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MAKE THE CONTRACT BE THE BAD GUY
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A few years ago I represented a thoroughly professional general contractor who did exceptional residential remodeling work. He had assembled a great cadre of subcontractors and had a good relationship with design professionals. His projects went quite smoothly in the beginning and mid-stages, but he got nailed every time at the end based on: (1) verbal change orders that he performed but were not reduced to writing; and (2) continuing to work without getting the last couple of progress draws on time. This crecendoed one year when he was stiffed as much as $250,000 on his projects because he was taken advantage of at these later stages.
When I sat down and analyzed this with him it became apparent that he was too lax in following the clear guidelines of the contract. He had a beautifully drafted contract (yeah, that’s right, I prepared it), but he never followed through. It had provisions such as: (1) payment on progress draws to be made within 10 days of presentation; (2) change orders to be in writing, outlining the scope, amount, and time extension; (3) engineering costs to be borne solely by the owner; and (4) the matching of existing stucco, paint, tile, and the like will not be exactly the same as to texture and color. They climbed all over him and it was as if a contract had not even been signed. After the contract was signed, he put it on the shelf and never discussed it, let alone insisted on it’s compliance, with the owners.
After we had a “heart-to-heart”, I patted him on the back and wished him luck. I didn’t hear from him for about five years but ran across him at a meeting and asked him how he was doing. He said he hadn’t called me because, in his phrase, “he used the contract as the bad guy”. For example, when they wanted an extra, he not only explained how it must be reduced to writing, but asked if they really wanted to do this because it would cost extra. He gave them a little speech that one of the easiest ways to go lopsided on a construction project is to make changes. Not only did they sign his change orders, but they appreciated the advice.
But, he also said something else that really surprised me. In negotiating the contract, he literally spent an hour or so going over the terms with the client. When a question later arose, they knew exactly what he was talking about when he referred to a contract provision. He would usually say, “It’s okay if we change this provision, but we’ll have to put it in a written addendum and my goal is to not cost you any more time or money. Do you really want to do this?” Do I need to say any more?
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