The most important part of any construction project is a well-written contract that clearly defines the rights and responsibilities of the respective parties, which in turn helps avoid disputes that may arise over payment or performance issues. To get the most out of your contract, consider the following tips:
• Make sure the contract includes the contractor’s name, address, phone number and license number (if applicable), as well as approximate start and completion dates.
• A detailed list of materials should be included in your contract, with information such as size, color, model, brand name and product.
• Study the design plans carefully. Approve and identify them in the contract before any work begins.
• Known as the “Right of Recision,” federal law requires a contractor to give you written notice of your right to cancel a contract within three business days of signing it without penalty, provided it was solicited somewhere other than the contractor’s place of business or appropriate trade premises.
• Make sure financial terms are spelled out in the contract. Total price, payment schedule and any cancellation penalties should be clear.
• A warranty covering materials and workmanship for a minimum of one year should be written into the contract. The warranty must be identified as either “full” or “limited,” and the name and address of the party that will honor the warranty (contractor, distributor or manufacturer) must be identified. Make sure the time period for the warranty is specified.
• A binding arbitration clause is a good inclusion in the event of a disagreement. Arbitration may enable you to resolve disputes without costly litigation.
• Never sign an incomplete contract. Always keep a copy of the final document for your records.
Anthony Neto, co-owner of Cardinal Construction, Inc. in Pleasanton, advises against paying a contractor a large deposit upfront. “Right now, solvency is a big issue with contractors, and some are out there taking huge deposits. It’s important to remember that there are laws that regulate exactly what a contractor can take upfront. In California, deposits are limited to 10 percent of the estimated cost of the project, with a maximum of $1,000.”
Make sure the contractor’s insurance coverage meets all the minimum requirements, and ask to see a copy of their insurance certification to verify coverage. According to Mr. Neto, you should also ask to be identified as an additional insured name on the contractor’s liability policy. “That gives you added protection—if anything goes wrong of if one of the employees gets injured, you can’t be sued. Not every contractor does it, but it provides you with additional value, so it’s a good idea to ask.”
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