Contract Drafting - What You Say, Or, More Importantly, What You Don’t Say, Can Lead to Disputes with Your Customer

You arrive at the home or office of a prospective customer, form contracts in hand, ready to redress the customer’s needs. After leaving the customer with an estimate (signed by you, but not by the customer), you begin work only to run into constant questions, changes, and consternation between you and your customer. Eventually, you are asked to leave or, worse, the customer refuses to pay. Is this an all-to-often scenario? Such an experience can be avoided by following some simple rules when drafting your estimate.

Put yourself in the place of the customer. Does your customer understand all the terms? As with any other profession, the industry has developed “terms of the trade” that may or may not be easily understood by laymen. While easily understood by members of the trade, they may have an entirely different meaning to the customer. In the event of a dispute, the definition of a term will be construed most favorably on the side of the customer. Therefore, it is vitally important you explain clearly the terms of the contract. Better yet, define your terms, in writing, in the contract. Does the customer understand exactly what you are doing? The “process” you use may be foreign to the customer. They may not understand the necessity to proceed as you recommend. They may even think the process you are using is merely an attempt to extract more money. Be sure to explain, thoroughly, the process you are using and the reason for doing so. Once again, put it in writing.

Have a “meeting of the minds.” Do all parties know and understand what they have agreed to do? Does the customer understand the structural problems the job entails? Are you being realistic regarding your ability to perform what is needed given the customer’s budget? Will the job be a permanent fix or just a temporary solution? If merely temporary, be sure the customer understands the temporary nature of the repairs and agrees.

Always be in a “collection” mode? I’ll never forget the client who gave me a file to collect. The only information in the file was the name “Mr. & Mrs. Smith” and the amount owed. Ask yourself these questions when preparing the contract:

1. What is the full and legal name of the customer?

2. Is the person signing the contract the owner of the property?

3. If not, do they have the authority to enter into a contract on behalf of the owner?

4. What is their home or office address? The address of the job may not be where the invoice should be sent.

Tell them what you will not do. Remember these two statements which should be part of any contract:

1. “There are no covenants or representations made other than those set forth in this contract.”

2. “There are no guarantee or warranties, either oral or written, for fitness for a particular purpose, or otherwise, other than those set forth in this contract.”

By using these two phrases, the customer cannot rely on any representations made outside the written contract nor imply any warranties or guarantees made other than those set forth therein. While these phrases are important restrictions and set forth limitations, they also protect you from the representations of over zealous sales persons.

Get it in writing. Oral agreements are problems waiting to happen. Customers have selective hearing. Your interpretation of what was agreed upon may be drastically different from that of the customer’s. Solution – put your agreement in writing, setting forth the information using the tips outlined above, and have the party is ultimately responsible for payment sign the agreement. Remember, an unsigned estimate is not a written contract. A written contract is defined as one signed by both parties.