| All Contracts Are Not Created Equal!
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| Know What You Are Agreeing Too |
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| We Are Quite Proud of Our Contracts.
They are user-friendly, comprehensive, clear and indicate right off the bat that you are dealing with professionals. The contract may be the most important part of any home improvement project. Maybe that’s why it’s completed first.
A written contract allows for a mutual understanding, so that both parties will be clear about what to expect from the job. From the contractor's point of view, it represents the legal mechanism to get paid for the job.
As with any contract, the “I's” should be dotted and the “T's” crossed. All bases need to be covered in the event of a dispute.
States have gone out of their way to protect consumers who enter into a contract. This is especially true when it involves real property, since the contractor can place a lien on such property to collect a debt.
Because of this power, the contractor is subjected to rigorous rules, regulations, laws and timelines. The law is not going to make it easy for a contractor to encumber someone’s home or other real property. That’s why it is in the contractor's best interest to comply with the letter of the law with regard to the contract.
And when we say “the letter of the law”, we mean it! Courts have ruled against contractors time after time because of contracts that were not well written or technically flawed.
A clause with one word not stipulated as the law requires, or a missing clause, or a clause not written in the right size or type style has resulted in the contractor losing a dispute in court. This is regardless of the merits of the contractor’s work or case.
Another mistake that contractors make is to fail to give 'The Three-day Notice of Cancellation,. Just because the contract mentions it, is not enough. Federal law (FTC) requires a separate form be given. The separate form fully explains the right to cancel and is to be used to notify the contractor that the consumer is exercising their right.
While commercial contracts and subcontracts also have certain language required, they are not nearly as regulated as a contract with a consumer. Regulators do not care as much about what people do to each other business-to-business, but they tend to be more strict when it comes to dealing with the consumer.
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The 'Three-Day Notice of Cancellation'
As most contractors know, the Federal Trade Commission (FTC) issued a “door-to-door” sales rule many years ago that was designed to protect unsuspecting homeowners from being victimized by door-to-door salespeople i.e. sellers of pots and pans, encyclopedias and vacuum cleaners.
What often happened in these situations is the homeowner would sign a document to purchase an item, which usually turned out to be more expensive than they thought or even worse more than they could afford.
Ultimately, their house could be foreclosed on since they might have given (unknowingly), the mortgage on their home or personal property as security. This would be taken away as part of a judgment for failing to pay or not paying on time.
During legislative hearings leading to passage of 'The 'Three-Day Notice' rule, it was noted that salespeople for improvements of property were also guilty of such tactics. Roofing and siding contractors were specifically mentioned. So, the US Congress included all property improvement agreements in this rule.
Since passage into law, all property improvement contracts signed in the home and involving a cost of $25 or more, require that a bold faced 'Three Day Cancellation Notice' be placed near the signature line on the actual contract. In addition, and this is what many contractors fail to understand, you must also give that customer a separate 'Notice of Cancellation'.
This form completely explains the three-day cancellation law and the steps needed to cancel the contract. It must include a copy for the customer to return to the contractor to cancel and a copy for the customer to keep for their records. Of course, the contractor should also have a copy as proof the notice was provided.
What happens if you do not give this notice? Well, simply put, you then have no obligation, under the law to carry out your portion of the contract, namely not paying for the work done. Until you give the contractor the 'Three Day Cancellation Notice' you do not have the mechanism, provided by law to cancel.
If you forget and give the notice to them late or at the end of the project, they can legally cancel the contract at whatever time you give it to them. They are under no legal obligation to pay for anything done prior to the time they were given the notice. Even if you never give them notice and even if the work was done to everyone’s satisfaction, they are not required to pay.
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| | The Importance of Change Orders
With the start of every new project come the 'inevitable changes'. The experienced contractor knows that it won't be long before the customer is asking him to make modifications in the original specifications.
Be sure that each of these changes are put in writing, priced accordingly and signed by both parties immediately to avoid disputes later on.
Contractors who do not document every change are setting themselves up for a losing battle in the event of a dispute. In addition, such contractors may be reducing their profit margin by not taking into account the additional cost (and related markup) of each change.
What may appear to be a minor change can cost you time and money. A little bit here and a little bit there can soon add up. For example, the customer may only want to change the color of a toilet. This small change may involve a price change for a color not in stock. It could take extra time to obtain. It could involve the hassle of exchanging a toilet already purchased. A delay could idle workers and extend the due date for completion of the contract. By the time the project is completed, the customer and contractor may have forgotten about that change. Or, the customer may dispute that this was a change at all.
Some changes may require another application having to be made for a building permit or the need to modify an existing permit.
A good 'change order' should be dated and signed by both the contractor and the customer. It should note the additional charges to be added and how it will be paid. It should indicate how many extra days, if any will be added to the original completion date. And, it should stipulate that the change will become part of the original contract.
The customer should be impressed with the professionalism of any contractor who pays attention to all the details such as formally documenting all changes. In the end nobody should have any cause to complain.
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