The Devils In the Details | What is an Effective Contractor for Contractors & Home Remodelers - Ask Clay Anything
You have questions America's number. One business coach has answers. You're from Minnesota. Here's another edition of ask clay anything on the thrive time business coach radio show. Yes yes yes tribe nation on today's show. We have a special guest and his name is wes yet right folks. His name is West which Kinda rhymes with guest. It's incredible West Carter. How are you sir. I'm amazing how are you. I'm excited heavy on the show because this is the segment called. Ask Me Anything or ask me any question and so I'm a Asia. Could you read the question from the thrive or here. I've highlighted on the show notes there in in green for you could read the question from the driver pulling ended up all your interest in meanwhile meanwhile why. Anders pulled it up here West. I gotta ask. You my friend. This just in we were talking about this a lot. What was the last time time that you cancelled something that you committed to do to going to you. I like representing a client of yours. You had to cancel because you have the sniffles I I. It's been years since I cancelled anything for being sick. You're a beer dayquil guy we are you just gotTa show up and get it done so you dayquil guy or what you know. I take as little medicine as humanly possible is Kinda my move. How do you get through it. What do you do you know barren barren Greenwich. Okay this presser injure. What are you doing today. What are you are you taking taking dayquil and whatever else the pharmacists gave me the daily podcast story. Can I share a store share store. Yes my partner how to trial that started yesterday and him and the other teams working on the case. We're both sick all weekend YEP but they stuck it out. 'cause we don't cancel clients. That's right they show up to court they start at nine thirty start litigating their entire side of the case until about three thirty wow until the judge notices his how bad they look because he's so sick yeah and says. I'M GONNA have to pause here. We're GONNA reschedule this. You're too sick to continue to sick to contain. My Attorney Says No. I'm I'm fine. You're on. I just got allergies this good. I'm good chatting here. The judge actually made them stop and reset it for a few weeks later because the judge just couldn't bear to watch anymore but that's how dedicated multiple dedicate the winters and king team is now Andrew. We have a question from a thrive or what is that question so the question is what is what does ineffective contract for contractors look like now the question were asked to me directly. I would say well. Here's a template. Here's a document that I've paid for in the past have made by an attorney and this is what it would look like and I would show them the actual tinplate so I wouldn't just talk in circles and I wouldn't say hey. I'm not an attorney but my professional opinion would be. I don't give people broad. Charlatan circular surveyed advice when it comes to legal issues and if I didn't have a template or a best practice document that I would say this because that's who I call so we're so I want to talk to you about a contract here on. Have you seen the sample contract. Did you see that document. I have okay so you saw the sample contract and I just want to go through a few things that I saw that I brought up to the client that said hey these are. These are some things that maybe we need to worry about one. This person is a general contractor which means that they get paid to remodel homes and to do home construction projects and I was looking to the contract. I noticed that there was no agreed upon final price in this contract I didn't see that I saw the I saw the required deposit right but I didn't see a final price nor did I see a specific end date nor did I see a specific start date and the question from the driver was hey. Hey you know I agree to deal with this client and we agreed on the down payment amount and now they've gone out and bought all the materials from from under me. They didn't ask me I bought of the materials and because I make a little bit of money on those materials now they've kind of pushed me out of that phase of the project and this is is not what we agreed to in the contract and as I read this contract I couldn't see anyone in the contract where prohibited the cut consumer from buying their own products or materials nor do I see official start time or an official in time nor do I see an official total priced. Anyone agreed upon We're those concern areas for you at all or what were the biggest it concerns that you saw when looking through this contract well let me start with my legal disclaimer here for our drivers that hell no matter how much knowledge we drop on you hear that you know this is not a substitute for legal advice for your specific situation relation so we're going to discuss general issues with the contract but just no you don't take this and do it yourself. Go find yourself a good attorney that gets advice about. Give advice talk about your specific situation just for clarity. Can you help a thriving who's in Texas or Missouri or Florida or what states can help people. In what states can you go can't help you but I can punt well a lot of states that we do work in and depending on what state it is either. We can do ourselves because we have license attorneys or we can associate with local local councils in some instances so just if we can't do it gives us a shout we can point you in the right direction but we can help a lot with