Contractor Blog Series: Contracts – The Basics

The word “Contractor” is defined as “one who enters into a Contract to provide work, services, or goods.”   Undoubtedly, the Contract is the most important document on a project as it will outline each party’s scope of duties, rights, and remedies.

            The nature and breadth of a particular Contract will have to take into account the project at issue.  As example, a large scale commercial project may include provisions (i.e., payment applications) that a small residential project does not.   Regardless of the Contract, there are certain provisions that every Contract must contain.

• The names of the parties to the Contract;
• The date of the Contract;
• The Contractor’s New Jersey Contractor Registration Number;
• Signatures by all parties to the Contract;
• A total price and all terms and conditions of payment;
• A description of the work to be performed and the products and materials to be used;
• The expected time of commencement of the work and completion of the work.

            The foregoing list is the minimum required.  Additional contract provisions must be included depending on the nature of the Contract.  For example, Home Improvement Contracts require that the homeowner be advised in the Contract of the right to rescind the contract within three business days.

            Oftentimes, the Contract is not given the proper attention at the time it is formed.  The description of the work to take place may be vague or there may be no date or timeframe at all listed within which the work is to be completed.   Later, if a disagreement arises, lawyers and the Court will look to one primary piece of evidence as the guide to the parties’ relationship – the Contract.   Therefore, it is imperative to give this document its proper attention at the outset.

            Here are a few tips to guide Contract formation.   With respect to a description of the work and products to be utilized, Contractors should delineate, if necessary, what work is excluded.  For example, if a Contractor will be renovating portions of a home but not the kitchen, a thorough Contract will list the kitchen under “Work Not Included”.  In this way, all parties can know at the outset what will and will not be done.  

            With respect to the time frame of the work, at contract formation, one may not know with specificity how long the project will take.  For example, permits may delay the start of the job.  Here, Contractors are advised that the “anticipated start date” be included in the Agreement along with the proposed duration of the project.  Language should also be included that the project duration may be modified by conditions beyond the control of the Contractor.   In this way, the Contractor has given the customer as much information as possible, while forewarning that outside conditions, like a permitting delay, will potentially impact the schedule.

            Importantly, a Contractor has to be crystal clear with respect to payment. This must include when payment is due and remedies for non-payment.  Customers want to know that their payments are appropriately tied to the work Contractors provide.  Therefore, outlining a payment schedule in the Contract tied to work completed will keep both parties invested in moving the job forward in exchange for timely payments.

            There are numerous issues that arise in the Contract process and the foregoing merely touch on a few.  Your specific circumstances will require specific advice and counsel.  Please contact Joseph Petrillo at jpetrillo@hoaglandlongo.com or call 732-545-4717 for more information, and be sure to check in next month for Change Orders - the next installment of our Contractor Blog Series. Stay tuned!