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Why You Need a Well-Written Contract

January 02, 2008  |  from Markup and Profit Blog

A contractor called recently to ask about a customer who decided to change the rules of their contract. She decided not to pay the full amount or on time as the contract specified.

This customer is becoming a real nightmare. She started out criticizing many things on the job, and now claims she won’t pay the full progress payment because in her opinion the job has not progressed far enough to warrant that payment. Our contractor was smart, in that he did not accept her check which was less than 1/2 the amount requested for the draw.

I suggested he give her a formal demand for payment (by way of a registered letter) and if she did not pay him the full amount due by the due date, to shut the job down. If she still doesn’t pay, send a Notice of Intent to Lien letter, and if necessary, file a lien. (A registered letter isn’t necessary if this possibility is outlined in the contract.)

I also suggested he give her a change work order specifically spelling out how the Punch List is to be handled on this job. He was afraid that she would keep throwing punch list after punch list at him trying to get him to walk away without final payment for the work completed.

All of this is dependent on having a well-written contract before the job starts, and, of course, on the contractor performing his job as defined in the contract. Without a well-written contract, the contractor has fewer options.

A controlling customer must be handled carefully. If you let them change the contract in any way, you are agreeing to whatever terms they try to impose and that is seldom a good thing for you. You must abide by your own contract, and insist others abide by it as well, especially the payment schedule.

Filed: Construction-Law