Most construction companies in California depend on the terms and conditions of contracts to form the basis of their business relationships with landowners, vendors, contractors and suppliers. Indeed, most businesses of any kind will depend on contracts in this manner. The written contract is the bedrock outline of the legal obligations that companies have to one another when they enter into an agreement. Construction companies in California should know the basics about contracts.
For starters, why is a contract needed to begin with? Well, in essence, a contract is a “legally binding” document, which means that, once a company signs on to the terms and conditions of a contract, that company is bound to comply, or face consequences. If a company is alleged to have “breached” a contract, the other party or parties to the contract usually have options to force compliance, such as taking the case to courtroom litigation, arbitration or mediation. Some contracts even include financial penalties for non-compliance.
However, there are certain baseline requirements for companies and their representatives who enter into contracts. The parties must be competent to enter into the agreement, which, by law, oftentimes precludes those who are minors or those who are in some way mentally disabled from executing a contract. Contracts also usually need to be balanced, for the most part – they cannot be unconscionable, which means that the contract is so lopsided that it should not be enforceable. And, of course, contracts need to be in writing.
The terms and conditions of a construction contract are vital to the long-term sustainability and profitability of companies in California. A careful legal analysis of proposed terms is a good way to attempt to ensure that a contract is fair.