The written agreement or 'contract' between a contractor or renovator and their client is the legally binding document that outlines expectations, payments and problem solving pathways for any work being completed. Having a strong understanding of contracts and their scope is a necessity.

What is a CONTRACT?

According to the Canadian Home Builders' Association...

A contract is a legal agreement between you and the company you hire... It sets out the roles and responsibilities of both parties in relation to the project, and it protect both parties interests.

WHAT IS A SUB-CONTRACT?

In some cases, a general contracting company may divide up a large job into smaller parts, hiring other professionals to complete that portion of the work. This is called SUB-CONTRACTING. Some common examples of sub-contract work are drywall installations, electrical work, kitchen installations or HVAC equipment installs. This type of arrangement allows a general contractor to act more like a project manager, leaving the physical work to smaller companies.

Some important notes about sub-contractors:

• A company that sub-contracts their work will have their own insurance and payroll for their employees. A general contractor will normally insist on proof of this before hiring them for work.
• The work that a sub-contractor performs will ADHERE TO THE SCOPE OF WORK IN THE MAIN CONTRACT WITH THE CLIENT. A sub-contract is still a contract, and the general contractor must ensure that the work is being done according to the written agreement.
• Beware of companies that hire workers on an hourly rate for cash under the table, calling them 'sub-contractors' to avoid paying insurance or taxes. When problems happen, there may be no legal recourse for repairs if the work was done for cash without a proper sub-contract agreement in writing.

CONTRACT TYPES

The type of contract that might happen for a construction or renovation job may be one of the following:

1. Fixed Price - This contract is based on a specific amount of work and a specific price that doesn't change. For small, repetitive jobs, OR for unit price items - for example, installing a wall unit cabinet in a house - a fixed price might work well. For larger fixed price contracts, there may be a large percentage added to accommodate for contingencies or to maintain a profit margin.
   
2. Cost Plus - When a job is ongoing or has an evolving plan - a new addition on an old building with interior renovations added, for example - a Cost Plus contract allows the contractor to charge for the work they actually do and the materials they need, plus a nominal amount for their time and/or overhead costs. The building owner pays the contractor at regular intervals and absorbs any additional costs incurred such as permits, equipment rental, etc.. This type of contract may be costly and challenging to keep track of, unless there is an agreed upon maximum price or a fixed date where work is to be completed.
   
3. Time and Materials - A time and materials contract is just like it sounds. The contractor / renovator will charge for the time they spend on the job and the materials they use. This type of agreement may happen between a general contractor and SUB-CONTRACTORS, which are workers brought on to complete a specified portion of a job. This contract may also be used similarly to a Cost Plus agreement for jobs that are phased over a long period of time.
   

IMPORTANT CONSIDERATIONS FOR CONTRACTS:

1. Define the scope of work - Talk to your client and CLEARLY define where you are going to start and stop your work. CLEARLY define what will happen if there are unexpected problems hidden. DON'T stray from the contract or the plans. See point #3.
2. Record your work - before, during and after! Take pictures of everything. You'll have a quick reference and it may reduce possible liability.
3. GET IT IN WRITING! - Do NOT undertake any work without making a plan and having a written contract with the client. Lawsuits happen and you could lose your business and other assets.
4. Include Safety in your Contract - Take care of yourself and your crew. Don't take chances with your health. Wear your Personal Protective Equipment (PPE) and be careful!!
5. GET AN ENERGY AUDIT!! - Involve an Energy Advisor in your renovation projects and give your client the best performance possible.
6. Get LEGAL advice when creating contract documents for the kind of work you do.