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Building Your Dream Theater: Step 2 - Homeowner's Guide to Construction Contracts Print E-mail
Monday, 01 August 2005
Article Index
Building Your Dream Theater: Step 2 - Homeowner's Guide to Construction Contracts
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Scheduling and Timing
Timing is always a critical issue with construction. The contract should include a construction schedule and a mechanism for adjustments, along with a promised completion date or duration of construction. There are many ways to encourage contractors to stay on schedule, including performance bonuses for early completion, liquidated damage clauses (a fee per day for late completion) and a savings-splitting clause, which can apply to both time and money savings. Savings-splitting and performance bonus clauses can reward a contractor for performing on or ahead of schedule and for saving you money.

Most contracts call for progress payments during the course of construction. The payment milestones and amounts should be clearly set forth in the contract documents. Progressive payments protect both the homeowner and installer. The installer is never out of pocket too much and the homeowner gets to make sure the work is being done properly before paying for it. Retention clauses should be considered when a certain amount, usually 10 percent of the progress payment that is actually earned, is held by the owner until the end of the job. This gives the owner some bargaining power when the job is completed to ensure that the contractor completely finishes all the miscellaneous or punch list items at the end of the project. To protect the contractor, a reasonable time limit should be set for payment of this final retention.

Problems After the Install?
After the project is completed, you may find something wrong with the contractor’s work and need an avenue for recourse. Traditional litigation in our court system is very expensive. A “simple” construction defect trial can cost $50,000 or more. Important options to consider in reducing the expense and risk are attorneys’ fee provisions, which allow the winning party to recover fees, and the use of alternative dispute resolution venues. Alternative dispute resolution typically consists of either mediation or arbitration and usually proceeds more quickly and can cost much less than litigation. The contract can govern whether alternative dispute resolution is required prior to litigation or even if it is to be binding in place of litigation. Certain rights are forfeited in exchange for faster and less expensive resolution, including jury trial and appeals, so this choice should be made carefully and in conjunction with the advice of an attorney.

It is likely a good idea to hire or at least consult with a lawyer when making major changes to your home or even your home theater, especially as home theater and especially home automation systems get bigger and bigger in terms of scope and price. With the tips listed above, you have an outline of some of the key elements you should understand before you enter into an agreement to have some major work done on your system and/or on your home. While some of the steps may seem overly cautious or even paranoid, they are designed to protect both you and your contractor from any problems. Your home theater should be the jewel of your home and, with the right steps to insure your success, it can be painless to purchase and have installed.

Brian D. Kahn is a partner in the Law Offices of Linda L. Northrup, A P.C. The firm, with offices in Los Angeles and Westlake Village, California, has been focusing on the areas of real estate and construction law since 1981.

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