It’s a time of dichotomy for the pool/spa industry, with issues such as price increases, supply-line issues and labor shortages tempering the relief and security one would normally experience from record sales figures.
As such, everything has become more important. This includes the writing of construction and service contracts. Extenuating circumstances brought on by the pandemic threaten to force delays and cut into profits — and, let’s face it, nobody has time for litigation.
To help pool/spa professionals adjust with the times, industry and legal experts have weighed in on this and other key issues to address in your contracts.
First, a note about the importance of clarity in your contracts. One might think ambiguities will afford you more leeway in meeting the terms of your contract. But, especially when working with homeowners, the opposite is true. In some states, home-improvement laws fall under the consumer-protection umbrella, because the homeowner is considered at a disadvantage. (Conversely, in commercial work, both sides are considered on equal footing.)
If a homeowner files a complaint on a matter about which the contract is vague, the court will decide whose interpretation applies. That likely won’t work in the contractor’s favor.
“Home improvement ... laws favor the customer,” says attorney Eric Probst, who serves as outside general counsel for the Northeast Spa and Pool Association. “So if there’s any vague statement in the clause, the courts will interpret it against the party who drafted it.”
Here, experts offer more tips to protect yourself.
Update your contract to allow for current conditions.
After the pandemic hit, the entire industry came to more greatly appreciate the value of the force majeure clause. Meaning “superior force” in French, this clause relieves the parties from meeting the terms of a contract if circumstances beyond their control make it impossible, illegal or inadvisable.
To ensure enforceability, the clause must list all the situations that would trigger it. Earthquakes and weather events frequently come in these clauses, as do riots and declarations of war.
Not all states have agreed that a standard force majeure clause applies to COVID-related issues. So, moving forward, these clauses also should include outbreaks and pandemics, along with related market conditions such as labor and supply shortages. Governmental restrictions such as declarations and emergency orders also should be named as they can render work illegal and limit the ability of building departments to issue permits.
“The clauses are only as good as they are written,” says Probst, principal with Porzio Bromberg & Newman PC in Morristown, N.J.
Of course, if something does activate the force majeure clause, the builder or service firm should contact customers immediate to let them know the impact on their projects. “If you communicate most issues, you won’t have a problem in most cases,” Probst says. “It’s when contractors fail to communicate that the issues fester for a while and then those lead to disputes.”
Some companies have added riders meant to shield them from liability for COVID infection, and allow them to stop work if the customer’s household undergoes an outbreak. Here, too, it’s best to avoid vague language. “If the contract is ambiguous and you can’t tell whether the clause applies to a certain situation, more than likely it won’t,” Probst says.
At least as important, contracts should allow room to make price adjustments in response to the frequent and sometimes sizable hikes in products and materials. Include clauses that clearly state how long your price is valid and under what circumstances it could increase.
“Be specific as to what triggers an increase, so that way there’s no question as to whether a triggering event has occurred or not,” says Steve Getzoff, outside national counsel for the Pool & Hot Tub Alliance.
It also helps to provide a concrete point of reference for the price hikes, adds Getzoff, also a partner in New York-based law firm Lester Schwab Katz & Dwyer, LLP. For instance, the manufacturer list price could provide this reference.
“That way, there’s no dispute as to what prices we’re comparing,” he explains. “If there’s a dispute, everybody can go look at the list price ... and there shouldn’t be an argument over whether or not the price went up.”
Explain how much of an increase would activate your right to make adjustments, as well as how you’d adjust your price. Will you only charge them your added cost, or will there be mark-up? “Preserve as much right and leeway as you can in your agreement,” Getzoff says. “Then when push comes to shove, see what you can do to satisfy the customer, because that’s always the cheapest way to resolve it.”
As a sidenote: When raising prices post-contract, make sure to present the customer with a change order. And understand that they don’t have to agree to move forward. “You can’t build the pool for [a higher price] if they don’t agree to it,” Probst says.
Also understand that, while such a price escalation clause likely would hold up in court if written properly, it doesn’t necessarily prevent disputes. “That’s a different issue,” Getzoff says.
Finally, in these times, salespeople should point out the potential for price increases before the contract is signed.
“If you verbally communicate it, it’s a sign of good service, and it will help you if there’s a dispute at a later time,” Probst says.
List the specific scope of services.
Whether for construction or service, your contract should provide a thorough and detailed account of the services to be provided.
