CONSTRUCTION AGREEMENT


CONTRACTOR:    ABC Builders, Inc.

REGISTRAR OF
CONTRACTOR
LICENSE NO.:    11111

BONDED/INSURED:

PROPERTY OWNER:

ADDRESS OF CONSTRUCTION PROJECT DESCRIBED BELOW:

DATE OF AGREEMENT:

The parties, in consideration of the mutual covenants and agreements contained herein agree as follows:

CONTRACT WORK: Contractor agrees to perform the following work for Owner in a workmanlike manner on the property referenced above including furnishing labor, materials, equipment and supplies described below and/or necessary to complete the following described work/project (describe in detail and reference any architectural plans):



The following items are specifically excluded from this agreement and to be furnished by others (describe in detail):


Special provisions such as exact description of materials, appliances, etc. to be provided:


ALLOWANCES: The following amounts are included in the Owner price (see below), and it is agreed in the event costs are less than the allowance, the difference shall be credited to the Owner, and in the event costs are greater, the Contractor shall be reimbursed for the excess.

NOTE: The above include the cost to Contractor including any sales tax and delivery, but not labor.

PERFORMANCE STANDARD: Contractor shall complete the work in a workmanlike manner, and it is agreed completion shall include obtaining the following governmental required completion certificates or the like (such as required permits and final inspection occupancy certificate):


PRICE: Owner agrees to pay Contractor the sum of $_______________ (as may be adjusted - see allowances above). The price is payable as follows: Deposit $______________.
NOTE: Payment terms need to be customized depending upon the type of financing or based upon certain percentages of the purchase price at certain times such as when concrete work, framing, carpentry, drywall and so on is completed. Add additional payment terms just below.

ADDITIONAL PAYMENT TERMS:


COMPLETION DATE(S): Contractor agrees to commence work on or about ________________ and to reasonably diligently pursue the work through completion with an expected completion date of about _________________. It is agreed the completion date shall be extended for delays experienced by Contractor because of the inability to reasonably obtain materials, negligence or non-performance of a subcontractor(s) employed by Contractor, acts of God, bad weather, fires, failure of power, restrictive governmental law or regulations, accidents or interference for any cause which is reasonably beyond the control of Contractor.

EXTRA WORK/CHANGE ORDERS: Contractor shall be required to provide extra work, upgrades or the like only pursuant to a separate written contract agreed upon between Contractor and Owner.

CONTRACTOR OBLIGATION EXCLUSIONS: Contractor shall not be obligated to perform any work to correct damage caused by termites or dry rot, caused by Owner or Owner's agents or subcontractors not hired by Contractor, acts of God, soil slippage, earthquake, fire, abnormal weather, vandalism as well as any act, event or occurrence beyond the reasonable control of Contractor.

WORK STOPPAGE: Contractor shall have the right to stop work and to keep the job idle if payments are not made when due. Further, Contractor shall be allowed to stop work in the event there is interference from sources outside of the reasonable control of Contractor, such as a governmental revocation of a required permit.

OWNER INSURANCE AND CONTRACTOR LIABILITY FOR PROPERTY DAMAGE PROVISIONS: Owner agrees that Contractor shall have no liability for damage to property of Owner, except as caused by any act or omission of Contractor and/or of Contractor's employees, agents and subcontractors. Owner also agrees that Owner shall make available any existing fire, casualty as well as any other insurance to cover any damage otherwise the obligation of Contractor (see just above), and Owner agrees to disclose all relevant insurance coverage as reasonably requested by Contractor.

INSURANCE REQUIREMENTS: NOTE: Reflect any insurance required by either party, such as casualty and fire insurance required to be paid for by Owner.

