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  • penalty for delay in construction contract

    Hello -

    I'm about to embark on a major bathroom remodeling (i.e. gutting that
    part of the house). This is in a *single* bathroom house and so it's
    going to be a big disruption to our life for the period that the
    bathroom is not available for our use. The project is probably going
    to cost around $25000.

    I've seen and heard the horror stories of contractors who take forever
    to finish projects. So, applying good old capitalist principles, I
    want to make in the contractor's best interest to get it done quickly
    and on schedule. To that end, I'm willing to put up an extra pile of
    money (say, $3000) and then have a cluase that says that after a
    previously agreed-upon period of contruction during which we have no
    bathroom (i.e. 2 weeks), that pile gets smaller by $500 a day.
    Further, after that pile has been eaten a way (after 6 days, in this
    case), there *continues* to be a $500/day penalty against the final
    payment. Once we're able to use the bathroom ("use" being strictly
    defined), the bleeding stops.

    I'll be using a reputable contractor, registered with NARI/etc, but I
    still want something in writing that protects me or at least gives the
    contractor an obvious incentive to get it done, besides him just
    wanting to collect on the final 10% payment.

    Can someone point me to precedents for this? How can I word this
    clause best so that I get the incentive behavior I want but it's not
    so onerous (or weird) that nobody will accept the terms?

  • #2
    penalty for delay in construction contract

    Use "liquidated damages" instead of penalty.

    Courts don't like penalties.

    But if 2 parties agree on a per day damage amount before signing a
    contract (that is known as "liquidated damages" they will enforce it.



    Comment


    • #3
      penalty for delay in construction contract

      Chris Campbell wrote:>>
      Hello -
      I'm about to embark on a major bathroom remodeling (i.e. gutting that part of the house). This is in a *single* bathroom house and so it's going to be a big disruption to our life for the period that the bathroom is not available for our use. The project is probably going to cost around $25000.
      I've seen and heard the horror stories of contractors who take forever to finish projects. So, applying good old capitalist principles, I want to make in the contractor's best interest to get it done quickly and on schedule. To that end, I'm willing to put up an extra pile of money (say, $3000) and then have a cluase that says that after a previously agreed-upon period of contruction during which we have no bathroom (i.e. 2 weeks), that pile gets smaller by $500 a day. Further, after that pile has been eaten a way (after 6 days, in this case), there *continues* to be a $500/day penalty against the final payment. Once we're able to use the bathroom ("use" being strictly defined), the bleeding stops.
      I'll be using a reputable contractor, registered with NARI/etc, but I still want something in writing that protects me or at least gives the contractor an obvious incentive to get it done, besides him just wanting to collect on the final 10% payment.
      Can someone point me to precedents for this? How can I word this clause best so that I get the incentive behavior I want but it's not so onerous (or weird) that nobody will accept the terms?
      That's done on a fairly routine basis. But in your case, you should lower
      the "fine" to a $100 a day.
      At 500 a day, that's gonna show you being paid by the contractor in short
      order.
      If the contractor has quite a bit of experience in this area, he'll
      understand what your needs are.
      A bathroom makeover should not take two weeks.
      After all, a team of five people can completely remodel a house in 5 days,
      and we're only talking of a bathroom here.
      Unless your bathroom is ten times the size of a standard one.



