CONSTRUCTION AGREEMENT
(New Jersey ‒ Private Commercial Project)
[// GUIDANCE: This master template is intentionally comprehensive. Edit bracketed placeholders, remove any provisions not applicable to the specific transaction, and verify all schedules before execution.]
TABLE OF CONTENTS
- Document Header
- Definitions
- Scope of Work
- Contract Price; Payment Terms; Retainage
- Time of Commencement and Completion
- Owner’s Responsibilities
- Contractor’s Responsibilities
- Site Conditions; Changes in the Work
- Lien Compliance; Payment and Performance Bonds
- Insurance; Risk of Loss
- Representations and Warranties
- Covenants
- Events of Default; Remedies
- Indemnification
- Limitation of Liability
- Force Majeure
- Dispute Resolution
- General Provisions
- Execution Blocks
1. DOCUMENT HEADER
CONSTRUCTION AGREEMENT (this “Agreement”) is entered into as of [EFFECTIVE DATE] (the “Effective Date”) by and between:
- [OWNER LEGAL NAME], a [STATE] [ENTITY TYPE] having its principal place of business at [ADDRESS] (“Owner”); and
- [CONTRACTOR LEGAL NAME], a [STATE] [ENTITY TYPE] having its principal place of business at [ADDRESS] (“Contractor”).
Owner and Contractor are each a “Party” and collectively the “Parties.”
2. DEFINITIONS
For ease of reference, certain capitalized terms used herein are defined alphabetically below. Terms defined in this Article shall have the same meaning wherever used in the Agreement, unless the context clearly requires otherwise.
“Applicable Law” means all federal, state, and local laws, statutes, regulations, ordinances, building codes, and mandatory guidelines applicable to the Project, including without limitation the New Jersey Construction Lien Law, N.J.S.A. 2A:44A-1 et seq., and the New Jersey Prompt Payment Act, N.J.S.A. 2A:30A-1 et seq.
“Change Order” has the meaning given in Section 8.3.
“Contract Documents” means this Agreement, the drawings, specifications, general conditions, supplemental conditions, schedules, exhibits, and any Change Orders executed by the Parties.
“Contract Price” has the meaning given in Section 4.1.
“Force Majeure Event” has the meaning given in Section 16.1.
“Lien Claim” means any mechanic’s or construction lien, stop-notice, or similar encumbrance filed or asserted in connection with the Work.
“Project” means the construction and completion of the improvements described in Exhibit A, to be located at [PROJECT ADDRESS] in the State of New Jersey.
“Retainage” has the meaning given in Section 4.4.
“Substantial Completion” means the stage in the progress of the Work when the Work (or an agreed portion thereof) is sufficiently complete, in accordance with the Contract Documents, to enable Owner to occupy or utilize the Project for its intended use.
“Work” means all construction and related services, labor, materials, equipment, and incidentals to be provided by Contractor under the Contract Documents.
[Add additional defined terms as needed.]
3. SCOPE OF WORK
3.1 Performance. Contractor shall furnish all labor, materials, equipment, supervision, and services necessary or incidental to perform the Work in strict conformity with the Contract Documents, industry best practices, and Applicable Law.
3.2 Standard of Care. Contractor shall perform the Work (i) in a good and workmanlike manner, (ii) using new and first-class materials unless otherwise specified, and (iii) in accordance with the skill and care ordinarily exercised by reputable contractors performing similar work in the State of New Jersey.
3.3 Permits. Except as expressly stated otherwise in Exhibit B, Contractor shall obtain and pay for all permits, licenses, inspections, and governmental fees necessary to perform the Work.
4. CONTRACT PRICE; PAYMENT TERMS; RETAINAGE
4.1 Contract Price. Subject to adjustments authorized by Change Order, Owner shall pay Contractor the lump-sum amount of [US $__] (the “Contract Price”) for full performance and completion of the Work.
4.2 Schedule of Values; Applications for Payment.
(a) Contractor shall submit a detailed schedule of values satisfactory to Owner within ten (10) days after the Effective Date.
(b) On or before the [___] day of each month, Contractor shall submit to Owner an application for payment covering Work completed through the preceding month, substantiated by supporting documentation and, upon request, conditional lien waivers from Contractor and all Subcontractors.
4.3 Payment. Owner shall, within thirty (30) days after receipt of an undisputed and properly documented application for payment, pay Contractor the amount then due, less Retainage and any set-offs permitted by the Contract Documents or Applicable Law.
4.4 Retainage.
(a) Owner may withhold retainage not to exceed ten percent (10%) of each progress payment (the “Retainage”) until the Work is fifty percent (50%) complete, after which Owner may reduce Retainage to two percent (2%) of each subsequent progress payment, consistent with Applicable Law.
