MORE THAN A QUOTE- IT’S A CONTRACT

Don’t have a standard form contract? Perhaps it’s time to get one. We hope you’re not still scribbling your quote on the back of a business card.

Courtesy of Hardwood Flooring Magazine USA, here are some tips on what a good contract should contain. It’s not exhaustive, but should get you started. Yes,a it’s a US-based publication, the details are very relevant here.

1. Be Specific. Many of the problems on jobs result from poor communication, starting with the written agreement. While a contract doesn’t always have to be a novel, it helps to clearly define expectations. So, if your price is dependent on availability of particular materials, spell that out.

2. Get it in Writing. Homeowners, in particular, are notorious for changing their minds in the middle of jobs. While it might seem like a small thing to the homeowner …get the customer to sign off on a written change.

3. Payment Milestones.  Avoid fronting the materials expense for a customer, particularly if the materials used are special order items. (Ed’s note- as a distributor, we have the same difficulty. For some items, once we sell it to you, it’s very hard to take it back.)

4. (Legal) Rights. Liens are a subject unto themselves. Make sure your contract and any other required documents comply with the law where the work is being done. (Ed’s note: in Australia, this is ensuring that your contract does not conflict with the
Trade Practices Act)

5. Timing. Timing is often an issue, particularly where the work being done interferes with use of the property or is otherwise inconvenient to the owner. It’s a good idea to give a range of dates for project completion.

6. Warranties and Liability Limitations.
Your contract should spell out what warranties you will and will not provide.

7. Source of Payments. Sometimes the customer will delay payment simply because they do not have all the money available at the time your payment is due. Often the customer may be relying on lending or insurance funds to pay you- you may … want to have the lender or insurer agree to make payments to you directly.

8. Interest. If your customer is going to make you a lender, your customer should pay interest on that loan.

9. What Law and What Court. You may want all disputes heard in your location rather than your customer’s. If you are in a different state, you may want the court to
rule based upon the laws in your state. (Ed’s note: In Australia, you will need to specify that claims will likely be heard at Consumer affairs, e.g. VCAT in Victoria).

10. Included and Excluded Items. Often there will be a back-and-forth exchange of communications, both before and after the contract. You want to define which of those communications will be included in the contract, and to exclude all other communication, whether verbal or in writing.

While this is not an exhaustive list of all considerations
for a contract, addressing these ten items will go a long way in eliminating
common issues and disputes, and they will provide some protection when you do
have problems with your customer.

Full article with more details and tips is at Hardwood Flooring Magazine.

 

 

2 responses to “MORE THAN A QUOTE- IT’S A CONTRACT

  1. Hi, again.
    Another good sound article, which, if most of us aren’t already, should take on board as good advice.

    The only thing I have a qualm with is the part about trying to charge a slow-paying customer interest on monies owed.
    (The full article here – Interest. If you do not charge interest for delayed payment, invariably you will get a customer who will delay as long as possible. When this happens, you are essentially loaning them the value of your unpaid contract. If your customer is going to make you a lender, your customer should pay interest on that loan. So, have a clause that provides a high rate of interest on any unpaid amount that is due. That interest should be the higher of the maximum amount allowed by law in the state where the work is performed, or a rate above a typical high credit card rate, since you likely would prefer the homeowner borrow from another source and pay you immediately).

    My understanding is, in Australia, you must be a registered lender to enable you to charge interest on monies owed.
    This, however, shouldn’t stop you from having it printed up on your quotes or invoices that you will charge them interest (today’s prevalent overdraft rate is the best one to go with, by the way) in an attempt to encourage them to cough up their dough as snappily as possible. Let’s face it, Cash-flow is King!

    Thanks again for a another great Blog posting.
    Clint Fudge.

    • Good point- as we understand the law, you can stipulate on a contract of sale for goods/ services that interest will be charged on monies owed, but it cannot be above a certain rate.

      If it is not stipulated on the contract, you can still charge interest but only after a court judgement is issued when legal action is taken on overdue monies.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s