INFORMATION ON DIFFERENT TYPES OF CONSTRUCTION AGREEMENTS INCLUDED WITH CONTRACTOR’S LEGAL KIT TEMPLATE FORMS
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2) Contract/Proposal: The Contract/Proposal template is the shortest agreement in the revised Contractor’s Legal Kit and may be an appropriate template for use on smaller sized projects or where the contractor wants a very abbreviated contract. It addresses some of the risks faced by builders and remodelers. It may be used either as fixed fee agreement or altered to be used as a time and materials agreement. The Contract/Proposal is preferable to the one-page wonder dime store contractor’s proposal because it does contain some important basic clauses that are important to the contractor
3) Short-Form Fixed Price (lump sum) Agreement: The Short-Form Fixed Price (lump sum) Agreement may give the builder some good, basic legal protection on smaller sized jobs. It may also be suitable on somewhat larger jobs when you have worked with the owner before and have established a very good working relationship and want to use a short form fixed price agreement. There are two major benefits to using this short-form fixed price agreement rather than the commonly used “dime-store” type of proposal/agreement. First, this short-form fixed price agreement contains many basic legal protections not found in many short-form boilerplate agreements. Second, the short-form fixed price agreement also contains a fairly detailed list of exclusions covering many areas of work that the builder has carefully considered. This list of exclusions has grown slightly over time with the second edition.
Contractually agreeing to exclude detailed areas of work will give the builder a clear legal basis from which to charge for legitimate change orders if these excluded areas of work arise during the job. Many builders rush through their bid preparation on small jobs, overlook these exclusions, and end up personally absorbing what would otherwise have been legitimate change orders. The detailed “Standard Exclusions” section in this agreement and most of the other agreements on this site will help you to avoid this common trap. You can delete portions of the “Standard Exclusions” section that do not apply to your specific job and add any additional exclusions in the section called “Project Specific Exclusions.”
The short-form fixed price agreement contains less detail than the long-form fixed price agreements, so be sure to review the longer fixed price agreement to see if it would be more appropriate, or if some of the language in the longer fixed price agreement should be incorporated into your short-form agreement. Keep in mind that there is no absolute rule to follow when trying to determine which length agreement to use. Generally, the costlier and more complicated the job, the longer the agreement.
4) Long-Form Fixed Price (lump sum) Agreement: The Long-Form Fixed Price (lump sum) Agreement may be well suited for use on new residential construction and on larger residential remodels. It has extensive language to help identify many of the risks a builder may encounter on larger projects and clarifies how to handle the many problems that can, and often do, arise on larger jobs. Many of these risks are hidden from the unwary or inexperienced builder, but they can lurk just around the next corner. This agreement, where reasonable, may allocate many of these risks in favor of the builder so the builder doesn’t end up unfairly absorbing all the costs associated with “job surprises.”
The long-form fixed price agreement contains all the beneficial language found in the proposal/contract and short form fixed price agreement, and expands and adds many clauses that may be helpful on a larger or more complicated job. Keep in mind that there is no absolute rule to help you decide which length agreement to use on a given job. Generally speaking, the costlier and complicated the job, the longer the agreement.
5) Cost-Plus-Percentage-Fee Agreement, Cost Plus fixed Fee Agreement, Labor Only Hourly Cost-Plus Percentage Fee Agreement:
5A) The Cost-Plus-Percentage-Fee Agreement template (also referred to as a “time and materials” contract) provides the owner with the opportunity to pay only for the actual contractually defined “cost of the work”, plus a contractor's fee that is calculated as a percentage of the contractually defined direct actual job costs. This percentage varies from contractor to contractor, sometimes even job to job, but is often in the 10% to 35% range depending on the size of the job, your company's overhead, the number of other contractors bidding the project and how much the contractor wants the work. With the cost-plus percentage fee agreement, the owner agrees to pay the contractor the contractually defined “cost of the work,” plus the contractor’s profit and overhead expressed as a percentage of the “cost of the work”.
5B) The Cost-Plus-Fixed-Fee Agreement template provides the owner with the opportunity to pay only for the actual “cost of the work”, plus a fixed lump sum fee covering the contractor's profit and overhead. The contractor has little to no financial incentive to increase project costs because the contractor is not paid a percentage of these higher costs unless the scope of the work significantly increases in which case there is a clause for an additional contractor fee.
5C) The Labor Only Hourly Cost Plus % Fee Agreement: The Labor Only Hourly Cost Plus % Fee Agreement template is one where the Owner pays for materials and the contractor charges hourly for his labor and also charges a Contractor’s fee calculated as a percentage of the contractually defined direct job costs. This percentage is often in the 10% to 35% range depending on the size of the job, your company's overhead, the number of other contractors bidding the project and how much the contractor wants the work.
The three types of cost-plus agreements above can be viewed as being based on a more cooperative style of relationship between the owner and contractor than are traditional fixed price, lump sum agreements. Cost-plus agreements are also often commonly referred to as time-and-materials agreements. Many contractors think of and use T&M agreements as very brief agreements which may not even include any profit and overhead and only very briefly define the contractor’s compensation:
“Contractor shall charge $60. per hour for all labor, plus reimbursement for the cost of materials purchased by contractor for this project.”
The cost-plus agreements in the Contractor’s Legal Kit may be similar in some ways to the T&M agreements you are familiar with, however, these cost-plus agreements do allow the contractor to charge profit and overhead. Also, the T&M agreements on this site go into more detail in defining the “cost of the work” for which the contractor is to be reimbursed because this is an area that is sometimes not fully addressed or is contested by the owner with T&M contracts.
Benefits for the Contractor
The primary advantage for the contractor with cost-plus agreements whether profit and overhead is based on a percentage of the cost of the work or is simply an agreed to fixed fee is that the risk of losing money through inaccurate bidding or “Murphy’s Law” types of occurrences is greatly reduced because the contract defines what is and is not a direct, billable job cost. Direct costs associated with the “cost of the work” are contractually defined job costs that the owner must reimburse the contractor for. This distinction is critical because if an expense you must incur is not a direct, billable job cost, it must then be paid directly by the contractor out of profit and overhead fee or personal funds. Some contractors on larger cost plus projects will include such costs as a portion of their liability insurance for the year and project supervision as a direct job cost while others will not and will pay that out of their overhead payment received for the job. There is flexibility with this type of agreement as long as you decide how to divide and define the “cost of the work” and separate that from overhead costs in your agreement.
