Archive for the ‘Construction Contracts’ Category

 

HOMEOWNERS & CONTRACTORS: READ THIS FIRST!

Photo by Rishichhibber

Photo by Rishichhibber

Under California Business and Professions Code Section 7159 (b) a home improvement project costing over $500 cannot legally go forward without a written contract in place. It behooves all parties involved for their mutual protection to create as thorough a document as possible, spelling out in specific terms the obligations and rights of the contractor, the homeowner, and even the architect or designers.

A good rule of thumb in drafting a contract is to detail everything agreed to between homeowner and contractor. This includes but is not limited to the following: what work is to be performed; the project start date and completion date; total cost of the project; payment schedule; who is responsible for obtaining the necessary building permits; what materials are to be used and who will pay for them. In the case of materials the contract should indicate the quality, quantity, weight, color, size, and brand name of each. (See Business and Professions Code Section 7159 for a complete list of contract requirements.)

The contract should also be very clear about the financial terms agreed to; beyond total cost and payment schedule, it should identify the amount of any down payment required (according to Business and Professions Code Section 7159 (d) (8) not to exceed 10% of the total budget or $1,000, whichever is less*), as well as any cancellation penalty. Regarding cancellations, the contract must state that any party may terminate the contract without penalty within three (3) days of signing provided that the terminating party put the cancellation in writing and mail it prior to midnight of the third day (Business and Professions Code Section 7159 (e) (6)).

Even after a contract has been written to the satisfaction of all parties, reviewed by an experienced attorney if necessary, and is signed, the contract may need to be amended after the project begins. A change in the design plans, the materials used, a foreseeable delay in the project completion date, whatever the cause of an alteration to the original terms of the contract, these amendments must be put in writing as “change orders.” (Click here to read our post on change orders and the importance of including a “changes” clause in your contract.) A proper change order lays out the specific modification to a contract term and how said modification affects the project budget. (See Business and Professions Code Section 7159.6.) Once a change order is signed by all parties it becomes a legally enforceable part of the contract.

The more time spent thinking about what a particular home improvement project will demand, and clarifying each aspect in writing using unambiguous language, the less opportunity there is for misunderstanding and confusion which can lead to long delays, bad reputations, and potential legal problems.

*See the Contractors State License Board website for exceptions to this rule. 

 

Posted by Green on June 30th, 2014

Filed under Construction Contracts | No Comments »

DANGERS IN REMODELING CHANGE ORDERS

It is imperative that construction contracts provide a clear and concise directive in dealing with the fluid course every project takes. Doing so will greatly aid in avoiding the confusion and mistakes that often lead to costly and laborious legal action between disgruntled parties.

While there is no such thing as a perfect construction contract, this guide will address the importance of keeping control of costs by making a provision for change orders.

Much like a construction contract, there is no perfect set of construction plans. Even the most meticulous scope of work is subject to change due to any number of unforeseen circumstances before or during the construction process.

Should the client decide to make alterations to the design specifications, desired materials are unavailable or found to exceed the costs outlined in the budget, or conditions at the worksite require amendments to the original plan and/or changes in personnel, a provision for such changes should be made in the construction contract.

While it is impossible to predict every such event, a competently written construction contract includes a “changes” clause that accounts for the likelihood of a request to add to or delete from the original scope of work.

The language of these clauses does vary depending on the contract, but most contain provisions allowing the client unilateral powers to modify the plan and specifications, and compelling the contractor to perform said modifications.

Other common provisions include a means for both parties to agree on how the revisions will affect budget and schedule, and a means for both parties to agree on how to handle any disputes that may arise concerning same.

The changes clause also addresses the prudent legal protocol to follow when parties wish to move forward with adjustments to the original scope of work.

For the protection of all involved and as required by the Contractors State License Board for residential projects, the clause should mandate that any modifications to the contract be done in writing, in the form of a change order, and specify the change in work. It should show any and all adjustments to the budget and schedule as finalized in the present contract.

Typically a change order is prepared by the architect or the contractor based on his/her discussion with the client. The change order must be signed by all relevant parties to ensure proper payment for the work performed.

On a more practical basis, if you wish to preserve your working relationship with your Contractor, having a written change order will prevent differences in memory and the resulting disagreements that go along with it.

Posted by Green on June 30th, 2014

Filed under Construction Contracts | No Comments »