A written contract is a legally binding agreement between you and your contractor. It provides a record of the agreement that you and the contractor have reached. A contract also documents the rights and responsibilities of both parties, something that protects both you and the contractor.

The level of detail that should be included in a contract will vary with the size and complexity of the project. However, some aspects of the contract do not vary, specifically proof that the contractor has proper business insurance, Workers' Compensation coverage and, where required by law, bonding and licenses.

Most often, the contractor will prepare a draft contract for you to review. You should read through this document carefully and ensure that it accurately reflects what you have agreed to. Depending on the value and complexity of the work, you may also wish to have your lawyer review the draft contract. If there are any aspects of the draft contract that you are not in agreement with, or if there are details missing, these should be discussed with the contractor and remedied to your satisfaction before you sign it.

A good contract is one that treats both parties fairly. The contract should provide you with assurance that you will get what you agreed to, on the schedule agreed to, and at the price agreed to. The limits of the contractor's responsibilities must be equally clear, as should your obligations to the contractor for timely payment.

With larger renovation and custom home projects, it is common for a contract to specify how possible disputes between you and the contractor will be resolved, should these occur. The use of mediation or third-party arbitration are sometimes specified.

It is also common for contracts to include provisions that allow either party to be released from the contract should the other party default in specific ways. For instance, the contractor may be in default if he/she declares bankruptcy or "abandons" the work for a specified period of time. Conversely, the consumer can be found in default if they declare bankruptcy or fail to pay the contractor as agreed.