Contractors present their bids in different ways. Some have the Proposal and Contract combined, while others will submit a Proposal and when their bid is accepted a Contract will be drawn up. No matter what method is used the Contract should include all the following.
1. The contractors address, phone numbers and contractor’s license number. Do not accept a contract that has a P.O. Box number.
2. The scope of work.
The plans should be listed and every page noted. All details and specifications shown on the plans or on a separate page. Be very specific on every item with complete descriptions of each. Example: install “Mayfield” cabinets in kitchen. Without all the particulars listed in detail, the example could be interpreted very differently between the contractor and the homeowner. Remember that the contractor is only going to complete the work as written in the documents. Anything else will be an additional charge to the homeowner. Most contractors will record everything because it protects them when the homeowner requests work to be performed that is not listed. If a decision on a particular piece of appliance or hardware has not been made at the time of accepting the bid then the easiest way of handling the lack of description of that item is to list an allotment. For example: you are having a new stove top but have not decided on the exact one then list an allotment in the contract. Make the allotment for $800 and when the final decision is made and the stove cost $750 the contractor will subtract $50 from the bid, and if is more, the homeowner will own anything over $800.
3. Change orders.
If during construction additional work or material is to be performed that was not included in the bid, the contractor shall inform the homeowner in writing of the additional costs. These costs are normally paid when they are completed, not at the end of the project. Additional work should never be performed until the homeowner in notified in writing.
4. The Contract price.
5. Time of completion.
The start day and estimated finish day should be listed. Most contracts will use the term “substantially completed”. To me that means the contractor is completely done except for a few “pickup” items to be finished. One of the biggest complaints from homeowners is the job took much longer than originally estimated. There are numerous reasons why this occurs. Weather, unforeseen problems during remodeling, material not ready on time, homeowner not making progress payments, trouble with the city inspectors. A good contractor can alleviate many problems. Communication with the homeowner, sometimes daily, will help ease the strain that is produced with prolonged jobs.
6. Progress payments.
The number one rule is do not advance too much money. Money is the only leverage you have. Many homeowners think that their government licensing agency can put pressure on a contractor to finish a job but in the real world this rarely happens. It can easily take years for a complaint to be resolved. Normally the contractor receives the first check the day he physically starts the job, and will receive payments as the job progresses. The final payment is made when the remodeling project is “substantially completed”. If everything is completed to your satisfaction pay the remaining balance. But if there are small items uncompleted, then hold back 5% or less until work is finished.
7. Who will be taking out permits? Usually the contractor pulls permits. The homeowner pays all permit costs.
8. List what work will be subcontracted.
Subcontractor’s names are not important at this time. Inform your general contractor that before any subcontractor begins work in your home you will need the subcontractor’s license number, and workers compensation certificate if he has any employees working in your home.