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Construction Law

Contracting with an Owner: A Practical Checklist

Including the statutory requirements in your contract with a property owner reduces the risk of legal disputes and costly litigation.

 

In general, a valid contract contains certain basic elements, such as an offer, the acceptance of the offer, and “consideration,” i.e., something of value to be exchanged between the parties.

 

This article appeared in the May 2012 issue of "The Construction Advisor" published by Lang & Klain, P.C.


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However, in the construction industry, contracts between a contractor and an owner are not so simple. Contractors who ignore or shortcut the statutory requirements when contracting with a property owner take needless risks of (a) disciplinary action by the Arizona Registrar of Contractors and (b) weakening their legal position if a dispute with the owner leads to a lawsuit.

Since December 31, 2007, Arizona law – specifically, A.R.S. § 32-1158(B) – has required that “any contract in an amount of more than one thousand dollars entered into between a contractor and the owner of a property to be improved shall contain in writing” certain essential information. That information appears below in a checklist format that is faithful to the statutory language.

While a contract that does not include all of these elements may still be enforceable, the presence of these elements should strengthen your position in case of a dispute.

Contract Checklist

[   ] Contractor’s name

[   ] Contractor's business address

[   ] Contractor’s license number

[   ] Owner’s name

[   ] Owner’s mailing address

[   ] Jobsite address or legal description

[   ] Date on which the contractor and owner entered into the contract

[   ] Description of the work to be performed under the contract

[   ] Estimated completion date for all work to be performed under the contract

[   ] Total dollar amount to be paid to the contractor by the owner for all work to be performed under the contract, including all applicable taxes

[   ] Dollar amount of any advance deposit paid, or scheduled to be paid, to the contractor by the owner

[   ] Dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract

Notice to the owner, in at least ten-point bold type:

[   ] that the owner has the right to file a written complaint with the Registrar of Contractors (ROC) for an alleged violation of A.R.S. § 32-1154(A)

[   ] that complaints must be made within the applicable time period as set forth in A.R.S. § 32-1155(A)

[   ] the ROC’s telephone number (602-542-1525, as of the original date of this article)

[   ] the ROC’s website (www.azroc.gov, as of the original date of this article)

This “notice to the owner” requirement does not apply to a person who is subject to and complies with A.R.S. § 12-1365.

The contract must be signed by:

[   ] the property owner

[   ] the contractor (or the contractor's designated representative)

At the time the contract is signed, the owner must be provided:

[   ] a legible copy of all documents signed

[   ] a written and signed receipt for (and in the true amount of) any cash paid to the contractor by the owner

Good News

Arizona requires this information in contracts between a contractor and a property owner because it reduces the risk of misunderstandings that often lead to avoidable legal disputes and costly litigation. By incorporating this checklist into your contracts with property owners, you enhance the profitability of the job and lessen your exposure in case a dispute occurs.