The Work Contract
Note: definitions for the underlined words in this chapter are found in the Glossary of Terms.
Once a contractor has been selected to complete your project, meet again to make final arrangements, and draw up a formal contract agreement. If a design professional and a contractor will both be involved in the project, all three parties should agree to and sign the contract; homeowner, designer, and contractor.
A contract is a binding legal agreement that details the project. It provides a complete description of the project, expectations of all parties concerned, and sets a price for work to be completed. Therefore, all parties involved should thoroughly read and understand the terms of the contract before signing.
If there are any terms or clauses not included in the contract at the time of signing, they are not legally binding. Verbal agreements and vague references are worthless in regards to a signed contract. If there are any terms that are not clear or might be misunderstood, ask for an explanation or revision; if necessary, consult with a lawyer.
A good contract should be detailed and specific about all aspects of the project. It should include:
Full names, addresses, and contact information of all parties involved - homeowner and contractor (and designer, if applicable). If the contractor is a representative from a contracting firm, include full name, address, and full contact information for the firm, as well.
The physical, legal address of the project site.
The exact start and completion dates; penalties, if any for not meeting completion dates. Include clauses specifying acceptable reasons for delay. (Weather, material shipping delays, etc.).
The detailed plans and drawings for the project.
Detailed specifications of materials, hardware, and fixtures.
Detailed costs of the project; including itemized labor and materials costs, and payment schedule terms. Including amounts and dates. (30-percent to 50-percent in advance is common, with an installment mid-point of the project, and final payment at completion; after final approval of work. )
Specification of all work being completed by subcontractors (plumbing, electrical, HOT WIRE, etc.) Include full name, address, and contact information of each person involved.
Specification of all required permits; who is responsible for obtaining them and payment of fees.
A statement of the contractor’s insurance and bonding coverage.
Assurance of full compliance with all building codes.
Details of any warranties of materials or workmanship, as well as duration of warranties, and warranty limitations.
Specifications on construction site clean up. Include schedule (daily, weekly, etc.).
Specify who is responsible for removing trash; and who is responsible for final clean-up after project completion.
In addition, any special clauses should be included in the contract that addresses unusual circumstances. For instance:
Contingency clauses that allow for additional charges for unexpected circumstances – i.e. hitting solid rock when excavating. Since contractors add 15%-20% to the overall quote price when there is no contingency clause, having one in the contract may be a more economical alternative. Many homeowners provide for an additional 10%-20% of the full quote amount as a contingency for unexpected costs.
A right of recession clause that gives the homeowner the right to back out of a contract within 72 hours of signing.
An arbitration clause, where the homeowner and contractor agree upon and name a method for resolving disputes; such as binding arbitration.
A release of liens that assures the homeowner that he will not be held responsible for or presented with any charges, debts, or liens that are filed against the contractor.
A materials substitution clause that makes provision in advance for situations that may arise, necessitating a variance from the original materials specifications. For instance, the unavailability of a certain product. Whenever it appears necessary to invoke changes, it should never be done without the approval of the homeowner. And a written statement from the contractor noting why a substitution is necessary, as well as changes in costs. Any resulting delays should also be noted.
There are many printed “standard contract” forms available. However, it is important to understand that each contract agreement is individual, and unique. If a pre-printed standard form is used, make sure every blank gets filled in. If one aspect does not apply, fill it in with “N/A” (does not apply ). Strike out any clauses you do not agree with, or re- write the contract before signing.
Again – verbal contracts are worthless! Always get a drawn up contract agreement in writing, signed by all parties involved.
Use the handy “Contract Content Checklist” located in the Printable Forms section at the front of the book to help insure you don’t leave pertinent information out of the contract.