Protect Yourself from a Contractor Dispute

Looking to hire a general contractor for a home renovation or remodeling project? Once you've settled on the right independent contractor and negotiated estimates, it's time to develop a written, binding contract stating your agreement.

A written contract is a must because it minimizes miscommunication, sets expectations and protects you from unexpected costs and legal consequences. After all, hiring a general contractor isn’t always a simple process.

So even if your state doesn’t require a contract, you should request one to ensure that you and the contractor are clear on the terms of the work. Take a look at a contract template if you’d like to see a starting point for a service agreement contract.

Your independent contractor agreement should be clear, concise and contain:

• The contractor's name (business name), address, phone number and professional license number, if required.
• A detailed scope of work listing what jobs the contractor will perform.
• A list of all construction materials needed, including color, quantity, model, size, brand name and cost.
• The project timeline, including estimated start and completion dates.
• A payment schedule for the contractor, subcontractors and suppliers.
• What the contractor is responsible for vs. anything you are responsible for (e.g., if you’re choosing and buying all the finishes yourself).
• A process for approving change orders.
• Promises and warranties that the work performed will be done in a professional manner, according to all applicable codes and standards.
• The contractor’s obligation to obtain all necessary permits (if you obtain permits, you are then responsible for any fines and penalties for incomplete and improper work).
• Who will pay for the applicable permits and inspections.
• Penalties for unsatisfactory work or work not completed by the projected date/within a reasonable time.
• A termination clause for unreasonably slow progress, incompetency or carelessness.
• A lien release for all employees, suppliers and subcontractors of the contractor.
• Any applicable warranties.
• An indemnity and hold harmless clause against any claim, demand, loss, liability, damage or expense arising from the contractor’s work.
• A statement of your right to cancel the contract within three business days of signing.

Some other best practices to keep in mind as you finalize a written agreement:

• Make sure the contractor obtains a permit if the job requires one. Ask to see the permit before work starts.
• Ask for a copy of the contractor's license and proof of insurance. Your contractor should have general liability insurance and workers' compensation in case a worker is hurt during the renovation.
• Pay by check and get a receipt. Write out the check to the contracting company, not the individual. Pay in increments and send your check only when the job is finished properly.
• Document any changes to the contract in writing. If you and the contractor agree to any changes during the renovation, make sure they are put in writing and signed by both of you.
• Keep a file for all related paperwork. This includes copies of the contract, contractor licenses, proof of insurance, change orders and all communication with your contractor. Keep a log or journal of all phone calls, emails, conversations and activities. You also might want to take photographs as the job progresses. These records are important if you have problems with your project either during or after construction.