Top 10 Building / Remodeling Contract Issues

Look for these important clauses before you sign

African-american man with pen thinking before signing a contract document
Before you Sign that Contract... Photo by Andrew Bret Wallis/Stockbyte Collection/Getty Images (cropped)

Before hiring a contractor for your building or remodeling project, all agreements should be put into writing. Here are some considerations to protect your interests before signing the written contract:

What Should the Written Contract Contain?

  1. Names and Dispute Resolution: A contract agreement is a legally binding document usually between two parties. Name the parties—the contractor's full name, address, telephone number, and professional license number and the name of the owner or owners. If the owner is married, the contract is usually signed by both partners, who are equally liable unless the owner is considered a business. How will contractual disputes be resolved?
  1. A list of attached documents: A detailed description of the work to be done and where it is to be done. This is called the "scope." Specify the materials to be used: quality, quantity, weight, color, size, brand name, etc. Pay particular attention to systems like HVAC and electrical  and "allowance" items—materials that can be chosen by the owner. The house plans will become part of the contract, but who is responsible for faulty design?
  2. Liability and construction insurance. Outline the responsibilities and risks incurred by the homeowner, contractor, and subcontractors. The owner should be exempt from Mechanics' Lien imposed by all subcontractors. Get that in writing.
  3. Dates: The starting and completion dates and repercussions if dates are not met.
  4. Itemized Expenses: The labor cost and the material charges.
  5. Payment Schedule: Information on how and when the owner must pay. Will the payment schedule be initiated by the owner or by a performance statement furnished by the contractor? What are the repercussions if payment is not on time?
  1. Final Inspection: Any warranties and guarantees of workmanship and materials
  2. Construction Site Protocols: Will the owner have access to the construction site and who assumes liability? What is the ongoing method for debris and material removal and when the job is complete?
  3. A "right to cancel" clause. This gives you time (3 days is the standard) after you have signed the contract to change your mind. The clause should also describe what happens if unexpected problems occur after the work is begun.
  1. Local Permits and Reporting: Compliance with codes (e.g., building codes, zoning regulations), environmental regulations, and employment regulations (e.g., documented workers)—what are the responsibilities of the owner and contractor for obtaining the necessary building permits, zoning waivers, and inspections? Know what is negotiable and what is not.

The Plans and Specifications

Newer design software integrates the specification list with the architectural drawings, but this hasn't always been the case. Part of the contract review process would be to reconcile any differences between the plan and spec list. For example, the plans indicate a garage but the specs show no garage door.

Should you be your own Project Manager and General Contractor?

As you can see, general contractors have plenty to worry about for any project. They take on the responsibility, organization, and liability for all subcontractors. Homeowners who take the lead in being their own general contractors may save money, but one contract can quickly multiply by the number of subcontractors you hire. If an owner purchases the construction materials, obligations and liabilities should be spelled out in all contracts with contractors and subcontractors.

Be Safe When You Sign

  1. Never sign a contract unless it is filled out completely.
  2. Read the entire contract carefully. Ask questions.
  3. Keep a copy of the signed contract.
  4. Do not pay more than the required minimum downpayment before the work is begun.
  5. Do not pay the balance until all work is completed, inspected, and debris removed.

NOTE:  The content on this page is the sole opinion of the author, who is not a legal professional. This information is not intended to be legal advice but can be used as guidance when reviewing a contract. Specific questions should be directed to a local attorney who specializes in contract law.

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Craven, Jackie. "Top 10 Building / Remodeling Contract Issues." ThoughtCo, Dec. 31, 2015, thoughtco.com/top-building-remodeling-contract-issues-177590. Craven, Jackie. (2015, December 31). Top 10 Building / Remodeling Contract Issues. Retrieved from https://www.thoughtco.com/top-building-remodeling-contract-issues-177590 Craven, Jackie. "Top 10 Building / Remodeling Contract Issues." ThoughtCo. https://www.thoughtco.com/top-building-remodeling-contract-issues-177590 (accessed December 15, 2017).