Signing a contract means you make a binding promise to complete work on behalf of a client. You might build houses, provide professional services or any number of other tasks. Contracts vary, but they often have similar properties to address the duties expected of a contractor.
Contractors have a responsibility to honor their end of the deal in the contract. If they cannot do so, either fairly or unfairly, this may lead to penalties. Before signing, contractors must familiarize themselves with the responsibilities of the contract.
Keep these five tips in mind before you sign:
1. Make Sure the Contract Outlines the Duties of Both Parties
Contracts usually outline the duties expected of the contractor. The contractor should carefully investigate these stipulations. If they believe that they need the contract adjusted, they should speak to the contract’s owner.
Furthermore, the contract should state the responsibilities of the contract owner. Contracts are a two way street. Upon the completion of the project, the owner will compensate the contractor. Therefore, it’s imperative that contractors have assurances of the owner’s obligations.
2. Determine Dispute Resolution
At times, contractors and owners have disputes about the completion of a project. These projects may be simple misunderstandings that need clarification. Other situations may lead to more serious disputes. Both parties should come to an agreement on how they can settle disputes with minimal project interruption. If possible, they should list this agreement in the contract.
3. Ensure Both Parties Can Meet Their Obligations
If either the contractor or the owner cannot honor their part of the contract, this may mean work cannot proceed. This may result in repercussions, up to breach of contract allegations. Before signing, contractors should consider the requirements of the contract. If they cannot complete them, they may not be able to ethically accept the contract.
4. Get Appropriate Bonds
Even if contractors can complete their work under normal circumstances, unforeseen events may intervene. If a contractor cannot honor a contract, they may have to compensate the owner for lost work and costs.
Many owners require contractors obtain bonds in case they cannot complete their project. Contractors buy the bond according to the owner’s requirements. If the project falls through, the owner may be able to make a claim on the bond to recover lost costs. This doesn’t mean the contractor is off the hook. The contractor usually has to compensate the company that issued the bond for the payout.
Do you need surety bonds? Call First Insurance Group at 800-511-2892 for more information on a bond quote.