(b) Retainage shall be released to Contractor with the final payment following Substantial Completion, delivery of unconditional lien waivers from all tiers, and satisfaction of all conditions precedent to final payment.
[// GUIDANCE: Edit percentages if the Project is subject to statutory caps different from the above defaults.]
4.5 Interest on Late Payments. Unpaid amounts shall accrue interest at the statutory rate provided in the New Jersey Prompt Payment Act until paid, unless disputed in good faith.
4.6 Lien Waivers. As a condition precedent to each progress payment, Contractor shall deliver conditional lien waivers in the form prescribed by N.J.S.A. 2A:44A-1 et seq. from itself and all Subcontractors and suppliers for the Work covered by the payment application. Unconditional waivers shall be delivered upon actual receipt of payment.
5. TIME OF COMMENCEMENT AND COMPLETION
5.1 Commencement. Contractor shall commence the Work within [___] days after the Effective Date or issuance of a notice-to-proceed, whichever occurs later.
5.2 Substantial Completion. Contractor shall achieve Substantial Completion of the Work not later than [DATE] (“Scheduled Substantial Completion Date”), subject to adjustments pursuant to Article 16 and approved Change Orders.
5.3 Liquidated Damages. If Contractor fails to achieve Substantial Completion by the Scheduled Substantial Completion Date (as adjusted), Contractor shall pay Owner liquidated damages of [US $___] per calendar day, which the Parties agree is a reasonable pre-estimate of Owner’s damages and not a penalty.
6. OWNER’S RESPONSIBILITIES
6.1 Information and Access. Owner shall furnish Contractor with all information, surveys, and reports in its possession relating to the Project site and shall provide reasonable access to the site so Contractor can perform the Work.
6.2 Payment. Owner shall make timely payments as required by Section 4.3.
6.3 Separate Contractors. Owner reserves the right to perform work or to engage separate contractors, provided Owner coordinates such work with Contractor to avoid unreasonable interference with Contractor’s performance.
7. CONTRACTOR’S RESPONSIBILITIES
7.1 Supervision and Construction Procedures. Contractor shall supervise and direct the Work and shall be solely responsible for and have control over construction means, methods, techniques, sequences, and procedures.
7.2 Safety. Contractor shall be responsible for initiating, maintaining, and supervising all safety precautions and programs in connection with the Work, consistent with Occupational Safety and Health Administration (“OSHA”) requirements and other Applicable Law.
7.3 Subcontractors. Contractor shall be fully responsible for acts and omissions of Subcontractors and suppliers and shall ensure that all Subcontracts incorporate obligations consistent with this Agreement.
8. SITE CONDITIONS; CHANGES IN THE WORK
8.1 Site Investigation. Contractor represents that it has (a) examined the site, (b) investigated its conditions, and (c) correlated its observations with the Contract Documents. No increase in the Contract Price shall be allowed for conditions that Contractor could have discovered by reasonable investigation.
8.2 Concealed or Unknown Conditions. If Contractor encounters concealed conditions that differ materially from those indicated in the Contract Documents, Contractor shall provide written notice within three (3) days and shall not disturb such conditions until directed by Owner. An equitable adjustment to the Contract Price and schedule shall be made by Change Order if appropriate.
8.3 Changes. Owner may, without invalidating the Agreement, order changes in the Work by written directive, including additions, deletions, or modifications (“Change Order”). Adjustments to the Contract Price or schedule shall be determined by (i) mutual agreement, (ii) unit prices stated in the Contract Documents, or (iii) cost-plus a fee not to exceed a mutually agreed percentage.
9. LIEN COMPLIANCE; PAYMENT AND PERFORMANCE BONDS
9.1 Lien Notices. Contractor shall comply with all notice and filing requirements under the New Jersey Construction Lien Law. For Work constituting “residential construction” under N.J.S.A. 2A:44A-21, Contractor shall serve the prescribed Notice of Unpaid Balance and Right to File Lien on the Owner and others before filing any Lien Claim.
9.2 Discharge of Liens. If any Lien Claim or stop-notice is filed against the Project or the Owner’s property as a result of Contractor’s Work or a Subcontractor’s work, Contractor shall, within ten (10) days after written notice, cause such Lien Claim to be discharged of record by payment, bonding, or otherwise, at Contractor’s sole cost.
9.3 Payment and Performance Bonds.
(a) If the Contract Price exceeds [US $___] or if required by Owner’s lender, Contractor shall, within five (5) days after the Effective Date, furnish (i) a performance bond and (ii) a labor and material payment bond, each in the full amount of the Contract Price, naming Owner as obligee and issued by a surety authorized to do business in New Jersey.
