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Old 05-19-2017, 11:03 AM   #1
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Default Are you using these contract clauses?

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"When youíre starting a new job, you always want to have a contract that both you and your client agree to and sign. The legally binding document is the guideline that spells out all the details of the job, from start to finish. Most contracts contain standard language, but other special items can be added to address specific circumstances." 4 Contract Clauses You Should Be Using and Why
Are you using the clauses mentioned in this article?

Why? Why not?
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Old 05-19-2017, 02:00 PM   #2
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What's a contract?
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Old 05-19-2017, 03:23 PM   #3
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I will be honest and say I have signed one contract in my 35+ years doing business. Probably stupid but I have been very lucky and have not had issues with any of my builders.
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Old 05-19-2017, 03:48 PM   #4
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I feel it's all dependent on the dollar amount of the project. For project under a specified amount. I will use a signed proposal. And if the project exceeds X amount of dollars i have a fully executed binding contract with the client. Other factors included of course.
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Old 05-19-2017, 04:17 PM   #5
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I've only had contracts with the government, you really can't trust them.
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Old 05-19-2017, 04:29 PM   #6
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Quote:
Originally Posted by Cricket View Post
Attachment 105354
4 Contract Clauses You Should Be Using and Why
When you’re starting a new job, you always want to have a contract that both you and your client agree to and sign. The legally binding document is the guideline that spells out all the details of the job, from start to finish. Most contracts contain standard language, but other special items can be added to address specific circumstances. These are referred to as clauses and although there is no real set number required, we have outlined four of the most important ones below.

Arbitration Clause

Let’s say you start the job, but for some reason the project is scrapped or there’s a disagreement and work is paused or canceled. If the customer put down a deposit, he might want it back. If you’ve done work, you might want to keep it or want additional payment to reflect the amount of work you’ve completed. If you can’t come to a mutual agreement, an arbitration clause generally states that a non-biased third party will listen to both sides of the situation and make a determination. The decision made by the arbitrator is final and binding. This is typically faster and less expensive than involving lawyers, going to court and having your case heard in front of a judge, but it’s just as legally binding.

Completion Clause

A completion cause means that work is not officially completed until everything on the work order is completed and both parties agree to this fact. Once the work order is satisfied in both parties’ eyes, the job is marked completed, the clause is met and final payment can be made. If both parties cannot agree that work is completed, arbitration or further legal action might be required.

Financing Clause

If you’re about to start a project, you want to make sure it’s fully financed before you get started. For example, if you’re wiring new construction, it’s important to make sure the owner has already secured the financing to build the structure before you sign the contract. A financing clause basically states that you don’t work until you know you’ll be paid. This can be accomplished with a letter of credit from a lender or a call to the bank to verify funds. However you seek the proof, make sure you do it before you start work.

Late Penalty

Now, you might balk at this one because if puts you on the hook. A late penalty clause means that if you start the job late or you don’t finish within a certain agreed-upon time frame, you’ll refund or discount the cost of the project. You might not like the idea, but face it, if you know you could lose a chunk of money if a project isn’t completed on time, you’re going to make sure your best workers are on the site, they’re on time and work gets done. So, it keeps you honest and it keeps your employees in line as well, since they know they’ll be replaced if they don’t give their all every day.

These four clauses can help you navigate through your projects with less headaches and conflict. Put these clauses into practice and create stronger contracts, enjoy more drama-free projects and put more money in the bank.

Are you using the clauses mentioned in this article?

Why? Why not?
I am not dissing the quoted article, but these are not the most important clauses in a contract, and their use as stated above is questionable.

It goes without saying that you should have a signed contract (as stated). If you don't have some kind of contract, you stand to lose a substantial amount of money for the few cents of paper and minimal time getting it printed and signed. In short, you have everything to lose and nothing at all to gain by not having a contract. It doesn't matter if you have been doing hand shake business for 40 years - people forget what was included all the time, and spelling it out on a piece of paper saves heartache, money, and sometimes longtime friendships.

Additionally, you may put yourself at risk with your own licensing and jurisdiction if you don't have a suitable contract. For instance, the state of Maryland spells out exactly what has to legally be on a contract if you are contracting work with homeowners, and a non-conforming contract puts you in a bad situation if things go south.