reiver's out there. Okay so looking through this contract on what kind of concerns that you have or did you have any concerns it overall a good deal or was it was more of a concern and what would you think about this well. There's a lot of concerns with the contract and common people come in my office and they say hey. I need you to do a contract for this. I don't want it longer than two pages and that's kind of one of these. This contract contract is it's a it's a couple of pager that someone's tried to be short and sweet with and the danger there is as you alluded to anytime we don't get into details tells it leaves it open for us to argue about it later. So you know you mentioned the price issue so with a contractor. You can do a cost plus contract where her look. I'm GonNa Charge you what my cost are and then. I'm going to make a margin on that cost plus ten percent cost plus fifteen percent so you can do that. You can't do that but you have to put a lot of frame around that. You can't just say that because this contract doesn't cover what about out of pocket expenses doesn't even mention that so what if it's not a material driller labor but so what if I as an example. Let's say I'm a I'm a builder and this builders is based in Michigan. Okay so say they're doing a project for Lake House and and the Lake House is thirty minutes from town thirty minutes from the closest place whether you can you know like Grand Lake home on the lake but if you want to go to a nice restaurant or something you don't have to drive fifteen twenty minutes so let's say this guy. He's not doing this just say he did. He has to take off his guys to get so much. under this kind of broad agreement one could say that. I bought my guys Burritos for lunch and I mark them up. You know thirty percent because that was a cost ahead. You know yeah or could go the other way. You could have a legitimate cost. Let's say you have to get a special license or permit that you didn't anticipate or you have to rent some equipment that you don't own bulldoze right. That's not covered clearly in here. So do you get to mark that up. Do you have to pay out of your fifteen percent any kind of ambiguity or things that are unclear. Just open it up for drama to fight about later so if you were going to take this contract and we're gonNA help the driver. WE'RE NOT GONNA share this contract with the thrive nation seen it just Andrews scene and we're not going to share this with anybody else for this thrive or what else were concerned as you look through was the clarity on about the specifics. It seemed like it's pretty broad. God pretty broad. especially relate to cost. There was no many times if we can do a cost plus. There's a maximum in there somewhere so everybody knows what they're getting into it. For the schedule payments very vague you know usually there's a lot of language when you're talking about draws and the proof of I've completed at twenty five percent complete so now I'm entitled to twenty five percent of the payment. You have very specific language. Usually there's an architect the signs off the bank signing off. I mean there's just not enough meat on the bone for anyone to read it and understand clearly exactly what the process looks and you've sooner our pool construction going on here I have. I have my wife tell you the name of the company was the name of the company. Pool creation creations right here in Tulsa and I would just say to anybody out there who's listening. I Love Pool Creations. They've got great references. They're doing a great job but if you were to go out there and look at the pool what percentage of the pools and your mind what percentage of the pool slash man cave slash grotto slash hot tub slash sauna slash indoor outdoor eating area slash pool hall slash is done on in your mind slash outdoor kitchen forty percent forty percent to you you know about the problem is to me. It feels like twenty percent right but I think you know you. GotTa dig a whole. That's gotta be like ten percents all by itself right and you've got to laze so that's the problem. Nobody schedule and I'm not just saying this. I love pool creation and they're going to be done right on time and they're great but what I'm saying to listeners out there. Is there probably half done but the deck that building probably a third done because a lot of detail work takes care of the Masonry Dan rea and all that stuff so again. It's so subjective so you gotta put on here. You'd put on your detailed. You would say I'm going to have I'm just making it an example. I'm going to have the deck completed all the citing completed and the windows installed as phase one and you're GonNa pay me this much for phase one and then draw to. I'm going to have have the outdoor kitchen. The Sun installed and the hot abets phase three or whatever right right so in the other thing I noticed in here is that you mention the time for completion. How long is this going to take. We'll says we're going to complete a timely honored before you know. Let's just say July thirty first okay well as an attorney. I'm thinking what does that mean. Are we talking about substantial completion. Are we talking about total completion the punchless authority we all knocked out. I mean most time on his contract. You're talking about substantial completion. I'm going to have the majority of it done but there may be a window here or a floor here that out to come back in and fix later. Have have you ever bought your incredible life a couch west. I have an interview about your wife account yet and not yet. Let me