Form 18-4

Residential Construction Contract

Basic Information

Date:

Owner:

Owner’s Mailing Address:

Contractor:

Contractor’s Mailing Address:

Property

Address:

Legal description:

Project Description:

A.Construction Terms

A.1.Allowance Items:

A.2.Contract Sum:

Stipulated sum: [dollars] DOLLARS ($[amount])

Unit price: [dollars] DOLLARS ($[amount]) per [unit of work, e.g., square yard of asphalt paving]

Cost-plus basis: costs plus [percent] percent ([percent]%) of “costs” as defined in Exhibit [exhibit letter/number] [include if applicable: but not to exceed a guaranteed maximum of [dollars] DOLLARS ($[amount])].

A.3.F.T.C. Insulation Disclosure Data:      The following data reflect characteristics of insulation according to data from the manufacturer:

All stated R-values are based on information provided by the manufacturer of this insu­lation.

B.Definitions

B.1.“Commencement Date” means the date on which the building permit is issued for Contractor to construct the Improvements.

B.2.“Completion Date” means the date of Substantial Completion and notice to Owner, but not later than [date], unless extended by the terms of the Contract Documents, force majeure delays, or other delays not within Contractor’s control.

B.3.“Concealed Conditions” means preexisting physical conditions situated below the surface of the ground, or concealed or unknown conditions in an existing structure, at vari­ance with the conditions indicated in the Contract Documents or differing materially from those ordinarily encountered and generally recognized as inherent in Work of the character provided for in the Contract Documents.

B.4.“Contract Documents” means this residential construction contract, the Plans, warranty documents, and any other documents governing the Work (collectively, the “Con­tract”).

B.5.“Improvements” means the improvements to be constructed on the Property according to the Plans, including [describe, e.g., a single-family residence].

B.6.“Payment Deadline” means 2:00 p.m. on the third business day after Contrac­tor’s request for payment is received by [Owner/Owner’s lender/[specify]].

B.7.“Plans” means all design plans and specifications for the Improvements (dated and initialed by Owner and Contractor).

B.8.“Scope of Work” means the Work covered by the Contract Documents.

B.9.“Substantial Completion” or “Substantially Complete” means the stage when a certificate of occupancy is issued, or if no certificate is required, when all Improvements are sufficiently complete, in accordance with the Contract Documents, so that Owner may use or occupy the Improvements for the intended purpose. If Owner moves into the Improvements, the Improvements will be deemed to be substantially complete.

B.10.The “Work” means the physical activities, materials, and equipment relating to the construction of the Improvements.

C.Precommencement Matters

C.1.Contractor agrees to—

a.Provide Owner a copy of the Builder’s Risk Insurance Policy for the Prop­erty with a coverage amount equal to or greater than the Contract Sum.

b.Obtain Contractor’s risk insurance coverage for casualty loss and public liability in reasonable amounts, to protect Contractor and Owner.

c.Provide Owner with a written list of all subcontractors and suppliers of any tier furnishing labor, material, equipment, or other improvements for the project. The list will include each subcontractor’s or supplier’s name, address, and telephone number and will be updated within fifteen days of any addition or deletion of a subcontractor or supplier. A final list will be provided to Owner on or before final completion of the project.

d.If Contractor provides the Plans, Contractor will deliver to Owner two cop­ies of the Plans. Contractor hereby assigns to Owner the right to use the Plans for the purpose of completing the Improvements if Contractor fails to do so in accordance with the terms of the Contract Documents.

C.2.Owner agrees to—

a.Furnish to Contractor reasonable proof acceptable to Contractor that Owner has the ability to pay to Contractor the full Contract Sum.

b.Provide water and electricity to the property line.

C.3.The following are stipulated:

a.Change Orders

i.Contractor is under no duty to make any changes in the Plans requested by Owner until a change order is signed by Contractor and Owner.

ii.Owner and Contractor must sign a written change order. An e-mail exchange between Owner and Contractor in which the changes are discussed and acknowledged by the parties will also satisfy this requirement.

iii.When Contractor receives a written request for any change from Owner, Contractor will present Owner with a proposal for the changes including any additional price, markup, and extensions to the projected Completion Date.

iv.Upon Owner’s acceptance, the change order will become an amend­ment to the Contract Documents, and the terms of the change order shall control if any conflict exists between it and the Contract Docu­ments. A signature or e-mail affirmation from any one Owner is suffi­cient to bind all Owners.

v.Failure of Owner to approve Contractor’s proposal for changes within five days after receipt shall constitute a rejection of the proposal. Owner shall pay for all agreed-upon change orders to the extent they increase the Contract Sum to Contractor in cash within five business days after Owner’s acceptance of the proposal.