Another advantage with cost-plus agreements is that you don’t need to have all the construction details and finishes completely spelled out at the time the contract is signed because the owner is paying the contractor the “cost of the work” and that work, within reason, is finally defined by the owner and the contractor as the project is built and is expected to change as the project progresses through its various phases. As long as the project is built properly, the contractor is practically guaranteed to make a profit. Even with these types of relatively low-risk agreements, however, disputes can and do arise for various reasons discussed below.
Drawbacks for the Contractor
What are some of the drawbacks of these types of contracts for the contractor? One common possible disadvantage can be lower profits. Because the contractor’s inherent risk of losing money on the project is reduced, the owner is often able to negotiate a lower profit and overhead rate than is possible with a typical lump sum contract. The profit and overhead rate is always a point of negotiation. It is not set by law. Local custom and practice may strongly influence your profit and overhead rate on different jobs, but it can vary considerably and is still a point of negotiation on each project. You must analyze your business costs to determine this rate and it helps to have an idea what the going rate is for different jobs in your area. One general rule is: the larger the job, the lower the profit and overhead rate. For instance, a contractor might charge 20% on a $200,000 job, and 15% on an $800,000 job, or 12% on a $2,500,000 job.
Another possible drawback for the contractor is that any money he saves through ingenuity, special discounts from suppliers, value engineering or other good efforts and fortune are passed directly on to the owner rather than being retained as “profit” because the owner is, by definition, paying the “cost of the work,” plus the contractor’s markup.
Another common risk the contractor faces with T&M agreements is being blamed for cost overruns which the owner may claim occurred because the contractor gave an unrealistically low initial ballpark estimate of the eventual final project cost or the contractor is alleged to have mismanaged the project. The contractor may be accused of engaging in “bait and switch” tactics with a low initial bid inducing the owner to enter into a T&M agreement and this will never foster trust between the owner and contractor.
However, on the other hand, the cost of the work may also have risen entirely or mostly due to the owner’s decisions, additional work, poor plans and specifications, etc… through no fault or miscalculation of the contractor. The revised cost plus agreements on this site have a no cost guarantee clause in them that helps deter the “bait and switch” inference or allegation.
Even still, with a cost-plus agreement, the contractor should be aware that this agreement does not authorize the contractor to charge the owner to repair “defective work” either during the construction phase or during the warranty phase. In general, the contractor and the owner need to have a reasonably high level of faith in each other’s sense of honesty and integrity or else the relationship is subject to rapid erosion at the first sign of significant perceived cost overruns, or sometimes when the owner starts down the all-too-common path of upgrading finishes without realizing the significant impact this will have on a typically tight budget.
For this reason, cost-plus place the contractor in more of a fiduciary relationship (or legal position of trust) with the owner. The owner is relying on the contractor’s representation that he will diligently complete the project in a workmanlike manner and won’t “milk” the owner for more money through inaccurate initial estimating, inefficient production in the field or repeated field mistakes which are billed to the owner as direct job costs. These agreements also are considered “open book” agreements that require the contractor to fully document the “cost of the work” with receipts and invoices.
With cost-plus-percentage agreements and labor-only-plus-percentage agreements, the more the job costs, typically the more money the contractor makes through. Every owner is keenly aware of this fact and will let you know it sooner or later. This is where the trust comes in. This is also where a good detailed agreement helps. If and when the owner starts to worry about his budget or the type of agreement he has entered into, you’ll find it very helpful to have the exact scope of the “cost of the work” defined in your agreement, along with the usual contract exclusions.
If a contractor has trouble with record keeping and tracking receipts, he’ll probably have a hard time with cost-plus agreements due to the fact that they are based on “actual costs incurred” and should require him to provide the owner with full and clear documentation for all expenses related to the cost of the work. This would include a copy of material receipts and daily description of hours and tasks performed for labor related to the cost of the work by the contractor along with subcontractor invoices and perhaps subcontractor agreements. If your record keeping is lax, you’ll have a hard time documenting your expenses and collecting all the money you are owed for job costs, let alone your markup, any confidence the owner has in you will quickly erode. The owner is entitled to verification of the expenses with T&M agreements so it’s a good idea to provide them with your invoices.
When you provide “ballpark” estimates or budget numbers for the owner, make sure they are as reasonably accurate as possible and not unrealistically low. The owner will be relying on your estimate and if you knowingly are grossly negligent in estimating it too low, you are almost guaranteed to have a dispute on your hands later when the owner runs out of money and the project is only 80% complete. For this reason, avoid signing a contract and starting a project based on a sloppy “shoot from the hip” unrealistic estimate. Also, even though you may sign a cost-plus agreement, generally define with the owner the scope of work and quality of finishes anticipated so that if the owner runs out of money because of his constant upgrades rather than the cost of your work coming too high, you’ll have emails, plans, specifications or some sort type of written documentation which draws this distinction showing the owner upgrades during the project.
Beware of Guaranteed Maximums
One control the owner may try to place on the contractor with T&M agreements which is not reflected in the agreements on this site is a guaranteed maximum price clause (or not-to-exceed final project cost) in the construction agreement. This may not be an unreasonable request of the contractor as long as the cap price is realistic. It is appealing to owners because it gives them the security of a locked-in maximum price with the opportunity to save money if the project costs less than the guaranteed maximum price. If you don’t have to provide a not-to-exceed price or guaranteed maximum price, don’t. It can potentially hurt you, and ordinarily can’t do you much good.
For this reason, a not-to-exceed clause does not appear in the agreements on this site. Nevertheless, if you are required to provide a not-to-exceed or guaranteed maximum price, and if the project is completed for less than the not-to-exceed or guaranteed maximum price, you can request that the owner contractually agree to share or split the saved money with you.
Potential Advantages to the Owner of Cost Plus Agreements
Cost-plus and labor-only agreements based on actual labor or project costs incurred can be beneficial to the owner because the owner pays only the actual costs incurred for the project work, plus the contractor’s markup. The owner does not need to pay for the contractor’s contingency or “padding” which is sometimes factored into a lump sum bid or fixed price agreement to compensate the contractor for the inherent risks of the project. The owner also may be able to negotiate a slightly lower profit and overhead rate with the contractor with a T&M agreement because the contractor’s risk with this type of contract is lower.
