Understanding Contracting Scams An unfortunate truth in the construction industry is that contractors are sometimes accused of scamming the client or being labeled as ‘con-artists.’ Often, a ‘con-artist’ contractor doesn’t have bad intentions. Instead, they don’t adequately cover their bases while communicating and negotiating the contract. Thankfully, we can prevent these accusations and maintain your credibility and reputation as a contractor with proactive measures. Contractors in commercial and residential construction need to prepare themselves in case they face reputational damage from an accusation. Ultimately, there isn’t a magic bullet here. Instead, it’s a matter of doing everything up to standards while maintaining clear communication throughout the project. More often than not, scams are unintentional. Contractors don’t have malicious intent; they simply aren’t thorough in the setup and execution of a contract. By working with our advisors and maintaining crystal clear communication with your clients, you’ll set yourself up for long-term success. We have the tools to improve the reception of the message you’re sending and the advice to counsel you through any hiccups or accusations during the project. However, an excellent first step is understanding how to appear credible even before the contract is signed, and our Good Contractor Checklist is a model for demonstrating credibility right from the start. The Good Contractor Checklist Eliminate the Sense of Urgency From residential remodels and new builds to commercial projects of all sizes, clients will have many questions during contract discussions. There are plenty of unknowns during the project, and clients should talk to different contractors to find one they’re comfortable with. As a candidate, you should give them the time and space to feel confident with their decision. The more urgent you are to get the contract signed, the less trustworthy and reputable you appear. Invite the client to ask questions about the project and make sure you are on the same page. Focus on complete understanding, and don’t be in a rush to get the contract signed. Clear, Complete, and Compliant Contracts Contracts are a lot like playing a game of Monopoly. Although the core rules stay the same, each family adopts their own interpretation of the rulebook based on what they deem is fair. For example, what happens when a player lands on Go? Everybody agrees that you get $200 for passing Go, but some families think it’s $400 for landing on the square, while others believe it stays at $200 regardless. Contracting projects operate similarly. The same square looks different in the eyes of some players. Contracts will always have multiple interpretations, but the client’s interpretation will always win in the court of law. To protect yourself and demonstrate credibility, your contract should be clear, complete, and compliant. The ‘perfect contract’ doesn’t exist. No matter how thorough you are in the drafting stages, it’s impossible to create a document that will provide you with complete protection from any issues during the project. There will always be unforeseen circumstances, mistakes on your part, or misunderstandings on theirs. However, contracts are still your first (and best) line of defense against accusations. Your contracts should clearly define the scope of work, the tasks performed, and the price that the customer will pay for that scope of work for best results. A contract can’t look like a legal document that unfairly benefits you. Instead, it should look like you know the business and have respect for the needs and uncertainties of the client while maintaining compliance with state and federal regulations. Include permits and inspections, start and completion dates, and a change order clause. Most importantly, don’t rush the process! Use Change Orders When Scope and Price Changes When the project changes from the original agreed-upon scope and price, create a change order describing the change. Whether it’s price, scope, or the time horizon for project completion, any additional work should be clearly documented and agreed upon between the client and the contractor. Don’t complete unlicensed work, and don’t loan your Department of Labor license to an unlicensed buddy so they can pull a contract under your name. Stay between the lines of the law and focus on honesty and transparency. This will improve your credibility and make the client more comfortable working with you and improve the odds of a referral once their project is complete. Maintain Control Over Project Communication Often during a project, you’ll find yourself using subcontractors to complete specific aspects of the job. If this is the case, there are moments when you won’t be present at the job site. Contractors need to maintain control over the project while the subcontractors represent them by maintaining clear communication between the contractor and subcontractors and the contractor and client. If the client asks for changes and the subcontractor does it, what happens if the client gets charged for this change without realizing it would incur extra costs? You’ll be responsible. Because of this, the subcontractors shouldn’t enter any agreements with the client without you knowing. Everything should be through you. Having control over all project communication will ensure that nothing slips through, and you won’t have to address any curve balls thrown your way. Don’t Get Defensive It doesn’t matter how clear the contract is or how strong the line of communication is between you and the client; there is bound to be some misunderstandings in the project. Contractors make mistakes; it happens! Don’t jump to defend yourself, and don’t act defensively to protect your pocketbook. Ask questions, gather the info you need, and provide a solution. It’s always less expensive to work with the client to expand scope than getting the legal system involved to resolve a dispute. Protecting Your Reputation and Partnerships First, let’s address the most severe accusation: fraud. If the client accuses you of fraud—whether by a misunderstanding or oversight by your team—talk to your attorney immediately. The word “fraud” is thrown around carelessly and is often a result of misinterpretation. Fraud as a term has legal weight and is a very serious accusation. You should take a different approach depending on the accusation. Was it a criminal problem, civil problem, or communication problem? Regardless, these accusations are serious concerns that require addressing in partnership with legal counsel. If the issue arises from a simple misunderstanding or mistake, emphasizing your desire to make the situation right will pay dividends. Your client wants a project completed to their standards, and they hired you to do so. Demonstrate your commitment to the client by listening to them. The project isn’t a success unless they are satisfied with the result, and making this clear to them will show them how dedicated you are to your craft and their project. Lead with respect and follow through with clear communication and empathy. We Are Your Industry Advocates Being a contractor is hard work, and nobody expects you to do it on your own. We are here to be more than just lawyers or janitors that only clean up after the mess is made. We were active in construction before we became attorneys, and we use this real-world industry experience to be your advocates and set you up for success. Preventative measures and proactivity will always be more affordable than reacting to a problem after it happens. As a contractor, you hire subcontractors for different parts of the project. Think of us as a subcontractor, a vital part of your team that gives you and your customers the ability to sleep soundly, knowing that the project will go smoothly. We’re here to help resolve an existing dispute or protect your business from future accusations. Talk to a member of our team and learn more about how we can be your long-term advocates. We’ll prepare you for anything the construction industry throws your way.
The Good Contractor Checklist: Avoid Fraud and Build Trust
Updated: Jun 5, 2023