Master Instructor for Michigan Builders License, Sid Woryn, knows you're pretty much up on contracts but just wants to bring something to your attention that may help to reduce future liability. Remember this: whatever is in the contract is the legal scope of the work. If it's not in the contract, then you don't do it. Or if it's not in the contract, you're not going to get paid for it if you do it.
Let's talk about the payment schedule. You should have specific dates or a percentage of work that's got to be done to make payment, but make sure that they adhere to it. And if, for some reason, the customer is late in payment, have a discussion with them. That might be a warning sign that they don't have sufficient funds to continue the project.
Warranties. The warranty can be whatever you require to be in the contract. So, if you say you're going to warranty the work for a year, that's an implied warranty. Under Michigan law, it implies that you are warrantying what you've done for a year. But there can also be no warranty. So, if you don't warranty certain things, such as concrete, then make sure it's in bold print on the contract.
This next one has come up in class.
In the back of your contract, there's always room for to add on stuff. So, make sure that if the owners have pets and they're going to be in the area where you're working, that you have a clause in there that says care and maintenance, the pet is the sole responsibility of the homeowner, not the contractor. That way, when the dog or cat goes running out the door, you're not going to have to chase it down.
Also, in your contract, it is very important to have unknown conditions that are the responsibility of the homeowner on some existing work. When you're renovating an existing house, you may pull off drywall or wet plaster and lath, and you're opening a wall only to find that you have an old boiler pipe with asbestos wrapping on it. Well, if you're not an asbestos removal contractor, you can't touch it. And so those costs go back to the homeowner because you're letting the homeowner know that they're responsible for unknown conditions. Also, regarding starting a job on an existing structure, you want to record pre-existing conditions and take pictures.
Another item I want to address is the final payment in your contract. When is the final payment due? I urge you to leave it blank and do it this way. If you're pulling a permit, then why not make the final payment due upon final inspection? Or if you want issuance of a CMO, but you have to pick one of them. That's definite. If a promise due date is not required, then put a date that states: no later than XXX. Then, give yourself plenty of time to complete the job and put a date in there. When you reach that date, payment is due.
Let’s discuss change orders. You should never do a change order without getting paid for it. Or another way of saying it is when they pay for the change order, they pay you. On our change orders, it says change orders must be paid for at the time of signing. You don't want to wait till the end of the job to get paid for your change orders.
Make sure you have an ADR clause alternative dispute resolution clause. We mentioned in our class that there's mediation, arbitration, and facilitation. Check with your attorney to decide what's in your best interest. But there should be at least an arbitration clause in there to resolve a dispute.
And then a word of caution on signatures. Make sure that you're dealing with the owner, the legal owner of the job. You may have two people living together, but only one of them is the legal owner. And you can find that out by checking out the tax rolls within that city to see who the legal owner is. So, I hope some of this helps you out. Good luck with your project.