Arbitration
It wasn't, but likely should have been stated that the article was referencing homeowner contracts. If you are in the driver's seat as the prime contractor, or contracting directly with the client/owner and not the GC, arbitration should be binding at your discretion. There are times when you do not want to go to arbitration because you have cheaper/better alternatives (small claims/collection). If you are contracting with a GC (secondary contractor), arbitration might be a good thing for your contract, but only if arbitration is to occur in a convenient locale. If the contract states that it is to be at the discretion of another party, you might be paying for you and your lawyers to travel 2000 miles to the arbitration, and pay a premium much higher than a court case in a local jurisdiction.

Completion
While it is important to delineate what, precisely, constitutes completion, I believe that the most important item is to state what constitutes "substantial completion". Often the most important draw is substantial completion, because that is the point that you are often going into the black on a job (a large portion of which is usually profit, and not just expense). Only the retainage (5 or 10%) should be left for the final draw, and while that is usually 100% profit, it is the gravy portion, and not the meat an potatoes.

Financing
I like this idea, but have never seen it. (Except for us having to post a bond, or submit financial info to the GC to "qualify" to do the work).

Late Penalty
No contractor in his right mind should ever willingly enter into a contract where there are damages for delay, especially with a homeowner contract. I am not saying I haven't done so. Many national retail GC's, and even AIA contracts, include damages for delay. Often the calendar days are spelled out. Complications always arise from delays due to others (which you need to provide written backup for each time it happens/weekly, to cover your behind), delays due to additional work/changes/weather/unforseen conditions/unknown subterranean conditions/obstructions/strikes/etc., delays due to construction methods by others, etc. Continuing to document these delays throughout a complex project is sometimes a full time job, just to make sure you don't get screwed in court later if and when the job goes South. I have been thrown under the bus before by a GC trying to cover their own behind by blaming the subs. To willingly, by one's own hand, write into a self generated contract a clause for damages for delay is absurd, IMO.
For a homeowner, spelling out a general time frame, and an outside completion date based on no delays of any kind, but subject to change if there are any delays that are due to (changes/unforeseen conditions/etc) is more than adequate for most contracts. Shooting yourself in the foot is not a method to promote success or early completion.
Now, there may be a case whereby the client would like to reward you for early completion. Unfortunately, the last time I was involved in a contract like that, the client managed to wiggle out of a $300,000.00 bonus that we were due. Additionally, I found out from our lawyers that any contract that has a bonus for early completion, also has an inherent damages for delay, which was apparently the reason that the client included it in our contract. (makes you wonder, huh ?)

As always, just my $.02. your results may vary.
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Old 05-19-2017, 10:58 PM   #7
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If you read the article, you should have seen my comments on it below it.
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Old 05-19-2017, 11:27 PM   #8
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Quote:
Originally Posted by wildleg View Post
I am not dissing the quoted article, but these are not the most important clauses in a contract, and their use as stated above is questionable.

It goes without saying that you should have a signed contract (as stated). If you don't have some kind of contract, you stand to lose a substantial amount of money for the few cents of paper and minimal time getting it printed and signed. In short, you have everything to lose and nothing at all to gain by not having a contract. It doesn't matter if you have been doing hand shake business for 40 years - people forget what was included all the time, and spelling it out on a piece of paper saves heartache, money, and sometimes longtime friendships.

Additionally, you may put yourself at risk with your own licensing and jurisdiction if you don't have a suitable contract. For instance, the state of Maryland spells out exactly what has to legally be on a contract if you are contracting work with homeowners, and a non-conforming contract puts you in a bad situation if things go south.

Arbitration
It wasn't, but likely should have been stated that the article was referencing homeowner contracts. If you are in the driver's seat as the prime contractor, or contracting directly with the client/owner and not the GC, arbitration should be binding at your discretion. There are times when you do not want to go to arbitration because you have cheaper/better alternatives (small claims/collection). If you are contracting with a GC (secondary contractor), arbitration might be a good thing for your contract, but only if arbitration is to occur in a convenient locale. If the contract states that it is to be at the discretion of another party, you might be paying for you and your lawyers to travel 2000 miles to the arbitration, and pay a premium much higher than a court case in a local jurisdiction.

