Paid when paid contracts/subcontractor contracts/Neill Bonding & Insurance/GA, LA, FL, AL, MS, MO, KY, AR, SC/Contruction Contracts

When it comes to contracts, knowledge is power.  The contract documents, which include the plans, project manual ( include the general conditions, supplemental conditions, technical specifications, etc) and the contract, not only define the scope of work but they also provide a set of rules and procedures that all parties are to follow.  This includes contract termination rights, change order and payment procedures, insurance requirements and a host of other important information.

The contract usually defines the powers and limitations that each party has in enforcing the rules and procedures.  This is an extremely powerful document but most people fail to read the entire contract before they sign it. 

Key items to look for in a contract:

1.  Defective plans or specifications.  Look for anything that  would be unreasonably difficult to perform and then clarify what is specifically required in the contract itself.  Unless you write in the contract itself that your proposal or bid is included, once you sign the contract, your proposal or bid is not part of the agreement.

2.  Unclear or generic scope of work.  If the scope of work does not have a clear and detailed description of the specific tasks, getting credit for extras or changes may be difficult because these will not be easily measured against the original intended scope of work.  How many times do change orders get disputed because one party believes they are part of the scope of work and the other believes they are an extra?

3.  Difficult payment procedures.  Many general contractors’ contracts say that the subs get paid only if, or when, the general gets paid.  While our courts have outlawed these provisions, people still tend to follow them during the course of the project.  Who wants to wait for the end and battle it out in court just to get paid?  Also, be aware of payment procedures that allow the owner or general to reject the entire pay application due to a minor defect in the application itself.

4.  Inconsistent details.  A common example is the stated quantity or quality of a certain material listed in the specs does not match up with what is sown on the plans or an existing condition does not match the actual site conditions.  It is imperative that those discrepancies be addressed in writing as soon as you know there is a problem. 

If you know of the issue before the contract is signed, do NOT sign the contract until the issue has been resolved and appropriate changes are made to the contract before signing.

5.  Unrealistic or undefined project schedules.  If an owner or general provides you with the schedule, make sure it it reasonable for your work.  If you can’t make the schedule, DON’T sign the contract.

6.  Vague timing for submittal reviews or request for information.  The contract documents should specify how long it will take the architect to review submittals or respond to requests for information, so that you will know what to expect to coordinate the information with the timing of work being performed on your project. 

7.  Strict notice procedures for delays, changes and/or extras.  Many contracts have provisions that if you do not provide written notice within the time required, you waive any right to get additional compensation for that extra, changed work or delay. 

8.  Decisions at the owner’s or contractor’s sole discretion.  Anything that allows an extremely subjective opinion as a final determination does not bode well for the person on the receiving end of that decision.

9.  Incorporation of the prime contract.  Subcontractors that reference the prime contract usually mean that the subcontractor is obligated to the general to the same extent the general is obligated to the owner as it relates to the sub’s work.  This applies to notices, insurance and indemnity.  Unless the sub reads and understands what obligations the prime contract imposes on the general contractor, there is no way the sub knows what they are getting into. 

Information provided by Modern Contractor Solutions.

3 comments to Paid when paid contracts/subcontractor contracts/Neill Bonding & Insurance/GA, LA, FL, AL, MS, MO, KY, AR, SC/Contruction Contracts

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