Contracts come in any number of shapes and forms, but there are a few essential items you should consider including in yours. These can go a long way toward stopping a problem before it starts and preventing small problems from becoming nightmares.
Explain the product: You can stop a number of customer complaints and “misunderstandings” if you tell the customer ahead of time what they should expect from their purchase. For example, if you're selling windows, explain in the contract what ambient temperature is and that condensation on or within a window is not a “defect.”
Interest and legal fees: If your contract doesn't say you're going to be able to recover interest on past due balances or your legal fees if you have to sue, don't expect to be able to.
Late cancellation fees: OK, the consumer wants to cancel outside the rescission period. These disputes are often not worth fighting, especially if you don't have any hard costs run up on the job yet. Make sure your contract says you can allow a late cancellation request, in exchange for a reasonable fee, say 10% to 20% of the purchase price.
Punch out list: Make sure your contract calls for payment of the entire balance on substantial completion and define what that means (final permitting, inspection, issuance of the certificate of occupancy, etc.) Then allow for a 5% to 10% hold back on a punch out list if there are disagreements left over.
Force majeure: If you run into some unforeseen event beyond your control that prevents performance of the job, force majeure clauses let you off the hook.
Clear and full acknowledgement: Make sure that above the buyer's signature line you have a clear bold statement confirming that the buyer has read the entire contract, has no questions, understands the terms, and is not relying on any oral agreements. —D.S. Berenson is the Washington, D.C. managing partner of Johanson Berenson LLP (www.johansonberenson.com), a national law firm specializing in the representation of contractors and the home improvement industry. He may be contacted at 703.759.1055 or info@johanson berenson.com. This article is for informational purposes only and should not be construed as legal advice.