1. A description of the project. The contract should include a project description that outlines all of the work, materials, fixtures and appliances that will go into the work.  It should describe what will be demolished and that the contractor will obtain all of the necessary permits.  Trash and debris removal should be included in the description.  Also, make sure that the project is covered by liability and workman’s compensation insurance.

2. Payment Schedule.  The contract should state the total price subject to change order and it should also outline the timing and amount of installment payments.  Payments should be made upon certain completion of work or delivery of certain materials, such as when the foundation is completed, the materials are delivered, the rough plumbing and electricity are installed, or the wallboard and trim are done. Your initial payment at the start of the job should be no more than 10% of the project cost or $1000, whichever is lower. If the contractor has to immediately place orders for expensive items such as windows or cabinets, offer to pay the supplier directly. The final payment should be at least 10%, payable only when the “punch list” is completed.

3.  Project start and finish dates.  The contract should state when the project will start and when it will finish, subject to change orders and other natural conditions.  

4. Lien waivers. Any worker who is involved in the remodeling could place a lien on your property, claiming he was never paid for his work—even if you have paid the contractor in full. To mitigate this, we contract should state that the contractor must provide you with a “lien waver” for each installment before you pay the next one. What that means is that the invoice for each payment needs to include a signed statement indicating that the contractor used your previous payment to pay for the labor and materials described in its invoice. This gives you some legal protection against liens from him or his employees and subcontractors.

5. A procedure for change orders.  The contract should state that any change orders will require prior written approval and contractor to provide a clear description of the change order and how much it will cost and how it will affect the schedule.  

6. An escape clause. In California, consumer protection laws give homeowners three (3) days to cancel a contract without penalty. And it’s a good idea to write in just such protection in the contract for double protection. This prevents you from losing your deposit if, for example, you sign the contract and you decide to change your mind or don’t have the funds to continue with the work.

7. Signatures. A contract isn’t a binding legal document unless it’s signed by both parties and it should include the contractor’s license number and both of your addresses.