A good contract is worth its weight in gold
Simply put; A contract is a binding agreement between two or more persons
or parties and is legally enforceable.
A well written contract will explain in detail what your responsibilities are as the one performing the work. It will also communicate to the customer what they can expect from you and what you are expecting from them. It will cover such things as; what the “scope of work” is, any subcontractors that will be involved, when the work will begin, a projected completion date, the cost of the work, etc. The "scope of work" will need to be articulated as clearly as possible to avoid “gray areas.” First of all, think about the details that might simply be common sense to you. If your customer isn't the type of person who enjoys building or would even consider the idea of picking up a tool, he or she probably won't think of the characteristics of the job that you consider "common sense" practices. Even though it might seem ridiculous to include them in your contract, you may want to for your own peace of mind.
A good contract may be very lengthy or very short, it depends on what you need. Are you facing a small quick job or a very large job that needs to have many details considered? I have seen instances where the contract was hand printed on a store bought pre-printed "estimate" form. I would, however, encourage you to have some sort of a binding agreement between you and the customer you are working for. It helps keep everyone honest!
Assumptions
Never assume that someone can read your mind, or that they will forgive you when you don’t want to include something that they feel you should, especially when you didn't intend to include it. That will always create hard feelings on both sides. Someone almost always loses when that happens. If you have put enough profit into the job, you may opt to "give a little" if needed, so that you can “over deliver” which can make for good word-of-mouth advertising.
I have had few, but enough, occasions where assumptions have happened that have made me leery of being too vague on any contract. Invariably, this happened with people that I knew (friendly aquaintences) and thought that I didn’t need to be so detailed in my “scope of work.” I actually walked away from one job making about three dollars an hour. Shame on me!
A good contract will explain not only how you expect to be paid but also what the customer can expect to happen if they don't pay on time. It should explain that you can file a “Notice of intent to file a Mechanics Lien” should it become necessary. Although the term might sound like it would involve someone who would work on your car, it is simply a legal ‘instrument’ for you to use in the event that a customer decides to leave you high and dry.
The Mechanics Lien (from the free dictionary by Farlex)
the right of a craftsman, laborer, supplier, architect or other person who has worked upon improvements or delivered materials to a particular parcel of real estate (either as an employee of the owner or as a sub-contractor to a general contractor) to place a lien on that real property for the value of the services and/or materials if not paid. Numerous other technical laws surround mechanic's liens, including requirements of prompt written notice to the owner of the property and the amount still owed (even before the general contractor has been tardy in making payment), limits on the amount collectable in some states, and various time limitations to enforce the lien. Ultimate, last resort enforcement of the mechanic's lien is accomplished by filing a lawsuit to foreclose the lien and have the property sold in order to be paid. Property owners should make sure that their general contractors pay their employees or sub-contractors to avoid a mechanic's lien, since the owner could be forced to pay the debts of a general contractor even though the owner has already paid the contractor. If the worker or supplier does not sue to enforce the mechanic's lien, he/she may still sue for the debt.
You would file a mechanics lien with the County Clerk and Recorders office. What this instrument does for you is usually down the road a little. I have known some contractors though, who upon the signing of any contract for work, will prepare the paperwork for the lien in advance just in case. If a mechanics lien is actually placed on a property, the owner of the property cannot sell the property until the matter that necessitated the lien is resolved. This may in some cases involve interest being paid to you if the court decides in your favor.
I have only had one occasion to do this. I was working on a project with another contractor and the customer had not paid in the time allotted. After calling the customer with no resolution to the problem, the appropriate paperwork was completed. Prior to filing the paperwork, we notified the lender of the issue. We expected a call back within 48 hours but literally a couple of hours later we were on the phone with the lender, who, after the details were communicated to them, contacted the homeowner and demanded he pay immediately. We had payment that day. As it turned out, the homeowner just didn't feel like paying the bill when it was due.
In that case, simply making the lender aware of the issue was enough to take care of the problem however, that's not always the case and you could end up in court. Although I believe that needing to take someone to court is the exception and not the rule you should always cover that base. In my years in the building trades, that was the only time that I ever had to even consider that option. It also helped me refine my own contract. In the future, through my contract I insured prompt payment with very little risk to my own financial status.
