Design and Construction Work without a contract. The reason why Owner's should never allow it

Today I want to address the reasons why Owner's should never allow any work to be performed without a fully executed written agreement.

In Today's HGTV world where entire room renovations happen "While you were out" and "Restaurant Impossible" rebrands failing eateries in a weekend, the notion that construction should happen quickly is all too prevalent.  These shows don't reveal the pre-work that goes into performing these miraculous transformations and they don't account for the incredible amount of man-power that goes into these feats.  The most critical component of all of this work is the written agreements that must be in place for any of these projects to happen. 

Aside from the magical transformations that we are treated to on TV, it is all too common in the construction industry for Architects or Contractors to jump right into the work without taking the time to negotiate an agreement.  There are various reasons why these pros are so eager to get started.  For starters, you may have expressed a desire for a very aggressive project schedule, which they are all too happy to demonstrate how responsive they can be.  Maybe the scope of the work is exciting and they can't wait to get started.  Maybe they are short on work or coming off another project and they need the work.  Whatever their reason for wanting to jump right into your project, your reasons for not allowing this are stronger.  Take time to negotiate your agreement and don't skip any steps.

First, when you allow a vendor to start work you give up all of your leverage to negotiate.  Leverage is most important for negotiating pricing and favorable legal terms.  Without this leverage the Vendor has almost complete control over you.  This means you could be pushed into unfavorable agreements that limit your recourse when things don't go well. 

Written agreements are the prevailing document protecting both parties in the event of a dispute.  If you allow a vendor to commence the work or even perform the entire scope of the work without a contract you are relying on verbal communications between yourself and the vendor.  Verbal agreements are not only subject to interpretation, they are also prone to selective recollections.  Problems can arise at any stage of the project including very early on.  Don't allow any work to happen until you have things in writing.

Another reason Owner's should not allow work without a contract is that the scope of work needs to be carefully written and agreed to by both parties.  Without a well-written scope of work, you and your Vendor may have different interpretations of the scope.  Not only does this cause tension between the parties, but then it also opens the window for the Vendor to ask for more money.  

These three critical concepts illustrate the reasons why you should never allow anyone to perform any work without an executed written agreement.  It is too easy to get caught up in the urgency of a project.  Owner's need to take disciplined measures to ensure that they have all the protections possible before any work begins.  Expediting or skipping the contracting process puts Owner's at great risk.  Projects that are allowed to go on without written agreements tend to be more contentious, they cost more to complete, and can actually take longer than projects that are contracted.  Take the time up front to agree on the scope, schedule, cost, and legal terms and your project will run more smoothly and if you have any issue, you will have a basis for resolving whatever comes your way.

Tell me about your experience.  Have you done work without a contract?  Was it successful?