      Comment


      • #4
        penalty for delay in construction contract


        "Chris Campbell" <[email protected]> wrote in message
        news:[email protected] om...
        Hello - I'm about to embark on a major bathroom remodeling (i.e. gutting that part of the house). This is in a *single* bathroom house and so it's going to be a big disruption to our life for the period that the bathroom is not available for our use. The project is probably going to cost around $25000. I've seen and heard the horror stories of contractors who take forever to finish projects. So, applying good old capitalist principles, I want to make in the contractor's best interest to get it done quickly and on schedule. To that end, I'm willing to put up an extra pile of money (say, $3000) and then have a cluase that says that after a previously agreed-upon period of contruction during which we have no bathroom (i.e. 2 weeks), that pile gets smaller by $500 a day. Further, after that pile has been eaten a way (after 6 days, in this case), there *continues* to be a $500/day penalty against the final payment. Once we're able to use the bathroom ("use" being strictly defined), the bleeding stops.
        Illegal here in this state..IIRC..
        HOWEVER, you CAN put in a clause that states a given amount, not to exceed
        XX per day will be subtracted from the final payment..
        I'll be using a reputable contractor, registered with NARI/etc, but I still want something in writing that protects me or at least gives the contractor an obvious incentive to get it done, besides him just wanting to collect on the final 10% payment.
        FINAL 10%?????
        Wow...your states got some nice contractor laws....here, by law, we are only
        allowed to get a deposit of 5%...and remainder upon completion..
        Can someone point me to precedents for this? How can I word this clause best so that I get the incentive behavior I want but it's not so onerous (or weird) that nobody will accept the terms?
        Trick is finding a contractor that lets YOU set the terms....
        None here will...


        Comment


        • #5
          penalty for delay in construction contract

          The contractor will generally have a standard form of contract and it will
          usually make provision for liquidated damages - with a daily amount to be
          included. You need to find that provision and negotiate on the rate.


          Comment


          • #6
            penalty for delay in construction contract

            Chris Campbell wrote:
            Hello - I'm about to embark on a major bathroom remodeling (i.e. gutting that part of the house). This is in a *single* bathroom house and so it's going to be a big disruption to our life for the period that the bathroom is not available for our use. The project is probably going to cost around $25000. I've seen and heard the horror stories of contractors who take forever to finish projects. So, applying good old capitalist principles, I want to make in the contractor's best interest to get it done quickly and on schedule. To that end, I'm willing to put up an extra pile of money (say, $3000) and then have a cluase that says that after a previously agreed-upon period of contruction during which we have no bathroom (i.e. 2 weeks), that pile gets smaller by $500 a day. Further, after that pile has been eaten a way (after 6 days, in this case), there *continues* to be a $500/day penalty against the final payment. Once we're able to use the bathroom ("use" being strictly defined), the bleeding stops. I'll be using a reputable contractor, registered with NARI/etc, but I still want something in writing that protects me or at least gives the contractor an obvious incentive to get it done, besides him just wanting to collect on the final 10% payment. Can someone point me to precedents for this? How can I word this clause best so that I get the incentive behavior I want but it's not so onerous (or weird) that nobody will accept the terms?
            go to a local lender that does alot of home building loans.. they gonna
            be the ones that have the contracts written up with no loop holes.. i
            know 30 yrs. ago when i had my home built and borrowed money from them
            for the project, they had the builder(general contractor) by the balls
            and had everything covered.. it was $100 a day at that time, dont know
            what it would be nowdays... but i am sure they have some blank contracts
            that you can look at or get some advice.. let them think that you going
            to them to borrow money, but you are not sure how much or what and see
            what they say?????
            hope this helps...

            Comment


            • #7
              penalty for delay in construction contract

              What are you talking about ?

              "Sam Kekavitch" <[email protected]> wrote in message
              news:[email protected]
              The contractor will generally have a standard form of contract and it will usually make provision for liquidated damages - with a daily amount to be included. You need to find that provision and negotiate on the rate.


