Is it a must to sign a contract wit a contractor ?

Question

Lynsey Dreis · Answer

@Brandon Miles I agree with @David Robertson.  It is a little more work on the front end but why not protect yourself.  If anyone steps foot onto your property and somehow gets injured while doing work you could end up getting in trouble if they do not have worker's comp insurance.  Also you have much more thunder behind a lawsuit if it were to ever happen if you have a written detailed contract.  Contractors tend to not want to do a contract because they are not good with their office/administrative side of their businesses but it just makes you and your project look 100x more professional if you have a contract.  They will take you more seriously and know that they cannot screw you over.

David Robertson · Answer

I have a Independent Contractor Agreement that I use which could be a good starter template, but I would recommend you have an attorney review the document for your particular area.

I'll send you a PM with a link to the document.

John Mocker · Answer

Brandon,

Whether you use a canned contract or get one drawn up by an attorney you should know beforehand what clauses/terms you need to have included.  From an Insurance standpoint, many companies that write either the Builders Risk or the Liability coverage have requirements that you need to comply with.  One example is a company that requires you to have the Contractor Name you as an additional insured on their policy.

Other areas that should be addressed in the contract for Insurance are:

1.  what coverage is required (ie. Liability, Workers Comp., Business Auto, etc..) and at what limits

2.  that any subs that the contractor use have to comply with the contract terms also

3.  what happens if they don't (can you then purchase the insured and charge it back)

There are terms and clauses we see in contracts that you may want to look into or discuss with your agent and a lawyer with construction expertise:

- Hold Harmless & Indemnification

- Wavier of Subrogation

- Primary and Non Contributory

You may also want to see what the attorney recommends as to how to avoid a Mechanics Lein if the Contractor does not pay his/her subs.

Lastly, you should review the project with your agent or an agent who is knowlegable in the Construction area to make sure you yourself have proper coverage.  For example,  If you are paying subs directly, you may need workers comp in your name as well (it may depend on the laws in the state the project is located).

David Robertson · Answer

Hey Brandon,

Yes, you should have an Independent Contractor Agreement signed by your contractor, as well as a detailed Scope of Work, Payment Schedule, W-9 and Proof of Insurance.

Independent Contractor AgreementThe Independent Contract Agreement outlines the terms, obligations and responsibilities of both parties to the Contract. A strong Independent Contract Agreement clearly defines the work that the Contractor needs to perform, when the work needs to be completed and how much the Contractor will be compensated.   The ICA also clearly spells out why the party being hired is not an employee for legal and tax purposes.

Scope of Work DocumentThe Scope of Work provides a detailed list of all of the repairs that need to be completed on the project. Your Scope of Work Document should include as much detail as possible including:

• Detailed List of Repairs
• Plans/Drawings
• List of Materials (SKU #s) & defines who's responsible for purchasing (you or Contractor)

Payment ScheduleThe Payment Schedule defines the Payment Terms of how and when the Contractor will be paid on the project. A Payment Schedule should outline Payment Milestones, Amounts & Terms which describe the work that needs to be completed in order for the Contractor to get paid, how much the Contractor gets paid, and when the Contractor gets paid.Form W-9You will need to get a W-9 from the Contractor so you have the Contractor's Name, Address & Taxpayer Identification number which will be used for preparing Vendor 1099s for your Contractors at tax time.Proof of InsuranceBefore hiring a Contractor you need to make sure that the Contractor is carrying the proper insurance to protect your property, investments & personal assets. Your Contractor should carry both General Liability Insurance to protect your property against damages, and Worker's Compensation insurance to protect you in the event that a worker is badly injured on your jobsite.Before you start construction ask your Contractor to provide a valid, up-to-date Certificate of Insurance that indicates the coverage that they are carrying for their business.

Is it a must to sign a contract wit a contractor ?

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