If you are just starting out ... you might as well get it right. Likely, you will be astounded by the hoops you have to go through. But, if you do not go through them, you will have no standing -- if you ever end up trying to collect through the courts.
The two best friends any small businessman has are his lawyer and his accountant. Get ones who specialize in small construction businesses.
Yes, they seem expensive, especially starting out. But their good advice can save your butt many times over.
Thank you all for you advice. I've learned a lot from your responses and I will go out and do some research via books & getting advice from the SBA + lawyers. Thanks.
Btw, what documents should I have handy when I send in a bid? After reading the GC's contract, and if the contract doesn't specify certain items, such as how long it takes for the GC to pay the subcontractor, is it okay if I create an addendum and make them sign it? What do you guys look for in contracts before sigining?
You are addressing the right issues and asking the right questions.
Let's start with a contract. It requires seven elements:
1) Offer -- I offer to do the following work ....
2) Acceptance -- We accept your offer ...
3) Consideration -- No money needs to change hands, the exchange of promises is the consideration.
4) Legal purpose -- obviously, the courts cannot enforce a contract for an illegal purpose.
5) No duress.
6) Capable persons. Basically, sane and sober adults with the apparent authority to cause the work to be done.
7) Capable of interpretation. The courts must be able to interpret the contract within the four corners of the page. For example, it is not enough for me to say I will you seven hundred dollars to fix my roof. Fix what? How? With what? Fix it when? How will we know when it is done? How is payment to be made, and when?
This is why you'll need some legal help when you start out.... Not only to ensure you are bulletproof ... but to ensure you understand what is usual and what is unusual.
For example, I pay plumbers and electricians seventy percent on rough in and the balance on completion. For drywallers, I supply the board, but the tapers provide their own mud and bead. I supply framing and finishing materials and pay on completion. If it is a long job ... more than a couple of weeks, I'll pay a draw. It all depends on what works -- for them and for me.
I'm small and flexible. Some of the larger contractors are inflexible. Their way or the highway. Whatever you sign, or agree to, make damn sure you understand it and that you have thought about how it will work in practice.
You will find that most of the contractors you work for are serious guys, who will watch for your welfare -- for the very selfish reason that they want you available for the next job, and the one after that.
It is good that you are very conscious of cash flow ... I recently backed out of a project because it meant I would have had to put up a (for me) big chunk of dough for four or five months... and I wasn't prepared to do that. I offered the owner a compromise, he declined, and I moved on.
Most people are very fair minded and want to make the job comfortable for you. Usually when people insist you take large risks, there is a reason. It is good you are wary.
As to changing the contract, if you are not prepared to sign it as is, I see no harm in asking whether a clause or condition can be re written. If the answer is no, politely but firmly decline the job. The only other advice I can give you is to lhang out with other plumbing contractors ... unless it is a real cut throat market, most will be happy to give you advice on what current practice is ..... especially if they can pass their overflow (pun intended) on to you.
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