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Introduction & Select
Features:
If You're a California Contractor, You Need
to Be Good at Writing Contracts
If you're a California contractor, you need to be good at writing
contracts.
That seems elementary. But few construction contractors would
consider themselves adept at preparing construction contracts.
That's too bad because there are good reasons and plenty of
opportunities to get control of the contract drafting process on
your jobs.
Reasons: The party who controls the contract also controls
the bottom line. That's accepted wisdom among vendors in nearly all
industries. Buy a car or a kitchen appliance or take your car to the
mechanic for service and you'll be handed a document (contract) to
sign. Vendors aren't dumb. They know from experience that contracts
offer protection. What's true for an auto dealer, an appliance
retailer or an auto repair shop is just as true for construction
contractors. You need the same protection. And the best way to get
that protection is with a contract you draft yourself.
Opportunities: Every contractor who enters into a
construction agreement has a chance to either draft the document or
negotiate terms of that agreement. Relatively few private jobs are
done on a take-it-or-leave-it basis on a printed contract form. Most
residential, commercial and industrial jobs are done on contracts
negotiated between the property owner and the contractor. Many
contractors offer to prepare the contract simply because the
property owner wouldn't know where to start. On most jobs, the
construction contractor starts contract negotiations simply by
submitting a written bid. Attaching a proposed contract to that bid
makes it easy for your client to say "Yes." Even if not accepted
immediately, a contract tendered with the written proposal is likely
to become the basis for further negotiation - especially if the
contract has a professional appearance and is obviously
custom-designed for the job.
Most experienced construction contractors (and every lawyer) will
agree: When you work under a contract you drafted, you've got
control of the job.
Of course, not every client will be eager to do business based on
your contract. Some will offer their own contracts. Others will
object to specific terms in the agreement you offer. What then? No
problem. That's the way it's supposed to be ¸negotiation. The better
you and your client understand the agreement, the less likely
there'll be surprises and disputes.
But no matter what objection a client may have to the contract you
offer, doing business on your own agreement is the best choice.
Obviously, you've got a major advantage in contract negotiations if
you're good at drafting contracts:
- You can make quick and easy contract
revisions,
- Your printed contract looks highly
professional,
- You're confident the contract complies
with state law,
- You can deliver a contract almost
instantly by email, and
- You deliver the finished contract in a
format that can't be easily changed.
And that brings us to the Construction
Contract Writer program, which does all of that, and
considerably more. California Construction Contract Writer (CCW)
is on the disc bound inside the back cover of this book.
CCW is a Little Different
For many years, construction contract forms were sold on paper,
usually at a hefty price per page. If a change was needed in the
printed form, you had to write between the lines or make notes in
the margin or attach a separate sheet. That made for messy contracts
and more than a few disputes.
Now that nearly everyone in business has a computer and a word
processor (like MS Word or WordPad), it makes more sense to buy
construction contracts in digital form, either on disc or by
download off the Web. That's Generation II in the development of
modem construction contracting practice. It's clearly a step in the
right direction. Making changes, additions and deletions in a
digital file is easy. But there's still a problem: flexibility.
You're going to be stuck with contract clauses that don't really
apply. And no stock contract covers even a fraction of the thousands
of possibilities that make every construction project unique. Worse,
stock contracts seldom explain what each clause means or when it
should be used. That's left up to you.
CCW is Generation III
CCW isn't a digital form you change with a word processor -
though it includes a word processor. CCW isn't a stock
contract in portable document format (PDF) - though CCW
output can be either RTF or PDF. CCW is best described as an
interview. To write a contract that fits your job precisely, just
answer the questions. When you click to answer, CCW adds to
your contract (lower center window in Figure 1). An Explainer window
(lower right in Figure 1) describes what you need to know before
selecting an option. Bias icons and the Contract Bias window (upper
right in Figure 1) identify who is favored by each contract clause
and by the developed contract as a whole. The Interview Navigator
window (left side in Figure 1) makes it easy to move from topic to
topic. When the interview is completed, you'll see a string of check
marks next to the subjects listed in the Navigator.
- The interview can be as short or as long
as you want.
