Construction Contracting on Your Own? Tips and Tools

So you've got a home improvement project you've been meaning to hire someone to handle? Or are you the entrepreneurial contractor looking to document your projects with a contract? Whatever your role in contracting, it always helps if you make your intentions known in writing, and if you document the "rules" of your agreement. Too many times, people will do business on a handshake, and then be sorry that they didn't write out the price, the payment terms, the project scope, or make risk allocations. Think your oral contract will protect you? I doubt it. Why? Because it's very hard to prove terms of a conversation, unless you have witnesses.

To avoid the pitfalls of construction or home-improvement contracting, here are the basic things you must include in your contract (and not necessarily in order of importance!)

  1. Names of the parties (you want to be sure who is responsible to you to complete). Be sure to include the full names of corporations, full names of people signing.
  2. Address or location of the property involved. All too many times a contract will specify all other terms, but omit the address. This is an essential.
  3. Cost of the work and a description of how it will be paid. If the work is being done over time, then the contract should outline how often payments are made. If the contract is lump sum, then it should detail when the payment is due.
  4. Risk of Loss before completion (if this is a new construction house or a residential project or commercial space, you need to know who is responsible for paying for the property in the event of loss). If your contractor accidentally sets a fire and the whole thing burns down, then he may be responsible for the loss.
  5. Insurance (it's a good idea to require insurance from your contractor, naming you as an "additional insured" on the project and specifying the project address.
  6. Attorney's Fees Provision (all good contracts have a fee provision, which specifies in most cases that the prevailing party in any suit may recover reasonable attorney's fees and costs).
  7. Mechanic's Lien Law (most contractors use supplies and materials from other parties, or likewise use subcontractors to complete work. Before you pay for work done, you want to be sure that the work is not liened or lienable by another party. You can require standard construction documents to avoid these pitfalls.
  8. Warranty (the work of any contractor should be fully warranted for at least a year for workmanship and materials.
  9. Choice of Law and Arbitration (you always want a claim, if filed, to be in your state and city, and you never want to be forced to arbitrate). While arbitration can be cheaper, it's not always conducted by lawyers and judges and you should always have the option of arbitrating or mediating a dispute, rather than being forced to any particular forum. Your local circuit court is usually the best place for your dispute to rest.
  10. Approval by owner of substitution of material (if the materials selected by the contractor for the work or by the owner are unavailable, then the owner should have the option to approve the replacement choice). Insist on this, as you may end up with something you didn't choose.

While there are countless other provisions that a construction contract could have, you don't have to get into a 10 page document to make your wishes known. The main idea is to document carefully, the terms of the deal. You can avoid hassle, disagreements and money issues, by being clear and straightforward at each turn.

For more information on construction law in Illinois, feel free to contact Alisa Levin at 312-720-0082 or via email at: [email protected]

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