The Contractor-Finding the Right Contract

I have discussed contracts frequently on this blog because they offer the best protection to both the homeowner and the contractor when commencing a renovation project. There are some excellent samples of contracts to be found, and like any document, they can always be improved. The Office of Consumer Affairs and Business Regulation in Massachusetts offers one online that is in compliance with our state's laws. The link is:

http://www.mass.gov/Eoca/docs/sampcont.pdf

Recently, a contractor-colleague asked me to review her contract. It was quite good, but I suggested the following clauses. Please keep in mind that these are in no specific order, but address problems that might arise throughout the course of the project.

1. Here is an example of a payment schedule. You need to include the information about the deposit not being more than 1/3, and the final payment not being paid until the work is done to the mutual satisfaction of the parties:

PAYMENT SCHEDULE AND PAYMENT TERMS

PAYMENT SCHEDULE:
First Payment: $ **** or ** % of contract amount due when Agreement is signed (not to exceed 1/3 of the contract price or the cost of special order items, whichever is greater): $ ****
Second Payment due +++++++++++++++++++++++ : $ ****
Third Payment due +++++++++++++++++++++++ : $ ****
Fourth Payment due +++++++++++++++++++++++ : $ ****
Fifth Payment due +++++++++++++++++++++++ : $ ****
Sixth Payment due +++++++++++++++++++++++ : $ ****
Final Payment: Balance of contract amount due upon completion of all work under contract done to the mutual satisfaction of the parties: $ ****

NO FINAL PAYMENT CAN BE DEMANDED UNTIL THE CONTRACT IS COMPLETED TO THE SATISFACTION OF THE PARTIES THERETO.

*Interest in the amount of 1% per month will be charged on all late payments under this ……………Agreement. “Late Payments” are defined as any payments not received within 7 days ……………of receipt of invoice from Contractor.


I also like the following provisions, but they are not required:

2. CHANGES REQUIRED BY PLAN CHECKERS OR FIELD INSPECTORS: Any increase in the Scope of Work set forth in these Contract Documents which is required by plan checkers or field inspectors with city or county building/planning departments will be treated as Additional Work to this Agreement for which the Contractor will issue a Change Order.

3. DELAY DAMAGES: If there is an increase in the cost of materials of 10% or more due to the delay of the homeowner, this increase will result in an automatic change order that will be charged to the client. Contractor will make every effort to keep costs within budget.

4. PERMIT NOTICE
It shall be the obligation of the Contractor to obtain permits as the owner's agent. The cost of permits is the responsibility of the owner and is included in this contract price. Owner' who secure their own construction-related permits or deal with unregistered contractors shall be excluded from access to the Guaranty Fund provided by the State of Massachusetts. The following construction-related permits are required:
1. Building Permit
2. Plumbing Permit
3. Electrical Permit
4. Other: ___________________________


I will include more contract clauses in my next post.