- You decide what's covered in the contract
and what's omitted.
- Enter names just once. CCW fills
in all the names from then on.
When completed, print two copies of the
contract - one for you and one for your client. Deliver the contract
with your bid. That makes it easy for your client to say "Yes" and
to sign on the dot-
ted line. If changes are needed, simply jump back into CCW to
make revisions. You can change your answer to any interview question
or even type text directly into the contract. Then print it again.
Whether you're bidding a big commercial project or a simple home
repair job, CCW can draft the contract you need. Once you've
created the prime contract, use it to clone subcontracts for the
same job.
Maybe best of all, you know the contract is legal and enforceable in
your state because CCW is written for your state.
*
* * * * * *
Where Risk and Contract Bias Collide
You've probably read construction contracts
that seem biased - favoring one party over the other. Here's
something you may not have considered: Every construction
contract has a built-in bias. There's no such thing as a
standard construction contract that's fair to everyone and fits
every job in all states. For many reasons, a contract like that
doesn't exist. It can't. The law in every state is different. The
disclosures required vary with the type of work - residential,
commercial, industrial, public or private. What's fair in one
context may be completely unfair under a different set of
circumstances.
Just as bias varies in contracts, risk varies from job to job. The
danger zone for every construction contractor is where bias and risk
intersect. To understand this point, consider a job with any of the
following:
- An undercapitalized owner, ~ An
inexperienced designer,
- An aggressive building inspector,
- Demanding specifications,
- Short deadlines.
A job with any of these characteristics
includes obvious risk. By the time you've walked the job site,
studied the plans and bid the work, you've probably recognized other
risks that should be considered. It's a shame if what you know about
risk in the job (the owner, the plans, the work) isn't written into
the contract.
You need a construction contract with bias neatly tailored to avoid
known risks.
No stock contract, no side agreement, no oral understanding, no
unspoken assumption can substitute for explicit contract language
covering what could go wrong.
You have a golden opportunity to head off trouble when preparing a
contract for any job. Don't fumble that chance by recycling a
contract you've used on some other job, or a form found on the Web.
Very few contractors draft an agreement that both fits the job and
navigates around known problems. A few minutes invested in contract
preparation can prevent most of the common disputes that plague
construction projects.
Specifics on Contract Bias
You won't see many construction contract forms that admit bias. But
be aware that bias is there. Forms promoted by architectural
associations tend to protect the architect. Forms promoted by
property owner associations favor property owners. That shouldn't be
a surprise. Several other trade associations offer stock contracts.
None that I've seen come with dozens of options that can shift
contract bias to meet job conditions. But tailoring bias to the job
is exactly what you need. And that's what CCW does.
In CCW, check the bias icon before responding to any
interview question. Figure 2 shows the bias icon legend.
As you respond to interview questions, contract bias accumulates in
the Contract Bias window. To see the bias accumulated in your
contract, click View on the menu bar. Then click Contract Bias.
See Figures 3 and 4.
Key Options in CCW That Bias the Agreement in Favor of the
Contractor
| Navigator Topic |
Question |
Selection |
| Plans and Contract Documents |
Does the bid define the job? |
Yes. |
| Scope of Work - General
|
Which form of the scope of
work clause? |
Limited form. |
| Qualifications on Site
Conditions |
What's in the contract on
site conditions? |
Contractor can rely on what
the owner says. |
| Omissions in the Plans |
What's in the contract on
omissions in the plans? |
Design defects are corrected
at owner's cost. |
| Retainage Basics |
Will retainage be deducted
from payments? |
No. |
| Rejected Work - Contractor
Rights |
What can contractor do when
work is rejected? |
Disagreement is handled as a
contract dispute. |
| Changes in the Work
|
Can the owner make changes
without consent? |
Changes require mutual
agreement. |
| Required Changes |
What should the contract say
about changes? |
Extra work includes changes
required by law. |
| Required Changes |
What should the contract say
about changes? |
Changes due to a plan defect
are extra work. |
| Required Changes
|
What should the contract say
about changes? |
An error by owner may result
in extra charges. |
| Pricing of Changes |
How will the price of
changes be determined? |
The normal selling price of
contractor. |
| Options When Pricing Changes |
What's the charge for extra
work? |
Owner pays if labor or
material costs change. |
| Call-backs |
What's the call-back period? |
The call-back period ends
at final completion. |
| Warranty |
What warranty does
contractor provide? |
No warranty. |
| Contractor Claims |
What should the contract say
about claims? |
Contractor has a claim for
any change. |
| Dispute Resolution
|
Will disputes be resolved by
arbitration? |
Arbitration is required.