              Comment


              • #8
                penalty for delay in construction contract


                "Chris Campbell" <[email protected]> wrote in message
                news:[email protected] om...
                Hello - I'm about to embark on a major bathroom remodeling (i.e.
                gutting that
                part of the house). This is in a *single* bathroom house
                and so it's
                going to be a big disruption to our life for the period
                that the
                bathroom is not available for our use. The project is
                probably going
                to cost around $25000. I've seen and heard the horror stories of contractors who
                take forever
                to finish projects. So, applying good old capitalist
                principles, I
                want to make in the contractor's best interest to get it
                done quickly
                and on schedule. To that end, I'm willing to put up an
                extra pile of
                money (say, $3000) and then have a cluase that says that
                after a
                previously agreed-upon period of contruction during which
                we have no
                bathroom (i.e. 2 weeks), that pile gets smaller by $500 a
                day.
                Further, after that pile has been eaten a way (after 6
                days, in this
                case), there *continues* to be a $500/day penalty against
                the final
                payment. Once we're able to use the bathroom ("use" being
                strictly
                defined), the bleeding stops. I'll be using a reputable contractor, registered with
                NARI/etc, but I
                still want something in writing that protects me or at
                least gives the
                contractor an obvious incentive to get it done, besides
                him just
                wanting to collect on the final 10% payment. Can someone point me to precedents for this? How can I
                word this
                clause best so that I get the incentive behavior I want
                but it's not
                so onerous (or weird) that nobody will accept the terms?
                $500 a day might be a bit steep, but it is your
                inconvenience to measure as it is your house and your
                deprivation of use.

                The biggest problem often attendant to delay penalties is
                their not being equitable or a balance between contract
                considerations. You have described a penalty that does in a
                sense reward the contractor for timely performance but you
                have stated it in a manner that does not explicitly state a
                reward for timely performance. I know, you have the money
                on the table, but once signed on the line, nearly anyone
                would consider that the contract price. Period.

                A good penalty clause contract has penalty offsetting reward
                terms. If deprivation of your bathroom is worth $500 a day
                to you, then use must also be worth $500 a day to you. (Not
                likely, which is why I said I thought it a bit high on a
                $25,000 contract.) If so, then the logical argument is that
                finishing a day early is worth an extra $500 to the
                contractor. Right? Most government contracts, as example,
                have monitored schedules, adjusted for conditions as the
                work progresses, wherein the contractor pays a penalty for
                "unearned" delay and gains a bonus for "earned" early
                delivery. For your stick, you should have an equal carrot.

                Also, remember, you must monitor the progress. You must
                allow for certain delays (historically, far more likely
                caused by the homeowner than the contractor) and, less
                frequently, the contractor must allow for some opportunities
                to shorten the reasonable duration (the homeowner yields to
                a more available, necessary product choice). Now, on large
                government contracts, this is a worthwhile endeavor . . .
                from both perspectives, the government and the contractors.
                Monitoring the ongoing process is a significant investment
                to both parties, but the loss or gain is even more
                significant.

                I do not think your $25,000 bathroom is worth the effort.
                Not on your part and not on the contractor's part. You
                might select a contractor on a separate basis and then
                discuss your concerns with him. Reach a mutually acceptable
                agreement (in writing) at that time. Do not include such a
                provision in your "Invitation to Bid." You will prevent the
                better contractors from being at all interested in the
                headache (including you, for that matter), and some less
                worthy contractor may well see an opportunity to ****** you.

                Jim
                our


                Comment


                • #9
                  penalty for delay -- Troll Alert?

                  "Chris Campbell" <[email protected]> wrote in message
                  news:[email protected] om...
                  I'm about to embark on a major bathroom remodeling (i.e. gutting that part of the house). This is in a *single* bathroom house and so it's going to be a big disruption to our life for the period that the bathroom is not available for our use. The project is probably going to cost around $25000.
                  Doesn't anyone else find it curious that someone is going to spend $25,000
                  to remodel the bath of a house with only one bath? Does this make sense?
                  Sounds pretty stupid to me.

                  I smell a troll when (among other things) I see the following:
                  1) Questions involving implausible situations.
                  2) The OP's lack of participation after first post.