In addition, if the contractor — or the owner — is able to reduce the anticipated cost of certain phases of the work through his ingenuity or value engineering, these savings will be passed on to the owner rather than being retained by the contractor as they might be with a fixed price contract. When cost-plus agreements are executed well the owner pays no more or less than the actual cost to build the project, plus a negotiated contractor markup or fee. This seems inherently fair to both parties as long as both live up to their promises, and have a high level of integrity and competence. Beware that, for reasons stated above, some consumer protection–oriented states may prohibit the use of cost-plus or T&M agreements on certain residential projects. Check with a local attorney familiar with construction law and your contractor’s state license board to determine the laws in your state.
6) The Labor-Only Fixed Fee Agreement: The Labor Only Fixed Fee Agreement template is one in which the contractor furnishes only labor, no materials and charges a fixed lump sum fee for labor.
7) Estimating Agreement & Pre-Construction Services Agreement: The estimating and pre-construction services agreement template allows a Contractor to charge for time spent estimating a project where it is not yet clear whether or not the contractor will be awarded the contract to build the project and the contractor doesn’t want to spend countless hours bidding the project for free. On many projects a contractor can’t get paid for bidding the job, but on some projects a contractor may be able to get paid for estimating project costs and this template may be useful.
8) Design-Build Preconstruction Services Agreement: There are many ways to approach a design-build customer. Some contractors may want to start off with a "Preconstruction Services Agreement" template that covers the design aspects of the project and the owner compensates the contractor either on an hourly basis or fixed price basis for design work only. Then, if the owner and contractor have worked together successfully during the design phase, the contractor can follow up this initial Preconstruction Services Agreement with a construction agreement for the construction phase of the project after the scope of work is completely detailed and the owner is ready to sign a construction contract. The Design-Build Preconstruction Services Agreement template allows the contractor to charge for the initial design time while working up such things as plans, specifications and pricing for the design build customer without entering into a contract for the construction phase of the project when construction plans and specifications have not yet been developed.
Other more adventurous contractors, however, may want to provide a design-build agreement to the owner before the project has a fully detailed set of plans. If the contractor submits a lump sum price for the work before the plans and specifications have been fully developed, the contractor must be careful to accurately describe the design criteria on which the lump sum price is based. After the first meeting with the owner where the contractor explains the company’s design-build approach and determines the general scope of the project, the contractor can choose to give the owner the preconstruction services agreement, assuring payment for his design and/or bidding time. The preconstruction services agreement (and the design-build agreement) is generally based on a scenario where the builder has “in-house” design capabilities being offered to the owner. This is the most typical type of residential design-build contracting.
The preconstruction services agreement can also place limitations on the owner’s use of the drawings made by the contractor should the contractor not be awarded the construction phase of the work. Note that all plans and specifications given to the owner prior to the time the owner is fully committed and ready to commence work may be stamped “PRELIMINARY PLANS — NOT FOR CONSTRUCTION.” This will help to protect the contractor in the event the owner takes the contractor’s design work and later decides to have another contractor build the project.
Before performing design build work, be sure you investigate and satisfy all the state licensing, insurance, bonding, and legal concerns that apply to design-build contractors. Contractors should also take into account that a design-build agreement potentially exposes the contractor to greater liability due to the fact that the contractor is both designing and building the project. The bottom line is that contractors should not do design-build work unless and until they are very skilled at construction, all aspects of design and planning work, contract administration and have checked with their insurance agent to verify their insurance covers design work they are intending to do. Often contractors will need a special rider on their liability policy to cover errors and omissions in their design work because their normal comprehensive general liability insurance policy for construction services may well not cover design work.
9) Design-Build Agreement: Design Build work involves an additional skill set to building and also involves more inherent risk for the reasons stated below. At the point in time when the design-build contractor has been given sufficient design criteria from the owner that it is possible to accurately commit to a fixed price contract amount to cover the owner’s design criteria, the contractor may then wish to provide owner with a Design-Build Agreement that covers both design and construction.
If, on the other hand, the design-build contractor is reluctant to commit to a price for the construction phase of the project based solely on owner’s design criteria before all the construction details are known and developed by Contractor, the contractor may wish to simply start out with the Design-Build Preconstruction Services Agreement and then enter into a subsequent fixed price or cost plus contract with the owner that covers the construction phase of the project.
Ordinarily, when a contractor builds a project, he has not designed the project and therefore he is not responsible for the implied accuracy or suitability of the plans or specifications. When the contractor performs both construction and design, the design-build contractor also inherits the additional risk that comes along with wearing two hats — that of both designer and contractor. If serious defects show up on the project, this places the owner in an unusually favorable position legally.
If defects arise on the project, the owner does not have to prove whether any patent (generally apparent) or latent (less apparent or concealed) defects were due to design errors/omissions or construction defects because the design-build contractor is legally responsible for both design and construction. The design-build contractor should take steps to reduce this increased legal exposure by adhering to very high standards of ethics, construction, design, and communication in all dealings with the owner.
The design-build contractor should also pay close attention to all written agreements used for this type of construction and review the same with their own local attorney. Finally, contractors should not lightly venture into design-build construction as if it is merely a simple twist on the same old work. For the many reasons stated herein, it’s not! One way to potentially reduce some of the risk associated with design-build construction is to subcontract the design work to a separate design entity.
Benefits of Design-Build
Whichever approach you select, the primary potential benefit of the design-build approach is that it dismantles some of the barriers between the owner, architect, and contractor and also may establish an early bond of trust between the owner and contractor.
Traditionally, the owner hires the architect to interpret ideas, design the project to suit a budget, and monitor the work of the contractor. The architect is also sometimes hired by the owner to verify and report on whether the contractor’s work follows the plans/specifications and is of acceptable quality. The owner/architect/contractor relationship can feel like a hierarchy with the owner on the top, the architect in the middle, and the contractor at the bottom. With reasonable people, this hierarchy works well; with unreasonable people, this division between the players can cause friction as a result of the divergent interests that each party brings to the table. With the design-build approach, on the other hand, all the parties may potentially benefit from having the construction and design work proceed more cooperatively and seamlessly than in the traditional building scheme. If the contractor and the designer are one and the same entity, or are working closely together, the contractor is likely to have more influence and control over the design and final cost of the project, and there is apt to be less job-site friction. The contractor may also have an advantage in marketing the design build approach to owners who are in the preliminary stages of planning their project. Construction costs may also be reduced because the contractor is often in a better position to design a project in line with the owner’s target budget. Many a project has not been built because the owner’s architect inadvertently designed a project that was 25% or 50% more expensive to build than the owner’s budget allowed for. Another potential major advantage with the design-build approach is that the contractor will no doubt find it easier to resolve design and construction problems that regularly arise in the field. In this case, the designer and builder are focused on resolving the problem, not so much on who caused it, or who has to pay for a design error or omission. Additionally, a design build contractor may charge less for the design work than an architect thereby saving the owner money that can be spent on construction.
