Hello ALL,
Who draws up your contracts? Do you write them yourselves? Did you have a lawyer draw up a “form contract” that you go by and then make them job specific? Can form contracts be bought? I am severing from my current arrangement and flying solo. Contracts were a major weak spot for my last arrangement and the result is the cause of me leaving. It just seems like so much information needs to be put in writing for jobs and I’m not sure I have the vocabulary to create such a document on my own. This is an area I have ZERO experience in and after seeing the results of poor contracting, I need to get this right in my own business. Any help with this would be greatly appreciated.
DP
Replies
start with "Contractor's Legal Kit"..... then email me..
i'll fax you one of ours..
put your own together and have a conference with your lawyer.. you should have a lwyer.. even to just introduce yourself... besides.. lawyers handle closings ... and land contracts and they make good referral sources
Mike Smith Rhode Island : Design / Build / Repair / Restore
Thanks Mike, where would I find "Contractor's Legal Kit"? Also, if you let me know your email address I'll gratefully take you up on that.
try JLC... or Amazon..
and you can get me at mfsmith1ATcox.net... (office).. or here and i'll forward it to the office for tomorrow... Mike Smith Rhode Island : Design / Build / Repair / Restore
i looked for that book too and found it in 2 places.
duluth 800-505-8888 and bni books 888-264-2665 good luck.
" besides.. lawyers handle closings ... and land contracts"
Mike, I think that's mostly an eastern US tradition. In our area cloisngs are usually done by a title insurance company. I've heard that on the west coast, they are commonly done by Closing Companies that are bonded just to close real estate sales. At any rate, it varies by area and State.It doesn't matter how fast you get there, it just matters that you go in the right direction.
Can only comment on what I do. Have a real simplistic form that takes 1 page or maybe more depending on how detailed the specs get. I use that for everything small, like a bath remodel. It's got all the basics, who, address, what will be done, price, terms, signatures, registration number (that saves them checking to see if you're legit). I have a second form for bigger stuff, commercial remodels, whatever, things that start in the 10K range on up (Okay, no commercial remodel is only 10K, but regardless). . . That's six pages without the specs. The difference is on small jobs, I'm probably not subbing anything more than a couple hundred bucks, and on something bigger, I've got electricians, HVAC, whatever. A lot of the fill in the big version covers some of that. Then you also detail payment schedules and how certain items will be determined to be complete. You might say when the framings done, here's the payment due. How do they know? It's done when the inspector signs off and puts a sticker on the wall. You just need to get a lot more detail oriented on jobs of that scope.
Seriously, get your hands on as many examples as you can, try to figure it out on your own. Not to be a lawyer yourself, but to see what others do and why certain lines are in there (what's an arbitration clause . . . for example) then do an outline of what you're going to need, or outline two or three versions. Once you've got an idea of what you want, it's worth it in the long haul to pay a laywer to make it right and give it back to you on disk. From there, it's just details specific to the job.
" Shoot first and inquire afterwards, and if you make mistakes, I will protect you." Hermann Goering to the Prussian police, 1933.
while you're at it, draw up one for the subs too. You want to be able to say what you want and how and who settles disputes and everyone works together and how and when they get their cash as well. Include the stipulation that if you get shanked, they're out too. Lots more on that one. Research will learn ya lots! Grab a pinch of cope and start learnin." Shoot first and inquire afterwards, and if you make mistakes, I will protect you." Hermann Goering to the Prussian police, 1933.
RW,
Must take issue with your 'getting shanked' philosophy.
If I bring a sub onto a job, and he does his job, he gets paid. His contract is with me, not the HO. At worst, I may ask him to wait a bit. If I'm getting shanked, it's my fault, not his. All my subs know this is my philosophy, they know they will get paid, and they always make time for my schedule if they possibly can.
We've all been there, and I would encourage any young sub to be very alert with young generals: "Can you hold this check?";"The customer is supposed to pay me Friday.";"I've got a problem with the bank draw.";"Inspector was supposed to be here, can't get a draw 'til he does his thing.";etc;etc;etc...ALL of which may be true. NONE of which meets your payroll.
Get the check, cash the check, do the work. That is the sequence of success.
skipj
Well, yes, idealistically, that's what we do all the time. Then there's that other 1%. If you are the general for a commercial job and the electricians bill is $40K, and the owner comes up short or late, do you have that in your back pocket? Not that you won't ever pay them, the intent is they understand if it's not there, it's not theirs (yet.) You'll go to court if you have to or get Big Vinny to go have a talk, but the day it's late it's late.
Something like:
Article 14. It is specifically understood and agreed upon that payment to Subcontractor under Article 6 is contingent upon Contractor receiving payment from the Owner.
" Shoot first and inquire afterwards, and if you make mistakes, I will protect you." Hermann Goering to the Prussian police, 1933.
RW,
I take your point, but the way I structure contracts, if I owe a spark 40k at the end of a job, he's already been paid 80k upfront and during the work; he's probably patient while I duke it out for the balance. Worst case scenario, if I have to sue, I cover his costs and he waits for profit, with my thanks.
skipj
RW,
Have you ever tried to get a residential sub to sign a contract with your article 14?