vi.Contractor will not be obligated to proceed with any Work until all amounts have been paid pursuant to a change order. Contractor has no obligation to stop Work while change orders are being negotiated.

b.Plans.      If Owner furnishes the Plans, Owner warrants the sufficiency of the Plans and Contractor may reasonably rely on the accuracy of the Plans. Contractor disclaims all liability for any errors or omissions in Plans fur­nished by Owner. Contractor is prohibited from using the Plans on any other property. If Contractor furnishes the Plans, Contractor warrants the Plans are in substantial compliance with all applicable laws [include if applicable: and any other standards adopted by the parties]. Plans and any supplements to the Plans prepared by Contractor will be the property of Contractor and may not be used by Owner on any other property. Owner agrees that as long as construction of the Improvements is in compliance with the Contract Documents, minor deviations will be accepted.

c.Consumer Products.      “Consumer Products,” as defined by the Federal Trade Commission, are excluded from Contractor’s warranty only to the extent individual manufacturers’ warranties are passed through Contractor and assigned to Owner, with a copy received by Owner. Contractor assigns and passes through to Owner the manufacturers’ warranties on all appli­ances and equipment. In the case of passed-through and received manufac­turers’ warranties on Consumer Products, Owner’s recourse is directly to the manufacturer, and Contractor will have no responsibility for them, except for problems relating to Contractor’s installation and hookup of the items.

d.Consult Your Attorney.      This is intended to be a legally binding contract. READ IT CAREFULLY. If you do not understand the effect of any part of the Contract Documents, consult your attorney BEFORE signing.

e.F.T.C. Insulation Disclosure.      The F.T.C. Insulation Disclosure Data are provided in accordance with the Federal Trade Commission regulation at 16 C.F.R. pt. 460.

D.After Completion of Precommencement Matters

D.1.Contractor agrees to—

a.Obtain a building permit and commence the Work within thirty days after Owner has completed all of Owner’s obligations under the Precommence­ment Matters and file an affidavit of commencement in the real property records of the county in which the Property is located.

b.Comply with all regulations and restrictions imposed by local, state, and federal agencies.

c.Diligently prosecute the Work to completion and substantially complete the Work according to the Plans by the Completion Date.

d.Pay all valid bills and charges to Contractor for material or labor relating to the Improvements.

e.Keep the Property free from claims of liens for labor or material arising directly through Contractor, except that Contractor may reasonably dispute any claim.

f.Include in the Improvements insulation with the characteristics set forth above in the F.T.C. Insulation Disclosure Data.

D.2.Contractor agrees not to delay the work.

D.3.Owner agrees to—

a.Pay to Contractor the Contract Sum, disbursed according to the [Contract terms/payment schedule], no later than the Payment Deadline.

b.Promptly pay to the seller of the Allowance Items all charges in excess of the allowances.

c.Make selection of Allowance Items within ten days after receipt of notice from Contractor; otherwise, Contractor may make the selections or extend the time for Owner to make the selections, in which case Owner will pay any charges related to the delay and Contractor is entitled to extend the Completion Date.

d.Deliver to Contractor, within three business days of Contractor’s draw request, written notice of Work not accepted, with specific reasons and rea­sonable requirements stated for causing the Work to be accepted.

D.4.Owner agrees not to—

a.Communicate directly with laborers about the Work.

b.Delay or interfere with the progress of the Work.

D.5.Contractor and Owner agree that—

a.If Owner, at any time before or during the progress of the Work, wants any modifications made to the Plans (“Changed Work”), Owner will request in writing that Contractor undertake the Changed Work. If Contractor agrees to do the Changed Work, Contractor may submit to Owner an estimate of the cost of the Changed Work and an extension of the Completion Date to reflect the additional time required for completing it. If a preapproved writ­ten change order is not obtained, Contractor may submit to Owner the notice of change order and extension of time in writing, and the failure of Owner to make written objection within ten days of the notice is conclu­sively deemed approval by Owner. The Contract Sum and the Completion Date will automatically adjust to incorporate any change orders.

b.Should Contractor encounter Concealed Conditions, the Contract Sum will be equitably adjusted by change order on claim by either party made within twenty days after notice by Contractor to Owner of the Concealed Conditions.

c.Contractor occupies the status of an independent contractor, as that term is defined in the construction industry.

d.Unless otherwise specifically provided, reference to any equipment, mate­rial, article, or patented process by trade name, make, or catalog number is regarded as establishing a standard of quality and is not construed as limit­ing competition. Contractor may, at Contractor’s option, use any equip­ment, material, article, or patented process that is substantially equal to that named.

e.Contractor has the right to subcontract any part or all of the Work.

