You should know about the Wisconsin "right to cure" statute, Wis. Stat. ? 895.07. This statute is contractor friendly, and requires that an owner with defective workmanship claims, go through a complicated procedure to try and resolve the dispute before the owner can file a lawsuit against a builder for defects This is a detailed subject matter, but for the purpose of this guide, suffice it to say that, in my opinion, a contractor must provide notice of this statute to the owner prior to signing the contract to obtain its protection. Exceptions exist where the notice is provided at a later date -- but to be safe, the builder should make the notice part of the contract or attach it as an exhibit. Further information can be found in the link below.
How to file a construction lien is another topic unto itself. Your contract should have the lien notice required by the Wisconsin statutes stated in all capital letters. Liens are complex, and if you make a mistake on the filing of the notice or claim documents, you could face liability for slander of title. Check out my other Avvo guides to learn move about this subject.
Litigation costs money. Lots of money. Attorneys are split on whether arbitration is less costly than civil litigation in today's environment, and in my view, it depends on the facts. The bottom line, in my view, is that you will have a friendlier audience in arbitration if you use the Construction Section of the AAA, and you will avoid the risk of a runaway jury. Also, an arbitration clause may help with collection, as many lawyers will not take on the smaller cases on behalf of owners with this type of clause - thus, this may serve as a disincentive for an owner to litigate, and an incentive to pay. Make sure your contract designates that the venue (county in which lawsuits are filed) are in the county where your business is located.
Attorney Fee/Costs of Collection Clause
This provision is risky if your work was defective in any way. This provision is excellent if you are dealing with a deadbeat. What it does is that it obligates the losing party to any dispute to pay the attorneys' fees of the victorious party. This provision creates a huge potential of risk to an owner who is refusing payment. Thus, this is the granddaddy clause of them all when it comes to discourage owners from refusing payment or filing suit. To those contractors who have a past history of allegations of substandard or defective work, this clause should not be used.
While not related to collection - this is an important clause to have due to the consumer advocacy of the news media. The news media is typically unsympathetic to contractors, and can destroy a company based on negative media attention. I strongly recommend that your contract have a confidentiality clause which prohibits either party from reporting a dispute to the media or third parties.
Join your local builders association.
Typically, a builder's association, such as the Madison Area Builder's Association ("MABA") will have model contracts available for you with the provisions above and additional provisions not discussed in this overview. I have provided a link to the MABA website below.
Additional resources provided by the author
These are the essential clauses you should have in your standard contract. You should also beware that contracts are not "one size fits all," and you should have a customized contract with a customized warranty specific to the type of construction you do. If there is one idea you take from this guide – it is this – spend the time and money to draft a quality contract that you can use with your owners. There is no better way to ensure payment and enhance collection efforts than through a quality contract that has payment incentives with teeth in it to protect you in the event of a defaulting owner.
Tip: conduct an Internet search for additional articles and information on this subject.
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