Bidding and Contracts

Many owners ask about reducing the risk of poor performance by the contractor (particularly not finishing on time) by including some form of penalty clause in the contract. While this is fairly common in commercial construction, it is rarely done in residential work for both legal and practical reasons (since we don't want to give legal advice, we'll stick to the practical aspects). To impose a penalty, the owner would have to prove that it was the contractor's fault that the job took too long. That's hard to do, because there are usually extenuating circumstances (real or exaggerated) that spread the blame. Perhaps you made a minor decision a week late. The contractor can claim that this held up the job, and it's hard to prove him wrong.

Penalties may also make the contractor reluctant to do anything that would make the job take longer, including extras that you may want like adding a light fixture or finishing part of the basement (change orders for such items can include additional time as well as money, but extra work just adds to the contractors risk that s/he won't finish on time).

David's Comment