Are These Contract Clauses Reasonable??

[Simmons99]

You wanted me to take a look at your posting on the contract issues.

Are there any other pool contractors in your area other than those two? The reason I ask - is because when we started looking at pool builders we found six that were either recommended by someone or had a good reputation. Then we called all of them - only four returned our calls.

We set-up appoinmentments with each of them and then told them what we wanted in a pool and waited to see what each of them recommeneded and why. We were able to guage the ability of each builder at this point. Then we got prices - it was very clear at this point that two of the remaining builders did not want to install our pool - one was about $20K higher than everyone else and the other didn't want to quote "custom" items - just wanted to do "standard" pools.

Now we were down to two - one was priced at 48K and the other at 52K for the same scope of work - then we started looking at the contracts. Here are some "red" flags we found that you should avoid.

1. Do not put more than 10% down for them to start pulling permits. Our pool builder actually only required 10% of the pool price (without all the extras) to pull the permit.
2. Also, you shouldn't pay them completely before they are complete to your satisfaction. One of the builders had the last payment of 10% due before start-up. This was unacceptable. The builder we chose has the last 10% upon final acceptance, and we don't pay for the pavers or the screen enclosure at all until we are happy with those items.
3. Beware of contractors that want progressive payments PRIOR to performing the work. The contract should say 20% AFTER the dig is complete (not just BEFORE).
4. My contract is standard with the "does not cover damage to sidewalks, bushes, irrigation systems, etc."

[webfeet]

I am learning soo much- Thanks to all who have responded and I am so impressed with this information- its a gold mine. I didn't know how to go about getting bids, and was really unsure of the specific things that I want due so many unknowns. But this forum has supplied value insight!

[KurtV]

Web,
Here's a prior thread on payment schedules: http://www.poolforum.com/pf2/showthread.php?t=621
Good luck.

[ozonedog4]

OK, I am a lawyer, not admitted to practice in Arkansas, I'm in Washington State and my practice has nothing to do with construction contracts, and I have no clue about Arkansas law, and you should not take what I am saying below as authoritative legal advice, or legal advice at all. Obviously, I do not represent you, nor could I.

Having said that, though, let me give you a basic idea of how most jurisdictions construct (i.e. interpret) contracts and why, if the contract essentially says verbatim what you say, the language doesn't really scare me that much.

First, almost every jurisdiction applies what's called an implied covenant of good faith and fair dealing. Moreover, most every jurisdiction allows parties to avoid unexecuted, partially executed, or fully executed contracts that were premised on what is called mutual material mistakes (hereinafter "MMM"). The following is why these two ideas are important, I believe, to your situation.

The implied, or perhaps explicit, covenant of good faith and fair dealing, in this context, would seem at a minimum, whether it is said or not in the contract by the pool contractor, to AT LEAST REQUIRE the pool contractor to install your pool in a commercially reasonable manner. In other words, be reasonably careful and follow reasonable industry standards in performing the installation. So, if some unqualified dude on the crew, drinks a few beers, and hops on the backhoe and decides they are going to run over your patio for fun, and it gets all cracked up, then notwithstanding the language in your contact, you would have a claim for damages under it. In other words, you are not contracting, nor indemnifying the contractor against his, or his agent's, own negligence.

It seems to me that if you ever ended up in court, the court would construe the provision about unforeseen damages as more or less what it says and limited to what it says, that is; if through best efforts, all around, a sewer pipe, for instance, is not found and burst, through no one's negligence, then the contractor is not liable to you for damages. But, you may be asking yourself now; what would you do then. This is where another idea in contracts about mutual material mistakes comes into play, and if I understand your contract correctly, you might be in a decent spot the way it is currently written.

A basic rule is that any party can avoid a contract provision where a mutual material mistake was involved. A mutual material mistake is where both parties (hence, the word "mutual") believed something important (hence, the word "material") was one thing and it turned out to be another (hence, the word "mistake") at the time of contract formation. You obviously, and the pool contractor too, are not going to execute say a $20,000 or $30,000 contract to install a pool if you knew that the exact site of the excavation, just below the surface, had an old 16 foot thick reinforced concrete missile silo that no one knew about. What the idea of mutually material mistakes does is says where a situation like that comes to pass, and it's no one's fault, the contract can then be avoided. That's the general rule, however, your contract has a slight twist, that actually is pretty favorable to you.

Let's keep going with my missile silo hypothetical: Day 1 the backhoe starts to dig and hits solid concrete. You have three options: i) rescind the first contract and write a new contract, or do what's called work a novation of the old one, and change the site; OR, ii) you COULD claim, "[w]ell OK, start blasting, get rid of it" that's what you covenanted to do in our contract: unforseen things, your cost + 10%, there's no mutual material mistake, we talked about unforeseen occurences and that's we executed, after all, Mr. Pool Builder, you wrote the contract; OR iii) you could, rescind the contract on mutual material mistake grounds, get your money back and walk away, having learned that you have a missile silo in your backyard.

Now, the pool contractor is going to, or should anyway, say Mutual Material Mistake and try to get out of the contract. After all, he doesn't want to spend all summer jackhammering a silo; he has other pools to build. But, you either get your money back or have a nonfrivolous claim under your contract to make him get rid of the obstruction. Now, whether you could convince a court to make him get rid of such a thing as a missile silo is one thing, but you could make him get rid of tree roots, sewer pipes, etc., without having to do the work of running around and getting bids, scheduling work, etc.. So, one way to look at the language, in that situation, is it creates some interesting options for you.


Having said the above, I would suggest two things to you. First, ask him/her to get construction insurance for the build and offer to split the cost with him. I'd call your homeowner's insurance agent, you may even find out you have some applicable coverage. It is my understanding on a pool project, this insurance is not that expensive, a couple hundred bucks at the most. Second, put in a sentence, in the contract, if you want, that says the pool builder agrees to install the pool in a "...commercially reasonable manner." Now, as to the last thing, I don't even think that's necessary, but if it would make you feel more comfortable, I'd do it. And, if the pool contractor won't agree to that language, then I'd run as fast as I can away from him/her and get another one.

[webfeet]

Ozone, I am getting the picture. I feel much better.
This forum is fortunate to have a member that is an attorney, who doesn't mind shedding some light on the legal aspects, which many of us do not understand. Especially someone like myself, who's had zero experience with construction contracts.
This pool is a big decision for us, because we are aware that we are digging a hole in the back yard and throwing money into it that we will never get back out, at least not in dollars and cents. We're just hoping to keep a "dream" from becoming a "nightmare". Again, thanks so much, I really appreciate and comprehend your explanations.

[aquarium]

Having worked in construction for a while, but never built a residential pool, I'd say that it -might- be cost-effective to have a geotech firm drill a hole in the center of the deep end location (prior to signing contracts) in order to determine if there is any rock. I say -might- because that alone can cost a few hundred bucks. It's a risk aversion strategy that may not be justified at this level of total project cost. Without that information, you take on the risk of encountering rock or a missle silo. But, if you try to lock in the contractor to a fixed excavation cost, they -should- pad the dollars to pay for the risk they are taking on. So it's a trade-off.

In urban areas there is usually a well-known geological pattern that has been developed over time, and a good geotech firm will have that on file. A good pool company that has some experience will know where to get this information and shouldn't be too surprised with what they dig up in your back yard.