A picture may be worth a thousand words, but Dennis Dixon warns that the wrong word in a contract can cost you a thousand dollars--at the least.
Dixon, a builder and consultant based in Flagstaff, Ariz., believes you can eliminate a lot of problems with customers by taking extra care in writing contracts that could go beyond what you might regard as necessary. Dixon outlined many of those provisions during a March 16 presentation in Providence, R.I., at the JLC Live New England show.
Dixon suggests your contract include these provisions:
- Conditions needed to begin the project.
- Allowance procedures.
- Change order procedures.
- Owner duties and responsibilities (basically, that the owner will be available to make decisions and pay you on time).
- Identifying who represents the owner.
- Identifying who represents the contractor.
- Supervision and management, particularly regarding who gets to tell who what to do. "I want to explain to people how we'll manage the job and when we'll be there," Dixon says. "Our clients think we'll be there 24/7 and bring our dog on Saturdays to play with them. The reality is that we'll be there to supervise when we need to supervise."
- Warranties--implied and other.
Allowances for product selection can cause a lot of grief, Dixon says, so it's best to set things down clearly in the contract. First, he encourages the client and you to select as many of the products to be selected as possible before work begins. If it's not possible to pick every product, seek to limit the number of allowances and list the dollar value of each one in the specification. Declare that the products are to be purchased through and installed by contractor and/or approved vendors/subs/suppliers only--no owner-supplied materials or labor are allowed. Specify that the warranty may vary with allowance selections. To curb abuses, state that you'll impose a processing fee on allowance overages.
Change orders can be similarly frustrating. Here again, Dixon recommends you include a minimum fee for handling change orders so that customers understand that such orders can take up lots of staff time to process, and staff time is money. Change orders are to be considered authorized when signed by the owner representative and the contractor representative. The order should list allowances, products selected, directives, limitations, and a cancellation date if the order isn't started by then.
Above all, verbal discussions aren't binding. "Even if you have to write and get signed a change order on a dirty envelope, those things are worth their weight in court," Dixon says.
See related article: Dennis Dixon's Must-Haves for a Comprehensive Contract