Hiring Dependable Contractor

Texas General Contractors Legally Operate Without Licenses

texas license licensure general contractorsTexas requires licenses for auctioneers, used auto-part recyclers, massage therapists, cat breeders, and others.

General contractors need no license.

Some argue this reduces administrative burdens and thereby keeps down what would otherwise be more excessive costs, which would be passed on to consumers. Others argue this exposes consumers to risky contractors and unduly places the burden of enforcement on private litigants. Additional arguments on both sides abound.

Our Tips & Resources posts are intended to provide general educational information. Like all other material on this blog, it is not a substitute for legal advice.

Joint Checks on Construction Projects

joint check texas construction project lawWhat are joint checks? How are they used on construction projects? Are they a perfect solution?

A joint check is a check made payable to two or more payees in the conjunctive, e.g. “Jane Doe Masonry, Inc. and Good Brick, Inc.” A financial institution should only honor the check if both payees have correctly endorsed it.

A joint check may provide the parties on a construction project an additional level of security. For example, an owner may issue a joint check payable to both the general contractor and the subcontractor. By endorsing this check, both the general contractor and subcontractor will be admitting receipt of payment: the general contractor from the owner, and the subcontractor from the general contractor. By virtue of this fact, the owner has some assurance that the general contractor has paid the subcontractor at least some portion of what the subcontractor is properly owed. Furthermore, the subcontractor will know when and how much the general contractor has been paid.

Joint checks are not foolproof. People and financial institutions can intentionally or carelessly circumvent the security joint checks may offer.

In our Law 101 posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more complex discussions.

Are Construction Contracts Enforceable if Not in Writing?

The major players in the construction realm do not, as a general proposition, routinely rely upon oral contracts on complex projects because of the number of issues, parties, and stakes that are usually involved. On the other hand, some projects may be so small or simple (or any number of other reasons may exist) that they may not be perceived to warrant the time and effort required to prepare a written contract.

Regardless, are oral construction contracts enforceable?texas oral verbal construction contract statute of frauds

In Texas, oral construction contracts generally are enforceable. However, they are not enforceable if they fall into or constitute any one of several categories under the Texas Business & Commerce Code including, but not limited to (1) a contract involving the transfer of certain interests in real estate; or (2) an agreement which isn’t to be performed within one year from the date of making the agreement.

Verbal construction contracts may make sense and be relied upon in some situations. In other contexts, they should be avoided — not only because they may not be enforceable, but because there could be other consequences, too, which are not discussed here.

But the fact that an agreement has construction as its subject matter does not in and of itself dictate whether it is enforceable if it is not in writing.

Can I Fire my Contractor?

I often get calls from folks who are unhappy with contractors they’ve hired, wanting to know if they can terminate the relationship before the project’s completion.texas construction terminate fire contractor

Termination is typically allowed under any one of three circumstances.

First, does the contract specify the events under which termination may take place? If so, have those events occurred?

Second, did the contractor materially breach the contract and, if so, did that breach occur before any material breach by the owner (the party that contracted with the contractor)?

Third, will the contractor agree to terminate the contract early?

There are repercussions associated with terminating a contractor prematurely. A project owner is wise to take stock of the situation from an objective standpoint, evaluate the risks and benefits of each available option and their attendant consequences, and then move forward decidedly.

Our Tips & Resources posts are intended to provide general educational information. Like all other material on this blog, it is not a substitute for legal advice.

Is Time Always of the Essence in Construction Contracts?

Whether it’s the construction of a new shopping center or a new home, many people assume that a construction time of the essence construction contractproject will be completed by a particular date. For example, the owner of that shopping center may anticipate a date that he/she needs to have the space finished in order to market it and thereby obtain a stream of income to defray his/her expenses. The owner of that home-under-construction may be without shelter if the home isn’t built timely.

Questions often arise around whether a project, or benchmarks leading up to the completion of the project, must be completed within a specific timeframe. Does the construction contract state an explicit completion date? Does it define what exactly constitutes completion? Does it express that time is of the essence? What if the contract attaches a proposed schedule but has no other reference to a completion date? What if that schedule was only an estimate but the owner of the project nevertheless relied upon its accuracy in agreeing to hire the contractor, investing in the shopping center, or selling his/her old home?

In Texas, time isn’t ordinarily of the essence in construction contracts. Moreover, a stated date for performance does not imply or mean that time is of the essence. The contract must expressly make time of the essence or there must be something in the nature or purpose of the contract and the circumstances surrounding it making it apparent that the parties intended that time be of the essence. Otherwise, the contract must be performed within a reasonable amount of time. And a judge, jury, or arbitrator may have to determine what “reasonable” means.

In our Law 101 posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more complex discussions.

 

 

Payment Bonds v. Performance Bonds

texas construction law payment bond performance bondSome construction projects must be bonded. This requirement may be imposed by contract, statute, or both.

A surety issues a payment bond to guarantee that people furnishing labor and materials on the project are paid for their work. Accordingly, payment bonds primarily benefit contractors.

A surety issues a performance bond to guarantee that the project will be completed in accordance with contract requirements. Consequently, performance bonds primarily benefit project owners.

In our Law 101 posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more complex discussions.

Overview of Construction Contract Pricing Methods

texas construction contract pricing method mechanismIn conjunction with selecting the project delivery system, the owner of a construction project must consider the mechanism used to determine the contract price and the contractor’s compensation. Generally speaking, there are four construction contract pricing methods.

First, under a fixed-price or stipulated-sum contract, the contractor agrees to perform a specific scope of work for a predetermined, fixed sum.

Second, under a cost-plus contract, the owner pays the contractor for the cost of the work plus an additional sum (often represented as a percentage of the project’s cost) for the contractor’s overhead and profit.

Third, under a cost-plus with guaranteed maximum price agreement, the owner agrees to pay cost-plus up to an agreed-upon maximum sum, beyond which the contractor bears the financial burden.

Fourth and finally, under a unit-pricing contract, the owner pays the contractor a fixed amount for certain units of material/labor used on the project, rather than paying a fixed total for all material/labor used on the project.

In our Law 101 posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more complex discussions.