Completion
While it is important to delineate what, precisely, constitutes completion, I believe that the most important item is to state what constitutes "substantial completion". Often the most important draw is substantial completion, because that is the point that you are often going into the black on a job (a large portion of which is usually profit, and not just expense). Only the retainage (5 or 10%) should be left for the final draw, and while that is usually 100% profit, it is the gravy portion, and not the meat an potatoes.

Financing
I like this idea, but have never seen it. (Except for us having to post a bond, or submit financial info to the GC to "qualify" to do the work).

Late Penalty
No contractor in his right mind should ever willingly enter into a contract where there are damages for delay, especially with a homeowner contract. I am not saying I haven't done so. Many national retail GC's, and even AIA contracts, include damages for delay. Often the calendar days are spelled out. Complications always arise from delays due to others (which you need to provide written backup for each time it happens/weekly, to cover your behind), delays due to additional work/changes/weather/unforseen conditions/unknown subterranean conditions/obstructions/strikes/etc., delays due to construction methods by others, etc. Continuing to document these delays throughout a complex project is sometimes a full time job, just to make sure you don't get screwed in court later if and when the job goes South. I have been thrown under the bus before by a GC trying to cover their own behind by blaming the subs. To willingly, by one's own hand, write into a self generated contract a clause for damages for delay is absurd, IMO.
For a homeowner, spelling out a general time frame, and an outside completion date based on no delays of any kind, but subject to change if there are any delays that are due to (changes/unforeseen conditions/etc) is more than adequate for most contracts. Shooting yourself in the foot is not a method to promote success or early completion.
Now, there may be a case whereby the client would like to reward you for early completion. Unfortunately, the last time I was involved in a contract like that, the client managed to wiggle out of a $300,000.00 bonus that we were due. Additionally, I found out from our lawyers that any contract that has a bonus for early completion, also has an inherent damages for delay, which was apparently the reason that the client included it in our contract. (makes you wonder, huh ?)

As always, just my $.02. your results may vary.
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Old 05-20-2017, 08:17 AM   #9
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A lot of contractors say that they don't use contracts, I am not sure why. It's for your benefit, it also protects the customer and makes you look more professional. I've had a contract signed (or in some cases, agreed to via email) for every job I have done since I stopped sideworking. Even small service calls.

If your systems are setup right, it's very easy and takes no time. It makes sure that both sides know and agree to an exact scope of work, it makes the customer feel safer, and it also stops the bad customers from trying to get over on you.
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Old 05-24-2017, 05:35 PM   #10
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Quote:
Originally Posted by Dennis Alwon View Post
I will be honest and say I have signed one contract in my 35+ years doing business. Probably stupid but I have been very lucky and have not had issues with any of my builders.
Wow. Ohio and North Carolina have reciprocal agreements
for state licensing. So , anyhoo...Denis...what are the names
of those builders ?
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Old 05-24-2017, 05:47 PM   #11
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Quote:
Originally Posted by wildleg View Post
I am not dissing the quoted article, but these are not the most important clauses in a contract, and their use as stated above is questionable.

It goes without saying that you should have a signed contract (as stated). If you don't have some kind of contract, you stand to lose a substantial amount of money for the few cents of paper and minimal time getting it printed and signed. In short, you have everything to lose and nothing at all to gain by not having a contract. It doesn't matter if you have been doing hand shake business for 40 years - people forget what was included all the time, and spelling it out on a piece of paper saves heartache, money, and sometimes longtime friendships.

Additionally, you may put yourself at risk with your own licensing and jurisdiction if you don't have a suitable contract. For instance, the state of Maryland spells out exactly what has to legally be on a contract if you are contracting work with homeowners, and a non-conforming contract puts you in a bad situation if things go south.

