What to Consider Before Entering a Joint Check Agreement
Working in construction takes both skill and intellect. Due to the inherent risks construction professionals face daily, it pays to seek out tools that will reduce your risks. Payments, in particular, are a common area of concern for everyone. A common tool used to make payment processes more efficient is the joint check agreement. Although this agreement is commonly used and can be very beneficial, the risks associated with them warrants some caution in their use.
Should You Use a Joint Check Agreement?
Whether you use a joint agreement or not depends on different factors. Without a joint check agreement, payments make their way from an owner to a general contractor who then has to pay the subcontractor who then has to pay those under him. Typically issues arise concerning delayed payments or no payments being made at all. Lower tier parties will then seek legal remedies for nonpayment. With a joint check agreement, one check is issued from an upper tier downstream to lower tier parties. Sometimes this lateral payment is necessary to ensure everyone is getting paid properly.
No Standard Check Agreement
A joint check agreement is meant to mitigate risk but it should not be your only source for securing payments. There is no state or federal law governing joint check agreements. Contractual parties can draft up this agreements based on the unique needs of their business relationship. Since these agreements are not regulated, costly mistakes can occur if individual parties are not meticulous about drafting the agreement.
It is important to ensure everyone agrees to and signs a joint check agreement because joint check fraud is common. Also, be on the lookout for check forging. If you find that a party is using illegal methods of endorsing a joint check contact a Tampa construction lawyer immediately.
Use Joint Check Agreements Wisely
Avoiding costly mistakes is crucial. To lessen the likelihood of risks consider the following:
- Define whether your joint check agreement is obligatory or permissive.
- Use clear contract language
- Establish that a joint check agreement does not create a contractual relationship between an upper-tier
- (i.e., owner) and lower-tier (i.e., supplier).
- Ensure that waiver and release of claim documents are completed and signed
- Identify who bears what risk and consider limits on liability
Get advice from a Tampa construction lawyer to assess the risks and benefits of entering into any joint check agreement. Failing to do so can leave you dealing with unexpected consequences, liabilities, and regret.
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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.