Thursday, September 03, 2009

Why You Need a Contract

I was at a NARI (National Association of the Remodeling Industry) meeting last night and was speaking with a contractor. He said, "I don't even use contracts," and appeared troubled by the notion of doing so. I am sympathetic. I have spoken with so many contractors who reminisce about the days when everything was done on a handshake. Unfortunately, those days are long past. It is possible to view contracts in a positive light, however.

In law, the definition of a contract is a "meeting of the minds." When one considers the meaning behind these words, a written agreement is really a wonderful document. It ensures that the communication between the parties has been clear, and that each has given careful thought to his or her priorities and understanding of the job. Disputes are prevented because possible issues have been anticipated and addressed. A good contract includes so many provisions that are important, such as scope of the work, allowances, payment schedules, warranties, etc. A well-drafted contract also reflects the experience of the drafter who, having faced many projects where problems have arisen, deals with those issues and therefore prevents these occurrences in future jobs.

In remodeling, the law requires that there be a written contract for any job valued at over $1000.00. The requirements for the contract are so strict, and the penalties can be so severe, that it would be foolish for a contractor to write a contract himself or buy one from the internet without being sure that it is complete and accurate. For new construction, a builder or construction company would be wise to ensure that its contracts are well-written. For example, unless builders include that they are entitled to recover their attorney's fees if they pursue a claim against an owner, then the would not be able to recover those costs.

There are so many reasons to have a written contract for any construction project. It does not have to be viewed as a negative, but rather as a memorialization of the agreement between the parties. As an arbitrator I know said, "A good contract is negotiated, drafted and then lies on a shelf and collects dust." At that point, all parties can have confidence that the terms have been agreed upon and that the communication is clear.