Legal Bits: Nuts & Bolts Advice About Your Remodeling Contract Part #1

The funny thing about contracts is that most people do not really read them until there is a problem, at which point each word is put under a microscope. You can save yourself expensive headaches by having proper wording in your contract to cover the myriad of situations that can get you into trouble as a remodeler. The purpose of this series of articles is to provide you with suggested contract language to protect yourself. I welcome any feedback, including clauses that you may be using in your contracts that might benefit other remodelers.

Today's Topics: Hard-Knocks Clauses
All experienced remodelers have clauses in their contracts that were learned in the "school of hard knocks". Following is a list of the clauses I have included in my contract to deal with the more pesky creative problems clients have come up with through the years.

1. "You let my cat Fluffy out of the house, and I can't find her. You are dead meat. You'll pay for this."
If Fluffy is missing or in kitty heaven, this is no idle threat. Homeowners can become understandably furious if something happens to their favorite pet. The legal threat, however, is minimal. Actual damages are limited and hard to evaluate. Do not underestimate the emotional angst. This kind of thing can terminate the relationship, even if things were perking along just fine.

Answer: "Contractor is not responsible for pets escaping from the residence during the course of construction. It is the owner's responsibility to make sure pets are secured throughout the construction period."

2. "I am deducting $350 for my electricity, water and gas you and your guys used during the course of my project."
This happened to me early in my career. Clients were either convinced that I actually owed them this, or they were miffed about something else and saw this as an opportunity to get revenge. If there is not anything to the contrary in the contract, some think it is fair game to with hold payment.

Answer: "Owners grant contractor use of the utilities on the premises (electricity, water, local telephone calls, gas, etc.) as needed to carry out the plans and specifications. Further, owners agree to allow contractor to use the driveway for parking vehicles during the day. The driveway or backyard may be used for storing lumber, debris, and other materials unless other arrangements are made by mutual agreement of the parties. The rights under this paragraph are granted to contractor free of charge. Contractor shall not be required to make reimbursement to owners for use of any of these, or items like them."

3. "I know we have signed a contract and you were going to start work tomorrow, but - I just got a cheaper bid from my brother- in-law who's a fireman."

Have you ever lost a job after putting in the work up front? Homeowners have no clue how much time and expertise it takes to pull a project estimate and specifications together.

Answer: "If, after signing this contract, owner refuses to permit contractor to proceed with the work, it is agreed that the contractor would suffer damages including loss of profit which the contractor would otherwise have made on the project, a portion of the sales commission, the cost of estimating the job and preparing to perform the project (mobilization), and loss of other potential business which the contractor might have obtained. It is agreed that it would be exceedingly difficult and impractical to determine the amount of damages that would be sustained by contractor and therefore agreed that, in the event of such default, owners will pay contractor ten percent (10%) of the contract price as liquidated damages and not as a penalty."

4. "I know we had a meeting at 1 p.m. today, but I decided to interview a new personal trainer instead."

Have you ever had a client set meetings and consistently fail to show up? If this is a pattern, it can cost you money.

Answer: "Without prior notification of at least 24 hours in advance, there will be a $50.00 fee for each occurrence when the contractor or one of his subcontractors has scheduled to perform work at the job site and cannot gain access. In the case of owner/contractor meetings or appointments, contractor requires a minimum of 24 hours notice to reschedule. There is a $50.00 fee per missed appointment plus an additional 25%, representing contractor's overhead and profit. Appointment delays in excess of 15 minutes will be charged at a rate of $50.00 per hour to owner and be payable at the end of the rescheduled appointment."

I know that many of you might already have clauses like this in your contracts, but for those who do not, these could come in handy. Of course, you should revise these clauses to fit your business and your jurisdiction. It would be wise to take your attorney to lunch and let him read them over to be sure they work in your area.

More will be coming in the next article (Hard-Knocks Clauses, Chapter 2). If you have interesting clauses resulting from the school of hard knocks, please e-mail them to me. I collect them!

Dan D. Bawden, CGR, GMB is president of Legal Eagle Contractors Co. in Houston. He was voted Texas Remodeler of the Year for 2000.