I used to do that in commercial work, residential is way different. View Image
Good grief. This is making mountains out of molehills. Yes, I am painfully aware of some of the differences between residential and commercial. I almost always pay the subs before the whole job is done and paid for. I'm not much different in mentality than skip - you don't keep the subs happy, you don't have good subs for long.
The whole point - diesel asked for inputs on contracts. W/O knowing exactly what he's doing, if he's going to pursue commercial, it's worth his time to know what some of the customary things in contracts are. And yes it's entirely possible that in his part of the country and yours and mine and someone elses what is customary varies significantly. You make it sound like I'm trying to get him to stiff the subs. Not at all. " Shoot first and inquire afterwards, and if you make mistakes, I will protect you." Hermann Goering to the Prussian police, 1933.
I'm with WAHD on this one. There's the practical concern that I would be slapping my subs in the face if I asked them to sign your #14 but further, it is illegal in my state.
That brings up the point generally that any legal contract has to be specific to your state. For instance, here in Maine, the construction laws require that a contract between contractor and homeowner contain something like this,
"You, the HO have certain rights under law.
These rights include the following ten points but may no be limited to these ten items...."
Those ten items are specified by the law.
If you do not not this notification included in your contract, and you need to go to court to collect, the contract is about as worthless as used toilet paper in the eyes of the court.
So get yopur boilerplate reviewed by a local lawyer with experiencce ion construction law..
Excellence is its own reward!
That bowls me over, the illegal part. This got me thinking when I read this a couple of hours ago, since I remember another time when I think you read something I posted about this area and your eyes crossed. This forum is leading me to believe we do some really really screwy stuff here. I decided to compile a list of those that come to mind easily. We'll see if this doesn't make you bang your head on the keyboard.
Things that seem odd here
No licensing requirements. No apprenticeship programs. In theory, anyone could put a sign on their truck and be a contractor. The closest we get is the WorkForce office, which requires contractors in three counties to have a registration number. This was part of a legislative bill passed about 5 years ago to insure workmans comp coverage. It only affects Lincoln and Omaha. If you’re a sole proprietorship without employees, you’re exempt from paying for the registration.
Homeowners can do anything they want on their own homes. You could build a shed, finish your basement, add a bath, change your windows without a building permit.
You must have a master plumbers license to change a garbage disposal or install a dishwasher within city limits, unless it is on your own home.
A contractor can work in a home doing repair work without a permit, so long as what gets torn out returns to its original condition, and no bearing walls are involved.
Roofers do not need building permits to install shingles or flashing. They do need a permit the minute they remove, repair, or replace sheathing, even if it’s just a patch.
An electrician or plumber needs a permit to do anything in a home, unless its their own.
Furnace installers don’t need a permit, but call the Building and Safety office when they’re done, and the office sends inspectors to check the work, primarily for adequate airflow, i.e. grilles in walls.
Down payments on work are not seen as acceptable. Some people still use them, but the local view, supported by newscasts, is not to trust anyone who asks for any money up front.
If a contractor is not paid for work, while they may win in court, the court will not enforce payments, and offers no other avenues for recouping of costs. The contractor may place a lien on the property, which is not renewable, and expires after two years. If you receive a parking ticket, it will stay on the books indefinitely, and payment is enforced.
Insurance companies seem to do more for oversight than state or local governments. For instance, I know exactly what scope(s) of work I am or am not insured for. They audit my books yearly, to ensure compliance with workmans comp laws. They have had a rep visit me while working. The owner of the agency has had me do work on her home and in her office, and knows far more about what I know and what I do than any government agency could hope to. This agent, to date, is one of only two people to ever ask for references.
Despite the number who disagree (which is fine, as a sub I don’t like it either, though its never bit me) the “payment contingent on us getting paid†clause is customary here. I have contracts from three different firms in my file cabinet which are all large enough to have had their lawyers pore over such things, and all three use nearly identical wording on that point.
Then there’s the companies who don’t even use contracts for subs. I have yet to do work as a sub for a builder, remodeler, (but only one of the commercial customers) where I ever saw any paperwork offered. It was always a handshake deal. It only got sideways once. It was resolved.
Head hurt yet?
" An example from the monkey: The higher it climbs, the more you see of its behind." Saint Bonaventure
I don't know if I was adding to your pain or just rubbing salt in the old wounds there, buddy.
My point was just that it is not legally possible to write yourself out of liabilities that the law assigns to us. It works fine as long as both parties are in agreement but as soon as there is a separation in understanding and the court is called in to decide, any portions of the agreement that attempt to transcend the law are immediately thrown out and the possibility exists that the entire contract will be invalidated. Most points of all modern law are based on contract law. So the principles that guide our understanding of it are applicable to all our lives.
We all can long for a simpler time but life is such that...here we are..
Excellence is its own reward!
I had a class on contracts in trade school, but I hired an attorney to help me when I got to the point where I needed it. He didn't do much except give me a copy of an American Institute of Architects blank form. Yikes! I'd never work under one of those!
It doesn't matter how fast you get there, it just matters that you go in the right direction.
Hasbeen,
There is still time to get away from the AIA!
