Click here to print:  "Best Practices for Contracts"

By Anna E. Eberlin

(Published by the Idaho Business Review) 

     We have all seen the mortgage crisis play out in the news over the past several years.  From mortgage companies foreclosing on the wrong property to lenders completely halting foreclosures due to paperwork issues, the problems run the gamut.  These lenders failed to focus on the details, and the details are coming back to haunt them now.  So what can contractors learn from the mortgage crisis?  Maintain control of your record-keeping and document everything.

     Although it may not be the first thing contractors think about when starting a new job, good record-keeping should be high on the priority list of construction contractors.  It is critical in setting up the scope of work and terms of the agreement, submitting applications for payment, getting proper lien waivers from subcontractors and/or suppliers, documenting delay issues or other problems on the job, verifying compliance with scopes of work and/or code requirements, and, ultimately, proving claims or defenses if litigation should arise.

     Every project should start with a written contract—no more handshakes in place of a contract and no more one-page invoices substituting as a contract.  In years past when business was booming, some projects moved forward without a written contract and construction went smoothly.  Even if there were a few issues, they were often ignored because the money was still flowing and everyone was getting paid.  

     Today, however, with every dollar and cent accounted for in both large and small projects, problems are inevitable without a detailed written contract in place.  What happens when there is a question about scope of work?  How are changes to be handled?  Is this a time-and-materials contract, a fixed price contract, or a cost plus contract?  How often and in what amount are payments to be made?  When will as-built drawings be provided, and what happens if they aren’t?  Is all the necessary insurance in place, and who is paying for it?  Who is responsible for defects or delays?  

     All of these questions can be answered with a written contract in place.  Laying out and clearly defining the duties, rights, and obligations of all the parties is critical.  Eliminating ambiguity between the owner and contractor and between the contractor and subcontractors will in turn eliminate future disputes. 

     Accurately documenting your work throughout a project is also important when it comes to protecting your right to place a lien on a property.  As a lien claimant you must be able to support the amount of your lien via the written contract, change orders, daily reports, pay applications, and any other documents to show the amount of the contract and when you started and stopped work. 

     The lien itself is also crucial, as it must comply with all the requirements of Idaho Code § 45-501 et seq. to be enforceable.  The claim of lien must state: 1) the amount of the claimant’s demand, after deducting all credits and offsets; 2) the name of the owner or reputed owner of the property, if known; 3) the name of the person who hired the claimant or to whom materials or equipment were furnished; 4) a sufficient description of the property; and 5) a verification by the oath of the claimant, his agent or attorney, to the effect that the affiant believes the same to be just.  With a written contract in place and good record-keeping throughout the project, most—if not all—of this information should be readily available. 

     Because disputes can arise even in the simplest of projects, record-keeping is a key component in the defense or pursuit of a claim.  Supporting your claims or defenses in litigation can be a nightmare without proper documentation, and you could end up losing a case because of your failure to keep thorough and timely records.  Mortgage companies and other lenders fell into the trap of keeping incomplete or non-existent records and they are paying the price for that.  Contractors should take note and use best practices: start with a written contract, uphold and enforce that written contract throughout the project, and accurately document your work.  Putting in a little time and money up front and throughout the project will save a lot of time and money later.

Anna Eberlin is an attorney with the law firm Meuleman Mollerup LLP, practicing in the areas of construction law and real property acquisition, development, finance, and leasing.  Ms. Eberlin had five years of real estate management and investment experience prior to joining Meuleman Mollerup.  Ms. Eberlin can be reached at 208.342.6066 or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .  More information at www.lawidaho.com.