and Signing a Contract

Chapter 6

Marriage is a partnership that can provide deep satisfaction or considerable grief, depending on the circumstances. While working with a general contractor may not be quite as significant to your life as getting married, there are some parallels. Good preparation will help ensure a successful relationship.

How will you meet? Checking the Yellow Pages is something like a blind date, but can lead to a successful contact. However, it is important to be cautious and get as much information as you can before becoming too involved. If someone you trust recommends a contractor, this can help speed up the process. If you know someone who had a successful remodeling experience and recommends the contractor, that's a good place to start. However, most people do not necessarily know someone who can make such a recommendation. If you are using some form of advertising (phone book, newspaper listings in the "service providers' section, etc.) to find your leads, it is even more important to do your homework.

Next comes the courtship period. Whether you are negotiating with one person or several competing firms, this is your chance to get to know them before making a commitment. It is important to be comfortable with the people who will be working on your house. Does the contractor respect your opinions, answer your questions, and explain technical details to your satisfaction? If not, you should probably look elsewhere. A construction project can be stressful, and it's important to be able to communicate well with your contractor when unexpected details come up. Ask for references from any contractor you are seriously considering, and check the references carefully. It is especially helpful to be able to visit a completed project to see if the quality of the workmanship is acceptable and find out if the clients are satisfied. It is also helpful to check the contractor's credit. Even if you don't go through a credit agency, you can ask for references for suppliers as well as clients.


Signing a contract is a commitment. The contractor agrees to complete a certain amount of work, and you agree to pay a certain sum as compensation. Before you get to this point, you should have completed the following steps:

  1. Verify the license and insurance coverage;
  2. Have plans and specifications that spell out exactly what you are paying for;
  3. Read and understand the contract;
  4. Be satisfied that you are paying a fair price for the work that is to be done.

When the job is completed, you should be able to enjoy the results for many years. A good relationship with your contractor can help make the construction process enjoyable as well. Make your choice wisely!

Before You Sign--The Search for a Contractor

It's important not to skimp on the process of finding a contractor. Start by asking your friends if they know of any good ones. Check ads in the Yellow Pages if you don't have many leads. If the job is a big one, you should have several contractors involved in the bidding process. You will learn things about your proposed project from each one, and you will increase the likelihood of getting competitive prices. It is wise to look for someone who has been in business for at least three to five years. You will have to make calls, arrange meetings, compare what each company offers, and perhaps modify your project before you move ahead. Allow plenty of time to make a selection.

Your contractor should treat you with respect, even if you are not familiar with construction issues. You should be able to feel that you can trust this person to be in your home without supervision, suggest legitimate changes, pay his bills (so you won't have liens), keep the job on schedule, and answer your questions in a satisfactory way. If you are not comfortable with this person when you are negotiating the project, there is a good chance that you will become angry or miserable by the time the project is half-completed. This is when there is the greatest likelihood of developing an adversarial relationship. You can lessen or avoid some of these pitfalls by following the guidelines in this chapter, but any construction project will have stressful periods. Mutual trust and respect will help you and the contractor work out any problems.


It is usually wise to get competitive bids. It is important to have good plans and specifications to make it easier to compare prices, since all contractors will be bidding on the same work. If you do intend to put the project out to bid, be sure to disclose that fact to all the contractors who help you during the "courtship" phase. It is just as important for you to maintain ethical standards as it is for the contractor. It's not fair to let one contractor do all the planning and estimating, and then give another contractor a chance to "beat the price." Most contractors expect to be bidding against others, and this will help ensure that they don't include excessive profit in their bids. On the other hand, if a contractor can't make a fair profit he will soon go out of business. You want a contractor who is reasonable, knowledgeable, and fair. Refer to Chapter 4 to review the many factors that affect legitimate bids.


Get references, and call them. Satisfied customers are a contractor's best asset, and a good contractor should be happy to supply the names of prior clients. If possible, visit a completed job and look at the quality of the work. It is also helpful to visit a job in progress. Is the job site professional or chaotic? Do the workers have a good attitude toward the contractor and their tasks? Is there good camaraderie between the contractor and the owner? Checking references is one of the most important steps you can take to ensure satisfaction with your selection.

Other possible references include suppliers, the local building department, trade associations, consumer protection agencies, and the like. If any of these entities gives you a warning, pay close attention. However, they may not be able to actually recommend a contractor, as they may not be in a position to promote one business over another.

If you already know a contractor that you want to work with, direct negotiation is an alternative to competitive bidding. If you have any doubt about whether this person is quoting a reasonable price, you may wish to have this person submit a more detailed cost breakdown, so you can see what the most expensive items are. Consider getting other bids for comparison, but if you are truly committed to a specific contractor, don't waste other people's time.

Scope of Work

Have your plans and specifications ready to be included as part of the contract. If you are working with an architect, be sure you understand the details of the project before signing a construction contract. For smaller jobs, the write-up is often done by the contractor. You should know what you are getting, including colors, models, and styles, before you make a commitment. This protects both you and the contractor, and helps ensure that you will be satisfied with the final product. While color selection can be made later, the quality of the products should be identified up front.

License Before you actually sign a contract, check the standing of the license. In California a contractor should always have the state license number on business cards, contracts, and advertising. You should call the Contractors State License Board to see if the license is current, active, and in good standing. There are different categories for various trades, as well as for general building. Contracting without a license is illegal. Do your homework now, to protect yourself from trouble later. Work done by an unlicensed contractor can cause problems when you sell or submit an insurance claim. If the unlicensed contractor is caught during the course of your project, he could be shut down without finishing the job. Don't take a chance.

