Implementing Payment Plans into Your Construction Contracts Part 2
In this two-part article series, we are discussing a few of the primary reasons why every contractor needs to have a payment schedule clause included in their contracts. As we discussed in the first section, it’s critical to have a clearly worded outline that unambiguously sets forth the payment expectations in regard to each stage of a project to ensure you are properly compensated for your work.
In this section, we will discuss a few other payment clauses that need to be included in the contract to make certain that you have the capital to perform the necessary work and are also protected from an owner that refuses to compensate you promptly. If you are interested in having an experienced Boca Raton construction attorney draft your construction contracts, please contact Cotney Attorneys & Consultants today.
Mitigating Financial Risks
Although ongoing finances in a construction project can quickly add up, the most significant project investments are made in the preliminary stage. As the old adage goes, “you never want to put all of your eggs in one basket.” When a Boca Raton construction lawyer negotiates your contract, they can ensure that most of your compensation is “front-loaded” so that you do not have to break the bank on that initial investment into the project. This saves you cash flow and eliminates significant financial risk that can compromise the future of your business.
Reward Prompt Payments
When a project is completed, every contractor has likely experienced that stressful feeling of awaiting final payment. To avoid the dreaded waiting game, it’s best to give the owner some extra motivation to pay promptly. If you implement a prompt payment reward that lowers the total cost owed, the owner will be more likely to take advantage of this clause and compensate you within weeks of the completion of your work. Of course, this total difference “bonus” can be factored into the contract before you agree to perform the work to ensure you are not taking a loss in offering this benefit.
How to Deal with a Delinquent Owner
To avoid an owner that is delinquent in payment, you will need a clause in place that clearly establishes the penalty for their late payment. Although this may not motivate every owner to pay on time, having such a clause in place can be an effective and aggressive tactic to ensure you are paid on time. Depending on if there is potential for future work with the owner, you can always waive the penalty if it seems like the logical step for developing an ongoing partnership.
If you would like to speak with a Boca Raton construction lawyer, please contact us today.