(b) The bonds shall be in a form acceptable to Owner and remain in effect until one (1) year after final completion.
10. INSURANCE; RISK OF LOSS
10.1 Contractor Insurance. Contractor shall maintain, at its expense and for the duration of the Work:
(a) Commercial General Liability insurance with limits of not less than [US $___] per occurrence and [US $___] aggregate;
(b) Automobile Liability insurance covering all owned, hired, and non-owned vehicles with limits of not less than [US $___] combined single limit;
(c) Workers’ Compensation insurance meeting statutory requirements and Employers’ Liability insurance with limits of not less than [US $___]; and
(d) Builder’s Risk insurance (if not provided by Owner) on an “all-risk” completed value basis for 100% of the replacement cost of the Work.
10.2 Additional Insured; Waiver of Subrogation. Owner, its lenders, and their respective directors, officers, and employees shall be named as additional insureds on policies required under Section 10.1(a) and (b). All policies shall contain waivers of subrogation in favor of the additional insureds.
10.3 Certificates of Insurance. Contractor shall deliver certificates evidencing the required insurance before commencing the Work and shall provide renewal certificates at least ten (10) days prior to policy expiration.
10.4 Risk of Loss. Risk of loss for damage to the Work shall remain with Contractor until Substantial Completion, except to the extent covered by Owner-furnished Builder’s Risk insurance.
11. REPRESENTATIONS AND WARRANTIES
11.1 Mutual Representations. Each Party represents that:
(a) it is duly organized, validly existing, and in good standing under the laws of its state of organization;
(b) it has full power and authority to enter into and perform this Agreement; and
(c) the execution and performance of this Agreement have been duly authorized by all requisite corporate or company action.
11.2 Contractor’s Additional Warranties. Contractor further warrants that:
(a) the Work will be free from defects in workmanship and materials for a period of one (1) year following the date of Substantial Completion;
(b) all materials and equipment furnished will be new and of good quality unless otherwise required or permitted; and
(c) it holds, and will maintain throughout the term, all licenses required to perform the Work in New Jersey.
11.3 Survival. The warranties set forth in this Article shall survive completion, termination, or expiration of this Agreement.
12. COVENANTS
12.1 Compliance with Laws. Contractor shall at all times comply with Applicable Law and shall not violate any federal, state, or local law, rule, or regulation in the performance of the Work.
12.2 Taxes. Contractor shall pay all applicable federal, state, and local taxes, duties, and assessments arising out of Contractor’s performance of the Work.
12.3 Confidentiality. Contractor shall keep confidential all proprietary information of Owner disclosed in connection with the Project and shall not use or disclose such information except as necessary to perform the Work.
13. EVENTS OF DEFAULT; REMEDIES
13.1 Contractor Defaults. Each of the following shall constitute an event of default by Contractor:
(a) failure to supply sufficient manpower, materials, or equipment to perform the Work timely;
(b) failure to pay Subcontractors or suppliers when due;
(c) filing or unstayed enforcement of any Lien Claim in violation of Section 9.2;
(d) failure to maintain required insurance;
(e) insolvency or bankruptcy;
(f) material breach of any covenant, representation, or warranty, which breach remains uncured for seven (7) days after written notice from Owner.
13.2 Owner Remedies. Upon a Contractor default, Owner may, without prejudice to other rights, (i) suspend payments; (ii) perform or cause to be performed any portion of the Work and deduct the cost from the Contract Price; (iii) terminate the Agreement in whole or in part; and/or (iv) seek specific performance, injunctive relief, or damages.
13.3 Owner Defaults and Contractor Remedies. If Owner fails to make an undisputed payment when due and fails to cure within ten (10) days after written notice, Contractor may suspend the Work until payment is made or terminate this Agreement and recover payment for Work performed to date plus reasonable demobilization costs.
13.4 Attorneys’ Fees. The prevailing Party in any dispute arising out of this Agreement shall be entitled to recover its reasonable attorneys’ fees and costs.
14. INDEMNIFICATION
14.1 Contractor Indemnity. To the fullest extent permitted by law, Contractor shall indemnify, defend, and hold harmless Owner and its affiliates, lenders, officers, directors, employees, and agents from and against any and all claims, demands, damages, losses, liabilities, fines, penalties, costs, and expenses (including reasonable attorneys’ fees) arising out of or relating to (i) bodily injury, sickness, disease, or death of any person, or damage to or destruction of property (including the Work itself), caused by Contractor, a Subcontractor, or anyone directly or indirectly employed by them; (ii) any breach by Contractor of its obligations under the Contract Documents; or (iii) any Lien Claim filed in violation of Section 9.