CONTRACTOR WARRANTY AND GUARANTEE LIMITATIONS: THE LIABILITY OF CONTRACTOR FOR DEFECTIVE MATERIAL OR INSTALLATION SHALL BE LIMITED TO THE REPLACEMENT OR CORRECTION OF SAID DEFECTIVE MATERIAL AND/OR INSTALLATION THAT APPEAR WITHIN A PERIOD OF ONE (1) YEAR FROM THE DATE OF SUBSTANTIAL COMPLETION OF THE CONTRACT, AND NO OTHER CLAIMS OR DEMANDS WHATSOEVER SHALL BE MADE AGAINST CONTRACTOR. APPLIANCES, ASSEMBLIES, UNITS AND SO ON PURCHASED BY CONTRACTOR FOR USE UNDER THIS CONTRACT ARE SOLD AND INSTALLED SUBJECT TO THE MANUFACTURER'S GUARANTEE AND/OR WARRANTY AND NOT SUBJECT TO ANY BY CONTRACTOR. OWNER AGREES ONCE THE JOB IS COMPLETED, INSPECTED AND APPROVED BY THE OWNER, OWNER ACCEPTS THE WORK AS BEING COMPLETED IN A WORKMANLIKE MANNER; SUCH COMPLETION, INSPECTION AND APPROVAL SHALL BE DEEMED TO HAVE TAKEN PLACE NO LATER THAN FIVE (5) DAYS AFTER CONTRACTOR AND ALL SUBCONTRACTORS HAVE LEFT THE JOBSITE, IF THE WORK HAS BEEN COMPLETED OR, IF LATER, THE DAY ANY REQUIRED GOVERNMENTAL FINAL INSPECTION(S) HAS BEEN SATISFACTORILY COMPLETED. ADDITIONALLY AT THAT TIME OR AT A LATER TIME WHEN ANY REQUIRED PERMITS HAVE BEEN ISSUED AND INSPECTIONS SATISFACTORILY COMPLETED, OWNER AGREES OTHER THAN CONTRACTOR LIABILITIES SET FORTH JUST ABOVE FOR DEFECTIVE MATERIAL OR INSTALLATION THAT OWNER ACCEPTS THE WORK, AS IS, WITH NO WARRANTIES. OTHER THAN ABOVE, OWNER ACKNOWLEDGES NO WARRANTIES EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND HABITABILITY HAVE BEEN MADE OR EXTENDED BY CONTRACTOR. NOTWITHSTANDING ANYTHING TO THE CONTRARY ABOVE, CONTRACTOR AGREES TO ABIDE BY ANY ARIZONA REGISTRAR OF CONTRACTOR REASONABLE WRITTEN REQUIREMENTS OR ORDERS DIRECTED SPECIFICALLY TO CONTRACTOR, RELATING SPECIFICALLY TO THE WORK TO BE PERFORMED UNDER THIS AGREEMENT. CAUTIONARY NOTE: The last part of the agreement states that the contractor agrees to remedy defects if so ordered by the Registrar of Contractors, and the practitioner should check with the Registrar of Contractors to see if the current period is longer than one year as set forth as the warranty and guarantee period above. As of May 2001, the author believes that the Registrar of Contractors would require defects to be remedied for at least a two-year period. The above is a limited warranty provision and does not protect the contractor against the contractor's own negligence or the negligence of a subcontractor. It would seem that type of contract clause in which the owner/promissor agrees to no claims and/or damages in the event of the contractor's negligence would be void under 32 ARS 1159, as it limits damages/indemnifies the contractor/promissee from the contractor's/promisee's own negligence. It would be possible to place into the contract, a waiver by owner of 32 ARS 1159A, but the issue would be whether or not the waiver is of a public or private right (see the Waiver of Statutory Provision topic in the Limitation of Liability material in the outline entitled Commercial Contract Drafting and Negotiating). Obviously, the owner would not want to make such a waiver and agree to no damages, if caused by the negligence of the contractor. Indemnity is defined as a contract by which one party obtains a promise by the other party, to protect against loss/legal consequences of an act or omission on the part of the one party or some third party. Thus, a limitation on the right to damages by the homeowner (promissor) protecting against the negligence of the subcontractor/promissee is void under 32 ARS 1159A. Again, the above is a limitation of damages based upon warranty limitations and not in the event of the negligence of the contractor.

