What is a Contract?

A contract is a legal agreement between two or more people. A written agreement is one of the most important communication tools for both the contractor and consumer. It helps avoid misunderstandings about what a job will include. A thorough contract tells how the work will be done, when it will be done, what materials will be used, and how much it will cost.

In California, a written contract is required for all home improvement projects over $500. A home improvement contract and any changes made to that contract must be in writing, legible, easy to understand, and inform the consumer of their rights to cancel or rescind the contract. If you are promised something verbally make sure that it is included in writing. Don't sign anything until you understand the contract and agree to the terms.

A contract should contain everything agreed upon by the consumer and contractor. Please review the Contracts and Binding Agreements section for further reference.

• The contract should describe, in detail, the products to be used and how the work will be performed, i.e., size, color, who will be doing what work, amounts of materials provided, manufacturer model number, etc.
• There must be a detailed, written payment schedule in the contract. The payments to the contractor cannot exceed the value of the work performed (with the exception of the down payment—see "REMEMBER" below).
• The contract needs written direction as to who will get the necessary permits, and must provide a date of completion.
• If the contract price or scope of work needs to be changed, it MUST be done with a written "Change Order," signed by the customer and contractor prior to the change, which then becomes a part of the contract.
• Swimming pool contracts must include a plan and scale drawing showing the shape, size dimensions, and construction and equipment specifications.
• Make sure the contract includes details like cleanup and removal of debris and materials, and special requests like saving lumber for firewood.
• The contract also should identify the contractor, their business address, and contractor license number.
• Be sure to get any warranty offered by the contractor for labor and materials in writing either for work done by the contractor or manufacturer warranties.

REMEMBER The down payment cannot be more than $1,000 or 10 percent of the contract price, whichever is less, for a home improvement job or swimming pool, excluding finance charges. There are no exceptions for special-order materials.

See CSLB's publication Terms of Agreement, A Consumer Guide to Home Improvement Contracts for additional information about swimming pools, finance charges, and commissions.