Sales contracts get no respect. They're signed every day. Sometimes with changes scribbled in that could cause trouble. Sometimes with prices that are flat out wrong. And sometimes with boilerplate language that doesn't say what you think it says.
Although no contract is bulletproof, a good one protects both you and your customer — and that's not a contradiction.
Read on for a checklist of important items to include in your contract. However, laws mandating what absolutely must be in a contract vary from state to state, so make sure you're aware of what's required where you do business. “What you don't know can hurt you very, very badly,” says attorney D.S. Berenson, managing partner of Johanson Berenson in Washington, D.C., and a legal columnist for this magazine.
Also, if you're inclined to tweak your contract for some reason, first get legal advice. “You're not a lawyer. You're a contractor. If anything comes up, the customer will get a lawyer,” says Ken Moeslein, president of Swing Line Windows in Pittsburgh. “You should get a lawyer at the time of your contract design.”
And, of course, no matter how good your contract is, make sure your work is even better. “If you do a good job,” Berenson says, “you don't need me.”
Specify what's included. Possibly one of the most important items you need is the most basic: a scope of work, or a detailed explanation of the goods and services provided. Don't just say, “We're going to apply Company X's siding to the entire house,” Berenson says. “We in the industry know what that means. But after the job is done, the homeowner may ask why there isn't siding on the chimney. It's important to explain [the scope of work] in enough detail to avoid that kind of misunderstanding.”
Specify what's not included. Having boilerplate exclusions is critical, says Soquel, Calif., attorney and contractor Gary Ransone, author of The Contractor's Legal Kit, a book many contractors swear by. “You can't remember every exclusion that could apply.” If, for instance, you have a standard exclusion that says you don't replace landscaping if it's damaged when you're replacing windows, most homeowners will back down on that demand. Moeslein gives another example: “At times, we have to use wood products, and we don't do any painting. In the contract, it says we don't do any painting.” That prevents customers from saying, “You never told me you weren't going to paint that.”
Define deviation from scope of work. Include wording that states that any change to the scope involving extra costs or labor or any changes required by inspectors or the owner additional work and an additional charge. That takes care of the homeowner who says, “This will only take you an extra hour.”
State that oral agreements are not binding. Many homeowners will have conversations with a number of salespeople (and a number of companies) and will get confused about who told them what, says Bob Birner, vice president of Amazing Siding, Houston.
“If it's not in writing, it doesn't exist.” Berenson recommends spelling that out above the line where homeowners sign the contract and including an acknowledgment stating that they've read the contract. Texas and two or three other states actually require that all homeowners (meaning husband and wife, usually) sign the contract. “The vast majority of states do not,” Berenson says. Amazing Siding goes one step further: It requires a company officer to accept the contract after the sales rep. That protects the company in case the rep errs badly (something Birner says hasn't happened).