Questions to ask before signing a modular contract

A modular project usually has more parties than a site-built one: the owner, the architect, the manufacturer, a hauler, a crane company, a setting crew and a general contractor. Each has its own contract, and the gaps between them are where problems tend to land. Before you sign, work through these questions with your attorney and project team.

This is general guidance, not legal advice. Have a construction attorney review your contracts.

Scope and responsibility

• Who is responsible for what, in writing? Get a responsibility matrix covering design, engineering, fabrication, transport, setting, site work, joints between modules, utilities, inspections and closeout. ICC/MBI 1200 sets out roles for the architect, modular manufacturer, construction manager and general contractor, which makes a good checklist.
• Where does the manufacturer's scope end? At the factory door, at the curb, on the foundation, or at final finish? Each answer leaves a different amount of work for someone else.
• Who engineers the connections? Module-to-module and module-to-foundation connections are often split between parties. The ICC/MBI 1200 standard addresses structural connections and lateral-force systems as part of fabrication and assembly, so make sure your contract names who designs and stamps them.
• Who handles the work at the joints? Marriage lines, fire-stopping, corridor tie-ins, roofing and exterior finishes at module seams are the most common source of disputes.

Schedule

• What exactly is the production slot? Get start and finish dates for production, and what happens if you miss your design or permit deadlines.
• What if the site isn't ready? Will the plant store finished modules? For how long, where, and at what cost?
• What if the plant is late? Are there liquidated damages, and do they cover your actual costs, such as idle cranes and site crews?
• Who coordinates delivery? One party should own the sequence of trucks, crane and setting crew.

Payment and deposits

• What deposits are required, and for what? Many plants need deposits to buy materials.
• How is your money protected? Consider escrow, payment tied to production milestones you can check, bonds, or title to finished modules passing to you as they are completed.
• When does ownership transfer? If modules are finished and paid for but the plant has a problem, who owns them?

Quality and inspection

• Which inspections happen in the plant, and which on site? In many states a third-party agency inspects in the factory and the local department inspects site work. California, for example, requires in-plant inspection by an HCD-certified quality assurance agency and an insignia of approval before shipping.
• Can you or your representative inspect in the plant? Get access rights in writing.
• What is the punch-list process? Who fixes factory defects found on site, how fast, and at whose cost?
• Is the manufacturer approved in your state? MBI keeps a directory of state programs. Ask for current approval documents.

Transport, setting and risk

• Who gets the transport permits? Oversize permits are issued by each state, so a multi-state route needs several.
• Who carries the risk during transport and setting? Define when risk of loss passes from manufacturer to hauler to setter to GC. Match insurance to those handoffs.
• What about damage in transit? Who inspects modules on arrival, how damage is recorded, and who pays for repairs.
• Who protects modules from weather after setting? Name the party.

Changes

• How are changes priced after design freeze? Factory changes can be expensive and disruptive. Agree on the process and pricing before you sign.
• Which decisions must be final before production? Finishes, fixtures, equipment and layouts. Get the list and the dates.

Warranty and closeout

• What does the factory warranty cover, and for how long?
• Who answers warranty calls, and does that change if the GC and manufacturer are different companies?
• What documents will you receive at closeout? Approved plans, state labels, inspection reports, as-built drawings and equipment manuals.

A final check

Before signing, sit down with the full project team and walk through one module's life: design, approval, production, inspection, loading, transport, arrival, setting, connection, finish and warranty. At every step, ask who is responsible and who pays if it goes wrong. If nobody can answer, fix the contract before you sign.

Documents to have in hand before you sign

• Drawings and specifications at the level of detail the manufacturer requires to start production
• The manufacturer's current state approvals for your project's location
• A responsibility matrix signed by every party
• A delivery and setting plan, including route, crane and staging
• A payment schedule tied to milestones you can verify
• Insurance certificates showing coverage at each handoff
• The warranty terms in writing

If any item on that list is missing, ask why, and decide whether you can live with the gap before you commit.