Just put it down, and walk away!
WAHDView Image
Was in a simular situation and used the forms from the following link....lawyer looked them over made a few small changes for my area for a minimal fee. They may be a little overkill but it beats the alternative! Good luck!
http://www.udatechnologies.com/
d-pig,
Don't skip the lawyer part. Get a refferal from you local HBA. A few hundred bucks to your lawyer now can save you big money later.
I'll bet most of us can tell you horror stories about how we lost money.
Field educations are very expensive.
Congrats on your new adventure, and your second job, now that you will be working 12 hrs a day.
WAHD
A big thanks to all who responded. This is the part that scares me the most. "Fear of the unknown" and all. I just remember reading on this site at one someone said something to the effect of "we are contractors first and foremost, meaning that we literally contract work on paper and then build it" I just want to be a sure as possible that I am protecting myself as completely as possible. The Rats are everywhere in this business and I've been around long enough to see the damage they can do firsthand. Nobody likes to get screwed and the screwers come in all forms, builders, subs, employees and homeowners alike.
I learned to be a carpenter, hope I will fare as well as a business man. There's so much more to this than banging nails in all the right spots!
"I learned to be a carpenter, hope I will fare as well as a business man. There's so much more to this than banging nails in all the right spots!"
This is serious and you see it . A report I read [sorry I dont remember where I read it ] said that 80 percent of trade based businesses fail because the owner was never trained to be a business person. Its really pretty simple to understand , but there is training available. You once again impress me as you realize the difference. I hope you do well.
I started a business buying repos , operating rentals , building rentals , etc. I still do some work for others on occasion , but my hat has definately changed. Im fixing to do the drywall for a complete shopping center and Im out of my comfort zone one more time. The numbers are pretty big and Im dealing with an out of state general contractor that could eat me for a snack. Im also wondering about a contract for this project as Ive already been accepted verbally.
Tim Mooney
Tim, I would be surprised if the general will allow you to come with your own contract. He will more than likely send you what he uses. Seeing this is your 1st foray into the commercial arena, you might have an attorney review it. If you are allowed to submit your own or are in a position to insist on your own contract, I still say AIA. There won't be any interstate generals that aren't familiar with it.
From a work product stand point you should have no problem. The principle difference you find with commercial/industrial work is the schedule. They will almost certainly be working from some form of critical path schedule. They will want you to start at a specific time and finish by a specific time. Be sure to understand your scheduling requirements and that you feel confident that you can finish in the allotted time. There could be liquidated damages.
Finally, make sure you understand completely how you are going to be paid. The most desirable way is to be able to submit your lien waiver to the title company and get paid. Call the title company and make sure the money is there in your name. If not make sure they show you the money and specifically the process of how you get paid. Don't be timid on this issue.
couple of obvious things, maybe.
contracts are written to favor the writer
because it is in the contract doesn't mean you have to agree to it. may lose the bid, but you don't have to agree to everything in it.bobl Volo Non Voleo Joe's BT Forum cheat sheet
We use only AIA contracts. Why the AIA contract, it is an industry standard and has been developed over the years through experience and more importantly litigation.
If you use any form based contract from another industry they will not allow you to change one word on the form, without review. Why, litigation. When you take out an insurance policy you sign their form as is. Why, every word of that insurance agreement has been litigated as to meaning and intent.
The same with an AIA contract. It has been litigated. If you go to an attorney and have him draw up a construction contract for you, welcome to the lawyer self employment program. An AIA contract can not keep you from being sued, but it can keep you from paying endlessly to have the contact interpreted. The thing no attorney will tell you, is that if you are sued with his contract, he and the opposing lawyer are going to break both of you questioning the meaning and intent of each and every word and phrase of your lawyer's "non-standard contract". Unless you've got enough money to burn a wet mule stay with what's proven, no need to pay to reinvent the wheel.
Where would one come across and AIA agreement?
Any architects office. They have a couple, one is an abbreviated and one the full contract. There is also a general conditions form that can go with it. We use the abbreviated form most. There is also an instruction sheet for them. Also, you can look them up on the AIA web site. Your supposed to not copy them, but.
You might have an attorney review it with you for any legal peculiarilities in your particular state, but that's about all.
Go out and find a Lawyer, for a customer. You'll learn fast enough :) Definitely have a Construction Lawyer review whatever you use. There are lots of good clauses to be found in past discussions, both here and at JLC, which you may want to incorporate. I don't see the AIA much, although an upcoming customer is an Architect. She has volunteered to "bullet hole" my current Contract. By the way, one of my current customers is an attorney, and local prosecutor. He didn't sign the one I gave him. I think that mine must be OK. Most of my work is still based on a handshake. Yeah, I know, I'm crazy. I usually only use a formal Contract, when I get " that feeling" at the meetings, but still want to build the project. It seems that distressed or problem customers are my niche. I get the people no one else can handle, and usually end up with both a lifetime customer, and a new friend. Communication is so key, to what we do. Sometimes people are indecisive, and need a little "hand holding". Go the extra mile for people, their usually willing to even pay for it, and they won't have a reason to sue you. Good luck!
Brudoggie