USLegal Newsletter July 2018 – Legal Considerations When Dealing with Home Improvement Contractors

Each year, millions of Americans hire contractors to do repair, maintenance, and remodeling work on their home and rental properties.  The hiring of a contractor involves careful consideration as many legal issues can arise such as poor workmanship, misappropriation of money, failure to meet deadlines, and use of substandard supplies to name a few. States also allow contractors in certain situations to file a mechanic’s lien against a property in the event labor is performed or materials provided and money is owed. With this in mind, it is vitally important to enter into a detailed written agreement with contractors and to understand the terms and conditions contained therein.

The following provisions are typically found in a contractor agreement:

Names and street addresses of all parties. Because contractors have been known to disappear without finishing a job or after doing a defective job, make sure you have more than a Post Office Box and check to make sure addresses and telephone numbers are correct before you sign the agreement.

Specifications and scope of work. This section should be very specific, and should outline what is to be done, what products are to be used by brand name or model number, colors, grades of material, and any other relevant information. You need to include a provision about cleanup after the project, such as removal of debris and dumpsters. This section should also include a list of the steps to be taken and how the work is to be done if there are alternative ways of doing the project.

Price or how price is to be determined. The price should be clearly broken down and easy to understand. Be wary of costs that are not determined until the end of the project. It would be better to get a final price up front, but if you can’t, at least be sure you know exactly how costs will be calculated.

Approximate timelinesYou can never be exactly sure how long a project will take, so an approximation should do, such as from August 1, 2018 to no later than December 1, 2018. Use dates instead of periods of time, like “4 months.”

Payment schedule. You should never pay a large percentage of construction costs in advance. Some states have limits on advance payment. Check with your state’s licensing agency to find out the rules in your states. Additional payments should be made as the work progresses, but payment schedules should be tied to work performance and not to dates. Do not make the final payment until after you’ve completely inspected the work and after any required inspections by building officials have been completed. Also do not pay before the contractor has proved that he or she has paid all the subcontractors and suppliers who could put a mechanic’s lien on your property.

Contractor will arrange for permits. The contractor should obtain any permits that are required and should check to see if there are zoning problems with your project. You can be fined or required to remove improvements if these requirements are not met.

Guaranties and warranties by the contractor. The contractor should give you a written warranty that the contracting company will be responsible for the failure of a subcontractor to perform adequately and a warranty on the workmanship and materials used by the contractor for a specified period of time.

Insurance. The agreement should require the contractor to provide worker’s compensation insurance and liability insurance. These are to protect the workers on the job and to protect your property from damage. If the contractor does not have worker’s compensation insurance, you might be sued if a worker is injured. This section should also include any bonds you and the contractor have agreed on.

Provision for additional work.  Sometimes additional work is needed that no one anticipated, such as work to repair termite damage. An agreement for additional work is often called a change order. Specify that additional work can only be done upon written agreement of the parties so that you can make sure the specifications for additional work are as carefully drafted as in your original agreement.

TerminationThis clause usually sets out the amount of notice either party must give to cancel a contract.

Conflict resolution. This section can require the parties to resolve differences outside of litigation, such as by requiring arbitration of the dispute. You can also provide for liquidated damages, or an agreed upon amount that one party will pay if he or she fails to fulfill some part of the contract.

Click here to review frequently asked questions concerning contractors and homeowners.

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Legal Definitions

Construction Contractor

A contractor in the context of construction may be defined as any person who in any capacity undertakes, offers to undertake, purports to have the capacity to undertake, or submits a bid to, or does himself or by or through others, perform construction. “Construction” may be defined as the performance of building, altering, repairing, adding to, subtracting from, improving, reconstructing, moving, excavating, wrecking or demolishing any building, highway, road, bridge, or other structure, project, development or improvement to real property, or to do any part thereof, including the erection of scaffolding or other structures or works in connection therewith. More

For more legal definitions, please visit our free online legal dictionary at