Publication Date:
Sun, 2001-06-10 19:00
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Dan Bawden's Editorial Archives
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It's a funny thing about contracts. Most people don't really read them until there is a problem -- and then each word is put under a microscope. You can save yourself a lot of 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 some suggested contract language to protect yourself. I welcome any feedback or suggested clauses that you may be using in your contract, that you think might benefit other remodeler readers.
"But I Thought It Was Included!"
How many times has this scenario happened to you?
You have written what you believe is a detailed set of specifications to do a project for your clients and started work. Both parties reviewed the specs and everything seemed to be on track. Somewhere along the way your clients realize that they forgot to ask you how much money you put in for the kitchen appliances. (This scenario arises more for the majority of you who are not using cost-plus contracts).
They call you in for a face to face meeting and ask you, "How much money did you put in for the appliances?" The Pentium chip in you brain heats up as you try to remember for sure. You have no memory of this. You're sure. "I don't remember including anything for appliances. I thought you wanted to buy them on your own to save money," you say. Both parties scramble to pull out their copies of the contract to see for sure who's right. The joint review of the contract reveals no mention of the appliances either way. Ouch! A golf ball size lump starts to roll slowly in the pit of your stomach. This could be expensive, even if you end up splitting the cost 50-50. "The appliances will have to be an extra. I haven't figured them at all," you say, standing firm, speaking truthfully.
The clients become very upset. "But we thought it was included!" they say. "You are the contractor -- you're supposed to know how all this works. You are the expert! We've never done this before! We only went with your company because we thought you had covered all the bases." This a no-win situation, and we've all been there.
Remodeling is a complex transaction. It is a diamond with so many facets there's no way to account for them all on every project. You must make it clear in your contract that you have done your best to spell everything out, BUT if you have missed something you have not included a price for that item in your price. It is imperative to make it crystal clear to your client that even if you messed up (and forgot to include something that you should have included), it is still an extra. You can prove you did not put dollars in the bid for it.
The following paragraph is a useful tool to communicate this point and make it a part of your contract at the top of your specifications:
"Costs for your project have been figured by these specifications. If an item of work is not listed above, it has not been included in the price. Owners shall walk through the project with these specifications in hand and check for any missing items or changes they wish to make, so the parties can be clear about scope of work and price before we get started. If an item of work has been inadvertently omitted, Contractor will document that the following: 1) a description of the item(s) of work, 2) the cost it will add, and 3) the time this may add to the project duration. These will be documented by a written Change Order. The Change Order terms must be approved by Owners before the described work can be undertaken by contractor. Payment for Change Order items is due at the time the Change Order is signed by the Owners, pursuant to the Change Order procedures in our contract, found at XX (refer to the Change Order section of your contract)."
If you have clearly stated that you have limited your pricing to the items listed in the estimate, you should be covered. Caveat: If your project involved architectural plans or drawings in addition to the written specifications you are obligated to have included costs for all the items shown in the plans -- unless you have excluded them in some way. You can try to limit the costs included to the written specifications and exclude the plans, but if this were tested in court you'd be skating on thin ice. Extra care is required when you are working with both plans and specifications.
Of course, you should review contract clauses like this be sure they fit your business and are allowed in your jurisdiction. It would be wise to take your attorney to lunch and let him read over your new wording.
Dan D. Bawden [1], CGR, GMB is president of Legal Eagle Contractors Co. in Houston. He was voted Texas Remodeler of the Year for 2000.
