What Is Included in a Home Construction Contract? Essential Guide

A home construction contract is the most important document in your building or renovation project. It defines expectations, protects both parties, and provides a roadmap for successful project completion. Understanding what should be in your contract—and what to watch out for—can save you from costly disputes and disappointments.

Why Construction Contracts Matter

A comprehensive contract:

• Defines Scope: Exactly what work will be done
• Sets Expectations: Timeline, quality, and communication
• Establishes Price: Total cost and payment schedule
• Allocates Risk: Who is responsible for what
• Provides Remedies: What happens if things go wrong
• Protects Both Parties: Legal framework for the relationship

Important: Never begin work without a signed written contract, regardless of your relationship with the contractor.

Essential Contract Elements

1. Parties and Project Information

Basic Information:

• Full legal names of all parties
• Contact information
• Project address
• Contractor's license number
• Date of agreement

2. Scope of Work

The heart of any construction contract:

What Should Be Included:

• Detailed description of all work
• Reference to plans and specifications
• List of included materials
• Specific exclusions (what's NOT included)
• Quality standards to be met

Be Specific: Instead of: "Install new kitchen cabinets" Write: "Install 45 linear feet of Wolf Classic full-overlay cabinets in Timber Stain, including soft-close hinges and drawers, per plans dated [date]"

3. Contract Price

Types of Pricing:

Contract Type	Description	Risk Level
Fixed Price	Set price for defined scope	Low for owner
Cost Plus	Actual costs + markup	Higher for owner
Time & Materials	Hourly rate + materials	Highest for owner
Guaranteed Maximum	Cap on total cost	Moderate

Fixed Price Contract (Most Common)

• Total price stated upfront
• Contractor bears cost risk
• Clear payment expectations
• Best when scope is well-defined

Cost Plus Contract

• Owner pays actual costs plus fee
• More flexibility for changes
• Less cost certainty
• Best for uncertain scope or renovations

4. Payment Terms

Payment Schedule Guidelines:

Milestone	Typical Percentage
Contract signing	10% (max in Nevada)
Foundation complete	15-20%
Framing complete	20-25%
Rough-in complete	15-20%
Drywall complete	10-15%
Substantial completion	15-20%
Final completion	5-10%

Nevada Law Note: Deposits are limited to 10% or $1,000, whichever is less, for residential construction.

Payment Terms Should Include:

• Due dates tied to milestones
• Invoice and approval procedures
• Acceptable payment methods
• Late payment consequences
• Retainage (holdback) amount

5. Timeline and Schedule

Schedule Elements:

• Start date (or conditions to start)
• Completion date
• Milestone dates
• Definition of "substantial completion"
• Definition of "final completion"

Delay Provisions:

• Excusable delays (weather, force majeure)
• Owner-caused delays
• Contractor-caused delays
• Extension procedures
• Liquidated damages (if applicable)

6. Change Order Procedures

Changes during construction are common. The contract should specify:

Change Order Process:

1. Written request with description
2. Contractor provides cost and time impact
3. Owner approves or rejects in writing
4. Work proceeds only after approval
5. Contract is formally amended

What to Include:

• Required written approval
• Pricing methodology for changes
• Timeline for providing quotes
• Authorization requirements
• Impact on completion date

7. Allowances

Allowances are budget placeholders for items selected later:

Common Allowance Items:

• Lighting fixtures
• Plumbing fixtures
• Flooring
• Countertops
• Appliances
• Hardware

Allowance Management:

• Clear dollar amount stated
• What's included (material only vs. installed)
• Process for exceeding allowance
• Credit for under-spending
• Selection deadlines

8. Insurance and Bonding

Required Insurance:

Coverage	Minimum
General Liability	$1,000,000
Workers' Compensation	State minimum
Auto Liability	$1,000,000

Bonding (for larger projects):

• Performance bond (ensures completion)
• Payment bond (protects subcontractors)
• Usually required for projects over $100,000

Contract Should Require:

• Certificates of insurance
• Owner named as additional insured
• Notice of cancellation requirements
• Proof before work begins

9. Warranties

Standard Warranty Coverage:

Coverage	Typical Duration
Workmanship	1 year
Systems (MEP)	2 years
Structural	10 years

Warranty Terms Should Address:

• What's covered and what's excluded
• Notification requirements
• Response time expectations
• Repair vs. replace decisions
• Transferability to new owners

10. Dispute Resolution

Resolution Options:

• Negotiation: Direct discussion first
• Mediation: Neutral third party facilitates
• Arbitration: Binding decision by arbitrator
• Litigation: Court resolution (last resort)

Contract Should Specify:

• Required steps before legal action
• Location and rules for arbitration
• Who pays for mediation/arbitration
• Attorney fee provisions

11. Termination Provisions

Grounds for Termination:

Party	Termination Rights
Owner	Material breach, abandonment, sustained default
Contractor	Non-payment, material breach, owner interference

Termination Process:

• Written notice requirements
• Opportunity to cure
• Settlement of accounts
• Ownership of materials and work
• Completion by others

Contract Red Flags

Warning Signs to Watch For

Vague Language:

• "Reasonable" without definition
• "Similar quality" without specifics
• "Approximately" for price or schedule

Unfair Terms:

• Large upfront payments (over 10%)
• No right to terminate
• Contractor keeps all deposits
• Mandatory arbitration in distant location

Missing Elements:

• No specifications or plans referenced
• No change order procedures
• No warranty terms
• No insurance requirements

One-Sided Provisions:

• Contractor can terminate at will
• Owner liable for contractor delays
• Unlimited price increases
• No remedies for owner

Before You Sign

Checklist

• Read entire contract thoroughly
• Understand every provision
• Verify contractor license and insurance
• Check references
• Have attorney review (for large projects)
• Clarify anything unclear
• Ensure all attachments are included
• Keep a signed copy

Questions to Ask

1. What exactly is included in this price?
2. What could cause additional costs?
3. How are changes handled?
4. What happens if you find unexpected problems?
5. Who are your subcontractors?
6. How do you handle disputes?

CERA Construction Contract Approach

Our contracts are designed to be:

• Clear: Easy to understand, no legalese
• Complete: All essential terms included
• Fair: Balanced protection for both parties
• Specific: Detailed scope and specifications
• Transparent: No hidden terms or surprises

Nevada's construction laws provide important protections for homeowners. The Nevada State Contractors Board regulates all licensed contractors, and state law limits deposits to 10% or $1,000 (whichever is less) for residential projects. Whether you're contracting for a design-build project, kitchen remodel, or custom home in Las Vegas, Henderson, or Summerlin, understanding these Nevada-specific regulations helps you negotiate from a position of knowledge.

Request a consultation and see our approach to contracts firsthand.