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Written contracts are essential when choosing a contractor. A professional contractor has a responsibility to provide a written contract with detail on all work to be completed. Having all of the information in writing helps minimize possible problems during the project and after the work is done. Be sure to include everything in writing. Remember, if it isn't documented, it never happened. Once you receive the contract, take about two days to read and review it carefully. Don't sign the contract until you are completely comfortable with the stipulations included. Think about having an attorney review the contract as well. Several key elements should be in a contract. If any of the information in the following checklist for contract information is not included, request an addendum or revision.
Checklist for Contract Information
This list is not meant to be all-inclusive, and certain information may or may not apply. Talk to an attorney before signing a legally-binding contract.
Contract Information that is needed and why it's important!- Contractor's name, mailing and physical address, phone number
Needed to contact the contractor or verify financial information when calling a bank or vendor. - Name(s) of the homeowner(s), location of job site, and address of homeowner(s)
Specifies parties involved. Tells who is making the decisions, especially as related to changes. - Signature section for contractor and homeowner
Signatures from both parties make the contract legally binding. - Current date
Establishes when the contract was officially executed. - Starting and estimated completion dates
Contractor and homeowner are in agreement on the beginning date and proposed completion date. - Estimated cost of work
Necessary to establish boundaries as related to work billed. - Payment schedule
Details how much money is due to the contractor and when it is to be paid. Make specifications related to special order items and cash advances. Check with your local building department for information on percentages allowed for advance cost deposits. One payment option is to pay 1/3 to start, 1/3 halfway, and the final 1/3 after the job is complete and all work is satisfactory. Another option is to pay on a cost-plus system where you receive monthly bills. Make sure you keep track of all payments made. Don't make the final payment until all inspections and change orders are completed. Never pay in cash – always write a check made out to the contractor's business. - Release of lien clause
If subcontractors are not paid and the contractor has been paid, they can sue the contractor for payment. The homeowner also needs to obtain copies of lien releases the contractor gets from the subcontractors to insure everyone is paid in full. - Written warranty (if applicable)
Covers materials and workmanship. Name and address of contractor, distributor, or manufacturer should be listed for those honoring the warranty. The limitations and length of the warranty should also be listed. - Dispute resolution
In the event of any problems that may arise, include a dispute resolution clause to determine how problems will be handled. Mediation or arbitration is the best and least expensive way to handle contract disputes. - Right of rescission
The Federal Trade Commission's three-day right to rescission allows the homeowner three days from the date of signing to void the contract legally with no repercussions. The homeowner is not liable for any service or finance charges. - Purchasing permits
The contractor must agree to purchase all required permits in his business name. - Inspection failure
The contractor must correct any problems related to inspection failure at no cost to the homeowner. - Insurance
Contractor must present proof of general and personal liability, workman's compensation, and automobile insurance. Contractor should be required to verify the same insurance information on the subcontractors. - Duties clearly outlined
Who will be responsible for what? Responsibilities include, but are not limited to: clean up during and after the job, use of personal facilities, use of phone, repairing damaged personal property (i.e. broken driveways and lawn damage). Include who will be responsible for ordering materials and scheduling workers and subcontractors. - Scope of work
Exactly what work will be done including a list of materials with brand names, sizes, and colors and code requirements for materials such as lumber and electrical components. If blueprints are used, reference a dated set of plans. Also, include any charges for work that is done in addition. For instance, if your water heater breaks and you ask the contractor to fix it, make sure a per hour extra work fee is clearly outlined. - Change order
A change order is a defined change process. Change orders should be used whenever work is added, materials and equipment are substituted, or any other changes are made. Change orders should be in writing and include an itemized list of the additional cost. The homeowner should approve all change orders.
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