explain to you how this works. You're going to buy your wife a couch. It's going to be a beautiful couch. Your wife's GonNa like it West. His wife Darcy Loves Vanessa. She goes my the couch. Women love the couch you go to a place like a math brothers. You find it. You know you meet the furniture guy and whatever kind we don't have in stock that we wanNA custom. Get it you know it's like they have red and blue and dose skin and the you know the height of of a cow this and that and leather no matter what kind you want. Do you have that in Fuchsia right. No matter what so you can get the customer ship so ships and then the people at the furniture store they deliver delivered the furniture West. Are you following me. This farm got you. Have you had furniture guys. Do you typically have them delivered. You'd pick it up yourself and create it in yourself. I have the luxury of letting them deliver it so they deliver it. They move it up to like where they think. It's GonNa go right and they would ask you know Darcy Vanessa. There's a where should this go and most women I might this is just my opinions where I've seen and just people that I know and I'm in West. May We haven't colluded on this. Maybe I'm wrong here but then they'll set down and then you're like well good couches this is done. Let's go get a pizza. Let's go for a walk. Let's go something in about ten seconds after they leave the vehicles far enough passwords your wife my wife would say hey. We move it over there. I want to see what it looks like next to the mirror and you run out to the front yard screaming. Just come on back. Come on back in the guys are gone yeah. The drawing up drove drove off in the moving truck and I realize now you who bought the couch and paid for the delivery now. You have to move it. Has that ever happened to you and I have on my couch but I will tell you a bed. It's giant pitchers really we're holding them up up on the wall. Okay and your wife's like little to the left to try it a little higher right and pretty soon your arms start to burn silvery dropping break the whole thing right. I understand stand the concept. So what happens is you move the move stuff around and even though you and your wife are on the same team and you want her to be happy as I want my wife happy they keep changing their minds about where they want it to be and then finally they find the perfect place all as well and it's good but imagine that you are doing a deck check for a woman or a man typically. Women are the ones hiring of people to do home remodeling. It's almost always women if the man who's signing the contract typically. It's a woman who's driving driving the signing of the contract and then the man might go well. Tell you what with looks good to me. I mean partner. What's Square up now. The wife might come outside. Well well well well. Oh that Beranda over there. The crown molding is not what I wanted and you're GONNA go. Ray looks good to me right right and then then then there's little dispute dispute there so what kind of language roughly and if we have to hire turning here knock this out but what sort of should say upon approval of the customer then that's when the final payment she'll be paid should say upon passing a local inspections. What kind of language would you wanNA throw in there. I think there's usually a few different benchmarks benchmarks to meet and one I would avoid for your on the contractor side. I would avoid any kind of final approval language because you run into customers. You're never gonNA make happy substantial completion than I'm entitled to get paid and then you can do something called retainers where you can hold back a little small amount until we finish out punch out list or we you have complete per complete everything but there are some people that will never be says right and I know people who fought with contractors for years because well they find out six months laters. All the windows does have condensation and that's the contract the builder's fault and so they go back to them or guys like me. The first time I got wood floors installed not aggressive enough to sue people random things. I don't like to do that kind of thing. I think litigation as a general rule I try to discourage that idea good rule but wood floors put in a brand new house. We built years ago one hundred eleventh and and memorial yeah. I remember I was trying to buy I was trying to buy west of trying to much house. We built our first house. I met with different builders and the one who could give me the most house for two hundred and sixty thousand dollars where my kind of guy like. How much house can you give us. So how much how do you want US bigger. I want more space. You know I'm a big man big head on a big space so the guy was like yeah. I'll give you base so somehow oh he was put together a drawing. I'm not kidding four thousand square feet for like two sixty to fifty huge and I had like carpet everywhere. Waldo Waldo carpet no fixtures that you would ever want no granite anywhere and I was like. Oh Yeah my wife's going no. We're going to build our first house. We're not gonNA build that the garage Mahal. We WanNA build the Taj. What are you thinking here. Come on man why never been I never grew up in a home with wood floors. I'd never grown up with it. I I never saw wood floors in someone's home except for a girlfriend I had in high school. My junior and senior year never saw west with wood floors I did I grew up in a very very old. Take out your original wood floors nice. You know the so I wasn't aware that one of the attributes of