Two Clauses Subcontractors Need to Review
Since the vast majority of commercial construction is performed by subcontractors, our Tallahassee construction law attorneys think it’s worthwhile to focus on the risks that subcontractors face in the construction industry and clauses that subcontractors should understand before they sign a contract.
Subcontractors Bear the Risk
We’ve said it many times and it bears repeating. Construction is risky business and even riskier for subcontractors. Risks subcontractors have to contend revolve around performance, safety, and finances. Since subcontractors perform much of the work on projects, naturally, through contract drafting, the risk was shifted to subcontractors. This was a trickle down effect meaning that as owners passed the risk to prime contractors, prime contractors would then shift the risk to subcontractors. This risk shifting has been the root of many construction disputes as subcontractors began to protest inequitable contracts.
Following are two clauses subcontractors should seek legal advice on before signing.
At times an owner may fail to compensate for work performed which leaves the general contractor bearing the risk. This also leads to a contractor potentially shifting the risk to subcontractors. Often times you will see a contingent payment clauses written in contracts. A subcontractor’s best course of action would be to revise the clause to ensure the subcontractor is paid within a reasonable amount of time if the reason for nonpayment is unrelated to the subcontractor’s work. Additionally,
Transfers responsibility from the general contractor to subcontractors. Since this clause usually conveys that the subcontractor is taking on all of the responsibility that the general contractor has towards the owner, it is critical that subcontractors understand what they are agreeing to. For this reason, it wise for subs to agree to share responsibilities as they relate to the subcontractor’s specific work as outlined in the project plans and specifications. It is also advised that subcontractors revise the clause so that they are afforded the same rights and remedies held by the general contractor.
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Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.