|
| Liability for Acts of
Subcontractor |
Is contractor liable for
acts of subcontractors? |
No, contractor will not be
liable. |
| Contractor Claims for Delay |
Will contractor be
compensated for delay? |
Contractor will be
compensated. |
| Right to Stop Work for
Nonpayment |
What right does contractor
have to stop work? |
Contractor can suspend work
for slow payment. |
| Damages from Suspension of
Work |
Is suspension for nonpayment
compensable? |
Suspension for nonpayment is
compensable. |
| Grounds for Termination |
On what grounds can
contractor terminate? |
Excessive delay.
|
| Grounds for Termination |
On what grounds can
contractor terminate? |
Financial uncertainty of
owner. |
| Grounds for Termination |
On what grounds can
contractor terminate? |
Owner's repeated failure to
meet obligations. |
| Compensation After
Termination |
What costs will contractor
recover? |
The full price less the cost
of completion. |
| Obligations After
Termination |
When is final payment due
after termination? |
Within 30 days after
termination. |
| Completion |
Is the punch list a final
list of defects? |
Anything not on the punch
list is accepted. |
Key Options in CCW That Bias the Agreement in Favor of the
Property Owner
| Navigator Topic |
Question |
Selection |
| Scope of Work - General
|
Which form of the scope of
work clause? |
Broad form. |
| Representations by
Contractor |
What representations are
made by contractor? |
The contract price covers
all job conditions. |
| Disclaimer by Owner |
What are the conditions at
the job site? |
Owner disclaims conclusion
of contractor. |
| Employee Relations |
What's in the contract on
employee relations? |
Owner can discharge
employees for cause. |
| Responsibility for Safety |
Who's responsible for safety
on the job? |
Owner is not responsible for
job site safety. |
| Rights After Discovery of
HazMat |
Is contractor responsible
for HazMat on the job? |
There will be no adjustment
to the contract. |
| Authority of Representative |
What tasks can the
representative handle? |
Representative can reject
any work completed. |
| Authority of Representative |
What tasks can the
representative handle? |
Representative interprets
the plans and specs. |
| Subcontracted Work
|
What's in the contract on
approval of subs? |
Owner may reject any
subcontractor. |
| Differing Site Conditions
|
What's in the contract on
differing conditions? |
No change order for
differing site conditions. |
| Qualifications - Site
Conditions |
What's in the contract on
differing conditions? |
No pay for work abandoned
due to conditions. |
| Omissions in the Plans |
What's in the contract on
omissions in the plans? |
Ambiguities get resolved in
favor of the owner. |
| Release of Claims by
Contractor |
What's in the contract on
release of claims? |
Final payment releases all
contractor claims. |
| Retainage Basics
|
Will retainage be deducted
from payments? |
Yes. |
| Grounds for Withholding
Payment |
Which are valid reasons to
withhold payment? |
Persistent deviations from
contract documents. |
| Grounds for Withholding
Payment |
Which are valid reasons to
withhold payment? |
Failure to keep the work on
schedule. |
| Changes in the Work |
Do changes require mutual
agreement? |
Owner can require changes.
|
| Options When Pricing Changes |
What's in the contract about
pricing changes? |
Owner can pay the estimated
cost of changes. |
| Right to Payment for Extra
Work |
Does the right to a change
order expire? |
Contractor must assert the
right to extra pay. |
| Defective Work |
What standard is used to
evaluate the work? |
Any unsatisfactory work can
be rejected. |
| Rejected Work |
What can owner do about
unsatisfactory work? |
Work can be removed at
contractor's expense. |
| Warranty |
What's the warranty on labor
and materials? |
Broad form warranty.
