A contract is a legally binding document that details the
expectations and responsibilities of all parties involved in a
home improvement project. It clarifies the goals of both
homeowner and contractor, and it protects each party's rights
regarding the project. Click here to look at sample contracts .
The Big Stuff
This article addresses the broad strokes of developing a
contract between you are your contractor. The finer points are
addressed in another article, but keep in mind that this is
simply a guide - contracts vary significantly from project to
project.
Contact Information
It seems obvious, but make sure that you include in the contract
the contractor's name, physical address, phone number, insurance
company and account and license numbers. If there is a dispute,
you need to know where the company is located (you can't serve a
subpoena if you don't have a physical address - a post office
box number won't do!), the company owner, the name of the
insurance and bonding carriers and the way by which you can
reach all involved parties.
Scope of Work
Require a complete description of the work to be done. This
includes the overall scope of the work as well as individual
aspects of the project: electrical, plumbing, finish carpentry,
masonry, etc. The type and quality of all materials should be
spelled out. Make allowances for fixtures, floor coverings, etc.
that are sufficient to provide the level of quality you require.
In addition, indicate all large equipment that will remain on
site for extended periods, such as scaffolding or cement mixers.
If you have architectural plans, include them in this section as
well.
If you decide to change the scope of the work during the job by
either adding or subtracting items, you should make sure there
is a written change order, with project cost and timing changes
signed off on by both the contactor and homeowner.
Project Schedule
Define the project's start date, and secure from your contractor
the approximate length of time it will take to complete. Ask
what potential conflicts might arise due to other projects with
which your contractor is concurrently involved. You will find
that most contractors are reluctant to sign a contract that
includes late penalty clauses, but it still may be an item that
you care to pursue. Finally, specify the time that workers will
arrive and depart each day, and mention the days, if any, that
they are not to work.
Schedule of Payments
There are no hard and fast rules as to how a contractor collects
his or her fees. Some don't collect until the work is completed,
while others ask for 50% up front. The average is three
payments; the first when the bulk of materials are delivered or
when a foundation is poured; a second payment when the job is
half complete; and 20% when the job is essentially complete.
Certainly you don't want to pay and then have them absent for
extended periods, but you also don't want withhold and have the
same result. Remember that this is a symbiotic relationship. It
is understandable to want to be paid and likewise understandable
to want your work done well and quickly. Try to be as
accommodating as your budget will allow. You contractor has
probably dealt with a variety of different payment structures;
perhaps what you have in mind is just fine with him. If you
don't have one in mind, there are two customary ways of paying
for a large job listed below:
A) Cost plus flat fee: usually there will be draws set up with
the homeowner. The contractor uses the draw to pay actual vs.
estimated costs, and submits all receipts and accounting on a
regular basis. Flat fees average 13% to 20% and are usually
paid, along with the draws, as the job progresses. This method
allows great flexibility to make changes as the job proceeds,
but it is more difficult to estimate the final cost.
B) Bid basis: Your contractor estimates the job, and provides a
contract with all materials and fees included. You and your
contractor agree on a payment schedule, referencing stages of
completion in the work.
In both cases above, it is your responsibility to be certain
that each stage is completed before cutting a check. If you're
not familiar enough with electrical or plumbing work, for
example, to know if the proper stage has been completed to make
the payment, ask a knowledgeable outside source.
Note: If financing is necessary, be certain that a clause is
added stating that the contract is void unless and until
financing is obtained.
Building Plans & Permits
Be sure the contractor states in writing that he/she will submit
any building plans needed to the city code compliance
department, obtain all necessary permits and arrange for all
inspections required.
*If the work does not pass inspection, the contractor must bear
the cost of corrections.
Licensing & Insurance
Do your homework on your contractor's licensing and insurance.
Contractor licensing requirements vary by state. Research these
regulations prior to beginning your project, and require that
your contractor provide proof of current licensing if relevant.
Mandate in your contract that the contractor provide proof of
all required insurance. This should include, but may not be
limited to, general liability and worker's compensation for his
or her employees. |
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