Some states do not require a license. Some require a license, but do not require any kind of test to qualify for the license. Call your local building department to find out the name of the state agency that handles the regulation of contractors. Most states have simple consumer pamphlets detailing their basic license laws. For example, the requirement for a license may apply to jobs over $300 in materials and labor. Most states also license subcontractors, such as electricians and plumbers. Any of these people can hire others to do the actual work, but the licensee is responsible for the overall job.


A contractor should carry liability insurance, and you should get a Certificate of Insurance from the carrier before you sign a contract. Ask the contractor to have his insurance company send a certificate to you. It will show the amount of insurance and the expiration date. If the date falls during the time you expect to have work done on your house, be sure to follow up on obtaining the renewal. Maintaining the insurance should be a condition of the contract. Many states have strict laws regarding Workers' Compensation coverage, and your contractor should also provide evidence of this coverage if he hires anyone to work for him. This pays for medical treatment and lost income for an injured worker, and should prevent that worker from suing you for additional damages.


It is not usually necessary for a Completion Bond or Payment Bond on relatively small projects, although large commercial and government projects usually require them. These bonds are issued for each job, and they are expensive and difficult for a small firm to obtain. (They are not to be confused with a license bond, which is required by California but provides no specific benefit to the contractor's clients.) If your project is large, you may wish to research the benefits and costs of bonds before you decide to require them.

When You Sign--Read the Fine Print

Read and understand the contract. You will have days, weeks, or months to put up with the inconvenience, dust, and aggravation of a remodeling project. It's worth it to take the relatively short time that is necessary to understand the contract, scope of work (plans and specs), and related legal issues before you sign.

Contracts Contract forms vary from contractor to contractor and state to state. Most contractors use their own form, and you should read all of it. Ask for a clarification of anything you don't understand. Should a dispute arise, both you and the contractor will be looking to the contract to help settle the conflict. Some of the items that should be addressed in the contract include:

What work is covered? The contract should refer to the plans and specifications that you used to obtain bids. (Be sure you are referring to the most recent version of the specs!)

How much will it cost? The total price of the job should be spelled out in the contract. How will changes or extra work be handled? Every change should be in writing. Will the payments be according to a schedule, or due on completion?

If progress payments are to be made, it should be clear to both parties when each one is due. How much time do you have between when the contractor requests a payment and when it is made? A little lead time is important if you must transfer money between accounts or get a draw from your bank. It is also wise to withhold 10% of the contract amount (a "retention') until 35 days after completion. This will give you some leverage if you discover any small items that were left unfinished. You may also want to check to see if any liens have been filed before you pay the final amount. If you pay the general contractor, and he doesn't pay the subs or suppliers, you may still be subject to having liens filed against your property. If any part of the job represents a significant dollar amount (e.g. replacing the roof) your contractor should get lien releases from the suppliers and subcontractors and give you copies when you make your payment. See Chapter 7 for further discussion of liens.

When will the job start? You should know when to expect workers to begin and what is expected of you. For example, will you need to empty your kitchen cupboards? It is wise to get a detailed schedule from the contractor before the work starts. Even if the schedule changes, you will have some idea of what to expect.

When will the job be finished? A completion date should be specified, with a provision for extra time if inclement weather is likely. Again, every change should be in writing! Will the contractor have to pay "liquidated damages' of an agreed amount for every day the job runs past the completion date?

Is clean-up included? Is the job site to be left "broom clean' on a daily basis? Will all construction debris be hauled to a legal dump site? Will the contractor do the window washing and vacuuming that is needed as a result of the work being done?

Is the cost of the building permit included? The contractor should obtain the permit at the beginning of the job, and get all the required approvals during the course of the project. There may be extra fees if the project involves increasing the square footage of the house, and special engineering may be required. You may think your plans are acceptable (especially if they were prepared by a professional designer or architect) but the agency may require changes before they will approve them. Who is responsible for getting the plans through plan check? Don't underestimate the time required to get a permit, especially if the job is complicated. Some agencies have a substantial backlog, and a permit can take much longer than you thought. At the end of the job the owner should be given proof of the final sign-off by the local building department. This protects both the contractor and the owner, and helps facilitate future sale of the property.

How early in the morning can the contractor or his subcontractors start work? Can they work on weekends? Late evenings?

Can the contractor or his workers use your phone? Your bathroom? Your electrical power? Will you give the contractor a key to your house if you will be at work all day?

What warranties will be provided? The contractor should provide you with all manufacturers' warranties, but is he willing to provide extended warranties of any kind for labor? You may have legal recourse if something fails in the first year or two, but be aware that warranties are only good if the entity issuing the warranty is still in business.

Routine clauses in contracts can be deleted or modified if you feel strongly about some aspect. Ask questions, feel comfortable with the answers, and be familiar with the terms.

You should not feel pressured to sign a contract. Some "home improvement' firms prey on unsuspecting homeowners, who realize later that they have overpaid, gotten shoddy work, or been misled about the benefits of the product. You should not need to worry whether you have a "three-day right to cancel' a construction contract, because you should have done extensive homework before agreeing to sign anything in the first place. When the law provides for such a delay it is to counteract the potential for grief and financial disaster when a homeowner is pressured into signing a contract without having properly researched the deal. Rushed contracts are a recipe for disaster. Take your time and do it right.

Next Chapter: During the Job
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