The Best Way for Trade Contractors to Stay Out of the Courtroom

The best way for specialty trade contractors to stay out of the courtroom is to manage their clients’ expectations. And the best way to do that is with a contract.

A contract doesn’t have to be long and confusing to be effective, practically or legally. In fact, the opposite is true. The shorter, easier, and more concise a contract is, the better it protects you. That’s because abundant clarity means both parties know exactly what they are accountable for.

You should understand the language and terms of your “boilerplate” contract enough to explain them to your client; if you can’t understand parts of your contract, you need a new one.

How much does a project have to cost to require a contract? If you are doing work for anyone—even as a favor—you must have something in writing. In fact, from my experience, the smaller the job, the more you need a contract. The smaller jobs are where the client thinks more is included than what they are actually paying for or expecting.

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Contract Essentials for Building Trade Contractors

From project scope to warranty details, here are the basics of a simple but effective (and legal) contract for specialty trade work.

Project Scope

What specifically are you being hired to do? The more specific you are, the better. Plans and drawings can save you some time (and words) by stating that "All work to be done is on the attached plans and/or drawings," when you bid on your project. Just make sure you attach that file before you submit it.

If you don't have plans or drawings, write down precisely what you are going to do, to the letter. It also is critical to always mention anything that is excluded from your work—such as related work by other trades—to further avoid confusion and misaligned expectations.

I tell my clients to imagine they are sitting in front of a judge or a jury and trying to explain the work they were hired to do—that’s why you need to have it in writing to describe your work.

Project Completion Date

If your work will take longer than a day, you need to specify a completion date. Make sure this date is 100% something you can do. If you put in a completion date that you can't meet, you will be in breach of your own contract.

I always tell my clients to estimate a later completion date than what they think it will actually be. That way, if you finish the job early, you’re a superhero, but you still have time to complete the job within the promised date if it takes you longer than you initially thought it would. This is a terrific way to manage client expectations.

In a contract, abundant clarity means both parties know exactly what they are accountable for. ... If you can’t understand parts of your contract, you need a new one.

Usually, the individual hiring you will not know much about your work or how long it takes, but if you are up-front, they will know what to expect and you can avoid breach of contract.

Changes to Work

As we know too well, no project goes exactly as planned. You may need to do extra work. To ensure you will get paid for the extra work, include this language in your contract:

"As hard as I try to do the project exactly as promised, there may be situations that will require us to do extra work to complete your project as promised. When these situations arise, we will bring them to your attention and discuss all options. Once we decide what actions to take, if there is a price increase, I will prepare a written change order explaining the additional work and the increased cost, I will not start on the extra work until I have a signed change order approving the work."

Then make sure you follow this procedure when the need for extra work arises.

Payment Terms

This section can conform to whatever you need. Do you need a deposit? Will you be paid in a lump sum upon completion, or will you require payments at certain milestones? Whatever you decide, make sure you are clear on what you expect.

Default and Termination

Although we all hope every project will have a successful conclusion, we must plan as though it will not.

In this section, you need to articulate how long either party will have to fix a default. A default is the failure to accomplish something you agreed to do in the contract. For a contractor, it usually involves failing to do a portion of the work they committed to do in writing. For an owner, default usually is falling to pay when promised.

The default provision says you will give the other side some notice (typically 48 hours or more) to fix the default, and if they don't adhere to this agreement, the contract can be terminated.

Warranty

This section is where you ensure your work is top-notch and promise that, if it is not, you will come to fix the issue/s during a specific window of time, typically one year or less.

It is to your benefit to have a warranty provision in your contract as it enables you to control the window of your responsibility. If you don't give your client a warranty, the law will provide one to your client instead, and it will not be within your control any longer.

In your contract, spell out exactly what your warranty will cover and for how long, and make sure to add that you have no obligation to honor warranty claims if you have not been paid in full.

Contract? Yes, You Need One

Don't be afraid of a contract; what you should be fearful of is not having one. Even if you were to take a piece of paper and handwrite all of the terms above on a piece of paper for your client to sign, that would be better than having nothing at all.

Ultimately, you want to spend your time helping your client and running your business. You don't want to spend time in a courtroom. Being incredibly clear with your clients is the best way to stay out of the courtroom, and the best way to be clear is with a well-structured, easy-to-understand contract.

Karalynn Cromeens is the owner and managing partner of The Cromeens Law Firm, a full-service construction and business law firm founded in 2006, and the author of Quit Getting Screwed: Understanding and Negotiating the Subcontract, and host of the “Quit Getting Screwed” podcast to bring free educational content to contractors nationwide.