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Crafting the Perfect Contract: A Tradesperson's Guide

Rhino Trade Insurance 06 June 2024

You enter into every transaction in good faith, and you would never dream of welching on a deal. In an ideal world, these two facts alone would be enough to safeguard you against all sorts of misunderstandings and accusations.

Not in this old world! Join your favourite trade insurance gurus at Rhino as we discover how the contract is king if you want to avoid a knobbly mess of crossed wires and angry customers. 

The Importance of a Contract in Trade Services

As a tradesperson, when you formally agree to carry out work for a customer, you’re making a promise. Whether that’s replacing a boiler, tiling a kitchen or installing CCTV cameras, the customer desires a certain end result and you’re promising to make it happen for them. 

Think of a contract as an official record of that promise. Your word may be your bond, but realistically, it’s much better for everyone involved to see the particulars set out clearly on paper (or over email). It works the other way, too. The customer is promising to pay you a certain amount by a certain date in return for your graft. 

Let’s break down the benefits. Contracts between yourself and customers will help with the following:

  • Providing clarity

In trade services (as elsewhere), the contract serves to formalise the agreement made and sets out the responsibilities of both parties. By setting out clear expectations, contracts help to drastically reduce disputes and theoretically mean that transactions should go without a hitch. 

  • Offering legal protection

Much as you might enjoy watching Suits to unwind, we doubt you fancy getting involved in any legal drama yourself. Technically, as soon as your customer has given the thumbs-up for a job to go ahead, you’re in a legally binding agreement. However, for ultimate legal protection, a robust, written contract which sets out the terms and conditions of the agreement is the way to go. 

  • Preventing misunderstandings

Misunderstandings are the bane of a tradesperson’s life. Perhaps a customer assumes the cost of materials is included in the labour charge. Or maybe you assume they know what ‘plus VAT’ means, as opposed to ‘inc VAT’. By clearly defining elements of the agreement such as timelines, billing details, and descriptions of the work, you avoid the potentially endless misunderstandings that can occur between you and your client.

  • Fostering better customer relationships

By removing doubt and the scope for misunderstandings, your customers will have a better experience dealing with you. As you know, word of mouth recommendations are a tradesperson’s bread and butter. If you’re getting into back-and-forth disputes with potential customers then you’re leaving a messy trail, reputation-wise. Nice clear contracts mean positive customer relationships. 

  • Cement your status as an independent contractor

This is a huge one. If you take a ‘flying by the seat of your pants’ approach to contracts, it will be much harder to prove yourself as an independent contractor if the taxman comes knocking to question your tax status. A well-organised contract history will make it simple to provide supporting evidence that you’re not acting outside IR35, that is, as an ‘employee in disguise’. 

Key Elements of a Tradesperson's Contract

So, we know how important a written contract is for a smooth and secure experience for both you and your customers. 

You could be the one providing the contract to the client. If so, you’re going to need to know what to include. Don’t worry, we’ve detailed a comprehensive checklist below. If you’re conducting work for a business or agency, you could be the one receiving the contract. If this is the case, then everything that follows still applies, but instead of crafting it yourself, you’ll be double-checking that they’ve included everything.

  • Your details

Along with the date, include the basic details of your company on the document, including your business name, your contact information and your VAT registration number. If you wish to get fancy, you can have your company logo and industry credentials on your contract documents, too. 

  • Scope of work

It’s important to clearly define the scope of the works to be carried out. This will help you to avoid the dreaded ‘scope creep’, when a project’s requirements increases in size over time until you find yourself doing a load of unbilled work. Remember, the scope of work should match the quote you gave the customer originally (so long as nothing has changed in your agreement with the customer). 

  • Payment terms

Now, the small matter of the remuneration. The payment terms should be clearly set out, including how you want to be paid and the fees and charges you’ve already agreed with the client via your quote. Whether you’re charging by the hour, or for the job as a whole (up to you, but beware of scope creep!), make sure it’s clear. Your VAT charges should also be clearly set out.

In this section you should also include whether you will send several invoices, or one invoice on project completion. Your payment timeframe will usually be found on your invoice (e.g., payment due 30 days from invoice date), but you can reference it here for extra clarity. Faster payments make for a healthier cashflow, but bear in mind that many customers will drag their heels and plan your cashflow accordingly. 

  • Duration of work

It’s a common complaint among customers that tradespeople don’t always turn up to begin the job as planned. Being mindful of this, give your client a definite start date for the work, including a rough time that you’ll be showing up (and stick to it!). Note the number of days you expect it will take you to finish the job.

  • Materials 

Many tradespeople have exclusive relationships with suppliers which allows them to get low prices on a huge array of materials. If you’re one of them, you are likely to provide your own materials and mark up the cost accordingly on your quote. Some customers insist on purchasing their own materials – if they do, then make sure you’ve agreed exactly what they are and who will incur their cost, including delivery costs.

