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Before You Sign That Contract: (Part 3)The final installment of necessary information to know before you sign!
Before you sign that contract: Part 3
Copyright © C. S. McMinn 2006
(Excerpts from “Understanding Contract Clauses” by C. S. McMinn.)
DISCLAIMER: Nothing contained in this article is presented as legal advice. We strongly recommend you have all contracts and legal documents reviewed by a competent, state-registered attorney. The ideas and suggestions contained herein are presented as advice only and are not to be used in any legally binding format, document or contract.
So... Whether you’ve scribbled all this on a back of a napkin with a felt tip marker, you still need the rest of these essential details.
Don’t forget to include:
1: You need a start and finish date. Even if you don’t know when that will be, make sure you have dates and durations. Your contract needs to state clearly: the contractor will start on: July 5th. 2002, and be substantially finished by: October 10th. 2002 .
2: Then, you need to spell out how much will be charged and paid, and how those payments will be made. In one lump sum at the end; in stage payments; weekly or monthly? Somewhere in there you need a clause which spells out when final payment occurs. Is that: before construction starts? (Never!); based on progress? Thirty days after completion?
3: And then... there should be a phrase which states that: “all this work will be completed in a substantial and workmanlike manner” or “to accepted professional standards.”
4: One last, but often challenging detail, you may (or may not) want to include this little sentence: “All work to be performed according to prevailing building codes and with (or without) permits.” You can add that you want the work inspected by the local building department and signed off too.
I’d also recommend you talk with one or two seasoned contractors in your area that will not be doing any work for you. Ask them about the code implications of work done with and without permits.
This is a complex issue, varies from state to state, not to mention work performed without permits could become a major problem when you decide to sell your property. On the other hand, especially for small jobs, permits can add dramatically to your costs...
All the rest of the fine print covers a bunch of issues we’ll get to later; these elements listed are the basics...
Just last year, we reviewed a contract for a larger home in which the contractor was to receive the entire balance of the homeowner’s contingency reserve (over fifty thousand dollars). This amount was for the homeowner’s miscellaneous expenses outside of his construction contract. He had already signed the contract, oblivious of this error. Fortunately, the loan had not funded. Needless to say, we asked for this minor detail to be rewritten.
Left unchanged, would the contractor collect that fifty thousand dollars, or would he immediately admit his mistake? It depends. If the project had gone well and relationships between owner and contractor were in good shape, resolution should be simple. But what if there were disagreements and cost overruns? Suddenly we have this time bomb buried in the fine print...
Summary points for the basics:
Every contract needs, as a minimum, the following:
1) Full names and addresses of all parties involved.
2) A written description of the work which then refers to:
3) A complete description of the various sheets of plans, by whom they are drawn, the sheet numbers and dates, plus any and all specifications.
4) How much of the work on the plans is being done the contractor.
5) Start and finish dates for substantial completion.
6) How much will be paid for this work.
7) When payments will be made.
8) Overall quality of work to be performed.
All the above forms the skeleton of a good agreement.
Copyright © C. S. McMinn 2006 |
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