Formalizing a Relationship with Hi-Tech Housing
The process begins with the submission of a “Builder Application.” This simply collects the information we need to conduct a basic competence and credit search and to understand your form of incorporation, legal address, etc…
Assuming all is in order, we will both sign a “General Terms and Conditions” form. Individual homes are ordered with a specific sales order. Rather than burden each order with repetitive legal terms, we execute the “General Terms and Conditions” that apply to every sales order once each year. Sometimes, a large and complex project deserves its own separate contract, but that is more typical of our multi-family and commercial business. The language in the “General Terms and Conditions” form is straightforward and self-explanatory, so we will simply list here the sections and call attention to some particularly important aspects.
• Sales Order Documents: This is a definition of the documents that constitute an order for a particular home, including applicable plans, specifications and the sales order itself. It also defines the precedence of the documents, that is, it establishes which document prevails if there are any inadvertent inconsistencies among them. We call your attention in particular to the inclusion of the “Standard Scope-of-Work Schedule.” Understanding the scope-of-work boundaries among the manufacturer and the on-site trades is a critical part of off-site construction, especially during your collection of bids from the on-site trades.
• Sales Order Acceptance: This section describes what must happen for a particular sales order to become a binding mutual agreement.
• Change Orders: This section describes the process for making a change after a sales order has been accepted. Note that after materials have been procured and especially after manufacturing commences, it may not be possible to accommodate a change.
• Time of Performance: This section describes the process for establishing a production and delivery schedule.
• Cancellation: While rare, circumstances may arise when either you or we need to cancel an accepted order. This section deals with the potential cost consequences of a cancellation.
• Risk of Loss: Whether your insurance or ours applies to damage or loss of the product depends on transportation arrangements as defined in this section.
• Service and Warranty: This section incorporates our standard limited warranty and service policy, both of which are downloadable documents. Note that there are important differences between the US and Canada.
• Relationship of the Parties: This section confirms that we are each independent firms and neither has an agency or franchise responsibility for the actions of the other.
• Indemnification: This is a mutual cross-indemnification in which we each take responsibility for our own actions, errors and omissions.
• Dispute Resolution: We agree to settle disputes through arbitration.
• Assignment: This is typical contract documentation forbidding the assignment of an order to another party without permission.
• Governing Law: Indiana contract law applies.
• Notification: Provisions for formally notifying the other party
• Whole Agreement: This is typical contract documentation for excluding verbal and written discussions which took place prior to the execution of the General Terms and Conditions.
• Waivers & Modifications: More typical contract language on what happens when the parties agree to waive a provision of the General Terms and Conditions in a particular instance or modify a particular provision by written amendment.
With our unique expertise in custom building, about 80% of our sales involve custom quotations. We do have published prices for our “standard” product offering, which are available by request in written or electronic form to qualified builders, accompanied by necessary explanations by our sales team. Both US and Canadian prices are denominated in US$. We attempt to confine changes in published prices to once annually, usually at the beginning of the calendar year. In periods of relatively rapid inflation in the cost of building materials, we may invoke a surcharge, usually expressed in terms of $/square foot for each general product category.
Since our distribution network is not particularly dense geographically and those builders and dealers who are relatively close often sell quite different products or do not rely on our standard designs, we rarely encounter conflicts. Therefore, in our system, a formal assignment of “territories” is rarely necessary. Nevertheless, situations in which such an acknowledgement is mutually beneficial do arise, particularly when a builder or dealer has made a substantial investment in display homes. For those situations we are prepared to enter into a marketing agreement tailored to the specific circumstances. In general, such agreements commit us to refraining from establishing other similar relationships in a particular geographic area contingent upon the builder or dealer sustaining an investment in display merchandise and/or achieving agreed sales volumes. Regardless of whether we enter into a formal marketing agreement, we pledge to inform current builders and dealers in our network when we have the opportunity to recruit another distributor somewhere nearby.
Reflecting the nature of our business and general conditions in the housing market since the “Great Recession,” we do not build a cushion into our prices to support volume rebate programs and frequent promotions and incentives. Occasionally, when economic circumstances render it desirable, we offer a seasonal incentive to all. While rare, we do occasionally have the opportunity to build a project with a large number of repetitive units. In that situation, we may be able to adjust our normal pricing methods to reflect the opportunity to purchase large quantities of materials at discounted prices and to achieve greater than normal labor productivity.
Documents referenced in this exploration of the process for establishing a buy-sell relationship can all be downloaded from the “Resources” section under “Builder/Dealer” on this web site.