If you own a landscaping company and you’ve ever seen the inside of a courtroom, you’re probably familiar with the importance of a good, binding contract. A landscaping contract can protect your company should a client ever try to sue, and can assist you in collecting from a deadbeat client should they decide they don’t want to pay for the services you’ve rendered. In the following paragraphs, I’m going to tell you about the kinds of provisions your landscaping contract should have to best protect your company and it’s interests. But first, let’s go over the basic elements of a contract.
For a contract to be valid (and binding), it must meet a few tests. First, the contract must be between two parties that are capable/competent to enter into a contract. In general this means one can’t enter into a contract with a minor, with someone of diminished mental capacity, or with someone who does not have the authority to represent the other party (a friend of the property owner, for example).
Second, there has to be consideration given. Each party must give up something to get something else in return. In our case, your client is giving up money in exchange for landscaping services being rendered. You are providing those services in exchange for payment.
Third, there has to be a meeting of the minds. Each party should have a demonstrable understanding of the terms of the contract. This is where having a written contract, signed by both parties, goes a long way toward establishing a meeting of the minds. Both parties signing a contract that describes the terms of the agreement demonstrates that each party is aware of their rights and obligations, and the rights and obligations of the other party.
With these three items in place, you have yourself a contract. Congratulations. But before you start asking clients to sign on the dotted line, you should carefully prepare the terms of your contract to best protect your interests. When I first started in business I was naïve, thinking that a contract should have terms that were favorable both to our company and to the client. A few rotten clients and $10,000 in lost revenue later and I realized that my job was to lock down our interests as tightly as I could in a contract, and let the client fend for themselves. You know your business. You know you aren’t out to take advantage of clients. You have mouths to feed, and so do your employees. And there are potential customers out there who seem to make a hobby out of putting contractors through the wringer. This is who you need to protect yourself against.
So without further ado, here’s the list of elements we have included in our landscaping services contract, and I suggest you include most or all of them in yours:
Payments
Make all deposits non-refundable. You can always decide later to refund a client’s money should circumstances warrant it. Just don’t leave that as an option for them to demand of you.
Collect a portion of the contract price at the time of signing. This gives you some money to begin buying materials. But more importantly, it commits your client to your services. While most would not shop around after a contract is signed, some do. Forcing them to pay a percentage (we require 20%) up front reduces the chance they’ll hire someone else. If they do, they just lost their 20% deposit.
Collect another payment when you start. Within the first day or two of our starting a project, we have collected 70% of the total project price. This does two things for us. First, it guarantees that we won’t lose money on the project should the client stiff us on the last payment (this almost never happens, but why risk it?). Second, having those payments already in the bank lets you sleep well at night, knowing you can pay all the bills for that project.
Don’t allow a long period of time to lapse before final payment is required. We give 15 days, and call on day 16 if we haven’t received final payment. Staying current on your receivables will ensure that you don’t run into cash flow problems. So many businesses that go bankrupt don’t fail because they don’t have any work it’s quite the opposite. They have tons of work. So much that they don’t have time to keep up on who owes them what. Before they know it, they have $50,000 in bills due next week, and $70,000 in money owed to them, with nothing in the bank. Late fees stack up like chord wood, and pretty soon attorneys are knocking down their door to liquidate their assets.
Provide for attorney’s fees should you need to hire a lawyer to collect overdue payments. A judge may not award you these monies, but if you don’t include it in your contract, you will most certainly not get it.
Change Orders
There are some clients out there that believe the landscape design process begins when you arrive in your trucks to break ground! They want to make change after miniscule change, running your labor costs up and wiping out profitability. Don’t let this happen! This is your business, your livelihood. The client should play by your rules or not at all. Each time they want to make a substantive change to the landscaping contract, make them sign a change order. Include in the change order the scope of the changes to be made and the costs associated with those changes. And always charge an administrative fee for the change. Why? Sometimes a change will result in a reduction in the actual work being done on the property. However, it never seems to result in the same reduction in costs to you.
For example, a client decides they want to delete 3 trees from the plan. You’ve already paid for those trees, picked them up from a local wholesaler and delivered them to the site. Now you need to store them, and you might even lose them after having to load and unload them several times. You need to be compensated for that time and expense. An administrative fee will help to cover that. I’ve heard of administrative fees ranging from $50 all the way up to $250 per change, no matter how big or small. And don’t be afraid to discount the reduction for a deletion. In the previous tree example, if the three trees were going to cost the client $900 installed, you might only credit them $600, and still add in a $100 administrative fee. It might sounds heartless, but as I write this I swear that you will lose your shirt and your company if you don’t watch your own bottom line like a hawk.
Lien Rights
Be sure to include any relevant copy required by your state regarding your assertions of lien rights over a client’s land and buildings.
Permits
Spell out clearly who is responsible for obtaining permits. If you are the responsible party, charge for permitting. If you’ve gone through the process, you know that sometimes it’s a cakewalk. Other times, you might spend 40 hours of otherwise billable time just getting a permit pulled for your work.
Excavation and Utilities
Spell out clearly your responsibility for utility marking as it pertains to excavations. Most all states offer free utility marking services, but they almost never include utilities not installed by the locality’s service provider. For example, an underground electric line run from a house (where the meter is attached) to a detached garage would not be marked by a utility marking service. Without markings you have no idea where a stray line might be buried. Spell out who is responsible should an unmarked line be damaged.
Failure to Enforce
The beauty of an ironclad contract is it provides your company protection. There may be circumstances where you will want to forego enforcement of a portion of the contract, but not forego the entire contract. For this circumstance you should include a clause that stipulates that your failure to enforce any right accruing under the contract will not be construed as a waiver of any other rights provided in the contract.
There are additional elements specific to certain types of landscaping work that you should consider when assembling your contract. Those and other landscaping-related issues are discussed every day at www.groundtradesxchange.com, a landscaping industry discussion forum created just for people in our industry. But this article should give you a great start to writing a solid landscaping contract. As always, have your attorney go over your contract before you begin having clients sign it.
If you'd like to discuss the terms you should include in your landscaping contract, you can do so in our free discussion forum: http://www.groundtradesxchange.com. With over 2,000 registered members, there isn't a contract provision someone in our community hasn't used or worked with before.
Have a great landscaping season!
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