OWNER FAVORABLE PROVISIONS: The Owner, such as a homeowner, entering into this contract might wish to include protective provisions such as that the Contractor will deliver waivers of any lien upon payment, that Contractor will comply with all applicable laws, Contractor will not assign all or certain responsibilities under this building contract, that Contractor shall be fully responsible for any damages caused by the negligence of Contractor or any subcontractor that the Contractor specifically carry certain type of insurance such as worker's compensation and liability insurance, that material, appliances and so on furnished are a specific quality/grade, that the Contractor shall be specifically responsible for certain things, such as the workmanship of subcontractors, clean-up and so on, the right of Owner to cancel the contract in certain instances such as unreasonable delays by Contractor, etc. THE OWNER WOULD WISH TO NEGOTIATE EXTENDED-TYPE WARRANTIES RATHER THAN BEING STUCK WITH THE LIMITED WARRANTY PROVISIONS ABOVE. IN THAT REGARD. ADDITIONALLY, THE OWNER WOULD DESIRE TO NEGOTIATE AN INDEMNIFICATION OF OWNER BY THE CONTRACTOR FOR ANY INJURIES OR DAMAGES CAUSED BY CONTRACTOR; the following would be an owner-protective indemnification-type provision:

INDEMNIFICATION PROVISIONS BY CONTRACTOR: Contractor agrees to hold harmless, indemnify and defend Owner as well as any agents of Owner from all claims, losses, damages or the like, including costs and reasonable attorney fees of any type, for injuries or death, as well as damage to property caused by Contractor or any of its subcontractors. These provisions are in addition to any obligation of contractor to provide liability insurance, but the obligation of contractor under this provision, shall be reduced by any insurance proceeds paid to Owner for such claims, losses, damages or the like.

Additionally, Owner would desire a clause like the following, in lieu of the more limited warranties provision above:

CORRECTION OF WORK: The contractor shall correct any work that fails to meet the workman-like or standards set forth in this agreement and shall remedy any defects due to faulty materials, equipment or workmanship, which appear within a two-year period from the date of substantial completion of this contract or within such longer period of time as may be prescribed by law, including but not limited to Arizona court decisions. Contractor specifically waives the Statute of Limitations provisions of 12 ARS 552, as well as any other limitation of action/Statute of Limitations that would otherwise be controlling. This provision shall apply to work done by the contractor, as well as any subcontractors.

PERMITS AND FINAL APPROVAL: Contractor shall obtain at Contractor's cost any required licenses, permits and so on and shall be required to obtain any final approvals from the issuing governmental entity as typically required by law.

WORKER'S COMPENSATION INSURANCE: Contractor shall procure and maintain worker's compensation type insurance as required by law at the sole cost of Contractor or paid by any subcontractor hired by Contractor. NOTE: The owner may wish to specifically indicate that the Contractor is required to insure that subcontractors are also providing required worker's compensation insurance.

PAYMENT OF SUBCONTRACTORS AND SUPPLIERS: The final payment under this contract shall not be due by Owner to Contractor until Contractor has provided proof of payment in full of all subcontractors and suppliers relating to the building project.

RIGHT OF CONTRACTOR TO ASSIGN DUTIES UNDER THIS CONTRACT: Property owner agrees that Contractor may assign duties under this contract; for example, to a subcontractor, with the proviso that Contractor shall have full responsibility for all obligations and duties under this contract in all events.

RISK OF LOSS: It is agreed Owner shall bear the risk of loss or damage from fire, casualty, vandalism, etc. and shall be required to provide the following type insurance during construction at the sole cost of Owner: NOTE: List the type of insurance that apply.

