So you've got your drawings and design, your permits in hand, a pile of money lined up, your Contractor(s) reviewed and selected, and a gleam in your eye. Well, hang on! The most important step is yet to come before one nail hits the job. Now you have to decide how well you are going to REALLY limit your risk...

The first concept to get your head firmly wrapped around is this:

If you didn't get it in writing, it NEVER HAPPENED. Period.

This is so important, I can't stress the concept enough. I don't care if it's your brother's buddy or your Uncle John- a construction project where money changes hands in return for work is a Business Arrangement, and should be dealt with accordingly. If not, you can leave yourself open to a huge risk of loss, both financially and spiritually! No reputable contractor will have any problem whatsoever with preparing and executing a written agreement on a project- no matter WHO they are to you personally; In fact, they will admire and respect your intelligence and responsibility. You see, a properly drafted contract protects them as much as it does you...

The actual Contract need not be elaborate, but there are certain sections that are vital. The first is the names of the parties or entities executing the agreement, the date the agreement is being entered into, and the legal description of the property being improved. If it is an established structure with a postal address, that full address is usually sufficient. If raw land or an unimproved lot, you will need to list the survey information which includes: the County, Township, Section, and Range, among other details. You can get this information from the title or deed, or from your local County or Township Government offices.

Second, you should clearly list the entire scope of work. If you are acting as the General Contractor, you will need to prepare a separate contract for each Sub-Contractor. If you don't have drawings and specifications for the project, you will want to list exactly what you are expecting to be done: for example, remove and dispose of existing kitchen countertops; Provide and install new countertops and 4" back splash as manufactured by [insert vendor], style [insert style and type], color [insert color]. You don't need to list every screw and nail, however the "standard of work" statement "All work shall be performed in a competent, workmanlike fashion, following accepted industry trade practices" should be included. This allows you to have an impartial third party expert inspect the work and give an opinion as to the suitability of the work in case of a dispute or before making final payment (see chapter on close out).

A quick and clean way to enumerate the scope of work is to attach the quote to the contract as "Exhibits". If you are satisfied that the quote you received from your chosen contractor is detailed enough, simply call it out in the contract, for example: All work to be as per the quote for [short description here], prepared by [contractor name], dated [date here], which is hereby attached as [exhibit A, B, etc...] and is/are included by reference. If you have drawings, include a reference to them as well, and list all pages, such as: "[And/Or] as per the drawings and specifications as prepared by [Architect or designer here], dated [date here], [revisions if any], sheets [list all: A-1, A-2, E-1, etc...], and is/are included by reference. After the detailed scope of work, remember to include the "Standard of Work" statement from the last section!

Third, list any special conditions for the project, such as the process for dealing with change orders, working times, Insurances to be provided (both by the owner and the contractor), who is responsible for the permits and calling for inspections, allowability of overtime, performance schedules and/or expected date of completion, Milestone descriptions and target dates, etc... Always require a schedule from your contractor. This can be as elaborate as you like, such as a formal spreadsheet type "Gantt" chart, or as simple as a wall calendar marked up and initialed by both parties, and included by reference in the contract. This schedule must of course be somewhat flexible, and include time for weather delays, material shortages, and acts of God, among other variables, but it should NOT be open-ended!

Finally we come to the Payment terms. These should include the statement "Contractor agrees to perform all work as specified, pursuant to the terms of this contract along with all exhibits and attachments, for the sum of [list contract sum here]. to be paid as follows: [list payment schedule here]".

Again, the terms of payment may be as elaborate as you care to make them. I always recommend that any and all payments be tied to performance of some specific milestone or event, such as: xx% down; xx% upon completion of foundation work and backfilling; xx% upon completion of rough framing and exterior enclosure; etc...Trust me, your contractor may not like this, but be adamant. You have NO OTHER "stick to beat them with" except your checkbook! Use it firmly but fairly. Once again, a reputable and honest contractor should have no problem with this: it is actually to their benefit, as it clearly defines when they are going to get paid as well! If they want to get paid, they have to perform. Simple as that.