What to Look For Before You Sign a Construction Contract
A construction contract defines more than price—it establishes scope, allowances, change orders, payment terms, and responsibilities before work begins.
Owner-Side Contract Review · Pre-Construction Support
JR-DBA provides owner-side advisory support for residential construction projects throughout the Portland metro area. If you're preparing to sign a construction contract and want an experienced set of eyes on the scope, allowances, and exclusions before work begins, we can help.
A construction contract usually arrives near the end of pre-construction, after the plans are done, the contractor is selected, and everyone is ready to move forward.
For many homeowners, signing feels like a formality. It is not.
The contract determines what the contractor is obligated to build, what you are obligated to pay, how changes will be handled, and who carries which risks. For a custom home, major remodel, addition, or complex ADU, it deserves the same attention as the plans and the budget.
Start With the Scope of Work
The most important question in any construction contract is simple: what, exactly, is the contractor agreeing to build?
A vague reference to "remodel kitchen per plans" or "construct new residence" is not enough. A well-coordinated contract identifies every document that defines the scope — architectural drawings, structural drawings, consultant documents, specifications, written proposals, allowance schedules, and accepted alternates — listed by title, date, and revision number where possible.
This matters because a contractor may have excluded work the owner believes is included. A consultant's drawing may have been issued after pricing was finalized. If the contract does not establish which documents control, the parties may start construction with different expectations.
Understand the Pricing Structure
The contract price may be structured as a lump sum, cost-plus, or time-and-materials arrangement. Each shifts risk differently.
A fixed-price contract does not eliminate change orders — it simply means the contractor has agreed to perform the currently defined scope for that amount. If drawings are incomplete, allowances are low, or existing conditions are uncertain, a fixed price can still lead to substantial additions later.
A cost-plus contract requires the owner to pay actual project costs plus an agreed contractor fee. It can be appropriate for complex remodels or projects with significant unknowns, but the owner should understand exactly what is included in "cost" and whether there is a guaranteed maximum price.
The issue is not which pricing method is inherently better. It is whether the pricing structure matches the level of design completion and budget certainty the project requires.
Review Allowances Before Assuming a Number
Allowances are placeholder amounts for products or materials not yet fully selected — appliances, tile, fixtures, lighting, cabinets. They are often necessary. The problem occurs when an owner assumes an allowance reflects the expected final cost while the contractor treats it as a provisional number.
Before signing, confirm what each allowance includes, whether it covers tax, delivery, installation, and markup, what quality level it assumes, and how overages and unused balances will be handled. A contract with many allowances may indicate that important design decisions remain unresolved — and that the stated contract amount may not represent the final project cost.
Read the Change-Order Process Before You Need It
Change orders are not a sign of poor planning. They are often necessary when owners make changes, concealed conditions are discovered, or code officials require modifications. What matters is whether the contract establishes a disciplined process.
A strong change-order provision addresses who can authorize a change, whether changes must be in writing, how costs are calculated, how schedule impacts are evaluated, and whether work can proceed before pricing is finalized. Informal field approvals can be useful — but they should not replace written documentation when the change affects cost, scope, or schedule.
Understand What Is Excluded
Every contract includes limits. Common exclusions may include permit fees, utility connection charges, engineering fees, hazardous material remediation, landscaping, hidden structural damage, dry rot or water damage, and escalating material costs.
For projects in the Portland metro area, jurisdictional requirements, utility coordination, historic review conditions, and existing-condition discoveries can all create work that was not in the original price. These issues are not necessarily anyone's fault — but they should not be invisible in the contract.
Look at the Payment Schedule
A payment schedule should reflect actual progress. It should not require you to pay substantially ahead of the value of work completed. Review the deposit amount, what must be completed before each payment is due, whether stored materials can be billed, and what the final-payment conditions are. Final payment should generally be tied to substantial completion, punch-list resolution, delivery of warranties and closeout materials, and required inspections.
Before signing, confirm that the contract clearly addresses scope, allowances, payment, change orders, schedule, insurance, and warranty obligations.
A Note on Owner's Representatives
If the contract language, allowances, exclusions, or pricing structure feels difficult to evaluate on your own, that is a reasonable signal that outside support may be useful. A custom home owner's representative works on your side of the table — reviewing the contract before signing, evaluating scope gaps, and helping you understand the obligations you are accepting before construction begins.
→ See our companion post: Do I Need an Owner's Representative If I Already Hired a General Contractor?
Questions to Ask Before Signing
• What documents define the full scope of work?
• What is included in the contract price, and what is excluded?
• Which items are allowances, and are those amounts realistic?
• How will change orders be priced, approved, and documented?
• What existing conditions could create additional cost?
• What must be complete before each payment is due?
• What is the anticipated schedule, and what events can extend it?
• Who carries the risk of loss if work is damaged before completion?
• What warranty is provided, and how are unresolved issues handled?
• Are your expectations actually reflected in the contract documents?
If the answers are unclear, resolve them before construction begins — not after a disagreement occurs.
Joshua Richards, Principal, JR-Design Build Architect Portland, Oregon — Owner's Representation | Architecture | Permit Consulting jr-dba.com | Joshua@jr-dba.com
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