|
| Notice of Claim |
What's in the contract about
notices of claim? |
Notice is required within 5
days of discovery. |
| Liability for Damage - Owner
Bias |
What's in the contract about
liability for loss? |
Contractor is liable for all
damages. |
| Indemnity |
Will contractor reimburse
owner for losses? |
Yes. |
| Payment for Inspections |
Who's responsible for
passing inspections? |
Contractor bears the cost of
corrections. |
Every time you answer an interview question
that has a bias icon, CCW recalculates the bias and displays
the result as a pie chart in the bias pane. Wedges of the bias pie
will swing back and forth like a pendulum when you first start
answering interview questions. When you've responded to dozens of
questions, most movement in the pie chart will be barely
perceptible.
In prime contracts, bias will favor either the property owner
(orange) or the general contractor (blue). In subcontracts, bias
will favor either the general contractor (blue) or the subcontractor
(green). The more blue, the more bias favors the general contractor,
whether in a prime contract or a subcontract. A pie chart evenly
divided means contract bias doesn't favor either party.
Some questions have no bias. For example, questions under the
Navigator topic Cover Page don't affect contract bias.
You have better control, more options and extra security when
contract bias is in your favor. CCW makes it easy to draft contracts
heavily weighted either way. But bending everything your way isn't
necessary. A more balanced contract will be accepted sooner and with
fewer revisions. Remember the discussion about the collision of bias
and risk. If the owner is financially solid and considered easy to
work with, bias of clauses on payment terms and liens may be
irrelevant. There's no need to weight those clauses heavily toward
the contractor. But if the same owner is in a hurry to take up
occupancy, pay close attention to bias when dealing with the
construction schedule. Another example: Suppose you feel the plans
are incomplete and expect many revisions after work starts. Consider
bias very carefully when selecting clauses that cover charges for
extra work.
How is Bias Assigned?
Accumulated contract bias is a measure of protection provided by the
contract. It's a capsule summary of whose interest is protected and
to what degree. Some CCW options have a contract bias that's
obvious. Indemnification is a perfect example. A contractor who
guarantees to reimburse a property owner for any loss on the job is
accepting more than usual risk. That's heavy bias. But bias for many
CCW options depends on the circumstances. For example, a
warranty against structural defects probably has minimal bias when
the risk of collapse is very low, such as a well engineered concrete
foundation set on stable ground. But if job conditions suggest
higher risk of structural failure, the same warranty could bias the
contract heavily in favor of the property owner. Be aware that
circumstances can affect the bias in any contract clause.
If you agree that contract bias is a function of job conditions,
it's possible to make some generalizations.
Heavy bias shifts a significant burden, risk or expense from
one party to the other. Heavy bias goes well beyond what the law
requires and beyond good professional practice.
Moderate bias is likely to add to the effort, risk or expense
carried by one party. But moderate bias also (1) benefits others or
(2) is considered good professional practice.
Light bias imposes a minor burden, such as extra paperwork,
but adds benefits likely to (1) reduce the risk ofloss, (2) be
considered reasonable, or (3) constitute first class work.
Even (neutral) bias imposes benefits and burdens likely to be
reciprocal, insignificant or fully compensated.
*
* * * * * *
About the 16 Sample Contracts
The California Construction Contract Writer disc in the back
of this book will draft an (almost) infinite number of contracts
designed to fit (almost) any job. Only 16 of those contracts appear
in this book. If you're in a hurry and simply want to copy contract
pages out of the book, that works fine. Contracts printed in this
book have blank lines where information has to be filled in. To help
you decide which contract fits your job, review the one page
introduction before each of the 16 contracts.
The same 16 contracts are available on the disc in the back of this
book in portable document format (PDF), rich text format (RTF) and
Construction Contract Writer format (CCF). To use the PDF
contract forms, you'll need Adobe Acrobat, which is free at http://adobe.com.
