Doing your Due Diligence: Who are the parties to your Construction Contract?
Contractors manage a lot to keep projects on track. A small mistake in measurement can have significant consequences. In our experience, however, contractors are not always as familiar with the details of their construction contracts. Many may not even remember how they even got their contract (whether from a fellow contractor, attorney, or perhaps the internet). The details of your construction contract are just as important as the details of your build. A solid contract can save tens of thousands of dollars. It can help your business thrive and not just survive.
There are many elements that make up a great construction contract. The first is doing your due diligence. It’s important to know who should sign your contract. This may seem obvious, but it can pose serious problems. If you’ve formed a company (or corporation), then you should sign as a member of the company or officer of the corporation. The legal name of your company should be listed on the contract. (You will know if you have a “legal name” if you have registered your company with the Georgia Secretary of State.) The name of your company listed on your contract should match the name that’s registered with the Secretary of State. If you need a reminder, you can do a quick search at www.ga.sos.gov to review your company’s name. For example, let’s say your registered company name is Central Georgia Kitchens and Bathrooms, Inc. That’s the name that should be listed on your contract -- not a shortened version, such as Central Georgia Kitchens.
Here’s why accuracy is important: if you sign a contract in the name of a company that doesn’t actually exist, then you could become personally liable. Being personally liable means that your personal assets are at stake if something goes wrong. One of the reasons you formed a company was to shift liability away from you. Therefore, it’s important to double-check the accuracy of your agreement.
But what about D/B/A’s? D/B/A stands for “doing business as.” You might operate under a d/b/a name that’s different from what is registered with the Secretary of State. If so, then you will need to list your company’s legal name followed by your d/b/a name. In the example above, you would write Central Georgia Kitchens and Bathrooms, Inc. d/b/a Central Georgia Kitchens. So don’t just list your d/b/a name, since that is not the name of your registered company.
The tips above only apply if you have a registered business and it’s possible to have a d/b/a name without having a registered legal business. In that case, you are considered a sole proprietor. Your d/b/a name is just for advertising or branding purposes and does not protect you from legal liability.
By the same token, it’s important that the person you are contracting with has the authority to sign an agreement with you. Make sure the actual homeowner signs the agreement, and not the spouse (or significant other) who may not be on the deed. Similarly, if you’re contracting with another company, make sure their company name is legally accurate.
At Downs Law, we understand that construction agreements can be confusing -- but they don’t have to be. In our free e-book, we've taken 10 important contract provisions and distilled them into plain, understandable language. You will be able to use these as a guide to determine whether your contract is on solid footing, or whether it needs more attention. And as always, we’re here for you if you need help. Contact us!