I have also had subcontractors take advantage of me when I tried to help them out in difficult times. In one particular situation I found myself going against my better judgement to help out a sub who was working for me. To make a long story short, he took the money and ran. I was left with no one to finish the job and having to purchase materials a second time.
Again, shame on me! That situation showed me something important. You don’t go against your contract! Along with the contract I had for the customer, I developed separate contracts for my subs. Each subcontractor had to sign one and provide proof of valid insurance and if necessary proof of a current masters license such as the ones that an electrician or a plumber need to have. Providing these became non-negotiable.
The clause that saved me –
I was working on project for a school and had to have a long ditch dug for an electrical line. It was summer and there were no students and no events planned during this time. This school happened to be out in the furthermost reaches of the county (some would ask if it was even in the state). We had already cordoned off the entire area with blockades, caution tape and “No entry” signs on both sides of the school building so that no one could even get close to the construction area. However, because of this ditch, I decided to include in the contract a section that was clearly communicated about barricades. I stated in writing that if the school wanted extra barricades specifically for the electric ditch, it would be their responsibility to provide them and it would also be at their expense.
They decided that what we had done was enough and did not want to add more expense or use any additional barricades. Remember that no one was going to be around, right? Well, they decided to schedule a sports event and with it would provide concessions. The concessions kitchen was near the back of the school but a safe distance from the construction site. One of the girls working the concessions was doing cleanup after the event and decided to take the hot fryer oil out back and dispose of it. She had put it into a large pot to carry it out. She went out the back door and into the construction area right where the electric ditch was.
She could have walked around the power pole on the right side which was only about 8 feet away and this would have kept her away from the ditch. She decided, however, that it would be better to “jump” across the ditch to save time. Yep, you see it coming don’t you? When she jumped, she slipped and all that really hot oil spilled all over her. As you can guess, she ended up needing immediate medical attention.
The Superintendent came to me and was very upset that I had not put up barricades along the ditch. This had been the man who had originally reviewed the contract and signed it agreeing to all the stipulations in it. I asked him to get his copy of the contract and showed him where the issue of the ditch was covered and that any additional barricades were up to the school to take care of. His comment was “I guess I forgot about that.”
This was one of those situations that would have been very easy to pass over since I had already put up blockades, caution tape, etc. and had also talked with the person in charge of making decisions and had been told not to do anything else. As you can see, thinking through something that shouldn’t have, but certainly did become an issue, actually worked to my advantage.
The Important Points;
1. Always have a contract of some sort that spells out very clearly what the details of the job are.
2. Don’t ever make assumptions that you or your customer can remember everything you talk about.
3. Don’t think for an instant that already being on good terms with someone will save you if a difficult situation arises that you could be blamed for. Remember – everyone wants to sue someone. While this is not always true, it is necessary to add specifics that will help keep everyone honest and clear about the details.
4. Make notes when talking to your customer so you can add everything you need into the contract.
5. If you did not cover something in the face to face meeting that should be covered, don’t assume it will be o.k. and leave it out. Call or meet with them and discuss the issue even if it might seem trivial, then add that into your contract.
6. Always get a signed copy of your contract back from the customer and never begin any work without it in your possession.
7. End your job with a “Certificate of Substantial Completion and Acceptance”. This can be a separate document or be included in some fashion on your work order, invoice, etc. Mine was a separate document and I had a specific area on it that either included any work yet to be completed i.e. “punch list” type work or I would put “None” in that space. I did this for legal reasons to show a court if needed that the customer considered the job “completed”.
Remember –
Clear communication makes the whole job more fair to you and your customer. That will reduce your stress through the job when those situations covered by the contract actually occur and all you have to do is let out a little sigh of relief and keep working because you know that the contract you have has already covered those bases.
I once heard something that I have tried to keep in mind over the years.
"Let every contract be well penned, that business stays business and friends stay friends"
(I would say that's good advice - thanks Dad)