                  Comment


                  • #10
                    penalty for delay in construction contract


                    "Sam Kekavitch" <[email protected]> wrote in message
                    news:[email protected]
                    The contractor will generally have a standard form of contract and it will usually make provision for liquidated damages - with a daily amount to be included. You need to find that provision and negotiate on the rate.
                    A standard contract that volunteers liquidated damages?

                    hehehehe That's a good one! Ever consider stand up?


                    Comment


                    • #11
                      penalty for delay in construction contract

                      "Chris Campbell" <[email protected]> wrote in message
                      news:[email protected] om...
                      Hello - I'm about to embark on a major bathroom remodeling (i.e. gutting that part of the house). This is in a *single* bathroom house and so it's going to be a big disruption to our life for the period that the bathroom is not available for our use. The project is probably going to cost around $25000. I've seen and heard the horror stories of contractors who take forever to finish projects. So, applying good old capitalist principles, I want to make in the contractor's best interest to get it done quickly and on schedule. To that end, I'm willing to put up an extra pile of money (say, $3000) and then have a cluase that says that after a previously agreed-upon period of contruction during which we have no bathroom (i.e. 2 weeks), that pile gets smaller by $500 a day. Further, after that pile has been eaten a way (after 6 days, in this case), there *continues* to be a $500/day penalty against the final payment. Once we're able to use the bathroom ("use" being strictly defined), the bleeding stops. I'll be using a reputable contractor, registered with NARI/etc, but I still want something in writing that protects me or at least gives the contractor an obvious incentive to get it done, besides him just wanting to collect on the final 10% payment. Can someone point me to precedents for this? How can I word this clause best so that I get the incentive behavior I want but it's not so onerous (or weird) that nobody will accept the terms?
                      Liquidated damages for delays are common on large projects and providing an
                      early completion incentive prevents a purely adverserial relationship before
                      the contract is signed. A good idea, I think, is to ask for a detail
                      schedule so you can follow along and help the schedule where you can.

                      The issue you will probably run into are owner caused delays. It may not
                      take much for the contractor to claim a day lost was your fault, therefore
                      he gets an extra day. Some possible causes of these delays could be any
                      owner furnished material being late, any late selection of finishes, any
                      finishes requiring special order, any finishes no longer available and
                      needing reselection, any lead time for special orders, etc. These items
                      should appear on the schedule and be accounted for except those that are
                      truly outside of the contractor's control.

                      Similarly, you should factor in the permit and inspection process. The
                      schedule should account for inspections and if you pulled the permit, this
                      could be your delay.


                      Sincerely,


                      Donald L. Phillips, Jr., P.E.
                      Worthington Engineering, Inc.
                      145 Greenglade Avenue
                      Worthington, OH 43085-2264

                      [email protected]
                      (remove NS to use the address)
                      614.937.0463 voice
                      208.975.1011 fax

                      http://worthingtonengineering.com


                      Comment


                      • #12
                        penalty for delay -- Troll Alert?

                        In article <[email protected] >,
                        Christopher Green <[email protected]> wrote:

                        OP's interest in a penalty clause of $500/day is counterproductive. No
                        contractor worth hiring would agree to it, and the others would never
                        have the resources to pay it when they flaked out -- at which point OP
                        would find out that they were judgment-proof and the subs and vendors
                        were filing mechanic's liens.

                        We agree. The clause would eliminate the very contractors he wants to
                        hire.

                        --
                        Lyle B. Harwood, President
                        Phoenix Homes, Inc.
                        (206) 523-9500 www.phoenixhomesinc.com

                        Comment


                        • #13
                          penalty for delay in construction contract

                          You are really full of it.... I would not even take my skill saw to a job where
                          I am the "one to be hanged" before the job even starts....

                          What one must do is to find a reputable and professional contractor and work
                          with them to produce the desired result. This adversary BS from the getgo is
                          going to run off any reputable high level contractors.... holding back 50% of
                          the job..... you're nuts....

