What Makes a Good Contract?
“Will you look at my contracts and make sure they are good?” This is one of the most common things contractors come into our law offices for. So what does a good contract look like?
Every contract is different and what works for some industries may not work in others. Generally speaking though there are a number of things which should be addressed in every contract. What follows is a list of those topics as well as questions you should ask yourself when writing the contract.
Scope of Work: What will you be doing for the customer? What type of project is it. Be specific. The scope of work for each contract should be different and apply specifically to the customer you are working with. Let us use a patio as an example. If you are going to be installing Holland pavers, state that in this part of the contract. Better yet, state which manufacturer will be making the pavers, and what color choice you have agreed upon with the customer. Will you be basing the installation on a landscape plan? If so, reference the plan. Will there be a soldier course? How about sand, will you be using regular sand or polymeric sand?
As you can see, there are many details which may seem inconsequential now, but could be important later. Writing it all out at the beginning will protect you from “He said, She said” later on if the project breaks down.
Timing: When will you start the job, how long will it take, when will you finish? Exact dates do not need to be assigned for these things, but timing should still be addressed. Also, delays can and do occur, so a general statement allowing for reasonable delays is a good idea.
Change Order Clause: This clause is an agreement within the contract stating that it cannot be modified with out the written consent of both parties. Once you put this clause in a contract, you need to start using change orders. Get a written change order form that can easily be filled out on site by the foreman and have them get the property owners signature for changes.
Permits and Utilities: Are there any permits necessary to do the job? If so, who will be responsible for getting them and paying for them? You should also address utility locations. Who is responsible for marking utilities, specifically the ones that Gopher One Call doesn’t mark like low voltage lighting lines, irrigation lines, invisible fencing, etc? Make sure to address these items so that you are protected later on if you happen to find an unmarked irrigation line.
Cleanup: Is that included in the cost of the project? Are you going to fill in & re-sod the ruts from the skid steer, or do you just seed them. Make everything as clear as possible so that there aren’t questions about what was agreed to.
Money & Payments: How much are you charging the customer? Is that total subject to change if you run into problems or other issues? How much of a down payment is required to start work. Will there be a schedule of payments along the way, or will the remainder be paid once work is finished? If you are going to charge late fees, interest, or other collections costs such as attorneys fees, that needs to be in writing as a part of your contract.
Warranties: What type of warranty do you provide with your work? Chances are that plants are guaranteed, but for how long and under what conditions will you replace them free of charge. How about warranties for Hardscape work? How long is the work warranted for, and under what conditions will the warranty apply?
Pre-Lien Notice: If you are not paid for your work, placing a mechanics lien on the property is a good way to help you get paid. There is specific language provided by Minnesota Law which must be delivered to a customer in order for the contractor to later place a lien on the property. One of the best ways to deliver this notice to the customer is by putting it in the language of your contract.
Dispute Resolution: What happens if there is a disagreement during or after the project? Will it be handled by mediation, arbitration, or in court? Who is responsible for paying the costs involved.
Other items: There are many other things that help make a good contract depending on the type and size of the project. Most notably, make sure the contract is written in plain language to minimize misinterpretation. The subjects discussed here were just a general overview of topics which are important for a contract.
Contractors Roundtable: If you are interested in talking more about contracts and mechanics liens, there will be an informal get together at 7:00pm on April 16th at Grumpy’s in Roseville. An attorney will speak briefly about contracts and then open up the floor for discussion among contractors about what their contracts say and what has worked well for them in the past.
For more information, consult the Minnesota Secretary of State’s website, or contact our firm.