A well-written t&m agreement is one of the most important documents in a contractor's toolkit. It sets expectations, defines scope, protects payment, and reduces disputes. This guide covers everything you need to know about time and materials contract construction.
What to include in a t&m agreement
- Parties and project info — Full legal names, addresses, project location, and project description.
- Scope of work — Specific, measurable deliverables. Vague scope is the #1 cause of construction disputes.
- Payment terms — Schedule, method, retainage (if any), and consequences for late payment.
- Timeline — Start and completion dates, milestone schedule, and provisions for weather delays.
- Change order process — How scope changes are authorized and priced. This clause saves jobs.
- Insurance requirements — General liability, workers' comp, and any project-specific coverage.
- Dispute resolution — Mediation, arbitration, or litigation clause; governing state law.
Common mistakes in t&m agreements
- Using a verbal scope instead of written specification
- Starting work without a signed document
- Omitting a change order process
- Vague payment schedules without milestone triggers
- No insurance certificate requirement for subcontractors
Before you sign or send this
- Have larger contracts reviewed by a construction attorney — the cost is small relative to what an unenforceable clause can cost you later.
- Attach the scope of work as an exhibit rather than burying it in prose; it's easier to reference if a dispute arises.
- Keep signed copies of every version, including change orders — verbal updates are not enforceable in most states.
- Confirm state-specific requirements. Licensing disclosures, lien notice language, and right-to-cancel clauses vary by state and are easy to miss.
Frequently asked questions
Is a verbal agreement enough for construction work?
No. Verbal agreements are legally unenforceable in most states for construction work above $500. A written t&m agreement is essential for any project. Even a simple one-page document is far better than nothing.
Do I need a lawyer to write a construction contract?
For projects under $100K, a well-written template reviewed by an attorney is usually sufficient. For large commercial or public works projects, retain a construction attorney to review or draft the agreement.
Do state requirements affect this document?
Yes — licensing disclosures, required notices, and enforceability rules vary by state. A template that works in one state may be missing a required clause in another, so confirm local requirements before relying on a generic template for a large project.
What makes a document like this legally binding?
Signatures from all parties, a clear scope, and consideration (payment terms) are the minimum. Verbal agreements and unsigned drafts generally aren't enforceable for construction work above small-claims thresholds in most states.