A 2023 report on construction disputes found that the average value of legal disputes in North America increased 42% last year compared with 2021.

The top cause for legal disputes? Errors within construction contracts.

There are several reasons why construction disputes can be costly: environmental, social, and governance requirements; supply chain; material cost increases; complex design; and securing finances during uncertain economic conditions, to name a few. Many of these factors are interconnected. All of these factors can be addressed with a sound construction contract.

Crafting a meticulous construction contract is vital to prevent disputes, ensure that all parties are in sync, and avoid a costly breach-of-contract lawsuit. As business legal professionals, we tend to see the same types of errors crop up in construction contracts. Here are six common errors to look for before you sign off on something that won’t hold weight if the bricks fall—in a literal and figurative sense.

•Lack of a written contract and missing signatures: Relying on verbal agreements can lead to misunderstandings and disputes. A written contract ensures that all terms and conditions are documented, providing a reference point for both parties in case of disagreements. And, though this harkens back to Contracts 101, it’s worth repeating that they must have signatures of all parties involved to be legally binding. A missing signature renders the contract unenforceable and leaves both parties without legal recourse.

•Incomplete or undefined terms and confusing language: While you are getting ready to sign your construction contract, make sure it makes sense. Effective contracts are detailed and clear, leaving no room for ambiguity. They should comprehensively outline all rights and responsibilities, ensuring that both parties have a precise understanding of their obligations. Contracts should use precise, consistent, and clear language. Ambiguity can result in misunderstandings and legal complications.

•Unclear timelines and unapproved changes: A well-defined timeline is crucial for project management. It enables all involved parties to stay on track, understand important dates, and anticipate payment schedules, thus reducing the risk of disputes. In line with our advice above, any modifications to a contract should be agreed upon in writing.

•Omitting mandatory disclosures: Washington state law mandates certain disclosures for general contractors. It includes details such as the name and address of the person or entity providing labor, materials, or services, a description of the property where the work was performed, and other pertinent information. Omitting these disclosures can result in claims under the Washington Consumer Protection Act, exposing businesses to civil penalties.

•Neglecting contract retentions: Retentions start from the initial bid and help safeguard against delays and potential noncompletion. If a retention of a portion of payment is included in the contract, it is important to document instances of the contractor’s noncompliance or breach of contract. This includes any incomplete or substandard work, missed deadlines, or other violations. Send an official notice to the contractor detailing the specific breaches of the contract, and be sure to include relevant documentation and photographs as evidence. Hopefully, the breach of contract isn’t severe enough to litigate, but if it comes to that, the well-documented official notices will help support your case.

•Relying on free contract services and ignoring arbitration and mediation provisions: Though tempting, free online contract services may lack vital clauses or contain misunderstood terms, risking the adequacy of the contract. Contracts should specify dispute-resolution methods, such as arbitration or mediation. These mechanisms can expedite dispute resolution, saving both time and money.

The bottom line is that clarity is paramount in construction. A well-drafted construction contract not only guards against disputes but also conveys professionalism and trust. It establishes a set of rules of engagement, outlining each party’s obligations and expectations.

Peter J. Smith is a founding attorney and co-owner at Coeur d’Alene-based business law firm Smith + Malek PLLC, which has a Spokane office. Katie Daniel is litigation practice lead at Smith + Malek and specializes in contract and business litigation.