CONTRACTOR REQUIREMENTS: All work shall be completed in a workman like manner and in compliance with all building codes and other applicable laws. To the extent required by law, all work shall be performed by individuals duly licensed and authorized by law to perform the work. Contractor may at its discretion engage subcontractors to perform work provided Contractor shall fully pay any Subcontractor and remain responsible for the proper completion of the work. Contractor shall furnish Owner appropriate releases or waivers of lien for all work performed or materials provided as Owner payments are made. Contractor shall at its own expense obtain all permits necessary for the work performed. Contractor agrees to maintain the job site in a safe condition and shall remove all debris and leave the premises in a clean condition. Contractor shall be required to start and continue the job such that it is timely completed, but in the event Owner shall fail to pay any periodic or installment payment due, Contractor may cease work without breach pending payment or resolution of any dispute. Notwithstanding anything to the contrary in this provision, this provision shall not extend or expand in any way the provisions set forth above entitled Contractor Warranty And Guarantee Limitations.

SPECIAL CONTRACT PROVISIONS: NOTE: Add any additional agreed upon terms and conditions:

WAIVER OF STATUTORY AND OTHER LEGAL REQUIREMENTS: ALL PARTIES TO THIS AGREEMENT DESIRE ALL PROVISIONS OF THIS AGREEMENT TO BE ENFORCEABLE AS THEY HAVE EQUAL BARGAINING POWER AND HAVE ENTERED INTO ALL PROVISIONS VOLUNTARILY AFTER THE OPPORTUNITY FOR FULL REVIEW AND UNDERSTANDING OF THIS ENTIRE AGREEMENT WITH ANY DESIRED LEGAL, ACCOUNTING OR OTHER ADVISOR, AND ALL PARTIES SPECIFICALLY WAIVE, IF LAWFUL, ANY STATUTORY PROVISION, CASE LAW OR OTHER LEGAL AUTHORITY, WHICH IS IN ANY WAY, CONTRARY TO AND/OR NULLIFIES/VOIDS ANY PROVISION OR PORTION OF A PROVISION OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO ANY REQUIRED AGREEMENT FORMALITY. AS AN EXAMPLE, OWNER WAIVES ANY LEGAL AUTHORITY CONTRARY TO THE SPECIFIC PROVISIONS OF THIS AGREEMENT, SUCH AS THE ONE-YEAR WARRANTY PROVISIONS ABOVE, INCLUDING WAIVING RIGHTS UNDER THE ARIZONA APPELLATE COURT DECISION HERSHEY VS. ROSEN CONSTRUCTION, 817 P2D. 55 (APP. 1991) AND 12 ARS 552. NOTE: The above provision is intended to waive warranty rights under such Arizona decisions as under Hershey vs. Rosen Construction. That decision could be referenced as an example in the provision above as one specific right that the owner is giving up (see the Waiver of Statutory and Other Legal Rights topic with the limitation of liability material in The Commercial Contract and Negotiating topic.

PROPERTY OWNER ACKNOWLEDGEMENTS: Except as otherwise provided herein by way of specific provisions of this agreement, such as the limited contractor warranty above, property owner assumes all risks of defects and any associated damages, including but not limited to those caused by the negligence of agents and subcontractors of contractor in workmanship and defects in any materials provided.

Builder Implied Warranties Of Habitability And Workmanship

Those warranties implied and given by a home builder were discussed in the 1991 Arizona Appellate decision Hershey vs. Rosen Construction; implied warranties of workmanship and habitability were recognized in Columbia Western Corp. vs. Vela, 592 P.2d, 1292 (App., 1979); those warranties were extended to subsequent purchasers in Richards vs. Powercraft Homes, Inc., 678 P.2d 427 (Ariz., 1984). The Rosen case involved a latent defect because of poor stucco workmanship and materials. The Rosen case focused on the reasonable length of such implied warranties and considered the expected efficient life of a component of a house. The court noted normal life expectancy of Arizona stucco may be 30-50 years, and found the discovery of the defect 12 years after the home was first sold was not unreasonable. See the articles "Building Houses and Building Cases - The Implied Warranty Of Workmanlike Construction and Habitability," Arizona Attorney, January, 1996, page 25, as well as "Strict Liability Against Homebuilders For Material Latent Defects: It's Time, Arizona," Arizona Law Review, Volume 38, No. 1 (Spring, 1996). IMPORTANT NOTE: 12 ARS 552 sets forth, the Statute of Limitations (the time limit to sue) for a complaint involving development, engineering and construction of real estate; the limitation is no action may be brought more than 8 years after substantial completion of the real estate such as a building or house with an action allowed in the 9th year for an injury due to a latent defect discovered during the 9th year. 12 ARS 552C provides, the statute applies to any action based on implied warranty, including implied warranties of habitability, fitness or workmanship, but Item D provides the statute does not apply to actions for personal injury or death and does not shorten the period of warranty provided in a written contract.