This type of “one-stop shopping” can be attractive to an owner who has not yet hired an architect or firmed up the idea of how to proceed with a project. Presenting this cooperative approach to a project — where finding solutions and having the designer who is intimately familiar with the project build it — may also be a relatively easy sell for the contractor.
Assess Your Skills
The design-build approach to construction elicits a myriad of responses from residential contractors. Most contractors I know have never formally entered into the design-build arena. Informally, however, most of them have at one time or another drawn a simple sketch for a deck or garage, or slightly revised a floor plan or construction detail and watched the owner shake his head and say, “That’s just what I had in mind — this will work. Build it for me.” In this sense, most contractors have worked on the fringe of design-build, perhaps without knowing it, and without directly being paid for their design. Depending on the specific situation, this can be relatively harmless and helpful or a rather risky thing to do.
There are two major typical concerns in the design of a project. First, there are the structural, engineering, and mechanical concerns: sizing of foundations and structural lumber to carry loads and resist forces, sizing of wires and pipes to carry electrical current, gases, and liquids, matching of products and materials to unique site conditions, weatherproofing, etc. And then there are of course the aesthetic concerns such as layout of the floor plan, architectural details, selection of finishes and colors, effect of lighting, etc…
Some of the items in these two categories above overlap. And regardless of the category, the way each of these items is designed will affect the cost, aesthetics, and functionality of the project. Furthermore, whoever designs these items will be held responsible to one degree or another for the suitability, accuracy, and functionality of the design. Some contractors are stronger in the structural area; others are much better in the aesthetic design area. Know your strong areas and weak areas if you plan on doing design work yourself, whether it’s for a fee in conjunction with your building or merely “free” advice.
The bottom line is this: If you design it, it had better work as represented and intended and better meet the standard of care in your local area for the type of project you are building! The implied warranty statute of limitations on structural defects and weather proofing failures tends to be many years long depending upon the state you work in. Always keep in mind that defects in the structural design and waterproofing of a building will carry the greatest potential for future legal liability and if the design of these is undertaken by the contractor must be approached only with the utmost care.
Proper licensing and legal relationships. Licensing requirements for designers and design-build contractors vary from state to state. Without proper licensing, a myriad of other nasty problems can arise. Some states have laws that specifically address design-build contracting; others do not. Be sure to check with an attorney in your state about proper licensing and prudent insurance prior to offering design-build services of any kind.
Questions you should address which could affect licensing and different types of design-build relationships include:
• Does your state law allow a properly licensed building contractor to perform both the construction and the design work of a project without the need for a separately licensed architect or designer? Does a state statute specifically address design-build licensing and contracting?
• If no separate design license is required, what is the limit on the size or type of construction that the contractor can design without having a design license? Residential wood-frame through three stories? Commercial? Residential multi-unit through four units? What parts of the design can’t you design according to state law such as fire sprinklers and what else?
• Does the builder plan to subcontract the design function out as he would any other sub-trade? If so, how does this affect any licensing requirement for the design-build contractor?
• Will the builder hire a properly licensed architect as an “in-house” employee to perform the design work? If so, how will this affect any licensing requirement for the design-build contractor?
A SIDE NOTE ON THE RISKS OF FREE DESIGN:
If you design it, it had better work because, if any property damage or personal injury occurs due to your design error or omission, you will likely be found liable for any damages the owner suffers. This could well be the outcome whether you are paid for the design, or are merely offering your sage advice free of charge — as part of a fixed price agreement. For example, you might not like an architect’s detail and tell the owner to change it and make it, “…just the way I did it at my own house.”
If it turns out your design doesn’t work at the owner’s house for whatever reason and the owner suffers a leak and resulting property damage, you may or may not have insurance that covers this type of claim by the owner. Be aware that if you even briefly unbuckle your tool belt and step into the shoes of the designer or architect, even with the best of intentions, and it turns out your suggested design failed, you may be found to have induced the owner into accepting your negligent design and later be held liable by an arbitrator or a judge for the rebuild of the failed portion of the work and the resulting damages, even if you were not paid for the design work.
If you encounter a detail you think won’t work and it exposes you to future liability (which includes any detail that involves structural work, framing as it related to eventual fit and finish details or waterproofing), have the owner’s designer or architect draft the new detail. Whether you offer alternate design possibilities or merely point out the possibility of a problem is up to you. Unless you are hired as the design-build contractor, it’s important to recognize that you are part of a team and that your role is not the same as that of the designer or architect unless you are working as a design build contractor. Resist the urge to be the contractor who interprets and changes plans at will, for better or worse, or the no good deed goes unpunished maxim may come find you.
9) Project Management Agreement: The project management agreement template may be used where the Contractor wants to act as project manager rather than general contractor and have the Owner pay project costs directly with the Contractor charging in several different possible ways for project management work.
10) Short-Form Subcontract Agreement: This short-form subcontract template can work well when working with subcontractors the contractor has known and worked well with over an extended period of time. This short form subcontract template covers many of the basic clauses typically included in any subcontract without being overwhelming to your subs.
11) Long-Form Subcontract Agreement: The long-form subcontract template contains several expanded and additional clauses that give potential added contractual protection to the general contractor. It is well suited for larger jobs and jobs with more complicated types of sub-trade work or on jobs where you don't have a good, established working relationship with the subcontractor who will be performing the work.
Construction subcontract agreements are sometimes ignored by residential general contractors because of the close working relationships that are commonly established between select subcontractors and the contractor. While this close working relationship and established history of working together is extremely valuable and often makes work more predictable, enjoyable, and of a higher quality, contractors occasionally will work with new subs or will have a problem with an established sub over issues such as liability, scope of work, warranties, or payments.
If and when this happens, you will probably wish you had entered into a written fair subcontract with the subcontractor that protected your interests. A reasonable written subcontract can help you bring about a fair and fast solution to most problems. As with contractor-owner relations, it is easier to figure out who has deviated from the main road and what needs to be done in order to get back on the path when you have a road map. The subcontract is that road map. Having a road map, i.e., a good subcontract, is certainly no guarantee that problems will not arise, but it makes it a lot easier to resolve the problems if they do occur.
Accordingly, there are two different length subcontract agreements included with the forms on this site. Decide which length subcontract agreement to use by assessing various factors such as the quality of the subcontractor’s work, the size of the job, and your previous relationship with the subcontractor, etc... The longer the agreement, the more protection is provided to the general contractor. Avoid relying on verbal subcontractor bids even if they are from your regular, well-known subs.
