7 Simple Tips To Avoid Contract Disputes With Your Contractors
Dan Levenson May 02, 2017
Unfortunately, contract disputes are all too common in the business world. Though contracts may be written with a great deal of care using verbose language, many still leave room for interpretation. And where there’s room for interpretation, high-priced lawyers are often called in to dispute the small details.
No one wants to go down that road of costly litigation, so it’s important to make sure any contract you sign is solid and clearly written before any project begins.
Here are 7 simple tips that can help avoid contract disputes with independent contractors.
1. Get a written, signed contract.
Don’t rely on a series of emails, phone conversations, and a handshake to communicate your expectations and back up any claims you make.
Among other details, a written contact should include:
- Scope of Work: Describe in detail the work to be performed. Outline the various stages of work, if applicable, and be as specific as possible when describing your expectations. Avoid generalities (e.g., a “structure”) and use exact language wherever possible (e.g., a “5-bedroom, 4-bathroom, 4,500-sq. foot home”).
- Time Frame: Specifically state the time frame in which each phase of work is to be completed, and provide an expected finish date for the entire project.
- Price: Give the exact price for the project and state when and how payments will be made. Don’t pay for work that is not completed.
2. Communicate in person.
Open communication is a critical part of maintaining healthy relationships with contractors and ensuring they meet contract requirements. Talk with them directly to ensure they’ve understood your expectations.
Meet with them in person as often as necessary to review the work as it progresses. Redirecting efforts at the beginning of a project is much easier and more cost-effective than waiting until after a contractor has wasted multiple hours and resources headed in the wrong direction because they misinterpreted your requests.
3. Make any agreed-upon changes to the contract in writing.
As work progresses, unexpected situations arise, and amendments and changes to an original contract are often required. Verbal agreements can be confusing and difficult to prove after the fact. Modifications to any contract should always be made in writing and recognized by all the parties involved with additional signatures or initials.
4. Request regular project updates in writing.
This ensures that contractors are holding up their end of the communication channel. Get daily reports on the progress made, difficulties encountered, resolutions employed, labor used, and other important details. If a dispute arises, these written reports provide solid proof of what happened, when it happened, and whether you were informed or not.
5. Sign the contract in front of a notary.
When faced with court action, unscrupulous individuals may deny they ever signed a contract. It is an expensive process for your lawyer to prove otherwise. Having your signatures witnessed in the presence of a notary is a simple, inexpensive way to provide concrete evidence that a contractor signed your contract. Courts will often automatically deem a notarized document as valid. For a small fee, some notaries will travel to you so you can avoid the hassle of going to them.
6. Add an early termination clause.
Unforeseen circumstances could arise to complicate progress at any stage of the project, leading to chaos and confusion about who owes whom what amount. An early termination clause gives clear direction in situations like these.
It should state the amount of compensation due, by percentage or estimation of the work completed, to one party if the other must withdraw from the contract before the project is fully complete.
7. Get lien releases from subcontractors.
On construction projects, contractors may hire subcontractors to complete segments of the work. If subcontractors aren’t fully paid in a timely manner, they may file a lien against your property for relief.
Before you make your final payment to the contractor, demand lien releases from all the subcontractors involved to protect yourself from any future liens.
Of course, if you are on the other side of this equation and are the contractor doing the work, it’s important to follow these guidelines as well to protect your side of the contract. By being absolutely up-front about the details, meeting in person, and tracking ongoing changes in writing, all parties can avoid unnecessary and financially detrimental litigation down the road.