whatever time that people like is that it actually kind of ages just a little bit and it Kinda creeks when you walk here and people actually like that and I don't understand that but people like that stuff yeah yeah I lived in an old two story home and you could hear the wind blowing would make the floors upstairs creek and you can't sneak out of that house. No so the thing is is that when and we put in the wood floors it started to warp a little bit now on what in the world where is that we should have gone with carpet vendors like that's part of the deal you want that to happen. It's just settling its but certain people can never be satisfied now. West what else when you looked at that contract that you think yourself. This contract needs to be tighter. Well one of the things I looked at it. Was You know we talk about a lot. If you're going to contract you need to have a real tiger. GonNa get divorced. there was no termination provisions for anyone so if you're working on the project and you don't like the Guy Right or is there a way to fire. They're just being obstinate or you're doing a bad job and they. WanNa fire you or they fire you and now there's no rules how we're. GonNa handle that so even though it doesn't Satan here doesn't mean a client's going to say hey you're fired. Don't ever come back now. What do we do and there's nothing in the contract about how we handled so also. I noticed that it really doesn't define liabilities ability at all. It doesn't say anything like if in the event that we burn your property down this happens I know with my. Dj Contracts even back in the day with my disc jockey company it said under under no my attorney time crafted but instead under no circumstance and even if the for a foreseen liability of this entertainment wedding entertainment performance exceed basically explained that even if there's an active godless even if like the DJ didn't show up for the wedding at no point. Are we liable for more than the total. We're charging yes and the customer is accepting this as terms for US continuing to offer low prices because a lot of brides would super emotional injury yeah seriously so our contracts said under no circumstance and even if acts of God or the. Dj doesn't show up anything we're only liable up to what you've paid us and so we did it was one hundred and fifty dollar deposit. The other four fifty wasn't until the night of the wedding and that's what we did you know and but it stated there our liability and people would sign off on it. What kind of liability should we put it in a contract like this. We're going to be fine and this is what it looks to be this to be about a six hundred thousand dollar home remodel yeah. There should be a lot in here about liability so one like you're talking about limitations apply limitations. If I get sued we have consequential damages which is kind of your out of pocket damages you have punitive damages which are supposed to be a penalty for being a bad person right and you you have all these different kinds of Damon as you're alluding to infliction of emotional distress in these other damages that you're GonNa want to say. These are the only things that we're going to be liable for eight. If you want to put a cap on on those put a cap on those and then you also have certain legal terms like indemnification where look if I get sued for something you do or you get sued for something I do are. Are we going to pay you know. How are we going to handle that and so insurance. Is another one look. I have insurance. Do we need. You have insurance if you get. If your house burns down that's covered by your insurance company. You can't come double dip and get after me too. You know there's something called subrogation. Where if your insurance company pays for it then my interest I don't have to pay for it so you have all these complicated not in his contract none of that's in the contract the other thing that we get into a lot with from innocent tied liability or warranties especially Ashley with a new home. There's one sentence in here about warranty materials nothing else in here. About what about factory warranties. Do they transfer to you. What about `bout warranties that we're doing for our workmanship. You know what about how long the warranty is. What kind of warranties are we providing. You know. We're not warranting that this is going to be a good use for a discotheque. This is a personal residence. I don't see in here hard start date at all no hard start date. I don't see that now sometimes you can get away with that. We have to craft it very carefully because all of your other dates then usually come back to some sort of effective date and so it's very dangerous. There's just leave that blank or Lou that up in the air because this contract could be binding for ten years and you still haven't started the contract now most of the contracts I've ever signed for home remodeling and I've seen quite a few of them are with the Pool Company recently which is pool creations great company. They typically have the company's letterhead on the contract in the companies address at the bottom and their phone number. Is that a best practice or is that just something that needs to be done legally. Should you always put your company's website and your physical address and all those kind of things on your contra that matter at all to have that in the contract some of it's just marketing I mean putting it on your letterhead with your logo and things like that but there are bare necessities yeah I mean you have to identify the parties to the