                          Jim Fincher

                          "McGyver" <[email protected]> wrote in message
                          news:[email protected].
                          "Chris Campbell" <[email protected]> wrote in message news:[email protected] om...
                          I'm about to embark on a major bathroom remodeling (i.e. gutting that part of the house). This is in a *single* bathroom house and so it's going to be a big disruption to our life for the period that the bathroom is not available for our use. The project is probably going to cost around $25000. I've seen and heard the horror stories of contractors who take forever to finish projects. So, applying good old capitalist principles, I want to make in the contractor's best interest to get it done quickly and on schedule. To that end, I'm willing to put up an extra pile of money (say, $3000) and then have a clause that says that after a previously agreed-upon period of contraction during which we have no bathroom (i.e. 2 weeks), that pile gets smaller by $500 a day. Further, after that pile has been eaten a way (after 6 days, in this case), there *continues* to be a $500/day penalty against the final payment. Once we're able to use the bathroom ("use" being strictly defined), the bleeding stops. I'll be using a reputable contractor, registered with NARI/etc, but I still want something in writing that protects me or at least gives the contractor an obvious incentive to get it done, besides him just wanting to collect on the final 10% payment. Can someone point me to precedents for this? How can I word this clause best so that I get the incentive behavior I want but it's not so onerous (or weird) that nobody will accept the terms?
                          Penalty clauses and liquidated damages clauses have some problems. First, the clause has to be drafted carefully so that the court interprets the clause as a liquidated damages clause rather than a penalty. That means make sure a local attorney experienced in construction matters drafts it or reviews it, and advises on the amount. Second, if you have a liquidated damages clause, that's all you get if there is a breach involving failure to complete on time. It may be less than you would get in actual damages. Third, it might be difficult to find a contractor who wants the job badly enough to sign up for liquidated damages. The second most important thing you can do is revise the payment schedule so that 50% of the price is not paid until completion. 10% is a proper amount if there are progress payments tied to actual progress. A retainage that small is ok if there is an architect reviewing the percentage of completion with every progress payment request. 10% is not the appropriate amount of retainage in a bathroom remodeling contract. If you can't get the builder to accept 50%, you could go down to 40%, I suppose, but if the builder insists on 10%, find a new builder. The most important thing you can do is insist on a performance bond. The price of the bond will be added to the contract price, but it's worth it. If the contractor doesn't do the job on time, write a letter terminating the contract for breach, hire another contractor to finish, file a claim against the bond. The bonding company will go after the contractor for reimbursement. The bond will provide plenty of incentive. If you have any trouble negotiating a contract with a performance bond and a high retainage, the easiest way to handle it is to borrow the money from a bank. Use the bank's rules about contract format. Experienced, reputable builders will have no objection to either of the clauses you want, and will be accustomed to bank rules. You can reduce the interest expense by repaying the bank early. McGyver


                          Comment


                          • #14
                            penalty for delay in construction contract

                            Some very good points here Jim.... the OP's entire posting makes this GC shudder
                            as to what one would be getting into with a contract to build that bath.... what
                            most of these owners forget is that the entire building process should be a
                            partnership between the owner and builder... this person's approach certainly
                            casts it differently...