Oversights seem especially easy in service contracts, as companies may overlook aspects of their job that they assume the consumer would know were included, say attorneys who work with pool/spa professionals. “When you get a bill at dinner, it doesn’t say, ‘$100 at a steak house,’” Probst says. “It says ‘$100’ and includes everything that you have ordered to make sure that’s exactly what you received and then ate.”
As important as what you will do, the contract should outline services you will not perform, and expectations of the customer.
“You might say, ‘We’re here to put in chemicals, test the water, and scoop out leaves. We’re not here to evaluate the pump,’” Getzoff says.
David Hawes, CEO of H&H Pool Services, in Dublin, Calif., specifies that his technicians will not add water to their pools, that solar covers must be removed, that any toys in the pool will be kept there, and that gates need to be unlocked unless the tech has a key or lock combination. His contracts also explain that the company closes between Christmas and New Years. He specifies what special processes will be required occasionally, such as annual service for salt systems and twice-yearly cleaning for filters, and that clients will be charged for them.
On the construction side, list what areas you will not touch. Make it clear if you’re not handling electrical or gas, for instance. If the homeowner is responsible for contracting out the barriers, stipulate that. And if you know other contractors will handle decking or other peripheral features, make it clear you’re not involved or responsible.
It becomes even more important to outlining what you won’t do when performing renovation work. Here, you need to avoid liability for problems rooted in original construction or services performed before you were contracted. State exactly what areas you will alter, along with which you will not touch and, therefore, carry no responsibility for.
Say how conflicts will be resolved.
Arbitration clauses, stating that disputes must go to arbitration rather than court, have been a favorite for a while. This alternative has become even more attractive as courts became backlogged and incapacitated by pandemic-induced shutdowns.
When including this clause, look at the costs of arbitration, as it sometimes can be more expensive. Also make sure an attorney reviews this language to make sure it aligns with state requirements.
Consider stating that you can work outside arbitration if trying to collect unpaid fees. States such as California do not allow contractors to file mechanics liens in arbitration proceedings. And certain states offer other alternatives that yield decisions more quickly and cheaply.
“Paying several thousand dollars in an arbitration proceeding to get $7,000, for instance, makes no sense,” Probst says.
As an alternative, attorney Mark Stapke considers stating that the parties must go through mediation before seeking arbitration or the courts, because mediation is a non-binding process handled between the two parties rather than the court or other outside entity. In a form contract that the California Association of Realtors provides to its members, for instance, mediation is required as a first step. If the client tries to bypasses that, the losing party must pay attorneys’ fees.
“That’s a big deal,” says Stapke, a partner in Stapke Law, a Santa Monica, Calif.-based firm specializing in the construction industries.
“If you get a case involving lots of time in arbitration, then attorneys’ fees can be a pretty important part of the case ... I’d recommend the industry learn from the Realtors. You could say you have the right of attorneys’ fees and prosecute recovery if you win anyway, but I thought the incentive to go to mediation is a really good one.”
Review contracts for accuracy and consistency.
It’s easy to repurpose a previously used contract, or borrow from others. When doing so, review the entire document to make sure the final version accurately reflects the services and terms of the work for this particular client.
Contracts often combine special conditions, meaning they were written for the specific job, with general conditions, which are used all the time. If this is the case, it is possible to provide contradictory terms.
For instance, one part of the contract may state that disputes must be resolved through arbitration, another may require going to the court of jurisdiction. In another example, one clause may say the price is good for acceptance within 30 days and construction within a year, while another may preserve the pricing for a longer period.
Always review the document to make sure that everything is consistent.
“Making sure that your first page in your proposal is mirrored by the other provisions in the contract is pretty important,” Stapke says.
Also, if you update certain terms, such as the time window during which your price is valid, make sure your general conditions reflect that.
Otherwise, Stapke says, “that’s an ambiguity in the contract, and a court would have to figure out that ambiguity if the parties couldn’t agree.”
When performing construction on commercial projects, the general contractor often will take your bid and submitted contract, then draft up a contract of their own and present it to you to sign. If that’s the case, check to make sure all your terms have been included.
For builders, a big one here could be clauses outlining what happens if you hit rock. In his experience, Stapke has sometimes seen that clause removed by the general contractors on large-scale commercial projects.
“It may say you got the soils report, you take the risk of whatever the soils are,” Stapke says. “And that could be a big deal ...”
