# Business on a handshake



## mike gunderson (May 23, 2010)

You're entitled to your opinion, but I had a good buddy that supposedly had an ironclad contract and he still got burned. Had to file a lien, go through all that , still got nothing. It can happen to anyone.


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## Oconomowoc (Oct 13, 2011)

mike gunderson said:


> You're entitled to your opinion, but I had a good buddy that supposedly had an ironclad contract and he still got burned. Had to file a lien, go through all that , still got nothing. It can happen to anyone.


Absolutely. A contract doesn't have as much power as people think. In my opinion the problem isn't a contract or not but the people you work for. 

When a deal goes bad what happens? Court? Costs? Wasting time? And how much do you get back after harping on the HO for 3 years? 

I do think contracts are smart, no doubt about it. But most contracts I've seen are pretty weak. If a person doesn't want to pay there's a 90% chance they can find a way not to. 

I


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## ohiohomedoctor (Dec 26, 2010)

Good point plastico. Sort of like locks are just for keeping the honest people out.


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## Oconomowoc (Oct 13, 2011)

ohiohomedoctor said:


> Good point plastico. Sort of like locks are just for keeping the honest people out.


Doc Baker, I figured you'd be out buying up Hostess Twinkies right now.


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## ohiohomedoctor (Dec 26, 2010)

Have a surgeon on it as we speak..


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## Oconomowoc (Oct 13, 2011)

These threads get hijacked easy. Lol


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## BlueRidgeGreen (Apr 21, 2012)

By the time someone sits down for a proposal, I have either worked for them before or have been recommended by someone they trust a good deal. After we settle on design, scope, timetable....and $, I tell them I will be back in the morning with a contract to review and sign. Then we shake hands and rest easy.

I do business with a handshake mentality in a litigious world. A contract simply allows both parties to feel an extra amount of trust based not on their relationship, but by legal code. Both parties. T&M.....is one thing, but fixed.....absolute. It is very easy for human beings to selectively forget. Even the most well-meaning. Thats why my own mother would get a contract with a detailed scope and well-defined payment schedules, along with C/O's that are immediate and concise. 

Those are the two biggest mistakes I see guys make. Poorly defined scope and those "end of the job-all at once " C/O's. 

I have never had a whiff of lawsuit and the discussion of the contract always seems like a silly legal nuisance to all involved. I am pretty sure the existence of one has avoided a couple unintentional misunderstandings though.

My first one was written by a client who was a lawyer, after a great handshake deal. For my future jobs, not his....go figure. I still use it almost 20 years later.


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## mike gunderson (May 23, 2010)

good comment blue ridge, makes sense. Hey guys I've got 100 cases of twinkles and I'm making up a sales contract now.


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## oaks renovation (Jun 16, 2007)

In the seven years that I have been on my own I have probably drawn up less than five contracts. Your tendencies I would say lean towards when you are first on your own, to work for people that are close to you (at least this is how it worked for me). Also I would say that you probably start striving to do more and bigger jobs.

As you progress your degrees of separation start to expand so you start working for friends of friends of friends, this is where the slippery slope starts to come into effect IMO. This is the point where I think you really need to start leaning on a contract.

I really need to start pushing in this direction more. I have been extremely lucky these past seven years. There have been a few times that I wish I had one when I didn't. I am completing a job right now, a 5 car garage with a 1700 sqft garage apt. addition (without a contract). The clients are wealthy and money has flowed like water.

This lady can change her mind about something five times during the course of a conversation which leaves me standing scratching my head. She nor her husband wanted to sign a contract at the beginning of the job, now I know why. She knows she is this way.

All of my work is referral so this is the reason why I haven't really pushed the contract issue so much I like working off of my reputation and feel better not having to have one, but you really are running around out there with your pants down around your ankles without one.


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## BlueRidgeGreen (Apr 21, 2012)

oaks renovation said:


> In the seven years that I have been on my own I have probably drawn up less than five contracts. Your tendencies I would say lean towards when you are first on your own, to work for people that are close to you (at least this is how it worked for me). Also I would say that you probably start striving to do more and bigger jobs.
> 
> As you progress your degrees of separation start to expand so you start working for friends of friends of friends, this is where the slippery slope starts to come into effect IMO. This is the point where I think you really need to start leaning on a contract.
> 
> ...



I think the point I was trying to make was, that even when a client has to ask who to make the $75,000 deposit check out to (cause they feel so comfortable they didn't even think to ask beforehand), they just feel even better when you respond with....."hey, let's get this down on paper". It's the final proof of their well-placed trust. They also know that I am going to deal with the subs the same way. Rock solid relationships built on earned trust.....and rock solid contracts...just in case. 

In my world, the actual contract is basically an unseen, unheard, stage prop....but it's there. 

You also touch on an important point, a contract also makes clear ALL of the extra things we do just to make a project glorious. Beyond contractual obligation, beyond financial reward, just cause it's right.

I have great respect for clients and craftsmen who can do business without a legal framework. I prefer to close the handshake deal, then add the security of a contract, like icing on a cake......or a nice white button-down shirt on a gorgeous woman's body. Long live honorable men who say what they mean and mean what they say!