contract. Lewis a certain degree of specificity so you have to need to name the name of the corporation not you you the individual yet be very careful about that using of your corporation. Yep You know what state are you incorporated in. What's Your Business Address. I understand you my understanding. Is You have to put the business address. Yes yes on one business address and make sure that you keep your personal name out unless you're doing business as an individual and that's another problem so you want to list the name of the company which I see that they did adhere right the name of the company. I do not see a business address. I see what appears to be a Po box which you know you can get into it. I've seen people in the past though so you know get into contracts and it's like hey that's not your legal place of business. That's not what you're actually doing. Business needs to be your legal address. Do you does that matter not matter. What do you think it depends on the circumstance. I mean you don't have to list a street address on a contract. Should you but yes because a lot of times in contracts. You have to give notices to the other party for certain things yes and you. WanNa you WanNa be very specific about where that notice has to go so they give you a thirty day notice of termination. It doesn't go to your mom's home address that US instead of Your Business Address where you're actually checking your mail or an old address or something only check once every few months so you need to be very very pay very close attention to what address you're using and making sure also that is not used in a way that's deceptive. There's some people will put appeal box. That's in a separate state state. Were they get mail and then your customer thinks they're doing business with an instinct business and you can open up to some liability in that regard as well. I also whenever I've signed a bigger bigger construction deals. There usually are exhibits attached so as an example they would say instead of like seeing it's saying on the contract like see proposed used plan or plans to see construction should be completed. See the plants yes. It would actually say see exhibit. A. Attach New would actually attach a pdf of the actual plans and I have to initial the plans to state yet again that these are the plans. I've actually agreed to I'm so it's not the bait and switch move. I don't see that in here. It says construction drawings but I don't see where it says see exhibit A. or B. Right and getting. We're getting into avoiding drama later on down. The road and what's going to happen is inevitably an unscrupulous customer. Yes is going to purposely pulled out a different drawings saying when you drew this deck your honor the deck they built was not the deck that we discussed on the fourth of Autobahn and because I remember everything I can tell you this right here was not when I check or I've never seen that join in my life seen I don't know we never show that to me or I've had in cases where people literally take. PDF edit it edit ally nice and just to favor them in a lawsuit so by attaching them to the contract. Yes everybody agrees these are the documents were referencing and there's no room for argument around it later. The it all goes back to clarifying all these variables now. We talk about you. I've seen you discuss this and previous deals in previous conversations. I'd like you to educate the listeners about this thing called sever ability so talking about what what that means and how that applies or doesn't apply to contracts for contractors so several is this concept that if I make a twenty page contract Yup and at some point later on down the road a court says that paragraph eleven is illegal or unlawful or doesn't apply for some reason. There's twenty points in the contract. There's let's say there's thirty sections point. One is thrown out point once throw now. There's a concept except in the law that will if that fails the whole contract fails okay and usually what you'll see at the end of contract are a lot of general provisions and one of those several ability clause says just because one of these might get overturned or you know posed yup does not negate the effectiveness of the rest of the entire contract but you still date that kind kind of thing in this kind of contractor because without someone's going to say hey if that's if that's no longer good than the whole deal is no longer good and I'm free and clear from everything. There's a guy out there. WHO's doing business us and let's say this project is a six hundred thousand dollar project yeah. Let's say the average project. He does is one hundred thousand dollars and the average profit on his project. Let's say twenty percent so the average deal for twenty eight thousand non profit. How much money would it cost you or an attorney that would be in the Michigan area that what would they charge to make make a contract like this that would be stone. Cold lead pipe locked a kind of a locked in. This is the real deal contract. This has all the details and it's going to be three page for patriots. GonNa be tight. Everything's in there. We're checking all the boxes. I mean this right. Here is a hot contract. How much money would that cost to get. You know. There's something probably the quote you never want to go. There's there's something to take into account where they're kind of our industry standard contracts for an organization called the the American Institute of Architects got many of these buildings. There's an architect architect involved that leads it