Construction Contracts –Unusual State Laws Stack the Deck Against Contractors
New state consumer-protection laws are making it really tough on contractors by requiring specific disclosures and statements in their home improvement and construction contracts. The days of “hand-shake” agreements, or boiler-plate contracts are over. Failure to include state-mandated disclosures or statements in a construction contract can result in fines, or make any construction contract null and void.
Most contractors may be unaware of these state changes in the laws affecting their construction and home-improvement contracts. Contractors typically run small businesses and put their emphasis on building to state codes rather than keeping track of legal changes required by state contract law. Many contractors still do business on a handshake or use a simple “boiler-plate” one-size-fits-all contract that may omit specific state requirements.
Some of the toughest states on construction contract requirements are Pennsylvania, Texas, New York, New Jersey, Florida, California and Hawaii.
Pennsylvania requires that a long list of disclosures to appear in a construction contract – such as start and finish dates, names and addresses of subs, insurance coverage and a phone number for Pennsylvania Bureau of Consumer Protection. Omit these disclosures and your construction contract is unenforceable in Pennsylvania. Also, any Pennsylvania construction contract that includes one of the eleven clauses commonly found in most home improvement contracts, renders the contract unenforceable. Failure to comply is a misdemeanor – if the contract is for a small job under $2000. But if the job is a larger job – for over $2000, a violation is a felony. The only contract writing program I've found that contains the disclosures required by Pennsylvania law is Construction Contract Writer. http://craftsman-book.com/products/index.php?main_page=cbc_product_software_info&cPath=43&products_id=548.
I've also found that there are even free samples of the Pennsylvania contracts that you can download as RTF or PDF format at http://www.construction-contract.net/.
Texas requires that contractors deliver a 2-page disclosure statement before the construction contract is signed. Texas Property Code requires a notice in contracts for building or remodeling a residential property that qualifies as a homestead. Forget this notice and you are liable for up to three times the actual damages – plus attorney’s fees. Arbitration clauses in Texas construction contracts have to be in 10-point bold type, or they’re void. These type of stringent requirements are hard to find in most boiler plate contracts. You can find some free sample contracts made especially for Texas at http://www.construction-contract.net/. If you download the RTF format you can customize the contract in MS Word to fit your job requirements and be fairly confident that you're complying with Texas laws.
New York requires a long list of specific disclosures in contracts for home improvement, home repair, construction of custom homes contracts Failure to comply brings a fine of $100 to $2,500. If you head to http://www.construction-contract.net/list.php?state=NY you'll find a plethora of contracts for home improvement, custom homes, public works, and more that you can customize for your needs with the help of your word processor.
New Jersey requires all home improvement contracts for more than $500 be in writing. Failure to comply can result in offering the property owner a full refund, or awarding three times any damages caused. What a pain. Every small job requires a contract. Luckily, there a number of these posted on the Web that you can customize on your computer. Find them at:
http://www.construction-contract.net/list.php?state=NJ .
Florida requires a 3-day right to cancel in your contract or you’re subject to a $1000 fine. Omission of the construction industry recovery fund notice in a contract risks a $500 fine. Florida also requires that contractors update their license with additional study. You can avoid the fines listed above by using a free contract downloaded at:
http://www.construction-contract.net/list.php?state=FL
California requires specific disclosures in every contract. Omit these disclosures and risk losing your contractor’s license. Without these specific disclosures, the contract becomes completely unenforceable. In fact, leaving out some disclosures can bring disciplinary action by the California State License Board. Yet, many contractors go blissfully on their way using boilerplate contracts from the stationary store -- not realizing that their license could be revoked should something go wrong. To get the disclosures you need to comply with California contract law go to: http://www.construction-contract.net/list.php?state=CA
How can contractors protect themselves? Many large construction companies hire or retain lawyers to keep their contracts within the legal boundaries of state law. Smaller contracting businesses may just try and keep the customer happy to avoid trouble and potential disagreements. This may work if you don't mind working for free. Chances are, some day you'll do a job for the customer who knows contract law, or consumer protection law, a little bit better than you. Hopefully, they won't use that knowledge as leverage to take advantage of your laxness in not keeping your contracts current with your state laws.
My mom used to tell me that an ounce of prevention was worth a pound of cure. Keeping your construction contracts current with your state's consumer protection acts may save you plenty.