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## cabinetsnj (Jun 10, 2012)

mike gunderson said:


> Does anyone do jobs sealed with a handshake any more? Maybe it's different where I live in rural Montana Where everyone in the county knows each other. [and who to stay away from]. I've been in the trade for 36 years, the first 17 years working for others, learning from them and their subs. For the last 19 years I've been mostly into remodeling as my specialty with some new. Usually with just a helper or two. Jobs have lasted upward of a year to mall two dayers. I do everything from concrete to flooring. except carpet and some concrete. I've never had a contract. I get paid every two weeks for labor and for material when I get the bill or the end of the job. I normally work for an hourly labor wage which includes travel time and mileage. I've found trying to bid a big remodel is to iffy. I've never been burnt or had an unsatisfied customer. I guess if you are in the city working for strangers one couldn't do this. Anyone else?


You got me thinking whether we should just considering moving our business to Montana.


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## wyoming 1 (May 7, 2008)

cabinetsnj said:


> You got me thinking whether we should just considering moving our business to Montana.


 

See I told you we need to keep it quiet!!!!:laughing:


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## EthanB (Sep 28, 2011)

I think contracts are like seatbelts. You might go your whole life without needing one, but when you need it, it has to be in place.


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## Lester P. (Jun 19, 2009)

EthanB said:


> I think contracts are like seatbelts. You might go your whole life without needing one, but when you need it, it has to be in place.


Exactly. Well put.


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## Spaint90 (Dec 26, 2011)

Oconomowoc said:


> Absolutely. A contract doesn't have as much power as people think. In my opinion the problem isn't a contract or not but the people you work for.
> 
> When a deal goes bad what happens? Court? Costs? Wasting time? And how much do you get back after harping on the HO for 3 years?
> 
> ...


And yet, if a person doesnt want to pay and you dont have a contract then they REALLY dont have to.

Our contracts state pretty clearly that loosing party in arbitration pays for the other parties fees. Time spent in the court room is also chargable, as well as all time spent to and from, filling out paperwork, paperwork fees, lawyers fees. Also covers leins.

People you work for have a big portion to do with it, but when you a run a company that isnt strictly off of referal, where you dont pick and choose every client. And there are lots of them. You dont have a choice. You get solid contracts drawn up, you get good lawyers.

I had one person try and stick us about 2 months back. Guy worked for a legal firm. We talked and i kind of laughed like we were friends and said "we both know you are getting more out of your solar panels than what is in the contract, there were no problems with the install, and you have a complete warranty. Id love to go to court, easy for me" He re-read everything and paid up.

If that contract wasnt in place, there would have been no leverage for me.

Contracts protect you if something does go wrong, money changes people. The amount of people i fully trust is limited, for a reason.

Also protects clients, black and white, they know what they are getting. In some markets people want them.

You can let your "ego" float your boat. Psshh i've never had to sign one, i only do business with people i choose and we have trust. Thats what its all about. 

Alot smarter to have that, and be covered.


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## J L (Nov 16, 2009)

I guess I'm at a point now where I provide a detailed scope of work which includes a project schedule, payment schedule, allowances, and owner provided items list and has a line at the bottom for signatures. It's not a contract per se, as it lacks all of the legal terms, but it provides a solid framework for what's provided and/or expected.

When I had more crews and did a ton more jobs, every project had a contract. Now I'm doing less projects and only for people I'm comfortable with. Before, I used to have to take jobs even with red flags as to keep my guys busy. It wasn't worth it, contract or not. 

My payment schedule is always paid in advance of work, not after work is done. So if a client fails to pay, I'm not out anything as I haven't done the work for that portion yet. However, if a client fails to pay, something is amiss and it's time to sit down and have a chat with the client to find out what's going on.


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## Spencer (Jul 6, 2005)

A couple years ago I worked for a contractor who was in business for 25 years. He never used contracts.....and he lost a ton of money. After so long people know just how to work a guy like that and screw him if they know he'll take the hit. He is now out of business and selling windows for some lumber yard.


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## cabinetsnj (Jun 10, 2012)

wyoming 1 said:


> See I told you we need to keep it quiet!!!!:laughing:


Yes you guys got a rare thing going there. Something called honesty and integrity.


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## Oconomowoc (Oct 13, 2011)

Spencer said:


> A couple years ago I worked for a contractor who was in business for 25 years. He never used contracts.....and he lost a ton of money. After so long people know just how to work a guy like that and screw him if they know he'll take the hit. He is now out of business and selling windows for some lumber yard.


I can promise you his failure wasn't a contract. He was just a fool who doesn't deserve a business.


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## jimmys (May 1, 2009)

Really the contract is for the small stuff. As has been said, if someone's out to sc**w you you'll feel it in all sorts of ways. To me, the contract is like wearing a chain-saw hat when you're cutting trees: it won't save you from a tree falling on your head, but a branch or stick-in-the-eye or fall backwards, it's there. And ear muffs.
We practically never look at the contract after the signing meeting. But people like knowing how they will be billed, when the work will happen, how changes are handled, etc. They usually tell me they look at it once or twice early on in the job just to see what to do. 
Contract makes things easier, not less trusting or more suspicious, imho. Plus it's a good ceremony to start off with, and an occasion for a check!
Jim


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