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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.
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