Must-Haves for a Comprehensive Contract

The better your contract is, the greater the likelihood that you’ll avoid problems later

Unless you have someone on staff who can do a Vulcan mind-meld with your customer, odds are you and your potential client will clash about something you thought you had agreed on. When that happens, you’re almost certain to refer to the contract, so the better it is, the greater the likelihood that you’ll avoid problems later.

Dennis Dixon, a builder and consultant based in Flagstaff, Ariz., has spent 30 years developing, with his attorney, a model contract that’s clear and comprehensive. Each item on the sheet below should have its own paragraph in the contract. There also should be separate addenda for allowances, options, warranties, and especially specifications. Take time to list specs by category, so that the client knows what products are included in the deal.

“Once you have a contract and the addenda in place, any new paperwork for a project can be edited and completed quickly,” Dixon says. “My advice: If you can’t execute an ‘A Grade’ contract and specs, don’t do the project. Without it, all the liability and risk is placed on you.

A. Who’s in Charge?Name your contact personnel; usually it’s the owner and the job superintendent. This eliminates problems later when the owner says “I told your brick mason about the fireplace deletion last week. Didn’t he tell you?”

B. Change Orders“Never, ever, ever proceed without a signature,” consultant Dennis Dixon declares, though he does agree that the signed document can be as simple as a few words on the back of an envelope. But the key here is: No paperwork, no payment.

C. Payment ScheduleSchedule weekly payments and the work percentages (e.g., framing 50% complete, rough plumbing 100% complete) for that week. Do not ask for 1/3 down, 1/3 during progress, and 1/3 at completion. The maximum you should be owed at completion is 10%.

D. Plan Problems“It is never your job to be a plan reviewer for mistakes, local zoning compliance, setbacks, and code compliance, etc.,” Dixon says. “Make sure that you are compensated on an hourly basis for your involvement in resolving and correcting issues.”