A thorough and complete contract agreement is one of the keys to successfully working with a builder; it eliminates or at least reduces the likelihood of disputes, disappointments, or unsatisfactory work.
The first thing that you should be aware of is that if you sign your contractors bid to do the project, this may be interpreted as the contract, which is far less than ideal. You want the contract to be formal and specific, so do not sign the bid unless the language on it indicates that it is not a contract.
Understanding the Contractor Agreement
-The names and street addresses of all parties found on the contract.
This is important because contractors have disappeared before the completion of a job or after doing an unsatisfactory job. Make sure that you have more than a P.O. Box, and check to ensure that all addresses and phone numbers are correct and valid.
-Details and extent of job.
It is important that this section be very specific, including all relevant details. That is, it should outline what should be done, the products to be used (by brand name, model number, color, grade, quantity, etc) and any other pertinent information. There should also be an agreement about clean-up, including the use of dumpsters and removal of debris. This section should include the specific steps taken to complete the project, as well as any alternate methods of completing the job.
-Price or method of determining price.
The price should be stated in a clear manner. The most important thing to be aware of is any costs to be determined after the completion of the job. It is better to get the final price in print at the outset. However, if this is not possible, at least include a clear an exact method by which additional costs will be calculated.
-Timeline.
While an exact timeline is unrealistic, an approximate one is to be desired. You should ask for dates, rather than periods of time (i.e. ask for Sept. 1 to Dec.1, rather than three months).
-Schedule of payments.
Do not pay large portions of the cost before the work is done. Some states even have specific limits on advance payments. You can check with your state’s licensing agency to find out the specific rules. Payments should be made as the work progresses and should be tied to actual progress (determined by yourself and inspections, for example) rather than specific dates. Also, the contractor should prove that all subcontractors and suppliers have been paid before receiving payment.
-Contractor arrangement of permits.
The contractor should be required to obtain all necessary permits and ensure that there are no problems with zoning or local ordinances. These could result in fines or the removal of any work done, so this is quite important.
-Guarantees and Warrenties.
You should receive a written warranty from the contracting company, in which they accept responsibility for the failure of any and all subcontractors to perform their job properly. You should also receive a warranty for their work and materials that covers a specified time.
-Insurance.
Your agreement should require that the contractor provide both worker’s comp and liability insurance. This is to protect the workers, you, and your property. If this clause is not included, you could be sued if a worker is injured. Make sure that the contractor really has the insurance.
-Bonds.
Any bonds agreed upon should be found in this section.
-Additional Work.
There are times when unforeseeable additional work is needed. An agreement for this type of work is called a change order. You should include in it the requirement that a written agreement be drawn up for additional work, so that it can be done as meticulously as the original contact.
-Termination.
The governs the cancellation of the contract, including how much notice must be given, if there are any penalties, and what circumstances allow it.
-Conflict Resolution.
In this section, you can require that disagreements be resolved outside of court or litigation. It also can provide for liquidated damages or a penalty if either side fails to fulfill some clause in the contract.
Beware of contract forms provided by the contractor, as they may give the contractor more control than you would like or include matters that you would not have agreed upon. Also, if there are any blank spaces, cross them out so that they cannot be filled in later.
If you have any apprehensions or anticipate any problems, it would be prudent to hire a construction attorney. The higher the cost of the project, the truer this is.
