Contract Review please

[jpcjguy]

Hi all,

So I received my contract from the contractor I am working with. Looking for thoughts on it.
My initial thoughts:
- gutters
- Thinking about going from 6 mil to 10 mil barrier. Need more details on concrete - (thinking about spe'cing 4000 psi) like fiber, rebar/mesh requirements.

that is off the top of my head.
I consider this "draft 1"
He is dropping the plans off tomorrow
Do the payment terms seem reasonable? This is my first large building project.

Thanks!

 

[wake74]

I'm assuming this is a fairly Mom & Pop contractor as that contract was written by a small contractor and not his / her attorney. While I review a lot construction contacts, they are for large industrial projects, not residential. We have lawyers, they have lawyers, and I swear they get paid by the page at times. It's missing almost all of the usual pages of terms and conditions.

Off the top of my head. I would want close out of all permits listed in the completion of work section. It says the contractor gets paid upon completion of physical work, it doesn't say they have to close out the permits. Open permits will turn into an issue upon sale of the house.

There is zero mention of warranty. Materials only? Workmanship? How many years?

There is no mention of what happens if contractor defaults.

There is no mention of schedule. Is the schedule open ended? What happens if the contractor starts, and the project takes 3 or 4 times longer than planned.

The hold harmless clause is useless if you aren't positive the contractor has active insurance. If an employee gets hurt, their ambulance chasing attorney will sue everyone involved, including you as the homeowner, particularly if it turns out the contractor doesn't have insurance. See if they will name you as additional insured.

If you are going to review a set of plans & specs before signing the contract, those plans and spec's should be listed in the contract.

I would want proof that the contractor has paid any major subcontractors and material suppliers prior to final payment. Remember, if the contractor uses material and labor on your project, and fails to pay the bill, you could be held responsible, and be liened accordingly. Lien waivers serve this purpose.

Remember that a contract will hopefully never be needed after the job starts. But if the project goes bad, the only thing that will matter is what is clearly defined in the contract. Everything else will be irrelevant.

Best of luck, sounds like a nice project.

 

[hchinaski]

This is very interesting to me as I just received a quote to build a 30x50x12 pole barn style metal building in suburban Nashville, with very similar specifications to yours. 4" 3500psi slab with 8"x12" perimeter footers and 4'x4'x6" pads for the lift. Two 10x10, one 9x7 garage doors, two 36x80 entry doors and two 30x30 windows. I'm coming in at about 25% less than yours, but it is a pole barn with trusses instead of a stick build, and there's no plumbing.

This is my first building project as well, so I don't have anything to compare it to; however, my guy wants 30% up front, 20% when materials are delivered and slab is done, 20% when it is dried in, and 20% upon completion. Your 25/25/25/25 seems more reasonable compared to that, I think.

 

[ConCretin]

H
- Thinking about going from 6 mil to 10 mil barrier. Need more details on concrete - (thinking about spe'cing 4000 psi) like fiber, rebar/mesh requirements.

Give my Guide to Floor Slabs in the link below a read for some additional thoughts on the subject. A quick read of your contractor's proposed contract is that it's short on detail other than the payment schedule. If he's reputable and honest, that's not a big deal but in that case you probably don't need a contract in the first place.

 

[meboatermike]

hchinaski -- I wouldn't go 30% up front and 20% when the materials are delivered and slab is done. You are way behind the 8 ball if you do this type of schedule!!! You will have paid 50% and only have a slab in place. If for some reason some of the materials take a walk and he decides to do no more work you will be out half your funds and only have a slab in place.

I worked for 40 plus years for the federal government in lending on houses and farms in rural areas and we would only release a certain % of the work in place (I can't recall the % tonite -- older age is a ***** ) unless the contractor put up a bond and 99.9% did not put up a bond. If I remember right we were usually releasing about the last 50% at final inspection.

 

[vavet]

I want mor details on rough in plumbing. Is that a sink? Is it toilet? Shower?

I’d also like to see either in the contract, or included in the plans, the location on your lot showing distances from property lines, your house, etc.

 

[JoeMcGov]

With a bit of detailed preparation & builder/contractor cooperation YOU can pay the main material bills/invoices yourself. Direct to the vendors.