Arbitration
It wasn't, but likely should have been stated that the article was referencing homeowner contracts. If you are in the driver's seat as the prime contractor, or contracting directly with the client/owner and not the GC, arbitration should be binding at your discretion. There are times when you do not want to go to arbitration because you have cheaper/better alternatives (small claims/collection). If you are contracting with a GC (secondary contractor), arbitration might be a good thing for your contract, but only if arbitration is to occur in a convenient locale. If the contract states that it is to be at the discretion of another party, you might be paying for you and your lawyers to travel 2000 miles to the arbitration, and pay a premium much higher than a court case in a local jurisdiction.

Completion
While it is important to delineate what, precisely, constitutes completion, I believe that the most important item is to state what constitutes "substantial completion". Often the most important draw is substantial completion, because that is the point that you are often going into the black on a job (a large portion of which is usually profit, and not just expense). Only the retainage (5 or 10%) should be left for the final draw, and while that is usually 100% profit, it is the gravy portion, and not the meat an potatoes.

Financing
I like this idea, but have never seen it. (Except for us having to post a bond, or submit financial info to the GC to "qualify" to do the work).

Late Penalty
No contractor in his right mind should ever willingly enter into a contract where there are damages for delay, especially with a homeowner contract. I am not saying I haven't done so. Many national retail GC's, and even AIA contracts, include damages for delay. Often the calendar days are spelled out. Complications always arise from delays due to others (which you need to provide written backup for each time it happens/weekly, to cover your behind), delays due to additional work/changes/weather/unforseen conditions/unknown subterranean conditions/obstructions/strikes/etc., delays due to construction methods by others, etc. Continuing to document these delays throughout a complex project is sometimes a full time job, just to make sure you don't get screwed in court later if and when the job goes South. I have been thrown under the bus before by a GC trying to cover their own behind by blaming the subs. To willingly, by one's own hand, write into a self generated contract a clause for damages for delay is absurd, IMO.
For a homeowner, spelling out a general time frame, and an outside completion date based on no delays of any kind, but subject to change if there are any delays that are due to (changes/unforeseen conditions/etc) is more than adequate for most contracts. Shooting yourself in the foot is not a method to promote success or early completion.
Now, there may be a case whereby the client would like to reward you for early completion. Unfortunately, the last time I was involved in a contract like that, the client managed to wiggle out of a $300,000.00 bonus that we were due. Additionally, I found out from our lawyers that any contract that has a bonus for early completion, also has an inherent damages for delay, which was apparently the reason that the client included it in our contract. (makes you wonder, huh ?)

As always, just my $.02. your results may vary.
Good stuff. Enjoyed reading this and learned a thing or two in the
process. This is good ET material.
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Old 05-24-2017, 08:36 PM   #12
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Try it in court, and get back to me....~CS~
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Old 05-25-2017, 02:19 AM   #13
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Quote:
Originally Posted by chicken steve View Post
Try it in court, and get back to me....~CS~
It seems to me that the only parties I've had that understand the concept of
signing a contract are when I have worked directly for HO's....
(even then , I'm not claiming everything went perfectly well at all times)

Having said this , IMO and my experience , trying to get a residential
general contractor to even read the paperwork let alone sign it is akin
to asking my medical doctor to speak with my attorney...it just doesn't
happen.

For this reason , I am limiting GC's ability to communicate with me
by e mail , this way the conversations , approvals etc are documented
by other than oral.
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Old 05-25-2017, 06:05 AM   #14
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The gold contractual standard is AIA* Document A401 Lighterup.

It's been plagiarized many times.

But when the rubbed hit the litigant road , even the lawyers and judges won't read it.

At the end of the day, it's just paper.....

~CS~
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Old 05-25-2017, 07:56 AM   #15
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Quote:
Originally Posted by chicken steve View Post
The gold contractual standard is AIA* Document A401 Lighterup.

It's been plagiarized many times.

But when the rubbed hit the litigant road , even the lawyers and judges won't read it.

At the end of the day, it's just paper.....

~CS~
Yep. I've been told this before by lawyer..."not worth the paper it's
written on" and that's his quote , not mine.

When it comes down to it , the best documentation is texts & e-mails
really. The whole transaction is really based on the honor system.
I just try to stay ahead of the curve by invoicing a higher value at
each phase until whats left due upon the finish phase ( if it goes
unpaid) won't burn me.
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