There are two types of contractors: those who pay attention to detail and all the rest.
Those in the first category have far fewer legal disputes arising from their construction activities than those in the second.
Here are some recommendations to make sure you are in the first group:
• Keep your license current and active. Disgorgement under Business and Professions Code §7031 is very painful.
• Make sure you are only contracting for work for which you are properly licensed.
• If you are doing a home improvement contract, make sure it conforms to all the requirements of B & P Code §7159.
• Keep accurate and contemporaneous accounting records on each job. Let me repeat: Keep accurate and contemporaneous accounting records for each job. If you're a direct contractor and doing two projects at the same time, once for Jones and one for Smith, have separate accounts (this can be done internally) for each. If you're using the same framer and lumber supplier on both, make sure you keep invoices and payments separate on each and make sure the framer and supplier bill you separately on each.
• Do not pay a Smith sub with Jones's money.
• Do not perform any extra or changed work without first obtaining a signed, written change order from the owner. If you're a sub, make sure the direct contractor issues you a change order first.
• Dispute resolution. Many contractors have poor dispute resolution clauses in their contracts. Do you want an attorney's fee provision? I personally like a mediation first condition prior to litigation or arbitration, similar to a provision used in purchase and sale agreements by the California Association of Realtors.
• Always have signed subcontracts and never use an unlicensed subcontractor.
• Show up on time.
• Communicate with the client. This applies to us lawyers as well. If a delivery is going to be later than scheduled, let the client know you're on it.