 

[jpcjguy]

Thanks everyone for the feedback so far! Regarding some questions:
Yes - he is a small 2nd generation builder/contractor.

Plumbing questions - I am going to have a 1/2 bath in the corner that I will finish out. I need the toilet, water and sink drain lines put into the concrete and run to outside the foundation wall. Figured I can take it from there......

Good call out on the Lien release. And close permit - was not aware of that detail and thought it was part of the "final inspection"

The plan includes platt and setbacks (not really an issue as i am required 5ft from the back and side of the lot and I am planning 20 from the rear and 30ish from the side.

Overall, I realize that this contract can be quadrupled in length with legal stuff and protections. Considering how long it has taken me to find a reasonable priced and reasonable to work with contractor, I don't want to come back with a hundred updates and have him decide "it's not worth it". My 'upgrades' to his initial high level quote were very reasonable (going from all scissor to attic truss, upstairs gable end exterior door, upgraded vinyl siding). So far, reviews have been good and he has been honest and upfront in all our discussions. At what point do you have to be reasonable and go with trust?

 

[nutjob]

I don't want to come back with a hundred updates and have him decide "it's not worth it".

This happened to me with a deck contract. One guy contractor, sent me the contract and I asked him to add somethings and he reply's that he was unable to accommodate my requests and have a nice day.

I remember someone else on here with his list of specs for a slab, alot of details and info suggested to him from others on here, no one would bid on it.

Kevin

 

[wake74]

At what point do you have to be reasonable and go with trust?

I think this really depends upon what type of market you are in. In most parts of the country and in most industrial sectors (or at least the ones I work in), it's a sellers market. As a buyer of services, you need to bend over backwards, and throw money at any contractor mid-tier and up if you want them on your project. I would put some of the pricing I've recently received in the ridiculous category, but what are you really going to do about it. The "gettin is good" currently but its a cyclical industry that will slow down at some point. Every industrial contractor I know is hunting people who will just show up to work, and pass a drug test.

I'd try to get a warranty listed, even if it's just for a year, a lien release (proof of payment, something) and get proof of insurance. The insurance one is ultimately the largest monetary risk even if the probability of an occurrence is low. If the project goes bad, you are likely only out the sunk costs to date. If someone falls off a ladder, and the contractor doesn't really have insurance, the monetary risk pretty much has no upside limit.

 

[pcmeiners]

"At what point do you have to be reasonable and go with trust?"

Trust and Contractor should not be on the same page.

The contract as is would be un-signable for me. Nothing but a few minutes of work all in his favor.

Call the insurance company to verify the policy is in place. Get it in writing
Get a bond for his performance . Even if you have pay for it. Again call the bonding company ,get it in writing. .

You should have an Architect not only for the plans but materials and SPECs.
Add your changes, have him put it on the plans

Start and finish date should be on paper, obviously weather can affect both.

Almost 1$18000. before he starts? If he can not use some of his money he not much of a contractor. If he places 15-18k in materials on the ground as he starts, that amount is OK.

He mention worker and himself are not your responsibility, how about subcontractors?

no mention of footer, foundation, vapor barrier, sand /gravel compaction or slab type.

Do not place water line in or below the slab.

Drains in slab for car washing, wet weather

Run lines for Ethernet/cameras/alarm

No mention of insulation type/ and vapor barrier

What finish grading will he do.

If you do not have a reputable Architect spec this out you will have issues.

 

[JoeMcGov]

"At what point do you have to be reasonable and go with trust?"

Trust and Contractor should not be on the same page.

The contract as is would be un-signable for me. Nothing but a few minutes of work all in his favor.

Call the insurance company to verify the policy is in place. Get it in writing
Get a bond for his performance . Even if you have pay for it. Again call the bonding company ,get it in writing. .

You should have an Architect not only for the plans but materials and SPECs.
Add your changes, have him put it on the plans

Start and finish date should be on paper, obviously weather can affect both.

Almost 1$18000. before he starts? If he can not use some of his money he not much of a contractor. If he places 15-18k in materials on the ground as he starts, that amount is OK.

He mention worker and himself are not your responsibility, how about subcontractors?

no mention of footer, foundation, vapor barrier, sand /gravel compaction or slab type.

