Example: Under local custom, the contractor had to obtain a certificate of occupancy before final payment. But the written agreement in question had no clause requiring the contractor to furnish the certificate of occupancy. The court found that the local custom was part of the agreement by implication.

Parties to a construction contract generally select from one of several traditional methods by which the contract is priced. The following are among the most common:

Lump sum. The owner agrees to pay a specific dollar amount for whatever is required to complete the job, such as an agreed fixed fee of $3,306 to install a new hardwood floor. If the contractor makes a mistake in the estimate for labor or materials, the contractor bears the loss.

Unit price. The contract is priced by the number of units delivered multiplied by a set rate per unit, such as an agreed rate of $6.39/square foot for installing a hardwood floor. Contractors bear less risk under unit price contracts because an error in estimating the size of the job does not stick the contractor with overages.

Cost plus a fee. Under this arrangement, the contractor agrees to keep records of the costs for labor and materials. The owner agrees to pay for all the submitted costs plus a markup, which can be expressed either as a percentage or as a lump sum, such as an agreement that a contractor will install a hardwood floor and charge the actual cost of the materials plus 35%.

If there is a dispute regarding the price, courts will first attempt to determine which type of pricing scheme the parties agreed to use, determine which party assumed risk of error or contingencies, and finally determine which party bears financial responsibility.

TEN THINGS TO THINK ABOUT BEFORE SIGNING A CONTRACT

At some point you will probably find yourself wondering whether you should really sign the contract in front of you. If you order items from a-door-to door salesman, hire a contractor for a home improvement project, or go to work for someone as a consultant, you will be faced with a document, hopefully, designed to protect both you and the other party. Ideally, a contract allows the parties to define, in specific terms, the extent of their obligations to each other relative to the delivery of products or services and payment terms. When the contract is signed, it generally cannot be changed unless both parties agree. Consequently, it is important to protect yourself prior to signing a contract by understanding exactly what it is you are committing yourself to. Use the following list as a general guide. Make sure that contract terms are workable for you. If they are not, attempt to negotiate terms that are more reasonable.