GENERAL PROVISIONS: This agreement shall be binding upon the heirs, personal representatives, lawful assigns and lawful successors of the parties.

It is agreed the utilization of gender, plural and singular and the like shall have no significance and each designation shall be construed as appropriate.

It is agreed paragraph headings/captions are for convenience only.

The parties agree in the event of a breach of this contract, the breaching party will pay the other party costs and reasonable attorney fees incurred because of the breach, whether a lawsuit is instituted or not.

Each party to this agreement agrees to do all things and take all actions, and to make, execute and deliver such other documents and instruments as shall be reasonable requested to carry out the provisions, intent and purpose of this agreement.

This agreement contains the entire agreement between the parties, and no statements, promises or inducements made by either party or agent of either party that are not contained in this written agreement shall be valid or binding; this contract may not be enlarged, modified or altered except in writing in accordance with the above provisions.

The parties agree this contract shall be construed in accordance with the laws of the state of Arizona, and any controversy, dispute or litigation shall be brought or commenced only in Pima County, Superior Court, Arizona (or other Pima County court as required by rules or procedure). NOTE: An arbitration or alternative dispute resolution provision could be substituted. The contractor would probably prefer an alternative dispute resolution provision, such as set forth in Employment Agreement with this provision to limit costs and avoid the homeowner being allowed a jury trial - the above clause, as well as the attorney fees provision above would be replaced by the alternative dispute resolution provision.

If any provision or portion of a provision of this agreement is declared void and unenforceable, such provision or portion of such provision shall be deemed severed from this agreement, which shall otherwise remain in full force and effect. Further, if any such provision or portion of such provision may be reduced and/or narrowed in scope or the like, such provision or portion of such provision shall be reduced, narrowed, and/or the like, and so enforced. The same shall apply to any portion of any provision.

The parties agree paragraph captions/headings are for convenience only.

MANDATORY SIGNATURE OF PRESIDENT OF CONTRACTOR - This contract shall become binding on and enforceable against Contractor only after acceptance by signature below of Mr. A, President of ABC Builders, Inc., Contractor. NOTE: This is to avoid a bad bid entered into by an employee and requires the businessowner to sign the contract before it is binding and enforceable. The signature requirement of the owner does not render the contract unenforceable; see Horizon vs. Westcor 688 P2d. 1021.


PROPERTY OWNER ACKNOWLEDGEMENT AND UNDERSTANDING: BY SIGNATURE BELOW, PROPERTY OWNER(S) ACKNOWLEDGES AND SIGNIFIES THAT PROPERTY OWNER HAS CAREFULLY READ THIS ENTIRE AGREEMENT AND HAS HAD TIME TO CONSIDER THE TERMS, INCLUDING THE OPPORTUNITY TO HAVE IT REVIEWED BY INDEPENDENT COUNSEL, AND FULLY UNDERSTANDS AND AGREES TO ALL SUCH PROVISIONS, INCLUDING BUT NOT LIMITED TO THOSE CONTAINED IN THE PROVISION ENTITLED CONTRACTOR WARRANTY AND GUARANTEE LIMITATIONS. PROPERTY OWNER ACKNOWLEDGES THAT THIS AGREEMENT HAS RESULTED FROM NEGOTIATIONS BETWEEN, AND IS FAIR TO, BOTH PARTIES, AND THEREFORE ANY RULE OF CONSTRUCTION REQUIRING AMBIGUITIES TO BE CONSTRUED AGAINST THE DRAFTER OF AN AGREEMENT SHALL NOT APPLY TO ANY TERM OR PROVISION OF THIS AGREEMENT.


