After the last two weeks’ analyses of a couple of big construction decisions that came out recently, I thought I’d keep this week’s post practical and short for those that are not construction lawyers. So without further ado, here is a short checklist of the top things (aside from calling their local experienced construction attorney) a construction subcontractor should do or look for when reviewing a construction contract from a general contractor (and for a couple of these that a general contractor can look for in its prime contract).
- ALWAYS get a copy of the Prime Contract between the Owner and the General Contractor. This contract will contain terms that will “flow down” to you through the incorporation clause that almost every subcontract contains. You can’t do much to change these terms, but you will need to know them as the job progresses.
- READ every provision of the subcontract. I know this sounds simple, but not all subcontracts hide the red flags in the same places. Remember the details of a subcontract can sink you later if you aren’t prepared.
- COMPARE the insurance and indemnity provisions of your subcontract. Be sure that you are insured for those things that you are indemnifying for or you could be left bare in the unlikely event of a problem. Also, be sure that you aren’t indemnifying the General Contractor for its negligence or for the actions of others. It also would not hurt to run these provisions by your insurance carrier to be sure that the carrier is on board.
- STRIKE or at the very least soften any “pay if paid” contract language. If a General Contractor won’t agree to strike the provision, at least put it in line with the law and try and add language that any non-payment has to be your fault before you are subject to such a clause.
- BALANCE the attorney fees provisions. Many subcontracts have one way provisions that allow the general contractor to collect its fees but barring your collection of the same even if you win. At the very least try and edit these types of provisions to allow the winner (“prevailing party”) to collect its fees.
This is far from an exhaustive list and should not be taken as a one size fits all approach to negotiating your subcontracts. As I stated above, you should always consult a construction attorney that you trust and do so early in the process to be sure that all of the nuances of your particular subcontract are covered.
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