Improvement Construction Contract Changes
Diane Dennis Enterprises © December 2005
Well, they've gone and done it again...
Our wonderful lawmakers have made LOTS of changes to various codes,
such as the Business and Professions Codes and the Civil Codes,
and these changes will require that you have a brand new construction
contract drawn up, or at the very least to have some serious
additions made to your current contract(s).
Several code sections are going to be repealed effective January
1 2006 and many others will be going into effect on the same day.
Many of these changes directly affect your contract(s).
If your 2006
construction contracts don't contain the newly required notices
and other items then you can be subject to disciplinary action
by the license board! Happy New Year, eh? ;)
But wait! It gets even better! Some of the new wording that's
supposed to go into effect Jan 1 2006 has already been repealed
and/or changed itself!
Minimum Size Type Now Required
All text on the contract MUST be a minimum 10-point typesize and
all headings must be a minimum 10-point typesize BOLD. This minimum
text size is required UNLESS a different size (read "larger" size)
is otherwise specified.
Some contractors use small type on their contract because it helps
to keep down the number of pages in the contract. An unfortunate
other reason for small type is to "help" the customer
to "miss" the information while reviewing the contract.
No matter the reason for small type though, it's now no longer
allowed. This will cause the overall size of contracts to grow.
Mechanic's Lien Notice to Owner
The 2005 B&P code required a mechanic's lien notice and it
allowed the notice to be an attachment to the contract.
However, this will be repealed Jan 1 2006 and the new B&P
Code that goes into effect Jan 1 2006 requires that a) the text
of the mechanic's lien notice be revised and b) the text MUST appear
directly on the contract and NOT as an attachment and c) as in
the past, it MUST be verbatim to the text in the "new" code.
This is a significant notice, approximately 300 words, and it
will take up a sizeable amount of space on your contract, probably
you to have to add another page.
Newly Required 2006 Notices Already
Revised, Again and Again!
Interesting thing here, and this is where it can get really confusing...
As mentioned above, the new 2006 code that was supposed to replace
the 2005 code has already gone through several changes.
The mechanic's lien notice had its wording changed, and the new
requirement that it be added to the contract was added, but then
the new code was repealed and replaced with even more new code.
That newest new code left out the new mechanic's lien notice requirement.
But alas "they" weren't done there... that newest new
code that left out the mechanic's lien notice requirement has already
been repealed itself and now there's even newer newest code (and
it has the mechanic's lien requirement back in it)!
AND, on top of everything...
The code listed at the government
legislative website as being effective Jan 1 2006 is NOT accurate!
The text has been changed and changed again and what's posted
at the government legislative website does NOT contain the latest
It's absolutely ridiculous, how do "they" expect a contractor
to have a legal contract when "they" can't even get it
Description of License Classification
Another new code requires the contract to contain the name, business
address, license number of the contractor and the DESCRIPTION of
the license classification relevant to the project.
Presumably this requirement is to help the customer to know whether
or not the contractor bidding/contracting to do the work is actually
licensed to do that specific work.
Workers Comp Insurance Notice Now
Another new code requires that you notify your customer concerning
BOTH general liability insurance AND Worker's Comp insurance. You're
required to state whether or not you have these insurances and
the insurer's contact info if you do have the insurance.
It used to be that it was just general liability insurance that
you had to do this for but now it has to be done for worker's comp
insurance as well.
New Headings Now Required
Another new code requires the addition of several headings and,
as mentioned above, these headings must be no less than 10-point
size type and they must be bold.
Here's a partial list:
- The contract price now has to have a heading "Contract
- If there'll be a finance charge then there's a heading required "Finance
- The heading "Description of the Project and Description
of the Significant Materials to be Used and Equipment to be Installed" is
- If there's a downpayment required then the heading "Downpayment" is
required, along with another notice in 12-point typeface BOLD
written verbatim to the code.
- If there'll be progress payments, the heading "Schedule
of Progress Payments" is now required, along with specific
text in 12-point typeface BOLD written verbatim to the code
- The headings "Approximate Start Date" and "Approximate
Completion Date" are now required
- If applicable, the heading "List of Documents to be Incorporated
into the Contract"
- A new heading "Note about Extra Work and Change Orders" along
with specific text written verbatim to the code.
- A new statement must be added to
the contract, exactly as written in the code, in minimum 12-point
typesize BOLD, that tells the customer that he is entitled to
a completely filled in copy of the agreement.
The above items are just a partial list of required changes and
who knows how many times the codes will change again (and again)...