By Lance McCarthy
Question of the day: So…why are we called “contractors” when so many of us don’t use “contracts”?
My wife got me into watching the show Once Upon A Time on Netflix (don’t make fun, I had to come down off Walking Dead for a while). There is a slimy character in the show that always gets people to sign contracts with him for crazy things. Like he magically makes someone fall in love with a woman if she gives him their first born child. They agree on the deal, and poof! he conjures up a contract and a pen so they can sign their life away.
Some people view construction or remodeling contracts that way. Both contractors and clients have been burned so many times, they each want the contract to be this sort of magical document that will protect them from getting hurt again. Unfortunately, I don’t think anyone has a magic pen, and contracts don’t really do a very good job at making other people do what you want.
I have had quite a few lawyers as clients over the years, and many of them have a very refreshing view of contracts (no, this isn’t the start of some lawyer joke about the bottom of the ocean). One of these clients is fond of saying “The best contract is one that never has to be used.” This is really good advice. The fact is that if a project goes so badly that lawyers or the court has to get involved, it isn’t going to be pretty for anyone, regardless of the contract.
If the goal of a contract isn’t to protect you in court, then what is it? The goal of a contract should be to help guide the expectations of both parties. In my opinion, the goal of a contract is to prevent disputes.
With that in mind, here are some questions every construction contract should answer:
- What is going to be done? The more detail here the better. Number of outlets…type of doors…
- What is NOT going to be done? The best agreements also describe what is not included so there is no question.
- How much will it cost? Not just total cost, but also how changes in cost will be handled.
- How long will it take? Include start and end dates, but because of the frequent changes involved in remodeling and custom construction, time-based penalties may create more problems than they solve.
- When will payments be? ****WARNING**** the easiest way to get in trouble is to pay a contractor too much too soon. Make sure the payments and the work are staying pretty balanced through the project.
- What insurance is required? This should be at least liability and worker’s compensation insurance
- Is a license and permit required? If walls are moving, the answer is yes.
- What is the warranty period and limits? 1 year is standard. The really awesome companies even have 2 year warranties (that is me bragging).
- What other documents are referenced? The “construction set of documents” should include at least (a) the plans, (b) the scope of work, (c ) the product list, (d) the timeline
- Finally…Equitability. This means fairness or balance. A contract that protects either party too much is destined for trouble. The best agreements allow both the contractor and the client to win. If it feels too lopsided, ask for it to change.