and they have formed contracts for about everything and a lot of times. What happens is someone who practices area will take one of those form contracts because the entire industry district used to seeing those Yup and they'll use one of those as a starting place to modify customized for your specific situation so should actually be lower lower than starting from scratch so I'm saying on the low end. You know you're talking probably four or five hours worth of work to do you know an very involved building contract young. You're looking at fifteen hundred dollars somewhere in there going up depending on how much time you have but then you can use this over and over and over and over right once you get a template. I mean you draw you should draft the contract contract with the thought that I know have to come in and tweak it here and there but I'm gonNA use the majority of this over and over. It's an investment for my business. I use the same contract for DJ connection for I think over over fifteen thousand weddings yeah but I had to pay initially for the one and the one you know why to pay for the one west. You don't happen to what happened. We had this wedding for the sweet late. It's been far enough. The past I can mention the first name only but I won't mention that here what he was at the Moose Lodge or and it was at eleven garnet the day of her wedding arrives and and it was twenty years old twenty twenty one and the phone rings singular phone did it he did it do you do. She calls DJ connection. She says where where is my DJ. I'm like oh well. Let me just check. I never had A. DJ Ghost me like that. I'm sure is right around the corner. She's supposed to be an hour ago. I waited waited till the end. I just want to call you because this is a big problem. We're going so I'm. Dj Show you know in my show starting like thirty minutes and her wedding starts in our psychology Guy Light Him up light him up. He's like I'm on my way. He keeps saying that and then he just never showed up but he said I'm on my way found out. He was in the process of conceiving a love child. Oh with a girl that he met at or option versity true story so he was in the process of conceiving the lovechild which he told me years later he thought it was funny. I was it's not funny then or now but so after her I found out and again I'm you know. Dj a wedding and she was like. Hey Guy never showed up her. Dad's an attorney. It's always fun and my contract was definitely not a real contract. It free contracts DOT COM or one of these places where you can go and download something something where it's I mean you've seen these tinplate contracts and I thought it was awesome. Got Paid like maybe twenty bucks right and he was like why won't you know do emotional distress us and the fact that I paid for the wedding. I'm an attorney so I'm not gonNA. Stop going for this like you only twenty thousand dollars because that's we spent on the whole wedding and you ruin the whole wedding literally ruined the whole thing so your name is going to be all over. Tulsa people are going to talk about this which they they did for about three or four years and but beyond that you ruined my daughter's wedding and I want an apology I when you come to our house look her in the face and apologize and handmade chick. He's like if I do that. Sign an agreement saying. I'm not GonNa talk about this anymore but if not I mean I'm just like what I didn't make you know fifty thousand year profit that point right and so Vanessa and I worked out an agreement and I settled for a lot and as a lot more than a contract act because the contracts are like how much was the contract where they're saying oh I mean. This is your time for it for a venue like this. You're providing a service. You should be able to get one five hundred Bucks Luke seven fifty. You know what I mean. I was thinking about that contracts a lot but ended up being a lot more to not have a country yeah and so this guy's going to six hundred thousand job right now and if this deal goes sideways and we're talking about twenty percent. I mean that could be one hundred twenty thousand dollars profit that we lose because is we don't have a tight contract. Yeah like you said then you never know. Also how much turns fees are going to be to fight that lawsuit suit right. Sometimes those are as much or more than the damages and you may get stuck paying your attorney fees their attorney's fees and the damages so you you can just Jack that number right on up a little higher. If you're out there today and you have any legal questions at all. This advice does not take the place of having an attorney but we hope to do here. Is We hope to provide you the right context the right details the right circumstances the right mixture extra business coaching advice and legal feedback from an attorney so that you can make an informed choice as to what to do we would just encourage you to please do business with the real attorney who knows what they're talking about and I would encourage you to have an attorney that you use before having litigation because once you get involved litigation. It's now too late to find find a great attorney. Money's Klay Clark that's West Carter with winners and king any legal questions or you'd like to set up a consultation with him. Go to winters King Dot Com. That's winter's winter's King Dot Com. If you have any other questions over email us today at info at thrive time show dot com that's info at thrive time show dot com and we'd like to each and every show where the boom canal that he further ado pre to what.