Remodeler Paul Eldrenkamp says that the best piece of legal advice he ever received came from one of his first clients, about two decades ago. At the time, Eldrenkamp, president of Byggmeister Associates, Newton, Mass., was converting a sun porch into a family room for a local lawyer. The attorney told him to write up a good contract, and then “run the job in such a way that no one ever goes back to look at it.”
Sound business practices and solid customer relations are indeed key to keeping yourself out of court while still collecting every dime that's owed to you. So, too, is choosing your clients carefully, so that you're working for people who aren't looking to pull one over on you.
But no matter how careful you are, sooner or later you are likely to find yourself in a dispute. Without a good contract — one that clearly defines all of the obligations of both contractor and homeowner — you could find yourself out not only the money owed to you but thousands of dollars in legal fees, as well.
A legally valid contract can be a fairly basic document. The names and addresses of both parties, a description of the services provided, the price and payment schedules, and signatures of all involved are generally all that's needed. For home improvement contracts, there are usually additional requirements — lead notification or right of recision language, for example — depending on your jurisdiction.
But the bare bones aren't enough. There are many other issues you need to address. We've identified five of the most important.
List Exclusions It's common practice to clearly define the scope of the work to be performed. Not as common — yet equally important — is laying out what work won't be done on a given project.
Gary Ransone, a construction lawyer and contractor based in California, says that “in every set of plans, there will be a gray area, and it's up to the contractor to identify that gray area and let the homeowner know what is not part of the contract.” Ransone, author of The Contractor's Legal Kit (published by JLC Books, a division of Hanley Wood, publisher of REMODELING), has developed a list of standard exclusions, which are listed in his book, and he recommends a project-specific list of exclusions to supplement them.
Joe Sciamarelli, owner of Sound Design Construction in Ocean, N.J., has developed an effective way to keep his clients from confusing “what-if” scenarios with final project specs. “During our meetings, I take notes on everything they mentioned they'd like to do,” he says. Then, Sciamarelli makes sure everything that doesn't make the final cut is listed in the contract as an exclusion.
Your contract should also include provisions that allow for adjustments to project cost and completion date due to “hidden conditions.” While this might be something as simple as faulty wiring discovered behind a wall that takes an extra half day and costs a few hundred dollars more, it should also provide for more complex situations — such as the discovery of mold — that require more lengthy delays and costly remedies. If such a situation comes up during the project, keep careful notes; your contract does you no good if you have no written record. “If the customer thinks you're going to finish in three months and it takes four, you need to keep track of why,” says Sciamarelli, whose detailed contract includes a hidden conditions clause on a special “legal page” that covers many potentially litigious issues.