waiver provisions. Each option adds important protections.

Legal Requirements & Notes

This Construction Contract template is drafted with reference to general U.S. contract law and construction industry standards. Key legal considerations:

Mechanic's Lien Laws: Every state has mechanic's lien statutes that allow contractors, subcontractors, and material suppliers to place a lien on the property if they are not paid. Lien filing deadlines, notice requirements, and procedures vary significantly by state. In many states (e.g., California, Texas, Florida), preliminary notices must be sent before lien rights can be exercised.

Contractor Licensing: Most states require contractors to hold a valid license. Working with an unlicensed contractor can void this contract and eliminate your ability to enforce payment terms (California Bus. & Prof. Code § 7031). Always verify the contractor's license status.

Bonding Requirements: For larger projects, particularly government or commercial work, performance and payment bonds may be required under the Miller Act (40 U.S.C. §§ 3131-3134) or state "Little Miller Acts." Consider adding bond requirements for projects over $100,000.

Home Improvement Laws: Many states have specific home improvement contractor laws that require additional disclosures, right-to-cancel periods, and contract provisions. California (Bus. & Prof. Code § 7159), New York (Gen. Bus. Law § 771), and Texas (Prop. Code § 53) have notable requirements.

Change Orders: Courts generally enforce the requirement that change orders be in writing. Oral change orders may not be enforceable under the statute of frauds in many jurisdictions. Always document scope changes in writing.

Warranty Obligations: The warranty period in this contract is separate from any implied warranties of habitability or workmanship that may exist under state law. Some states impose minimum warranty periods by statute.

Frequently Asked Questions

The project description should be as detailed as possible. Include the specific rooms or areas involved, types of materials to be used, brand names where applicable, dimensions, finishes, and any reference to architectural plans or specifications. A vague project description is the most common source of construction disputes. If you have blueprints or architectural drawings, reference them in the description (e.g., 'as detailed in plans prepared by [Architect] dated [Date]').

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