To use the RTF forms, you'll need Microsoft Word or Wordpad, which
are included in most versions of Windows. To use the CCF forms,
you'll need Construction Contract Writer, which installs from
the disc in the back of this book. Once Construction Contract
Writer is installed, copy any CCF forms you need from the folder
CA Contracts in CCF on the CD to the subbfolder
Craftsman/Contracts under Documents on your hard drive.
The 16 contracts on the disc in PDF and RTF formats look like the
contracts in this book. They have dotted lines where blanks have to
be filled in. The 16 contracts on the disc in CCF format have a zero
or null where something has to be filled in, such as the contract
price. To find all places where information has to be filled in,
just click Continue >> from Cover Page to Done. Along the
way, change anything you want. But be sure to save the contract to
your computer hard drive when finished making changes.
On the following page, you'll see a list of the 16 contracts printed
in this book. To save space, contracts printed in this book don't
include a glossary of terms. But every contract you print from the
CCW program will include a glossary.
California Construction Contracts
| Form Title |
Bias |
Type of Contract |
Length |
| CA Home Repair I |
Heavy - Contractor |
Prime Contract |
17 pages |
| CA Home Repair II |
Heavy - Owner |
Prime Contract |
22 pages |
| CA Home Improvement I |
Moderate - Contractor |
Prime Contract |
25 pages |
| CA Home Improvement II |
Moderate - Owner |
Prime Contract |
32 pages |
| CA Pool |
Neutral |
Prime Contract |
25 pages |
| CA Custom Home I |
Light - Contractor |
Prime Contract |
13 pages |
| CA Custom Home II |
Light - Owner |
Prime Contract |
19 pages |
| CA Commercial Repair |
Neutral |
Prime Contract |
16 pages |
| CA Commercial Construction I |
Li ht - Contractor |
Prime Contract |
32 pages |
| CA Commercial Construction II |
Light- Owner |
Prime Contract |
11 pages |
| CA Tenant Improvements |
Neutral |
Prime Contract |
12 pages |
| CA Residential Subcontract I |
Light - Subcontractor |
Subcontract |
10 pages |
| CA Residential Subcontract II |
Light - Contractor |
Subcontract |
17 pages |
| CA Commercial Subcontract I |
Light - Subcontractor |
Subcontract |
28 pages |
| CA Commercial Subcontract II |
Light - Contractor |
Subcontract |
13 pages |
| CA Public Works Subcontract
|
Moderate - Contractor |
Subcontract |
30 pages |
These
contracts comply with the following California law and court
decisions:
Business and Professions Code sections 7030 and 7159 (home
improvement contracts)
Business and Professions Code section 7108.5 (payment of
subcontractors)
Business and Professions Code section 7164 (home construction
contracts)
Business and Professions Code section 7191 (arbitration)
Civil Code section 1559 (rights of third parties)
Civil Code section 1671 (liquidated damages)
Civil Code section 1717 (collection of attorney fees)
Civil Code section 1802 (retail installment contracts)
Civil Code section 2782 (indemnity and insurance)
Civil Code section 3260 (payment due dates and retainage)
Civil Code section 3262 (lien rights)
Civil Code section 1797.94 (warranty)
Civil Code Title 7 (warranty)
Code of Civil Procedure section 337.1 (limitation on claims)
Code of Civil Procedure section 410.42 (choice of venue)
Code of Regulations section 872 (checklist and disclosures)
Acoustics, Inc. v. Trepte Construction (change orders)
C. Norman Peterson Co. v. Container Corporation of America
(excessive change orders)
Capehart v. Heady (shortening of the statute of limitations)
COAC, Inc. v. Kennedy Engineers (obligations of owner)
Hawley v. Orange County Flood Control District (damages for delay)
E. H. Morrill Co. v. State (disclaimer of site information)
United States v. Spearin (plan defects)
Warner Construction v. Los Angeles (discrepancy between plans and
field conditions)
Wm. R. Clarke Corporation v. Safeco (pay when paid)
Zurn Engineers v. State of California (constructive acceleration)
15 United States Code section 1638 (truth in lending)
12 Code of Federal Regulations section 226.15 (right of rescission)
324 pages
8-1/2 x 11 in.
California Construction Contract
Writer
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