Confusion over scope of work issues is too common and normally results in either the general contractor or the subcontractor paying for the subcontractor’s oversight or lack of clarity in describing the work to be performed. Even the short-form subcontract agreement requires the subcontractor to complete his work in conformance with a specified set of plans and/or specifications. When the subcontractor knows he must sign a subcontract agreement, he may pay just a little more attention and spend a little more time thoroughly bidding the plans because he knows that if he misses details in the plans, he will be the one who is asked to perform and pay for the work that was inadvertently overlooked at bid time.
In any event, whether you are working with a subcontractor you have known for 10 years or are working with one for the first time, use some form of subcontract agreement that, at minimum, contains the following clauses:
• Proper licensing, bonding (if required in your state), and insurance.
• A clear scope of work to be performed by the subcontractor and time to complete the work.
• A clear lump-sum amount, payment schedule, and, if desired or required by your contract with the owner, retention.
• An indemnification clause and warranty terms.
• Any other miscellaneous clauses you feel are appropriate considering the scope of work and your prior history of working together.
Regarding insurance, you should require that every subcontractor who works for you carry worker’s compensation and comprehensive general liability policies. At the minimum, your general liability coverage should be $1,000,000, although this amount can vary depending upon the requirements of your contract with the owner, or the advice of your attorney. A 2,000,000 limit is getting to be more common these days in areas.
Keep in mind that a contractor’s comprehensive general liability policy usually requires that you work only with subcontractors who also carry comprehensive general liability insurance. Therefore, you should keep a file in your office or on your computer with these certificates from your subs so they are easily accessible when you need them. Your insurance company doesn’t want you working with subs who don’t carry comprehensive liability insurance because it increases their exposure to claims. If you do work with a sub who doesn’t carry comprehensive general liability insurance, you may well be hit with an additional premium from your liability carrier when your insurance audit is performed and worst case scenario, a carrier could try to deny a claim that arises if you worked with uninsured subs and your comprehensive general liability policy prohibited you from working with uninsured subs.
Before you let a sub start work on your project, make sure his insurance agent sends you an insurance certificate which names you, the general contractor, as an “additional insured” under his general liability policy. This may give you additional rights under the sub’s policy in the event of a future claim. The binder naming you as an additional insured should also contain a 30-day cancellation notice clause. This clause requires the sub’s insurance company to send you a written cancellation notice 30 days prior to cancellation of the sub’s general liability insurance. If you receive one of these cancellation notices, you should contact your subcontractor to obtain a certificate of insurance from his new liability carrier.
In general, it’s safest to work with subcontractors who are large enough to carry a worker’s compensation policy. However, if you work with a one-man shop subcontractor, make it clear that you will never allow him to have an uninsured helper on your job site. Even a one-man sub may occasionally hire a laborer or helper, and if the sub carries no worker’s compensation coverage, that helper may try to make a claim against your worker’s compensation policy if he is injured on the site or the injured helper may sue the owner. This will cost you plenty. Obviously you can’t always control who is working on your job site at every minute, so there is some inherent risk associated with a one-man-shop subcontractor (if he doesn’t carry worker’s compensation). Some very small subcontractors work alone and never have employees. The sole owner of a business that has no employees may not be required by law in most states to carry a worker’s compensation policy to insure himself.
The owner of the contracting business might be considered free to take his own risks or provide his own medical insurance that will cover any job-site injury to himself as the owner of the construction business. However, this exception to the general rule requiring worker’s compensation insurance extends only to properly and actively licensed subcontractors who operate with no employees. It does not extend to the subcontractor who hires casual labor to work briefly on a “contract basis” unless the casual labor comes through a company that also has a worker’s compensation policy covering the casual labor. Neither you nor your subcontractor should ever contractually agree to hire an unlicensed person as a “quasi-subcontractor” or “captive sub” or “casual labor” sub who is responsible for their own worker’s compensation insurance.
12) Subcontractor Information Form: The contractor may want to send a Subcontractor Information Form template to new subcontractors when plans are given out to bid. Contractor can also send it to regular subcontractors to get their tax identification numbers, and to inform them about current insurance requirements. It’s a good idea to send a Subcontractor Information Form to new subcontractors when you give them plans to bid. You can also send it to your regular subcontractors to get their tax identification numbers, and to inform them about your current insurance requirements.
Review your insurance requirements with your own local attorney and an insurance agent familiar with the construction industry, and fill in the amount required by your company for subcontractors’ comprehensive general liability insurance. Make sure the dollar amount you write in on this form matches the amount of insurance you require the sub to carry in your subcontract agreement and the amount the owner requires you to carry. With new subs, the purpose of the Subcontractor Information Form is to “prequalify” them by having them provide evidence of proper licensing and insurance. This form also requires the subcontractor to provide his federal tax i.d. number or social security number (you’ll need this to properly file your tax return) and his type of business (e.g., sole proprietorship, corporation, partnership, etc.). With your regular subcontractors, it’s still a good idea to send this form out on an annual basis to help you stay on top of any changes in their businesses that could have an impact on your working relationship.
Your insurance carrier will probably want to audit the insurance certificates of all your subcontractors from time to time so it is important to have this information readily available when the auditor comes calling. If you fail to do so and your insurance company’s auditor discovers you worked with subs that did not carry liability insurance, it is likely that you will be hit with a nasty insurance premium surcharge and have to pay it! To make things easy, it’s a good idea to keep the subcontractors’ insurance certificates and licensing information in a single file and also in the job file where they worked.
Also, if you are audited by your insurance company, it’s well worth it to take the time to carefully review these insurance audits. In my experience, they are sometimes inaccurate and revised only when the contractor digs into the extra charges and provides additional documentation to refute them. These surprise premiums, if not successfully challenged with documentation, can cost you thousands of dollars a year. Having insurance certificates on all your subs naming you additional insured may help you significantly with an insurance audit.
This subcontractor information form doesn’t request customer references from the subcontractor. If you have never worked with the sub and have never heard of him before, you may want to ask around and get some references from other contractors who have worked with him in the recent past. If your state has a contractor’s state license department, you may want to contact this agency and find out the nature and number of any complaints against the subcontractor. You also should verify that a license has been issued to the business you are contracting with. Do not work with a subcontractor who is “borrowing” the license of another.
