Protect yourself with a great contract

protect yourself with a great contract

Pilcher, Terri

“After a large restoration job that took months to complete, the client decided not to pay us our final draw,” said Bill Pilcher of Bill Pilcher Painting. “Part of their excuse was their objection to a five percent increase in the estimated price, which was added to compensate for conditions that the customer had intentionally hidden from us when we estimated the job.” His contract stated that the proposed amount was an estimate and the price could be increased up to 10 percent, if necessary, to cover costs. This statement is legal in his licensing state of Maryland.

“I spent five hours on the stand being cross-examined by their high-priced lawyers, refuting their accusations point-by-point. Because the contract spelled out the terms and conditions of our agreement in plain language, my opponent couldn’t punch holes in it. Towards the end of the trial, the judge exclaimed in exasperation to them, ‘What is it about this contract that you don’t understand?’ We won the case.”

Contracts legally bind your company to perform work for a customer and, in turn, bind them to fairly compensate you for your work. A strong contract protects your company and makes it profitable.

You Need to Strengthen Your Contract

“Most painters that I know, their contracts are very vague… they don’t even cover how many coats they’re going to use or what colors go where or when the customer’s going to let them in the house,” said Scott Kuperman of Paint Platoon USA. His company’s contract has more terms and conditions than most other contractors, which now protects him from litigation, but it didn’t start out that way.

Paint Platoon USA has been to court very few times. The last time was several years ago. Kuperman had to sue a client who refused to pay for work done on a large apartment building. When he bid the job, the hundred-year-old building looked decrepit. The windows were caulked shut, the wood was rotting, and there were broken panes of glass. He explained to the customer that, “It’s not going to look perfect when we’re done.” Kuperman listed the prep work he would do for the price he quoted.

During the job, the owner got her mother involved. The mother began accusing painters of painting shut windows that had been stuck closed for years, breaking window panes, and neglecting to repair rotten wood. The owner refused to pay Kuperman after his company completed the work. Kuperman sued.

In court, “The judge cut the baby in half, because my contract was too vague at the time,” explained Kuperman. Rather than feeling bitter, Kuperman chose to learn from his mistake. “That’s where I really started including all of these things in my contract.” His contract evolved over the years, and now contains over 50 terms and conditions on the back. “Every time I ran into a customer who I felt was wrong or unreasonable and I could not defend myself to the customer, I promised myself, ‘Well, next time I’ll be sure to include that in the contract.'” At this point, he feels his contract is just about bulletproof.

Contracts And Subcontractors

Painters who sign contracts offered by general contractors may feel they don’t have the option to protect themselves with their own terms and conditions. Don’t ever let yourself feel desperate enough to sign a contract without reading it thoroughly and getting legal advice. Christopher Montez, a lawyer with Thomas, Feldman & Wilshusen, LLP, a Dallas, TX law firm specializing in representing the construction industry, explained, “Sometimes the proposed contract is so thick and full of legalese that it is worthwhile for your company to hire a lawyer to review the contract and advise you of the risks associated with particularly bad or one-sided contract clauses.”

A good lawyer will suggest ways you can modify the contract to make it fair to both you and the general contractor, but Montez warned, “if the prospective customer insists that you sign the contract as-is, then the decision is yours about whether to take the job along with the risks.”

Unfortunately, there always seems to be another painter waiting around the corner without the bad experiences or good advice to teach him how to protect himself. Ron Joseph, an expert paint witness who testifies in court cases where paint products are involved, sees more than his share of painters being sued. “Sometimes you just have to say no to a job. If it’s high risk, it’s not worth it.”

In California, Joseph sees many cases where homeowners find every tiny defect in their homes five to seven years after the home is built and then sue absolutely everybody. He said, “The homeowners or the property developer will sue the general contractor, and the general contractor will turn around and sue everybody, whether they have any failures or no failures at all. What is the goal? The goal, really, is to get the insurance companies to settle out of court.” In California, the homeowners often receive a settlement.

Montez said that in Texas the homeowner must prove that the builder was negligent and fell below a reasonable standard for contractors and caused property damage. Indiscriminate lawsuits don’t occur in Texas. It’s essential that you talk to a lawyer in your area to learn your risk of being involved in this type of lawsuit. To find a business attorney specializing in construction law, ask the executive directors of your area’s trade associations or search them out on the Internet.

How to Improve Your Contract

The best way for painting contractors to protect themselves, “is they must be very, very, very, very specific about what their job is,” said Joseph. “For instance, do they have to do caulking or do they not have to do caulking? If they caulk, what are they going to caulk? I understand that when a window has been installed, they may be required to caulk the gap between the window and the window sill, so that needs to be specified. What I’m seeing is that they may even be responsible for having caulked the window before the window is even installed, which is unreasonable. The vast amount of what I see is completely and totally unreasonable, and the painter gets into trouble, because he never clarifies it. He wants the business… so he simply signs on the bottom line without being very, very careful about what his responsibilities are.”

Even verbal agreements must be documented in writing and signed by your customers. “The most common mistake that I see contractors make is to make verbal agreements in the field, but then not document what was agreed to in writing,” said Montez. “Contractors make verbal agreements in the field about changes to the original scope of work, the pricing of extra work, or the scheduling of the work.” The problem is that the contractor doesn’t follow up the conversation with a letter, e-mail, or change order proposal. Verbal agreements cause conflicts when customers and contractors don’t remember the same statements and each believes the other failed to honor the agreement. “If such a dispute isn’t resolved before the project is ended, this is the type of case that ends up being the subject of a lawsuit,” Montez warned.

In addition to documenting verbal agreements, Montez suggested keeping folders with important paperwork for your jobs. He said, “Painting contractors should make it a priority to maintain a well-documented project file so that if any issue comes up, the contractor can refer to the project file for any documents that are relevant to the issue. Peoples’ memories fade, so if there is a document you can refer to… that document may… help your company avoid a potential dispute.”

Pilcher recommended purposefully adding to this file when customers fail to pay as stated in the contract. He said, “If people aren’t paying you, establish a paper trail. Send them letters requesting payment and keep a copy. If you send the customer five letters requesting payment or clarification of why no payment has been received, they’ll have a hard time convincing a judge that they were unhappy with your work. If that was the case, why didn’t they respond to your correspondence?”

“I’ve also learned that if a customer stalls in paying you without a compelling excuse, get your lawyer involved right away. Usually a letter from a lawyer is all it takes to speed things up,” said Pilcher. He pays his lawyer a set fee to send a letter to the nonpaying customer. Get advice from your lawyer about the timing of these letters. Your state, “may have a particular notice requirement for perfecting a lien claim,” explained Montez.

No matter what you do, as a business owner, you’ll probably end up in court at some point. The best thing you can do for yourself and your company is strengthen your contract. Good customers know what to expect from your company and crooked customers know to avoid you. “Load it up with terms and conditions,” said Kuperman. “Very few customers didn’t pay me after I got the terms together.”

Terri Pilcher is the occupational health and safety officer at Bill Pilcher Painting.

Copyright Finan Publishing Company, Inc. Jan/Feb 2007

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