Contracting the Contractors

Do you need contracts? Yes is the short answer
Contracts are a crucial part of the paper trail that will help assure that you get what you want. This pathway begins with your preliminary drawings and moves on to the designer's sketches and then to the working drawings. The estimates lead to the contracts and, eventually, the road will be papered with your canceled checks and the Certificate of Occu­pancy. It's a story with a beginning, middle, and conclusion—and if parts of it are omitted, the ending might not be a happy one.

Contracts are legal documents that specify the responsibilities of the parties. A contract will define the work to be done by each contractor, the sums to be paid by you, and other terms. The documents will probably be drawn on standard forms that you, the contractor, and perhaps your attorney will negotiate and execute.

Contracts should always be in writing
In most states, a contract is not bind­ing if it's not in writing. It's only logical: If the understanding isn't written down to start with, when an argument arises later, how do you know whose recollection is right? Get it on paper.

You may never look at the contract again after you've signed it. However, since the contract in a legal sense defines the relationship you have with your con­tractor, you probably will refer to it occasionally as the job progresses and you make payments. When there are disagreements, you will also refer to it since it provides a framework defining expectations, payments, and schedules.

Obviously the word contractor comes from the word contract. Let's say you've met with the contractor, described the job, he's prepared an estimate, and you've agreed upon the other terms of the agreement. The contract that results obligates the contractee (that's you) to pay the contractor for the agreed-upon work.

Both parties should sign the contract, and both should be bound by the terms and conditions spelled out in the agreement. In general that means the contractor will be obliged to provide specified materials and to perform certain services for you. In turn, you will be required to pay for those goods and that labor.

A contract should, however, specify in as much detail as possible the work to be done. If the estimate was prepared on the basis of the plans and specifications, they should become a part of the contract, too. If the estimate was prepared without a formal set of specifications, now is the time to get specific. The materials to be used should be listed, not only the quantity but also brand names and model numbers and dimensions and weight and quality and color and other details. A schedule for the work should be specified, as well as the prices and the terms of payment.

Most often renovation contracts begin life as estimates. If you are adding a deck off your kitchen, the contractor may arrive at your home one evening, discusswith you the job to be done, inspect the site, and then retire to his calculator and clip­board. He'll probably use a standard estimate contract form, and may well before your very eyes write down your name, address, a description of the work to be done and the materials to be used, and then sign the sheet and hand it to you for your con­sideration. He may ask you to sign right then and there and also advance a portion of the price. He may promise to begin work in the morning. It can be that simple.

Do you want to sign on the dotted line?
Use your own judgment: It may make sense to hire him, you may want it done right away, you may have done business with this fellow before and know him to be trustworthy. In general, however, I'd sug­gest that you might be better off if you take your time and give the decision proper consideration.

Whether the job is large or small, the price modest or mind-boggling, there are basic questions to ask of the contractor and about the contractor.

Does this contractor do quality work? The only way to know is to check out some of his previous jobs/references.

Is the price fair?
Unless you have two or more comparable estimates, you proba­bly can't make that judgment. Getting at least three is a good practice.

Is this piece of paper fair to you?
Particularly if the document is long and packed with tiny print, get your lawyer to have a look. (If the cost of the work being con­tracted for is small, you may not want to spend the time and money in getting your lawyer to review it. It may not make sense if the attorney's fees will be greater than the contractor's price. One common rule of thumb is have an attorney review any contract that will cost you more than what you make in a week.)

Do you understand every word?
In many states, the law requires that contracts be written in plain language, but whatever the case in your area, take care to under­stand what you are signing. Don't be fooled by complicated locutions like "hereto­fore" and "notwithstanding" into agreeing to something you don't mean.

Does the contract incorporate every piece of paper that has gone between the two signers of the contract?
That includes the plans and the specifications you gave the contractor and the estimate and any changes he gave you in return. Remember, only written representations will stand the test of most courts.

PAYMENT TERMS
You should never pay more than a fraction of the entire cost of the job before work begins. Advancing 10 or perhaps 15 percent of the estimated cost is reasonable. In general, the principle to follow is that monies should change hands on the basis of progress, not talk or paperwork.

If the contractor demands a disproportionately large payment up front, find another contractor. Good sense also suggests that at least 15 to 20 percent of the total should be withheld until the job is done, and all payments in between should be made only on completion of specific portions of the job, although as major material purchases are made, more money should flow. The payment of bills is your best sin­gle method of controlling quality. You pay when the work is done properly and not before.