All About Contracts
Contracts are a necessary evil of doing business. Some clients are put off by long contracts. They would like to act with a handshake or minimal paper work. I try to tell people that the contract is to protect them as well as protect us. When I say this, they seem very skeptical. A well-drawn up contract spells out both the client's duties as well as the contractors.
I just returned from the National Association of Home Builders convention where I took several classes, one of them on contracts and law.
Simply put, a contract is an agreement between two or more persons to do or refrain from doing something. To create a binding contract there must be an offer, acceptance of that offer and value or consideration flowing to each party. A well written contract will manage expectations, reduce liability and allocate responsibilities.
A contract to remodel is slightly different than a contract to build a new home. For one thing, a remodeling contract will have a hidden conditions clause stating the price for the work is based on what the contractor can see, not what is hidden behind walls.
A well written contract will have at least the following items:
- Names and addresses of all parties
- A detailed scope of work
- Stipulated price for the work
- Date of commencement and substantial completion
- Change order clauseIf remodeling a concealed condition clause
- An exclusion clause
- An allowance clause if applicable
- A payment schedule
- Conflict resolution clause
- Lien release clause
- Insurance Clause
- Warranty Clause
Other items that should go along with the contract and be referenced in the contract are:
- Any drawings pertaining to the work.
- If a large job, a separate scope of work sheet
- A list of products and part numbers (such as what brand refrigerator and what model)
- A nationally recognized set of construction standards such as the RESIDENTIAL CONSTRUCTION PERFORMANCE GUIDELINES. This publication is put out by the National Association of Home Builders. This set of guidelines goes into great detail of what is acceptable construction tolerances and workmanship. These guidelines help the homeowner understand the construction process and help avoid disputes by having a reference standard.
- An allowance statement. This sheet should specify all allowance items and their associated cost.
Sometimes in construction the project will start, but not all the material selections will have been made. An example might be a chandelier for the living room. The contractor will assign a dollar amount to this item at the time of contract signing. It is up to the homeowner to pick out the item within the assigned allowance amount, or pay the difference if they pick out a more expensive item.
We at Craftsman Construction strive to have a great customer experience and a great customer experience starts with a great contract, that sets the expectations of all parties involved.
Jerry Jackness, President
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