Craftsman Book Company

  • Guaranteed Maximum Price Contracting - GMP Contract

    If you’ve never met a GMP contract, let me provide an introduction. GMP is a handy tool put to good use by many contractors.

    Back in July of 2010, I explained why home improvement contractors in six states (CA, IL, MA, NV, PA and TN) use GMP contracts. In those states, time & material contracts aren't legal for most residential work and can't be enforced. That makes GMP contracts an obvious choice. What I didn’t explain back in 2010 was how to write a GMP contract. So here goes. Continue reading

  • Changes in Construction Contract Law – First Half of 2018

    Changes in Construction Contract Law -- First Half of 2018

    So far this year, eighteen states have changed how construction contractors have to do business. Some changes are trivial. Others will affect most contractors in the state.

    Here’s a state-by-state run-down on the most significant changes in Construction Contract law.

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  • Limits on Warranty Claims

    Limits on Warranty Claims.

    Is this your worst nightmare?

    You get a call out of the blue complaining about a job you finished many years ago. The caller complains your work was defective – required a lot of repairs, many thousands worth in fact. And the person complaining isn’t even someone you know. It’s someone who bought the house years later!

    In a nutshell, that’s what happened to Chip Buerger of Chip Buerger Custom Homes, Inc. in Spicewood, Texas. When Chip didn’t pay what was asked, James and Maureen Maroney filed suit. That was February 2016. Last week, the Texas Court of Appeals decided the case. I’ll explain what the appellate court ruled. But first I’ll make an important point about warranty claims, and not just in Texas. Continue reading

  • The Wrong Way to Close-Out a Project

    The Wrong Way to Close-Out a Project

    A few years ago, Eric Novelli, a Tennessee contractor, agreed to have Wagner Heating & Air install the HVAC system in a new 3-story home Novelli had under construction. There was no written contract.When work was done, Wagner called for final inspection by the City of Chattanooga. The inspector found no deficiencies. Two months passed. Novelli didn’t make a final payment on the job. Instead, Novelli showed up at the inspector's office with pictures showing what he claimed were defects in Wagner’s work. A senior building inspector re-checked the job and found some problems. Wagner made repairs and called for another inspection. This time, the entire system passed. But that wasn’t the end of the story. When Wagner presented his final bill, Novelli wadded it up, threw it away and told Wagner not to come back to the job. With no other option, Wagner filed a claim for $12,000.

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  • Contract Termination Your Way

    Earlier this month I got a question from a construction contractor negotiating a deal with the owner’s attorney. The attorney wanted a termination clause in the agreement. The contractor wanted the job but didn’t want to give his client the right to back out of the deal once work started.

    “Why even have a contract if the owner can terminate the job any time he wants?”

    Good question. But there’s a good answer. First, a few basics.

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  • The No-Contract Contract

    Construction contract law can be more than a little complex. Every state has different requirements – notices, disclosures, warranties, waiting periods, penalties. The list grows longer every year as consumer protection laws multiply. What’s a contractor to do?

    I’m going to have a suggestion a little later. But first I’ll offer an example of what not to do.

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  • Get the Name Right on Your Contracts

    In January of 2015, Nicholas and Monica Koudela selected Bill and Bob Johnson to build their new single-family craftsman style home in Willowick, Ohio. The Johnsons offered a contract to do the work for $227,200. The heading on the signed agreement showed "Johnson & Johnson Builders" as the contractor.

    Johnson & Johnson Custom Builders, LLC is a limited liability company licensed to do business in Ohio. The Johnson’s contract with the Koudelas omitted the words "Custom" and "LLC" from the company name. A little mistake. But it kept the Johnsons in court for two years, as you’ll soon see. Continue reading

  • Changes in Construction Contract Law for 2018

     Eighteen states have made changes to construction contract law in the last few months. Some of these changes are trivial. A few will affect nearly every contractor in the state. Here’s a state-by-state summary of the highlights: Continue reading

  • Should I Set Up My Own LLC?

    I’ve heard that contractors should do business as an LLC so they can’t be sued. Is that true?

    A conversation I had earlier this month answers the question.

    But first, let’s define some terms. Members of an LLC (limited liability company) get the advantage of limited liability (like a corporation) but have the option of paying tax as either a partnership or a corporation. The IRS considers a single-member LLC to be the same as the owner for tax purposes but a separate company for employment purposes. The cost of setting up an LLC to comply with law in your state will be at least several hundred dollars for filing and recording forms. Plus, most states charge LLCs a minimum franchise tax. In California that’s $800 a year plus a fee on gross revenue that adds another $900 for up to $500,000 in income.

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