It’s not a bad idea to get the subcontractor’s federal tax i.d. number before allowing work to begin so that you have this information when it comes time to file the federal 1099 tax form at the end of the year. According to federal law, if you subcontract more than around $600 in a year to a given unincorporated subcontractor, you are required by law to disclose the amount you paid the subcontractor during the prior year on this federal 1099. Discuss this procedure with your accountant so you don’t end up being hit paying with someone else’s taxes.
Finally, in order to reduce the possibility of change order disputes, the subcontractor information form states your company’s policy of requiring all change orders to be in writing prior to beginning any change order work by the subcontractor. This form also states that the subcontractor’s payment requests must be backed up by written invoices, and it informs the subcontractor that he may need to furnish mechanic’s lien releases if requested by the contractor.
13) Subcontractor and Supplier Bidding Checklist: The Subcontractor and Supplier Bidding Checklist template provides a simple way to organize and compare prices from subs and suppliers. Most categories on the form also contain notes that remind you about some common ambiguities with specific types of subcontractors and suppliers. These ambiguities are important to address and clarify before you rely on any subcontractor prices quoted. Again, as with all the forms on this site, fine-tune this form to suit your specific needs and experiences.
14) Change Order Form and Accounting Summary (long form): This change order form template keeps the owner (and yourself) informed and constantly updated on how the financial status of the project is affected by change orders and is a critical part of the contractor's job. Nothing shakes the owner's confidence (or the contractor's bottom line) quite like not knowing just how much money the owner has committed to pay toward contract payments and different change orders, and how the original contract amount and project time has been affected by numerous change orders. This includes both increases and deductive change orders (those that result in a credit to the owner). This change order template also has lines to track additional project time.
Every experienced contractor knows that the owner who tells you on Monday to finish the extra work at all costs, “Just get it done, whatever it takes!”, may not feel the same way about paying for the extra work the following Monday when the bills come due. In my experience, the most common and costly owner/contractor dispute is over change orders. Change order disputes often result in the contractor losing money, as well as the trust and confidence of the owner (and sometimes his subs). And, if there have been other areas of dispute with the owner, disagreeing about change orders may push the contractor closer to the brink of litigation.
The best way to avoid disputes over change orders is to establish a clear policy in your construction agreement on what amounts to “additional work” and how this additional work will be identified, carried out, and paid for when it is encountered during the project. Your agreements should call for additional or extra work to ordinarily be written up as a change order. Stick to the policy of getting extra work approved in writing by the owner before you do the work. Occasionally, you’ll do some work before the owner signs the change order — just to keep the job moving — but 95% of the time, it’s possible to get that signature first. If you can’t get it signed before starting the additional work, at least describe the work in an email to the owner and get an email approval from the owner to move forward with what is defined as additional or extra work before you do the extra work. A signed change order will almost entirely eliminate arguments over the owner’s obligation to pay for the additional work.
The construction agreements on this site contain clauses that define “additional work.” When something comes up that is not included in the agreement’s scope of work or an item that has been specifically excluded from your scope of work (see exclusions section of agreements), you will be glad to have a contractual basis for identifying it as additional work. You can turn to a paragraph in the agreement that clearly establishes the item as additional work and feel confident about bringing the extra work to the owner’s attention, following your change order procedure, and getting paid fair and square for the work.
Get It in Writing
Once in litigation or arbitration, owners very often challenge claims of verbal change orders by the contractor. However, written change orders that are signed by the parties before the work is done are only very rarely raised as a claim against the contractor. What does this tell you? Don’t do change order work without first writing up the change order and getting the owner’s signature.
There may not be a single residential contractor who hasn’t “eaten” hundreds or thousands of dollars of legitimate change order work at the end of a job just so he could get the owner to release his final check. Why would a contractor do this? The main reason is that the contractor never put these legitimate change orders in writing and the additional charge was contested by the owner. Why weren’t they in writing? Good question. Let’s have a look at a few of my favorite excuses for donating “free” additional work worth hundreds or thousands of dollars.
The first line below is what the contractor was thinking when he decided not to put the change order in writing. The text in italics that follows is what he was thinking after he discovered he would never be paid for the additional work.
■ “I’m just too busy right now to take the time to write this up...”
“Man, this lawsuit is sure taking a lot longer than it would have taken to write up that $27,000 in change orders the owner said he would pay. Being too busy to write up those change orders is like being too busy to change the oil in my truck and now I get to rebuild my engine. Boy, was I stupid.”
■ “I’m a nice guy. And the owner seems like a fair, kind of guy. He won’t have a problem paying for legitimate work later. He said he trusted me and that is why he gave me the job. I really trust him too.”
“Wish I’d gotten a signed change order! Can’t pay my subs and lumber bills for the project with trust.”
■ “I really don’t want to rock the boat and give the owner a change order this early in the project, even though it is legitimate. After all, the owner said just a couple of weeks ago in our meeting that he expected there to be no change orders on this job.”
“Wish I had rocked the boat now. I gave up two legitimate change orders early on, and then the owner would not agree to sign the later ones because he thought if I could afford to give away those first couple of change orders I never write up, I could afford to give away the rest as well.”
■ “No way. The owner is my, take your choice: good friend, neighbor, relative, business associate, friend of my best friend, doctor, lawyer. He would never refuse to pay for this legitimate additional work — we trust each other, and after all, that’s why we’re friends and a big reason why I got this project.”
“We used to be friends! I’ll never do that again, and I get stiffed like this, we’ll probably never be friends again either! How could I have so badly misjudged the someone I knew and why wasn’t I smart enough to avoid this?”
■ “Why, I’ve got plenty of money in the job to cover a few extras in the early phases. I’m not going to be bothered right now writing up these few change orders.”
“Man, I blew it. I may have made 10% more on the foundation than I expected, but after losing 15% on the framing and finish work, I realize I underbid the job as a whole! I thought the owner would pay me for the things we both know I overlooked in my bid, but he wouldn’t. I sure wish I’d charged for those legitimate extras when I could have!
■ “The owner is loaded. He knows he wants quality work, and he’ll be willing to pay for it later. That’s why he hired me in the first place.”
“Wow, the owner really is loaded. He has his own lawyer on staff and says it won’t cost him a penny to fight me on these $37,500 worth of change orders. How come the lawyer I talked to wanted $15,000 up front just to take the case? Just the legal fees will crush me on this thing. I don’t have an attorney’s fees clause in my agreement so I’ll probably never be able to recoup the legal costs (which ought to just about equal what the owner owes me now). Guess I lose either way.”