14.2 No Limitation. The indemnification obligations in this Article shall not be limited by insurance requirements, the monetary limitation of liability in Article 15, or any worker’s compensation act or similar statute.
15. LIMITATION OF LIABILITY
15.1 Cap on Damages. Except for (i) Contractor’s indemnification obligations under Article 14, (ii) losses caused by Contractor’s gross negligence or willful misconduct, or (iii) insurance proceeds payable to Owner, Contractor’s aggregate liability to Owner arising out of or related to the Contract Documents shall not exceed the Contract Price.
15.2 Exclusion of Certain Damages. In no event shall either Party be liable to the other for consequential, incidental, or punitive damages, including lost profits, loss of use, or loss of financing, except to the extent such damages are (a) included in liquidated damages expressly provided herein, or (b) payable to third parties pursuant to the indemnification obligations in Article 14.
16. FORCE MAJEURE
16.1 Definition. “Force Majeure Event” means an event beyond the reasonable control of the affected Party, including but not limited to acts of God, fire, flood, earthquake, explosion, epidemic, war, terrorism, sabotage, labor strikes (excluding strikes of Contractor’s own workforce), or governmental orders.
16.2 Notice and Mitigation. A Party claiming delay or inability to perform by reason of a Force Majeure Event shall give the other Party written notice within five (5) days after the occurrence and shall use commercially reasonable efforts to mitigate the effects.
16.3 Schedule Extension. If a Force Majeure Event causes delay in performance, the affected Party shall be entitled to a reasonable extension of time but not to monetary compensation, except as otherwise expressly provided in the Contract Documents.
17. DISPUTE RESOLUTION
17.1 Negotiation. The Parties shall attempt in good faith to resolve any dispute arising under this Agreement promptly by negotiation between senior executives.
17.2 Optional Arbitration. If a dispute is not resolved by negotiation within thirty (30) days, either Party may elect to submit the matter to binding arbitration administered by the American Arbitration Association (“AAA”) under its Construction Industry Arbitration Rules in effect on the date of the demand for arbitration. The election shall be made by written notice. If neither Party so elects, the Parties shall proceed in the forum designated in Section 17.4.
17.3 Preservation of Injunctive Relief. Nothing in this Article shall prevent a Party from seeking temporary or preliminary injunctive relief in a court of competent jurisdiction to prevent irreparable harm pending resolution of the underlying dispute.
17.4 Governing Law; Forum Selection. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without regard to conflicts-of-law principles. Subject to Section 17.2, the state courts located in [COUNTY], New Jersey, shall have exclusive jurisdiction and venue over any legal action arising out of or relating to this Agreement.
17.5 Jury Trial Waiver. EACH PARTY KNOWINGLY, VOLUNTARILY, AND IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
18. GENERAL PROVISIONS
18.1 Amendment; Waiver. No amendment or waiver of any provision of this Agreement shall be effective unless in writing and signed by both Parties. A waiver shall apply only to the specific instance and shall not operate as a continuing waiver.
18.2 Assignment. Neither Party may assign or delegate its rights or obligations under this Agreement without the prior written consent of the other Party, except that Owner may assign this Agreement to its lender or an affiliate without Contractor consent.
18.3 Successors and Assigns. This Agreement shall inure to the benefit of and be binding on the Parties and their respective successors and permitted assigns.
18.4 Severability. If any provision of this Agreement is determined to be invalid or unenforceable, the remaining provisions shall remain in full force and effect, and the Parties shall negotiate in good faith to replace the invalid provision with a valid, enforceable provision that best reflects the Parties’ original intent.
18.5 Entire Agreement. The Contract Documents constitute the entire agreement between the Parties with respect to the Project and supersede all prior agreements, negotiations, and understandings, whether oral or written.
18.6 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together constitute one instrument. Signatures delivered electronically or by facsimile shall be deemed original signatures and fully enforceable.
19. EXECUTION BLOCKS
IN WITNESS WHEREOF, the Parties have executed this Construction Agreement as of the Effective Date.
OWNER:
[OWNER LEGAL NAME]
By: ____
Name: ____
Title: _____
Date: _________
CONTRACTOR:
[CONTRACTOR LEGAL NAME]
By: ____
Name: ____
Title: _____
Date: _________
(Seal, if required)
[// GUIDANCE: Notarization is generally not required for private construction contracts in NJ, but add acknowledgment and witnesses if lender or local recording requirements apply.]
EXHIBIT A
(Project Description, Drawings, Specifications)
EXHIBIT B
(Allocation of Permit and Utility Responsibilities)
EXHIBIT C
(Schedule of Values and Payment Application Forms)
[// GUIDANCE: Insert additional exhibits—e.g., insurance certificates, bond forms, project schedule—as applicable.]