Construction contracts are a big part of any contractor, subcontractor, supplier or construction attorney’s daily life. Therefore, it is key to know when you actually have a contract. Is it after your bid is accepted and used by the Owner or General Contractor? Is it only after the subcontract is signed? Is it when you start, regardless of signature? The answer is (of course) “Maybe.”
As pointed out in the wonderful article by my friends at the Virginia Construction Law Update, entitled Deal…or No Deal? Identifying and Addressing Gray Areas in Construction Contracting, this question is not as easily answered as you may think. The rules as to what actions or inactions create a contract at various stages of the bidding and contracting process vary widely from state to state. Questions of promissory estoppel and “intent to contract” (among other considerations) are brought into play.
Somewhat like that tree falling in the woods with no one to hear it, the question to be answered is:
If a contract is written but no one signs it, is there actually a contract?
In Virginia for instance, parties cannot be held to their intent to contract (the so called, agreement to agree) but an oral/unsigned contract where the parties have clearly agreed on the contract terms and fully intend to perform under those terms will be enforced. Another example of potential confusion is in the change order process. While a contractor can survive (and possibly collect) on unwritten change orders, under most circumstances, statutory or contractual processes must be followed to the letter.
Because, the article linked above goes through many of the other situations (from accepted bids that don’t make it into the contract to subcontractors starting work after refusing to sign a subcontract) that construction professionals run into on a daily basis, I won’t go through them all here. Because of the thorough nature of the review of these situations and the legal problems that they can create, I strongly recommend it to both construction professionals and their attorneys.
The true lesson from all of this discussion of when contracts are made? Be sure that you document everything that you can and that you carefully review and properly execute all of the contracts necessary for your project.
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