■ “I hate this paperwork stuff! I’m sure I’ll be able to remember these 17 changes six months from now, and I’m sure the owner won’t mind me showing these changes to him then.”
“What a fool I was. I can’t figure out which of the receipts in this brown paper bag filing system of mine are for additional work and which are for work that was covered by the contract. I can’t even begin to sort out how much labor I spent on the extra work. Oh well, to heck with it...the owner won’t pay me for it now anyway. We’re behind schedule and the owner is out of money and boiling mad that I never told him about the extra work until now. Besides, he’s holding my final $44,500 check as a hostage. I gotta’ have that final check to pay my bills. Maybe next job I’ll get organized..., yeah, that’s it...next job I’ll get organized and be fine!”
Any of these sound familiar? Do all of them sound a little familiar? Enough said. Put it in writing before you do the additional work unless you really are willing to happily sometimes forget about the money you are owed. At minimum describe the extra work in an email to the owner along with the cost and get the owner’s email written approval before you start the additional work even if you don’t get a signed change order.
What if I Need to “Prove” a Change Order?
In the absence of a written change order signed by both parties, the contractor may be required to prove through clear and convincing evidence such things as:
• The extra work was outside the scope of work in the original contract.
• The extra work was ordered by the owner.
• The owner agreed to pay for the additional work, either by words or conduct.
• The extra work was not a gift, or given “without charge” by the contractor.
• The extra work was not required as a result of the negligence of the contractor or caused by a default of one of the Subcontractors.
If proving these points in order to establish the validity of extra work sounds complicated, you’re right. It is extremely complicated in contrast to the simplicity of organizing your work in the field to incorporate written change orders for extra work prior to actually performing the work. Why spend hours of time arguing over who will pay for change orders, accept unreasonable offsets in change order payments, or no money at all in some cases, or be forced into litigation or arbitration over disputed change orders, when using a simple change order procedure can prevent 98% of all of these problems from ever occurring?
Take the time to incorporate written change orders into your normal work routine and you will be rewarded with payment for extra work and better profit margins. You’ll also have greater peace of mind as a result of not having to argue with the owner, after the fact, about getting paid for your extra work and ironically, the sense of trust between you and the owner may be better maintained.
15) Change Order Form (short form): Basic change order form template for additional work and changes in the work. This change order template also has lines to track cost and additional project time.
16) Change Order Contingency Fund Information Form: This informational form template may be given to Owner with a blank copy of contractor’s change order form at contract signing before the project starts. Contractor may want to review the change order form explain to the owner that some change orders are to be expected on practically every job. You may want to explain they typically arise as a result of owner upgrades or betterments, work caused by concealed conditions unknown to the contractor at the time the agreement was provided to the owner, items specifically excluded from the agreement by the contractor which are later required or requested to be performed, or errors or omissions in the design documents prepared by the owner’s architect or designer. This form explains these things, and more so the owner has a better idea of what to expect during the construction phase.
17) Long-Form Construction Invoice: This long form invoice template is both an invoice and an accounting summary that is very helpful for projects that contain lots of change orders. The invoice will help contractors separate and keep track of payments made by owner towards contract work and change order work so that you always know what the payments from the owner were allocated towards.
There’s an old saying, “We pay off of invoices and work off of contracts!” This is a good rule, no matter which end of the money you’re on. Perform your work in accordance with a signed contract and when you’re ready to be paid for all or a portion of your work, give the owner an invoice. It’s a simple procedure and it keeps everyone’s accounting in order. As a general rule, invoicing forms and procedures are a little less important on small jobs. However, on medium-sized and larger jobs with multiple draws and numerous change orders, invoicing forms and procedures become indispensable.
Invoicing and Payment Schedules
The payment schedule set forth in your construction agreement is what structures your invoicing, and your invoicing is what structures the timing of your payments from the owner and keeps your cash flow going. Because most contractors can’t afford to personally finance a large job, and shouldn’t even if they can, they need to count on a reliable and predictable incoming cash flow from the owner in order to get the job done. The best way to ensure this cash flow is to issue invoices in a timely fashion which coincides with the payment schedule and contract payment terms.
Contractors may want to tailor the payment schedules in their contracts based upon the requirements of each job, and take frequent draws that are roughly equivalent to the value of labor and materials installed at the job site. Then, follow the contract payment schedule when issuing invoices. Some contractors are nearly devastated by sloppy payment schedules that leave them trying to finance big portions of the job out of funds they don’t have. This leads to credit problems and hurts the contractor’s relationship with employees and subs who rely on the contractor for prompt payments.
Also, make every effort to not leave a large payment owing at the end of the job. Ideally, your final payment should not exceed 20% of the contract amount on small jobs and 5% to 10% of the contract amount on larger jobs. I always try to make the final contract payment equal to, or less than, the dollar limit of the local Small Claims Court whenever possible. That way, if an owner decides to unjustly withhold final payment for some reason, you can turn to the Small Claims Court and have a chance of collecting money without the need for a costly lawsuit.
Another mistake contractors sometimes make is drafting payment schedules and invoices for significant portions of work that have not yet been completed. If you do this, you will probably make the owner nervous, and get a false sense of having earned money that you actually owe to your employees, subs, materials suppliers. This can also get you into a lot of trouble.
Be fair with your payment schedule and invoicing, but be prompt about getting your invoices to the owner and getting paid. And keep your invoices in sequence with the payment schedule in your contract with the owner. The outcome will be well worth your organizational efforts.
Two Types of Billing Procedures & Invoices
Some contractors draft payment schedules for fixed price agreements so that they are paid on a weekly or bimonthly basis for the percentage of work they have
completed during the prior work period. This percentage-of-work-completed invoicing method works well on time-and-materials jobs and with fixed price contracts as long as there are no disagreements about the amount or value of work actually completed by the contractor. Sometimes the amount of the contractor’s invoice is checked against a schedule of values submitted by the contractor with the construction agreement. However, this invoicing method can backfire on a contractor at the end of a job if the contractor has invoiced for 90% of the job but only completed 75% of the work.
Other contractors draft payment schedules that trigger a specific dollar amount or percentage of the contract amount to become due immediately upon completion of certain phases of the work.
Where possible, the benefit of specified-draw milestone method can work well because prior to beginning any work, everyone knows and contractually agrees that payments will be due when fixed easily identifiable amounts of work are completed. As work is completed in stages, there are fewer opportunities for disagreements over exactly how much money is due in each payment.