  • Subcontractors 

Include a short section indicating whether you intend to use subcontractors to complete the work. Of course, you will still be responsible for the work regardless of whether you subcontract elements of it out, but it pays to be transparent and should any disputes arise, you’ll be glad it’s all down in black and white. 

  • Insurance

Ah, our favourite topic! In every tradesperson’s contract there should be a section confirming the insurance you’ll have in place when carrying out the work. If you’re the one receiving the contract (e.g., from a local authority or business), it goes without saying that you should check it with a fine tooth comb to make sure you meet the insurance requirements. Public Liability Insurance, Employer’s Liability Insurance and Professional Indemnity Insurance are common contractual stipulations, with varying limits (although Employer’s Liability Insurance has a legal minimum set at £5million). If you’re the one drafting the contract, include details of the relevant policies you hold.

  • The cleanup

It’s a good idea to include details of how the clean-up will be managed once the job is finished. This is a common area for misunderstandings, and can be a bone of contention for otherwise satisfied clients, so getting it down in writing is recommended. For example, include mention of who will pay for waste disposal and skips. 

  • Termination clauses

Your customer may have the legal right to cancel the contract without charge after they’ve signed it. This will generally only be possible to do before the work has actually started, and would assume that you haven’t already spent any money on the work (such as ordering bespoke items). 

Your contract should include details on how to cancel. It must be in writing, and within the official ‘cooling-off’ period which is generally 14 days. For extra clarity, you could include a cancellation form for the client to complete and send to you.

Contract Templates – A Great Option for Clarity

You might hear it referred to as a contract. Other people call them Terms & Conditions, T&Cs, Scope and/or Statement of Works, or Terms of Business. Whatever you like to call them, you shouldn’t start work without the assurance that comes with having everything down in black and white.

Contract formation for tradespeople doesn’t have to be a headache. Let us let you into a little secret. There are hundreds of tradesman contract templates available online for you to adopt and adapt to your business. Just make sure it’s free to use and that you’re allowed to add your company’s logos. 

The Citizen’s Advice Bureau recommends this as an example for home repair and maintenance work and this for building works (and who are we to argue with them?). They carry no technical jargon and have gained the Plain English Campaign’s Crystal Mark for clarity.

If you’d rather shop around for a contract template, there are countless options out there to choose from. In some cases, you have to pay a small fee to download the template (around £10). Some solicitors offer an option to create bespoke contracts for tradespeople which tend to cost more – around £300. However, these bespoke contracts will take your individual business’s circumstances into account and the contents of the contract will exactly reflect likely legal and practical requirements. 

Utilising Contract Templates: Pros and Cons

The benefits of using templates for your works contracts are clear. They are likely to have been drafted by someone with a legal background, and if you use the same contract every time then there’ll be consistency in the contracts your clients receive. This will lend your business an air of professionalism, without you having to craft a contract from scratch that might not be up to the mark.

However, there’s a flip side. Be careful of over-reliance on generic templates without customising them to specific projects. You need to make sure every single word is accurate and reflective of the project in question, as once the terms have been agreed then your customer can hold you to your (written) words.

The Role of Digital Contracts and E-Signatures in Today's Trades

These days, we’re more likely to sign a contract online rather than using a pen and paper. Yes folks, the future is now. Online signatures are excellent for efficiency, accuracy and general ease of use – and many tradespeople use them to create, sign and manage their agreements. Signable, DocuSign, eSign… there are a huge range of electronic signature apps out there, so do a little research to choose the one that you find most user-friendly. 

Here are some reasons why a digital contract could be the best choice:

  • They’re secure: they’re not going to get lost in the post or eaten by a dog.
  • They’re accessible: as they’re kept in cloud-based storage, they’re editable by those with permission from anywhere around the globe. 
  • They’re cost-effective: you don’t need to spend the admin time on printing, checking and mailing reams of paper.
  • They’re trackable: every edit and movement within the document is tracked, meaning traceability of all changes.
  • They’re instant: as soon as you or a client signs, all stakeholders are updated in real-time.
  • They’re legally valid: in case you weren’t sure, digital contracts are legally valid in the UK.

Navigating Client Disputes with a Well-Structured Contract

If you’ve been in the trade game a while, you know that disputes can and do rear their ugly heads. It’s at times like these that you’ll be glad you have a well-drafted contract as your first line of defence in dispute resolution. 

Because a well-drafted contract sets out the rights, obligations and responsibilities of each party, you have a reference point to work from. The contract acts as a framework against which to address any disagreements that have arisen.

Essentially, if it’s there in black and white, there’s no room for arguing over who agreed what. You may well still need legal help to settle more complex disputes, but at least you will have a good record of what both parties’ initial intentions were.

About The Author Phil McCormick

Experienced in brand marketing and content. Most of that lovely communication you see online will be from Phil. social media, emails, videos, how to make a bacon sarny? You get the gist!

Trade most identified with: Electrician - It’s our Phil’s job to map out all our communications and make sure the signal works! Also, he’s one of the cockiest blighters in the team so electrician fits perfectly!

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