E.After Substantial Completion

E.1.Contractor agrees to—

a.Remove debris and surplus materials occasioned by the Work.

b.Notify Owner on Substantial Completion of the Work and file an affidavit of completion in the real property records of the county in which the Prop­erty is located.

c.Deliver possession of the Improvements to Owner on the day following the later of Substantial Completion or final payment to Contractor of the Con­tract Sum.

d.Release the Work and Property from all claims, including claims of sub­contractors and materialmen, on receipt of final payment.

e.Contractor warrants its labor and materials against construction defects and warrants that its construction services have been performed in a good and workmanlike manner and that the materials are adequate for their intended purposes. These warranties extend for a period of one year after substantial completion. Owner must give notice of the defect within this one-year war­ranty period, and contractor has up to six months to correct the defect. The giving of this express warranty is not intended to, and does not, negate implied warranties.

e.Contractor warrants that its performance of work on the project meets the residential construction warranties adopted by the Texas Residential Con­struction Commission. The warranties will extend for the following peri­ods after substantial completion:

i.one year for workmanship and materials;

ii.two years for plumbing, electrical, heating, and air-conditioning delivery systems; and

iii.ten years for major structural components of the Improvements.

These express warranties are given in lieu of the implied warranty of good and workmanlike construction, which is disclaimed.

E.2.Owner agrees to—

a.Pay to Contractor the final payment of the Contract Sum, including all amounts due under the Contract Documents, according to Exhibit A.

b.Sign and file for record within five days after Substantial Completion a notice of substantial completion and acceptance.

E.3.Owner and Contractor agree that Owner’s acceptance of possession will be con­clusively presumed to constitute Owner’s acceptance of the Improvements as Substantially Complete and inhabitable.

F.Default and Termination

F.1.Building Permit.      If a building permit has not been issued within ten business days of completion of all Precommencement Matters, Owner may terminate this Contract by written notice within ten business days and recover out-of-pocket costs from Contractor; oth­erwise, Owner must give Contractor ten days’ written notice and opportunity to cure before terminating this Contract.

F.2.Precommencement Matters.      If the Precommencement Matters have not been completed within thirty days from the Contract Date, Owner or Contractor may unilaterally terminate this Contract by written notice within forty days from the Contract Date, in which case this Contract will terminate, and the performing party is entitled to recover reasonable out-of-pocket costs from the nonperforming party.

F.3.Owner’s Default.      Each of the following constitutes a material breach of this Contract by Owner: (a) failing to fully and timely perform any covenant of Owner under this Contract; (b) making any representation to Contractor found to be materially false, mislead­ing, or erroneous; and (c) substantially breaching any of Owner’s obligations under this Con­tract.

F.4.Contractor’s Default.      Each of the following constitutes a material breach of this Contract by Contractor: (a) delaying the Work such that the progress of the Substantial Completion of the Improvements falls more than thirty days behind the time shown for com­pletion of the Work; (b) failing to fully and timely perform any covenant of Contractor under this Contract; (c) making any representation to Owner found to be materially false, mislead­ing, or erroneous; and (d) substantially breaching any of Contractor’s obligations under this Contract or required by applicable law.

F.5.Remedies.      If one party defaults, and the default is not cured within ten days of written notice specifically describing the default, this Contract may be terminated by written notice from the nondefaulting party to the defaulting party.

In the event of such termination, the following formula is agreed on as a reasonable and fair way to assess the actual damages, without the expense and delay associated with other forms of dispute resolution:

a.Damages to Contractor.      If termination resulted from an act of default of Owner, Owner will pay to Contractor, within thirty days of written notice from Contractor, an amount equal to all amounts due and owing at the time of the termination, including payment for Changed Work, plus [percent] percent of the remaining Contract Sum to compensate Contractor for the lost profit and for the difficulty and burden of locating other work for the Contractor’s subcontractors to prevent hardship on them and the loss of loyalty resulting from such hardship.

b.Damages to Owner.      If termination resulted from an act of default of Contractor, damages recoverable by Owner from Contractor will be in accordance with Texas Property Code chapter 27 (the Residential Con­struction Liability Act), if applicable. If the Residential Construction Lia­bility Act does not apply, Contractor will pay to Owner, in addition to actual damages, consequential damages, which are liquidated in an amount equal to two months’ interest on Owner’s interim construction loan (based on the assumption, whether true or not, that there exists such a loan and that it is fully disbursed and in an amount equal to the Contract Sum) to compensate Owner for the time and expense associated with obtaining another contractor to complete the Work. It is agreed by the parties that this liquidated amount is a reasonable estimate of the consequential dam­ages actually incurred by Owner. Payment by Contractor will be delivered to Owner on the earlier of (i) payment of all amounts due to Contractor, with a right of offset to Owner for unpaid damages under this section; (ii) completion of construction of the Improvements; or (iii) the expiration of thirty days from written notice from Owner.

