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.

Contractors Affected by Illinois Laws

New Illinois laws intended to protect homeowners are making it really tough on contractors.

The Illinois Home Repair and Remodeling Act requires that contractors provide a written contract for every residential remodeling or repair job over $1000. The contractor, as well as the homeowner, are required to sign and date a contract, as well as a State brochure Home Repair, Know Your Consumer Rights.

If contractors operate a business under an assumed name they're liable for a $2,500 fine and a year in prison. If contractors take on a home improvement project and don't finish it on time, the homeowner can demand a refund on any money paid. If the contractor doesn't pay this money, he faces a suspension of his business license and a fine up to $50,000.

Illinois contractors must be careful what they say to their customers. False promises can get them up to a year in jail under the new Illinois Home Repair Fraud Act (HRFA). Under this law contractors are also liable for making false excuses for non-performance, failing to employ qualified personnel (forget about your brother-in-law), or violating the building code.

What can contractors do to protect themselves? They can write contracts that comply with the State of Illinois requirements. Unfortunately, contracts that cover these requirements can't be found in the local stationary store. Contractor's can consult a lawyer and have a new contract drafted for each job -- but that's an expensive option for small remodeling contractors.

Only a few contract writing programs even offer options for these Illinois requirements. One of them, Construction Contract Writer contains all of the options needed to protect the contractor

as well as provide the ability to list and cover all the possible problem areas of the job -- before work begins. Contractors can find sample Illinois contracts that they can download and use for free at http://www.construction-contract.net/list.php?state=IL.

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.