Construction Contracts Get Complicated

Venture onto your state’s licensing board website and you’re bound to stumble on a list of the recently punished. It’s made up of contractors who’ve been found guilty of contracting sins, such as substandard workmanship, working without a license, attempting to defraud customers, or not providing the required notices in their contracts.

It seems many states have recently adopted new consumer protection policies that require the contractor to hand the customer addendums, attachments and small flyers that educate the homeowner on what’s required of the contractor. Forget these extra pages in your contract, and you chance tangling with the state licensing board for a contract violation.

Each state has different rules on what they require. Some states are much more stringent then others. Nevada has extremely strict contract requirements for swimming pools and spas. Texas requires that contractors deliver a two-page disclosure statement before the contract is signed. Pennsylvania's Home Improvement Consumer Protection Act requires that a long list of disclosures appear in the contract – like start and finish dates, names and addresses of subs, insurance coverage, and a phone number for the Pennsylvania Bureau of Consumer Protection. Florida requires you include the Homeowner’s Construction Industry Recovery Fund notice in your contract, or risk a $500 fine. In California, forget to include disclosures on your insurance, and you risk discipline by the Contractor’s State License Board.

Each state now has its own unique, and sometimes peculiar, contract requirements. If you use a pre-made contract form and don’t include your state’s requirements, you might get away with it for a while. But if a disagreement occurs (and eventually one will), you’ll be sorry that you didn’t use a good, legal contract – especially since you can now make one in minutes, for less than what you’d spend on one excruciating visit to a lawyer’s office.

And, you don’t have to know contract law to draft a good contract. Construction Contract Writer walks you through the process. Leave something important out, and the program reminds you why it’s important for your state. Can’t decide what choice to make? The program explains the results of your choices – making it clear.

Download the program and create hundreds of contracts. Keep them on file. Print them out. Save them as PDFs and e-mail them. The Construction Contract Writer program includes free updates for one year. You can subscribe to future updates for only $25 a year to keep your contracts current with your state’s laws. State laws do change (and rather abruptly). To stay in compliance, your contracts should change also.

If all this makes you twitch with legal unease, at least download the trial program for your state. It has all the features of the real program – it just has the print function disabled. Try it and see if this program isn’t all that it’s touted to be. With the trial download, there’s a promotion code that will save you 15% should you decide to buy the program. And here’s a secret: That promo code is good for 15% savings on anything listed on the Craftsman web site.

Contracts that are Almost Legal in all 50 States

Browse the Web for “construction contracts” and you'll see braggadocio about some boilerplate contract being "legal in all 50 states."

Claims like this show up on Web sites run by savvy companies with good credentials -- who should know better than to make these claims. Every state has the right to set unique requirements for construction contracts. And nearly all have. It's simply foolish to claim any construction contract is "legal in all 50 states."

You can take this to the bank: There's no home improvement contract that's legal in all 50 states. I'll go one step further: There's no contract for residential construction that's legal in all 50 states. You won't even find a contract for commercial construction that's legal in most states. That's not the way it works.

Construction contract law varies from state to state the same way income tax law varies from state to state. Imagine the reaction if you tried to file a New York or Texas income tax return with the Montana Department of Revenue. You'd probably be breaking the law in two states.

It's the same with construction contracts. Nearly all states require specific disclosures, set unique limits or void certain types of clauses in construction contracts. No two states are alike. And most states impose heavy penalties for doing construction work under a contract that doesn't meet state code. Fines up to $1,000 are common, as is the threat of jail time.

Even if you aren't concerned about fines and jail time, consider the impact if you get into a dispute before collecting final payment. The attorney for your client won't be impressed with your "legal in all 50 states" contract. More likely, you'll discover that the contract is either partially or totally unenforceable under state law. Game over! You lose. Run, don't walk, to the nearest exit. You're not going to collect another dime on that contract. If opposing counsel is charitable, you'll escape discipline from the state board. Persist and you'll get an invitation to do the perp walk at a state hearing.

When you see the claim, "legal in all 50 states," I recommend thinking "probably not legal in any state." The latter is far more likely than the former.

So how do you judge if some boilerplate contract is legal? If you're paying the $10 to $150 that most vendors change for a download, you've got the right to know: Is it really legal in my state?

I can recommend a Web site. It's free. Construction-Contract.net has a good selection of state-specific home improvement, residential and commercial construction contracts. You can download the contracts in Rich Text format and change them on your word processor to fit the specifics of your job. Even better, the site lists laws in each state that set minimums for construction contracts. Before buying any boilerplate contract or contract package, compare what the law requires in your state with what the vendor is offering. If the vendor's contract comes up short, save your money.

California Construction Contracts

What's required in a California Construction Contract?

A heck of a lot.

In 2006 California Construction Law changed and became much more complex. A California construction contract has to be in 10 point type, has to include the name and address of the owner, the contractor, and the lending agent, and the contractor's license number. It has to list the contract price, the downpayment, the estimated start and completion dates, the general liability insurance coverage, a note about how extra charges will be handled and a disclosure for the owner on Mechanic's Lien Waivers. This is just a start of the requirements.

For free California construction contracts that you can download and use go to:
http://www.construction-contract.net/list.php?state=CA

For more easy-to-understand information on California construction contracts visit:
http://www.docstoc.com/docs/document-preview.aspx?doc_id=3011099

New State Laws Effects on Construction Contracts

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.