_____________________________________
Mr. A,
President of ABC Builders, Inc.,
Contractor

_____________________________________
Property Owner:
Name of Single Individual or Husband, OR
Name of Authorized Agent if Property Owner is a
corporation, limited liability company or other entity:

If property owner is a corporation, limited liability
company or other entity - complete the personal
guarantee agreement below.


_____________________________________
Property Owner:
Name of Wife (if applicable)


NOTE: 25 ARS 214C requires both spouses to sign regarding any real estate transaction, and if the homeowner is married, both spouses must sign. If the property owner is not married, check the box below.

[_] By checking this box, the property owner acknowledges unmarried status, and in such case, the signature line for spouse above would be blank.

UNCONDITIONAL PERSONAL GUARANTEE AGREEMENT

NOTE: If property owner is a corporation, limited liability company or other entity - complete the Personal Guarantee Agreement below.

    As inducement to ABC Builders, Inc., Contractor, to enter into the above construction agreement, the undersigned individual(s)/Guarantor(s) acknowledge true and valuable consideration for the promises and agreements contained herein and hereby unconditionally guarantee to ABC Builders, Inc., performance of the above agreement, including but not limited to all obligations and payments due under the above contract. The Guarantor(s) acknowledges and agrees that obligations under the personal guarantee are separate and independent and a separate action(s) may be brought against Guarantor(s).

    Each Guarantor waives any and all presentment, demand, protest or notice of dishonor, non-payment or other default with respect to the obligations under this guarantee agreement and the construction agreement. Each Guarantor desires all provisions of this agreement to be enforceable and specifically waives any statutory provision, case law or other legal authority that is in any way contrary to and/or nullifies/voids and provision or portion of a provision of this agreement including but not limited to any required agreement formality. Each Guarantor agrees the obligation of each Guarantor is joint and several and each is liable for the full performance of all terms and conditions of this guarantee agreement and the construction agreement.

    Guarantors waive any right to require the Contractor to proceed against the Buyer, proceed and/or exhaust the security interest or to take any other remedy whatsoever before enforcing this guarantee. Guarantors agree this guarantee agreement is an independent obligation, and a separate action may be brought against a guarantor or guarantors whether an action is brought against the Buyers or whether the Buyers are joined in any such action.

    Guarantors further waive any legal and equitable defense whatsoever and waive provisions of 12 ARS 1641 through 12 ARS 1646 and 14 ARS 142 as well as provisions under Arizona Civil Rule of Procedure 17(f), the defense of any statute of limitations in any action under or related to this guarantee and the construction agreement, any right or defense arising under law to benefit Buyer, such as allowed in a bankruptcy proceeding. Guarantors waive the right to any demand, notice or the like regarding the non-performance of Buyer before such guarantee is effective. Guarantors further waive all notices of non-performance as well as any other type notice that may be required by a statute or otherwise. The rights of Contractor under this guarantee agreement shall be in addition to all rights, powers and remedies given Contractor by law.

    It is agreed that all provisions of the general provisions of the construction agreement above shall be deemed to be as if fully set forth in this guarantee agreement and shall fully apply to this guarantee agreement.


DATE OF UNCONDITIONAL PERSONAL GUARANTEE:
(Same date as reflected on CONSTRUCTION
AGREEMENT above)


_________________________________________________
Name of Single Individual or Husband, Personal Guarantor


_________________________________________________
Name of Wife (if applicable), Personal Guarantor


NOTE: Under Arizona law, 25 ARS 214C2 requires for a guarantee to be enforceable against husband and wife that both spouses must sign.

[_]By checking this box, the Single Individual acknowledges unmarried status, and in such case the second signature line for spouse above would be blank.

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