                            Jim Fincher

                            "james w lazenby" <[email protected]> wrote in message
                            news:[email protected]
                            "Chris Campbell" <[email protected]> wrote in message news:[email protected] om...
                            Hello - I'm about to embark on a major bathroom remodeling (i.e.
                            gutting that
                            part of the house). This is in a *single* bathroom house
                            and so it's
                            going to be a big disruption to our life for the period
                            that the
                            bathroom is not available for our use. The project is
                            probably going
                            to cost around $25000. I've seen and heard the horror stories of contractors who
                            take forever
                            to finish projects. So, applying good old capitalist
                            principles, I
                            want to make in the contractor's best interest to get it
                            done quickly
                            and on schedule. To that end, I'm willing to put up an
                            extra pile of
                            money (say, $3000) and then have a cluase that says that
                            after a
                            previously agreed-upon period of contruction during which
                            we have no
                            bathroom (i.e. 2 weeks), that pile gets smaller by $500 a
                            day.
                            Further, after that pile has been eaten a way (after 6
                            days, in this
                            case), there *continues* to be a $500/day penalty against
                            the final
                            payment. Once we're able to use the bathroom ("use" being
                            strictly
                            defined), the bleeding stops. I'll be using a reputable contractor, registered with
                            NARI/etc, but I
                            still want something in writing that protects me or at
                            least gives the
                            contractor an obvious incentive to get it done, besides
                            him just
                            wanting to collect on the final 10% payment. Can someone point me to precedents for this? How can I
                            word this
                            clause best so that I get the incentive behavior I want
                            but it's not
                            so onerous (or weird) that nobody will accept the terms?
                            $500 a day might be a bit steep, but it is your inconvenience to measure as it is your house and your deprivation of use. The biggest problem often attendant to delay penalties is their not being equitable or a balance between contract considerations. You have described a penalty that does in a sense reward the contractor for timely performance but you have stated it in a manner that does not explicitly state a reward for timely performance. I know, you have the money on the table, but once signed on the line, nearly anyone would consider that the contract price. Period. A good penalty clause contract has penalty offsetting reward terms. If deprivation of your bathroom is worth $500 a day to you, then use must also be worth $500 a day to you. (Not likely, which is why I said I thought it a bit high on a $25,000 contract.) If so, then the logical argument is that finishing a day early is worth an extra $500 to the contractor. Right? Most government contracts, as example, have monitored schedules, adjusted for conditions as the work progresses, wherein the contractor pays a penalty for "unearned" delay and gains a bonus for "earned" early delivery. For your stick, you should have an equal carrot. Also, remember, you must monitor the progress. You must allow for certain delays (historically, far more likely caused by the homeowner than the contractor) and, less frequently, the contractor must allow for some opportunities to shorten the reasonable duration (the homeowner yields to a more available, necessary product choice). Now, on large government contracts, this is a worthwhile endeavor . . . from both perspectives, the government and the contractors. Monitoring the ongoing process is a significant investment to both parties, but the loss or gain is even more significant. I do not think your $25,000 bathroom is worth the effort. Not on your part and not on the contractor's part. You might select a contractor on a separate basis and then discuss your concerns with him. Reach a mutually acceptable agreement (in writing) at that time. Do not include such a provision in your "Invitation to Bid." You will prevent the better contractors from being at all interested in the headache (including you, for that matter), and some less worthy contractor may well see an opportunity to ****** you. Jim our


                            Comment


                            • #15
                              penalty for delay -- Troll Alert?


                              "Art Begun" <[email protected]> wrote in message
                              news:[email protected] ink.net...
                              On Long Island there are 50 year old houses with one bath that are worth $300k to people who live and work there. $25k to fix one is nothing. Might take $50k or more.
                              The point is, if you're going to sink that much into a bath wouldn't it be a
                              higher priority to add a 2nd bath?

                              BTW, putting 25k into the only bath of a house worth 300k doesn't sound
                              rational to me.
                              "JD" <[email protected]> wrote in message news:[email protected] ..
                              "Chris Campbell" <[email protected]> wrote in message news:[email protected] om...
                              I'm about to embark on a major bathroom remodeling (i.e. gutting
                              that
                              part of the house). This is in a *single* bathroom house and so
                              it's
                              going to be a big disruption to our life for the period that the bathroom is not available for our use. The project is probably
                              going
                              to cost around $25000. Doesn't anyone else find it curious that someone is going to spend
                              $25,000
                              to remodel the bath of a house with only one bath? Does this make
                              sense?
                              Sounds pretty stupid to me. I smell a troll when (among other things) I see the following: 1) Questions involving implausible situations. 2) The OP's lack of participation after first post.

                              Comment

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