A contract is a document that clearly states the expectations and responsibilities of the parties involved in a project and protects each party's rights concerning the project. The signed contract is legally binding, but it should really be considered a statement of trust between contractor and homeowner.
Also understand that in virtually all cases you have three days during which you may reconsider and cancel a contract after signing it. If you do cancel, send written notice by registered mail with a signed receipt requested from the contractor.
In any construction or remodeling project, both owner and contractor will follow their own agendas to some degree. All have different understandings of how the project should be carried out. The contract is an attempt to clarify everyone's expectations and make them mutually acceptable.
Contracts are generally overly long and written in legalese that is difficult to understand. Before signing a contract, take it home and read it for a day or two. If there's anything you don't understand, find someone who can explain it to you.
Do not rely on oral agreements.
A contract should contain the following sections:
Scope of work
The contract should clearly define all work that is to be done. This includes the overall scope plus individual aspects such as foundation, framing, plumbing, electrical, roofing, and all finish work down to the color, style, and manufacturer of paint and carpets. If you have architectural plans, refer to them in the scope of work.
Materials and equipment
Make sure the contract identifies all materials and products by name, style, quality, weight, color, brand name, and any other pertinent facts. Identify all equipment that will be needed, such as scaffolding or cranes. Be specific about all details that concern you. If you expect 2-by-6 walls instead of 2-by-4, make sure they are specified.
Clearly indicate the date the job will begin. State when workers should arrive each day and what time they should stop. Discuss with the contractor when the project will likely be finished and see if that meets your expectations. Contractors often work on more than one job at a time, so discuss what conflicts, if any, might arise with your project. Ask for an estimated completion date in the contract. Keep in mind, there are numerous factors that can delay a project, such as weather, change orders, and unforeseen problems. Few contractors will agree to sign a contract with a late penalty clause because many unexpected factors can come in to play. Open communication with your contractor throughout the duration of your project is the best way to determine if the project is progressing on time or to understand what factors have delayed the completion date.
The contract should state that the contractor will provide proof of all required insurance, particularly general liability and workers' compensation for his or her employees. The contract should also require the contractor to verify that subcontractors have their own required insurance.
Ask that all written warranties provided with any appliances, equipment, or materials used in the project be given to you.
All contracts should contain clauses specifying what form of arbitration should be conducted and by whom if disputes cannot be resolved between homeowner and contractor.
Paying Your Contractor
Because of the expense involved in construction projects, it is customary for contractors to request that a certain percentage be paid in advance. Contractors point out that they are not bankers and should not be expected to carry the entire cost of a project. On the other hand, homeowners are wary of paying out a large amount of money for uncompleted work.
Every contractor has his or her own policy regarding down payments. On jobs under $10,000, some are willing to front all the costs while expecting payment in full upon completion. Others routinely expect one-third down to start, one-third at the halfway point, and one-third on completion. For large jobs of $100,000 or more, the arrangement may be 10 percent down followed by regularly scheduled payments. Some states, including California, limit the down payment to 10 percent of the bid. Prior to any final payments, however, confirm that the work has been completed to your satisfaction. Ten percent or more of the total owed may be held back until the final walk-through is complete and there is mutual agreement that the job is finished.
A schedule of progress payments is recommended for inclusion in the contract. The schedule should include the amount of each payment, the date of the payment, and the completion stage of the project required before payment is made. If permits are required for a project, the building inspection department generally inspects the progress of the work. Those inspections are a good completion stage standard to associate with progress payments. Generally, progress payments should not exceed one third of the total project price, and ten percent of the final payment should be withheld by the homeowner until all work is satisfactorily completed. Specify any materials that are to be delivered to the site before the progress payment is made. Materials that require special ordering, such as cabinets, flooring, bath fixtures may affect the required payment amount. Any additional expenses that are the result of a change order should be dealt with separately, but in writing.
The real solution to down payment questions requires the homeowner and contractor to establish a mutual trust. The contractor should supply at least half a dozen recent references, and the homeowner should check them out, inquiring about the contractor's quality and ability to meet schedules.
It's those nitty-gritty little details that often spell the difference between a happy homeowner and one with continuing concerns. Following are some specific issues to consider addressing in the contract:
- Equipment on the lawn: Will heavy machinery tear up the grass?
- Broken or damaged household items: Who pays to fix or replace them?
- Radios: You have the right to tell workers to turn it down (or off).
- Cleaning up after work: Will workers clean up everything every day, including sweeping?
- Working hours: Do you mind if workers are there at 6 a.m.? Still there at 7 p.m.?
- Debris removal: Who is responsible for hauling away all debris? Is putting debris on the curb considered removal?
- Paint removal: If walkways, fixtures, or other items are spattered, specify that workers are to clean it.
- Toilets: Can workers use household toilets, or do you need portable toilets?
- Phone: Can workers use it?