Several years ago, Ron Dimon of Dimon Construction in Manlius, N.Y., built an addition for a client whose harassment, threats, and needling demoralized his staff and delayed completion of the project. He and the client ended up in arbitration that cost Dimon $36,000 and satisfied neither party.
Determined never to repeat the experience, Dimon decided that among his mistakes was the fact that he'd promised too much in the contract. His draw schedule was tied to tasks completed, and completion was defined by installation of all the products listed in the specs. A back-ordered glass door for the fireplace, for example, could become the client's excuse not to pay for a "completed" masonry hearth. "Once it started, it kind of snowballed," Dimon recalls, with the client holding back all funds. "If you tie these specs to a quote and a payment, your own words become a noose."
To protect himself, Dimon made three changes to his contract and subsequently ran them by his attorney. First, he front-loaded his draw schedule, requiring a 10% to 15% deposit due on the day the job starts, with draws to follow every two weeks. Next, he made payment milestones simpler and non-specific. "Specifications are attached as a separate sheet. They're not attached to the financial end of it." Finally, Dimon eliminated the arbitration clause. (State legal requirements vary, so check with your attorney before changing your contract.)
Today, if a dispute develops or a client withholds payment, Dimon closes down the job and turns matters over to his attorneys.
"It sounds like a nasty thing, to walk off the job," Dimon says. "But basically you're taking a break so it can get back on track. You're making sure the communications are right."
Recently, Dimon pulled his crew off a $160,000 addition after a client sent him a letter saying the project was way over budget. A letter to that client from Dimon's lawyer pointed out that the client was two payments behind and could not simply terminate a signed contract for no reason. Ultimately, Dimon's workers returned to the job and finished it.