G.Miscellaneous Provisions

G.1.Agreement of Parties.      The Contract Documents, including any of their exhib­its and attachments, are the entire agreement of the parties. There are no representations, agreements, or promises between the parties, and neither party is relying on any statements or representations of any agent of the other party, that are not in those documents.

G.2.Amendment of Contract.      This Contract may be amended only by an instru­ment in writing signed by the parties.

G.3.Attorney’s Fees.      If either party retains an attorney to enforce this Contract, the party prevailing in litigation is entitled to recover reasonable attorney’s fees, court and other costs, and related expenses.

G.4.Binding Effect.      This Contract binds, benefits, and may be enforced by the par­ties and their respective representatives, successors in interest, and, if permitted, their assigns.

G.5.Counterparts.      If this Contract is executed in multiple counterparts, all coun­terparts taken together will constitute this Contract.

G.6.Choice of Law.      This contract is to be construed under the laws of the state of Texas, without regard to choice-of-laws in any jurisdiction.

G.7.Venue.      Venue is in the county or counties in which the Property is located.

G.8.Notices.      Any notice required or permitted under this Contract must be in writ­ing. Any notice required by this Contract will be deemed to be given (whether received or not) the earlier of receipt or three business days after being deposited with the United States Postal Service, postage prepaid, certified mail, return receipt requested, and addressed to the intended recipient at the address shown in this Contract. Notice may also be given by regular mail, personal delivery, courier delivery, or e-mail and will be effective when received. Any address for notice may be changed by written notice given as provided herein.

G.9.Time.      Time is of the essence. Unless otherwise specified, all references to days mean calendar days. Business days exclude all Saturdays, Sundays, and national holi­days. If the date for performance of any obligation falls on a Saturday, Sunday, or national holiday, that obligation is performable on the next business day.

G.10.Real Estate Broker’s Fees.      There are no contracts with any real estate broker or other party in connection with this Contract to whom any fees are due and payable unless specified in a separate commission agreement between the real estate broker and the party responsible for paying the commission.

G.11.When the context requires, singular nouns and pronouns include the plural.

G.12.Repair or Renovation Construction.      If the Scope of Work includes repair or renovation of existing improvements, the following provisions apply. Contractor and Owner certify and represent that they are aware of and have complied with the following legal rights and obligations:

a.Rescission.      Owner may rescind this contract (and any other proposals, con­tracts, or agreements with Contractor regarding the repair or renovation of existing improvements) without penalty or charge within three days after the execution of the contract by all parties. See the “Notice of Cancellation” form below.

b.Place of Signing Contract.      Owner acknowledges that this contract was signed at one of the following offices and not elsewhere: (i) the office of a third-party lender making an extension of credit for the Work and material to be furnished; (ii) the office of an attorney at law; or (iii) the office of a title company.

c.Five-Day Waiting Period.      This contract and any other contract signed in connection with the repair and renovation Work mentioned in this contract have not been executed by Owner or Owner’s spouse before the fifth day after Owner made written application for an extension of credit for the Work and material contemplated.

G.13.Special Provisions.      [Specify.]

G.14.Notices      

Important notice: You and your contractor are responsible for meeting the terms and conditions of this contract. If you sign this contract and you fail to meet the terms and conditions of this contract, you may lose your legal ownership rights in your Improvements. Know your rights and duties under the law.

RESIDENTIAL CONSTRUCTION LIABILITY ACT (RCLA) NOTICE

This contract is subject to Chapter 27 of the Texas Property Code. The provisions of that chapter may affect your right to recover damages arising from a construction defect. If you have a complaint concerning a construction defect and that defect has not been corrected as may be required by law or by contract, you must provide the notice required by Chapter 27 of the Texas Property Code to the contractor by certified mail, return receipt requested, not later than the 60th day before the date you file suit to recover damages in a court of law or initiate arbitration. The notice must refer to Chapter 27 of the Texas Property Code and must describe the construction defect. If requested by the contractor, you must provide the contractor an opportunity to inspect and cure the defect as provided by Section 27.004 of the Texas Property Code.

You, the Owner, may cancel this transaction at any time before mid­night of the third business day after the date of this transaction. See the attached Notice of Cancellation form for an explanation of this right.

