Section 2 - CONTRACTOR
More than likely, wherever you may be based, some sort of contractor registration
or even certification is necessary. Investigate with your local builders
association, state department of commerce or other state government offices.
Before you enter into a construction contract, make sure you understand how
responsibilities, risks, and costs are to be allocated between the owner and
all others involved in the project. Addressing liability within the contract
can reduce your exposure to third-party claims.
The following information is an overview of construction contract issues, not
a comprehensive discussion of contractual protection. For more guidance, you
should consult your attorney. Two publications containing helpful information
regarding construction contracts are available from the National Association
of Home Builders (NAHB) at (800) 223-2665:
- Contracts and Liability - provides detailed information about many of the
different aspects involved with contracts
- Construction Forms and Contracts - provides various forms you can copy from
the book or load directly into your computer from the free disk enclosed
Compliance with environmental regulations helps protect you from liability
and financial hardship. Your contracts with subcontractors should require their
compliance as well. All subcontractors should be required to:
- Comply with all government requirements.
- Protect the construction site and monitor activities to prevent a third-party
from creating a hazardous incident or causing environmental contamination.
- Identify hazardous materials used or stored at the project site and ensure
proper labeling, storage, handling, and disposal.
Known or Suspected Hazardous Substances
Some environmental contaminants were prevalent in construction materials
prior to the 1980s (such as asbestos in floor tile, insulation, and shingles).
When remodeling, your contract should address the need to test for known or
suspected contaminants and should specify who is responsible for hiring a qualified
person to conduct such tests.
Federal and state environmental regulations require proper management of hazardous
wastes generated at your site. You are responsible for hazardous waste management,
removal, and, if transferred off-site, assurance that the waste is delivered
to its final destination.
Unexpected Site Conditions or Hazardous Substances
Your contract should clarify your responsibilities and obligations for unexpected
site conditions or the discovery of hazardous materials. The owner's disclaimer
of liability clause should be modified to state that the contractor has no responsibility
for existing site conditions or materials located at the site such as toxic,
hazardous, or other dangerous substances. If you encounter an unknown hazardous
substance or condition, immediately notify the owner.
If you must absorb the risk of unexpected conditions on the site, negotiate
a provision that allows you access to the site and time to evaluate that risk
before beginning construction. Provide for a contract allowance to cover appropriate
inspections and testing. The contract should give you the option to terminate
the contract if conditions are not satisfactory.
Superfund and CECRA Sites
Congress created the federal Superfund program in 1980 under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) to address
the cleanup of the nation's most contaminated sites. As a residential
building contractor, you are unlikely to work on a project that is located on
a Superfund or CECRA site (typical Superfund or CECRA sites include old landfills
and dumps, old mining and smelting facilities, barrel sites, or places where
chemicals or solvents were used such as autobody shops, drycleaning businesses,
- Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
- Comprehensive Environmental Cleanup and Responsibility Act (CECRA)
- Superfund Amendment Reauthorization Act (SARA) Title 3
Utilities Underground Location Center
Call the "North American One Call Referral System" at (888) 258-0808
before you dig anywhere on your site. This national hotline is also known as
the "Call Before You Dig" or "One-Call" line. Once referred
to your local center, observe the following recommendations. Please
verify the exact services of your local center!
- Call to give advance notice at least 2 (but not more than 10) business days
prior to digging
- Be prepared to describe the type of work to be done and to pinpoint the
exact location of your dig site
- Your local center should notify subscribing utilities and underground facility
owners for you
- Utility representatives will come to your work site and mark where buried
facilities are located according to the following color code:
Red - Electric
Yellow - Gas/Oil/Steam
Blue - Water
Green - Sewer
Orange - Communications/Cable TV
Pink - Temporary Survey Markings
White - Proposed Excavation
- You must stay at least 2 feet away from the marks (they do not mean "dig
- If you do not notify your local "call before you dig center" (and
fail to obtain information about an underground facility location) prior to
digging and you damage an underground facility, you are liable to the owner
of the facility for the entire cost of the repair.
Most contractors rely on general liability coverage because of the difficulty
in obtaining pollution insurance. General liability insurance may be purchased
alone (mono-line) or included in a commercial package policy (contractors' equipment,
property, general liability, auto, etc.). Although liability insurance is usually
inexpensive, it is some of the most important coverage you can buy. Because
any type of liability insurance is extremely complicated, your attorney should
review the policy to determine exactly what your coverage is.
Workers' compensation insurance may be available through your state or through
a private insurance carrier. Private carriers may select those individuals
or businesses they wish to insure and so may offer more competitive rates.
- Appropriate legal counsel
- Insurance representatives
- National Association of Home Builders (NAHB)
1201 15th St. NW
Washington, DC 20005
- Local or State Contractors Association
- North American One-Call Referral Center
(Fact Sheet 2 of 12)