Do not place water line in or below the slab.

Drains in slab for car washing, wet weather

Run lines for Ethernet/cameras/alarm

No mention of insulation type/ and vapor barrier

What finish grading will he do.

If you do not have a reputable Architect spec this out you will have issues.

Architect and Issues should be on the same page.

 

[ConCretin]

Overall, I realize that this contract can be quadrupled in length with legal stuff and protections. Considering how long it has taken me to find a reasonable priced and reasonable to work with contractor, I don't want to come back with a hundred updates and have him decide "it's not worth it". My 'upgrades' to his initial high level quote were very reasonable (going from all scissor to attic truss, upstairs gable end exterior door, upgraded vinyl siding). So far, reviews have been good and he has been honest and upfront in all our discussions. At what point do you have to be reasonable and go with trust?

I seriously doubt that those who insist that you demand a detailed legal instrument from your contractor have done too many projects lately or maybe at all. It is a sellers market out there and most residential contractors won't have the patience to deal with it.

This obviously puts the homeowner in a very difficult spot if they want to get work done. You can employ a commercial contractor who is accustomed to working under detailed contracts and pay a steep premium or you can work with less sophisticated residential builders and assume some risk.

The reality is that a contract is only as good as the contractor. The only way to enforce a contract is through legal action, which is costly and offers no guarantee of any recovery. There is no substitute for reputation and experience when it comes to hiring a contractor.

That doesn't mean that you shouldn't have a written agreement but a meeting of the minds when to come to scope and price is even more important. Research your state's consumer protection rules, take detailed notes of your conversations, negotiate reasonable payment terms, pay close attention to the work and protect yourself by obtaining lien waivers from all subs and suppliers covered by the last payment before making the next one.

Most of us will successfully undertake many home improvement or construction projects with minimal or no contracts. The occasional failed project won't likely be saved by a contract, it will be avoided in the first place by picking the right guy.

 

[yeldogt]

I seriously doubt that those who insist that you demand a detailed legal instrument from your contractor have done too many projects lately or maybe at all. It is a sellers market out there and most residential contractors won't have the patience to deal with it.

This obviously puts the homeowner in a very difficult spot if they want to get work done. You can employ a commercial contractor who is accustomed to working under detailed contracts and pay a steep premium or you can work with less sophisticated residential builders and assume some risk.

The reality is that a contract is only as good as the contractor. The only way to enforce a contract is through legal action, which is costly and offers no guarantee of any recovery. There is no substitute for reputation and experience when it comes to hiring a contractor.

That doesn't mean that you shouldn't have a written agreement but a meeting of the minds when to come to scope and price is even more important. Research your state's consumer protection rules, take detailed notes of your conversations, negotiate reasonable payment terms, pay close attention to the work and protect yourself by obtaining lien waivers from all subs and suppliers covered by the last payment before making the next one.

Most of us will successfully undertake many home improvement or construction projects with minimal or no contracts. The occasional failed project won't likely be saved by a contract, it will be avoided in the first place by picking the right guy.

This is so true ... true ..true ...true.

 

[pcmeiners]

"Most of us will successfully undertake many home improvement or construction projects with minimal or no contracts. The occasional failed project won't likely be saved by a contract, it will be avoided in the first place by picking the right guy. "

Depending where you live it may not be "the occasional failed project", it can be the norm.
Unless a project, such a garage build, is properly communicated with specifications there will be misunderstandings, that is a 100% guaranteed. There is no need for this if a contract is written properly. Was a contractor in a past life, I prepared very detailed contracts, I also liked when a Architect provided very detailed specs, which saved me a great deal of time writing the contract and dealing with the contractee during and after the job. On lager jobs, such a 5 story building, it would be impossible to properly bid /build on a job without proper specs. Again I emphasize a performance bond, not cheap but sure beats being ripped off and or disappointed, sure beats the results if you do not pick "the right guy".

 

[joes169]

If you're taking a loan out to do this, you'll likely have a title company in place to set-up the payment schedule.

If you don't need to borrow, I'd still consider hiring a title company for a small nominal fee to protect you from getting financially screwed. They perform these tasks every day and have experience with them, you don't.