   
[Name of owner]

   
[Name of contractor]

Notice of Cancellation

[Date]

You may cancel this transaction, without any penalty or obligation, within three business days from the above date.

If you cancel, any property traded in, any payments made by you under the contract or sale, and any negotiable instrument executed by you will be returned within ten business days following receipt by the merchant of your cancellation notice, and any security interest arising out of the transac­tion will be canceled.

If you cancel you must make available to the merchant at your resi­dence, in substantially as good condition as when received, any goods deliv­ered to you under this contract or sale; or you may if you wish, comply with the instructions of the merchant regarding the return shipment of the goods at the merchant’s expense and risk.

If you do not agree to return the goods to the merchant or if the mer­chant does not pick them up within twenty days of the date of your notice of cancellation, you may retain or dispose of the goods without any further obligation.

To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice or any other written notice, or send a telegram, to [name of merchant], at [address of merchant’s place of business] not later than mid­night of [date].

      

I HEREBY CANCEL THIS TRANSACTION.

Dated: ___________________________________.

   
[Name of purchaser]

Exhibit A

Payment Schedule

The Contract Sum will be paid by Owner to Contractor as follows:

1.Retainage.      Ten percent of all draws, including 10 percent of all change orders or other modifications to the contract price, will be withheld by Owner to be paid at the time of the Retainage Draw described below.

1.Reservation.      Ten percent of all draws, including 10 percent of all change orders or other modifications to the contract price, will be withheld by Owner to be paid at the time of the Reservation Draw described below.

2.Precommencement.      Owner has deposited with Contractor the sum of $[amount], which will be credited to Owner on the [initial/final/[describe other]] draw.

3.Interim Draws.      Owner will pay to Contractor the following portions of the Con­tract Sum according to the following schedule:

a.Draw No. 1 for $[amount]:      After foundation poured

b.Draw No. 2 for $[amount]:      Roof work begins

c.Draw No. 3 for $[amount]:      Interior trim work begins

d.Draw No. 4 for $[amount]:      Interior painting begins

e.Draw No. 5 for $[amount]:      Substantial Completion

f.Retainage Draw for remaining unpaid 10 percent withheld from each draw, change order, or other modification to the contract price: [select one of the following: If Contractor has complied with paragraph C.1.c. under “Precom­mencement Matters” by timely providing Owner with the updated written list of subcontractors and suppliers of any tier and Contractor has verified the list as accurate as of final completion, Owner will prepare, file, and send an affi­davit of completion within ten days of the date of project final completion. Retainage will then be released to Contractor the fiftieth day after the date of final completion as stated in the affidavit, provided no unreleased mechanic’s liens have been filed by that time./Retainage will be paid to Contractor on the last business day of the third month following the month of final completion of the project, provided no unreleased mechanic’s liens have been filed by that time.]

g.Other Draws: In addition to the draws provided for above, Contractor will also make the following draws on the Contract Sum:

$[amount] for [specify]

$[amount] for [specify]

$[amount] for [specify]

3.Interim Draws.      Owner will pay to Contractor the following portions of the Con­tract Sum according to the following schedule: [describe schedule for interim draws, including retainage draw].

3.Interim Draws.      Owner will pay to Contractor the following portions of the Con­tract Sum according to the following schedule:

a.Draw No. 1 for $[amount]:      After foundation poured

b.Draw No. 2 for $[amount]:      Roof work begins

c.Draw No. 3 for $[amount]:      Interior trim work begins

d.Draw No. 4 for $[amount]:      Interior painting begins

e.Draw No. 5 for $[amount]:      Substantial Completion

f.Reservation Draw for remaining unpaid 10 percent withheld from each draw, change order, or other modification to the contract price: [select one of the following: If Contractor has complied with paragraph C.1.c. under “Precom­mencement Matters” by timely providing Owner with the updated written list of subcontractors and suppliers of any tier and Contractor has verified the list as accurate as of final completion, Owner will prepare, file, and send an affi­davit of completion within ten days of the date of project final completion. Reservation will then be released to Contractor the fiftieth day after the date of final completion as stated in the affidavit, provided no unreleased mechanic’s liens have been filed by that time./Reservation will be paid to Contractor on the last business day of the third month following the month of final completion of the project, provided no unreleased mechanic’s liens have been filed by that time.]

g.Other Draws: In addition to the draws provided for above, Contractor will also make the following draws on the Contract Sum:

$[amount] for [specify]

$[amount] for [specify]

$[amount] for [specify]

3.Interim Draws.      Owner will pay to Contractor the following portions of the Con­tract Sum according to the following schedule: [describe schedule for interim draws, including reservation draw].

Exhibit B