You are doing a kitchen remodel and a materials shortage interrupts work, a common phenomenon in the age of the coronavirus. Though not in your control, your client pursues litigation against you for delays in their project. This client is someone you trust and have worked for before so, instead of a written contract, you relied on a verbal conversation sealed with a handshake. Your client now claims you failed to meet the terms of your agreement, and, because of the absence of documentation, it is now a messy question of your word against theirs.
Whether fighting a claim filed against your insurance or a dispute in court, a written contract that clearly communicates project expectations can serve as a layer of personal protection. Contracts even help your clients as they establish a project roadmap and outline methods for handling disputes — clients know what to expect and what to do when their expectations are not being met.
Arizona State Contract Requirements
Although Arizona does not require you to use a contract, if you opt to use one, they stipulate that if the project cost exceeds $1,000, it must contain the following information:
- Name of the contractor and the contractor’s business address and license number.
- The name and mailing address of the client and the jobsite address
- Date the parties entered into the contract
- Estimated date of completion of all work to be performed under the contract
- Description of the work to be performed under the contract
- The total dollar amount to be paid to the contract by the client for all work under the contract, including any applicable taxes
- The dollar amount of any advance deposit paid or scheduled to be paid to the contractor by the client
- The dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract.
- The registrar’s telephone number and website address, with a note that clients have the right to file a complaint if the contractor violates the conditions of their license
When using a contract, the state also requires that you provide clients with a legible copy of all signed documents and signed receipts for any cash paid to you.
What Else Might You Add to Your Contract?
Arizona’s contract requirements are by no means exhaustive, so you may want to include the following elements in your agreement for documentation’s sake:
- Stop-Work Clause and Stop-Payment Clause, which give you the legal right to stop a project if your client has not paid you, and clients the right to withhold payment if you do not hit milestones or work at the agreed quality level.
- Act of God Clause, which outlines how you will move forward if faced with unforeseeable circumstances out of your control (i.e. pandemic, earthquake, supply chain disruption)
- Change Order Agreement, which allows either party to deviate, change, or add to the original contract with a written document signed by both parties.
- Risk Shifting Provisions?, which identify who will be responsible for certain risks such as regulatory/licensing obstacles, design issues, etc.
You may also choose to include details regarding communication logistics, such as how disputes will be handled, how payments will operate, insurance provisions, etc. Note that this list is nowhere near exhaustive. Depending on the size of the project and the nature of your business, you may want to consult with a legal professional to build a specific contract or generalized template to use on jobs.
The Value of Construction Contracts
Construction projects are complicated and using a contract helps you and your clients get on the same page — and follow through on the terms of your agreement. Moreover, contracts are a means of self-defense as they protect you in the event of any disputes or disagreements during the course of the project. Contracts, however, are only one part of a multi-layered business protection plan. Get your business the best coverage by bundling contracts with risk mitigation practices and strong insurance.