Construction lenders also tend to use a specified draw system like this for residential construction (e.g., 15% of contract amount due upon completion of excavation for foundation, setting of forms and steel, pouring of concrete and stripping of forms; 15% of contract amount due upon completion of subfloor and all underfloor mechanical and plumbing work; 25% of contract amount due upon completion of above-floor rough framing, installation of roof and gutters, and setting of exterior doors and windows; etc.).
When drafting your own payment schedule, remember that frequent smaller payments are always better than a couple of bigger payments. If an owner is going to have financial trouble on a job and not be able to pay you, the sooner you find out about this, the better. For instance, if the owner has only $12,000 to pay toward your last $22,000 invoice, better that you discover this before you complete the last $10,000 worth of work. The smaller the payments, the less likely the owner will be to let you perform work that he can’t pay for in a timely manner.
Unfortunately, a few people tend to not want to pay a contractor when the final payment on a job is $35,000 to $50,000 or more. On the other hand, if the final payment on the very same job is $10,000 or less, the same owner may just go ahead and pay the contractor without a fight. What I’ve observed is that some owners will “draw the line in the sand” and fight with the contractor over a larger final payment, but may be less apt to do so with a smaller final payment figuring it’s not worth fighting over.
The moral of this invoicing story is that when possible you should submit frequent invoices and make your final payment as small as possible. Just by doing those two simple things, your odds of fighting or having to litigate over final payments will decrease significantly. Also, by billing frequently, if the owner suddenly runs out of funding, you’ll discover this sooner rather than later, and you’ll have less financial exposure. Providing the owner with a tight, concise, and fair payment schedule and then following this payment schedule with prompt invoicing and collection of draws is a good policy to implement.
The Accounting Summary Compared to drafting contracts, invoicing is rather routine. Anyone can scratch out an invoice for a small job. For small jobs with one or two invoices, almost any invoice form will do. However, on jobs with numerous payments and change orders, it’s best to provide an accounting summary at the bottom of every invoice given to the owner. This accounting summary serves as an aid to both the owner and the contractor. On a bigger job with lots of change orders and lots of contract draws, the accounting summary portion of your invoice can save you literally hours of time reviewing the job file in an attempt to piece together exactly how much the owner paid and whether the disbursements were for contract payments, change orders (if so, which ones?), or materials deposits, etc. It can even keep you from losing money through simple accounting errors.
In addition, an owner always has more confidence in a contractor when it is evident that the contractor has complete understanding and control of where the owner’s money is being applied throughout the project. On a larger job, timely invoicing and use of the accounting summary increases the owner’s trust in your ability to run the job professionally. In this respect, the invoice accounting summary is also a good marketing tool.
The invoice accounting summary is simple to use and quite similar to the change order accounting summary. You start off by including it on invoice #1 and it simply builds itself with each successive invoice. The accounting summary is made up of three sections which correspond to the three sections of the invoice itself: one section for itemizing contract payments, one section for change order payments, and a third for the total amount paid in both of the other categories. Separating out the change order payments and the contract payments makes reading the accounting summary (and the invoice itself) easier because these two categories (and their subtotals) will always match these same categories and “balance out” in the change order accounting summary (see Form 4.2)
18. Short-Form Construction Invoice: The short-form invoice template is useful for small jobs with only a few payments where no accounting summary is needed.
19) Estimating Worksheet: Many contractors have estimating programs, but if not, the simple Estimating Worksheet template helps the contractor to remember various kinds of job costs and may be set up by contractor in a spreadsheet program. Most items on the form are listed in the general sequence in which they come up on the job (e.g., permits, foundation, framing, finish, etc.). Remember, this is only a sample form template. Add to this template any additional categories of labor, materials, equipment, and miscellaneous costs that are frequently used on your jobs.
20) Pre-Construction Conference Form: You may want to use a pre-construction conference form template on larger projects. Present the form to the owner at the meeting where they will be signing the contract -- the pre-construction conference -- and have them review and sign this form at the same time. The purpose of this form is to assure that important aspects of the project and the accompanying paperwork have been reviewed by the owner and the contractor prior to the signing of the construction agreement. In addition, it has clauses that establish some ground rules for job-site procedures and logistical details, such as safety on the site, work hours, use of a job-site sign and photos for advertising in social media, storage of tools and equipment and bathroom access, if applicable. Some of these clauses may seem nit-picking, but with remodeling, they cover issues that come up on almost every job site and which, if not addressed before work begins, can lead to unnecessary tension and misunderstandings between the contractor and the owner.
21) Customer Information Form: Remodeling: This is a simple informational form template that describes the common high and low points that occur during the course of a residential remodeling project can help owners better prepare for and cope with what lies ahead. When the builder/remodeler informs the owner about these things in advance, it's less of a surprise when the framing goes fast and is exciting, but the rough plumbing, electrical, mechanical, drywall, painting, finish woodworking, flooring, and countertop stages may seem to take lots of time. This form also tells the owner that doesn’t vacate during construction that his normal lifestyle will be disrupted to some degree as a result of disorder, dust, temporary loss of the driveway or utilities, and other inconveniences created by every remodeling project. Realistically preparing the owner up front for these typical conditions may help later when tensions rise over inconveniences that invariably occur despite the builder/remodelers best efforts.
22) Optional Contract Clauses: This is a sample material price escalation clause template that a contractor may want to insert in certain agreements to hedge against the volatility of sudden material price increases. There is a sample Cancellation of Contract for Convenience Form by Owner clause that addresses owner cancellation of contract when contractor is not in default under the agreement. The Contractor’s Legal Kit forms do not automatically contain these clauses, but if desired, one or more can be added and revised based on contractor’s individual needs along with input and advice from contractor’s attorney.
23) Punch List Addendum Form: The punch list addendum form template can be filled out by contractor at end of the project to identify the punch list items that the contractor and owner agree will bring the project to 100% completion. This can help deter the never ending punch list syndrome that most contractors have dealt with when they run into a challenging or difficult to please customer.
Important Notice to Contractor and Disclaimer: Before using or relying on the template forms and information above, read the template forms with care, fill in, modify, delete, add language to, and revise portions of the template forms according to your specific needs and any state laws applicable to the type of job you are using the document for. Use of the form templates on this site does not constitute the formation of any kind of attorney/client relationship between you and us. You should seek and obtain independent legal advice from a licensed attorney in your local area familiar with construction law before using or relying on any of the forms or information on this site. The forms and information on this site are provided only as general information, not legal advice and may or may not reflect the most current legal developments, your specific needs or laws applicable to the state where you conduct business. Only the original purchaser of the forms has a limited license to modify, edit, print and use the forms.
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