Alsi, very good info from LLY, as usual. I agree with him, this is undoubtedly a "sellers" market in the vast majority of this country right now. If you start requesting hours and hours of additional non-paying time from the contractor at this point, don't be surprised if he simply "cut's bait and run's" form you. There's so much work out there that it's often far easier to work for customers that already know & trustyou.

 

[glentre]

Joe,

We exchanged emails about two years ago while I was building my garage and you were in the planning stages. Glad to see your project is finally being started.

I agree with several of the above comments that you are really asking for trouble if you don't have a detailed written specification on every aspect of the project, including work done by the subs. I also agree with those who feel getting too detailed with a busy contractor may chase him away. However, you seem to have found a cooperative builder you can work with. Without written details as part of the contract, you both will have different ideas on what materials and workmanship will be used and this is normal. But, this will produce conflicts during the build and the end result will not be pretty.

I suggest you sit down with your contractor and get him to talk about every aspect of the job, what specific materials he will use, exactly what he is including or not including in the build and to review his terms which are not good for you as written. If this conversation is held in a cordial and cooperative manner, you will get a full understanding of exactly what you are getting. Then, together, you can write up specs covering the details that are now almost totally lacking in the contract you posted.

Too many owners rely on the architectural plans, falsely thinking they should cover everything. But, there is simply not enough space on plans to provide enough details and that is why separate specifications need to be part of the contract. For my garage build, I prepared a seven page spec that covered everything I could think of and made that a part of the bid package. Yes, it scared some bidders away but you don't want those guys anyway if they refuse to bid because they won't be able to build their way or won't be able to slip things by you. My original bid spec had a lot of cooperative words indicating I would be open to spec changes if the contractor could suggest better ways of handling any aspect of the job or could substitute materials without compromising the quality of the job. In effect, you are telling the builder exactly what you want but are open to any suggestions he might have for improvements or cost savings. After selecting my contractor, we sat down to review the specs and made a number of changes in both the plans and specs. After all, an experienced contractor knows more about building than any owner or architect and he should be listened to.

If you want, I can send you my specifications to give you an idea just what you should be getting in writing from the contractor before you sign any documents. It's not a matter of whether you trust the builder, it's a matter of you both understanding what each of you expect in the details of the build. PM me.

Glen

 

[yeldogt]

"Most of us will successfully undertake many home improvement or construction projects with minimal or no contracts. The occasional failed project won't likely be saved by a contract, it will be avoided in the first place by picking the right guy. "

Depending where you live it may not be "the occasional failed project", it can be the norm.
Unless a project, such a garage build, is properly communicated with specifications there will be misunderstandings, that is a 100% guaranteed. There is no need for this if a contractor is written properly. Was a contractor in a past life, I prepared very detailed contracts, I also liked when a Architect provided very detailed specs, which saved me a great deal of time writing the contract and dealing with the contractee during and after the job. Again I emphasize a performance bond, not cheap but sure beats being ripped off and or disappointed, sure beats the results if you do not pick "the right guy".

Good communication is important .. knowing the specifications. Most contractors want and are not afraid of list of "wants" and what's agreed. What's being discussed is contracts ... there are many people who have never built a house and somehow "know' what should be in a contract .. or they do commercial work and expect a small builder to copy what they just did for the county dam project.

In all my years of building I have had one serious problem/disaster -- and it's my current project. It's also has the most detailed plans and contract -- it's a complex and expensive project .. but, not the most I have done. Contracts have to be enforced .. and doing so is expensive.

 

[BFBOB]

The hold harmless clause is useless if you aren't positive the contractor has active insurance. If an employee gets hurt, their ambulance chasing attorney will sue everyone involved, including you as the homeowner, particularly if it turns out the contractor doesn't have insurance. See if they will name you as additional insured.

This should be a non-issue with any legit contractor. I'm as small as they get, and I can accomplish this in 3 minutes with one phone call. My insurance agent's number isn't on speed dial because I know it by heart!
It costs me nothing, and I have no problem getting the certificate issued before the contract is signed.

Anyone asks me about insurance my answer, as I reach for my cell phone, is Sure-what's your fax number or email? Simple as that.