If you’re a subcontractor or material supplier in the construction industry, you routinely enter into contracts with general contractors (GCs) to define the scope of work and other aspects of your roles and responsibilities with the project. However, you have to be careful about entering one-sided contracts that have terms that only benefit the GC and offer you little protection. A one-sided contract can harm your business and even lead to costly litigation.
Emalfarb Law has published a webinar that offers tips for avoiding one-sided contracts and things you can do to protect yourself when dealing with GCs. For more information and specific advice regarding your case, reach out to an attorney experienced in construction law and contracts.
Believe in Yourself — Negotiate Your Contracts
Subcontractors and suppliers perform an important role in any construction project, but they don’t always get the respect they deserve. A GC who doesn’t recognize their subcontractors’ and suppliers’ true worth can draft a lopsided contract, putting these parties in the position of having to negotiate for a fair deal.
Any term in a contract can be modified, but to succeed, you need to go into the negotiations with the right attitude. You have to believe in the quality of your work and expect that you’ll be paid what it’s worth. Without this attitude, you’ll never get anywhere in the negotiation process.
Construction lawyers negotiate construction contracts every day. As you and your attorney negotiate your contract with your GC, you should insist on provisions that:
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- Ensure timely payment for your work
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- Limit your liability from compliance issues, cost overruns, delays, and damage caused by another party’s negligence
In short, your goal is to obtain a fair and reasonable contract that won’t harm your business in the long run. You may not get everything you want, but you won’t get anything unless you try.
Protect Yourself — Beware Killer Clauses
As a subcontractor or material supplier, you want to protect yourself. Your GC, on the other hand, wants to shift as much of the project’s risk onto you as possible. This means they might require you to use your insurance as the primary provider, for example, or they may try to limit their so-called “flow-down” liability or place undue liability on you for the extent of recovery from the owner.
Since you may never actually see the prime contract, you might not have any idea of its terms. Thus, you shouldn’t be held accountable to all the general contract’s terms and provisions.
Chief among those terms is the scope of work. The GC may require you to provide “all things necessary” for your work, regardless of whether they’re in the plans or not. You may also be required to perform all work in “strict” accordance with “all contract documents.” The GC could even ask you to assume “all obligations, risks, and responsibilities” and try to fully bind you to the contract.
Be sure to read the prime contract and pay careful attention to its clauses. You can and should negotiate to limit your work to the project’s plans and specifications, and not agree to do work outside your scope or that goes beyond what you intended to sign up for.
In fact, a Supreme Court case states that as a subcontractor, you are not responsible for the accuracy of plans and specifications unless you agree to it. So don’t agree to it.
You also need to be careful about the provisions indicating when you’ll be paid: The GC may try to include a clause where they only have to pay you when they get paid. Instead, negotiate for terms that you will receive payment within a certain timeframe, whether or not the GC is paid, and include interest on late payments and the right to stop work if you’re not paid on time.
Two other items you should never tacitly agree to in your contract:
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- The appropriateness of the job site for the project
- The accuracy of the project’s plans and specs.
Insurance Risks and Indemnification
Two of the most overlooked issues involving construction contracts are indemnification and insurance risks. Because these two concepts are inseparably linked, you must analyze them together to avoid creating a bigger nightmare for yourself and possibly bankrupting your company.
In some cases, when an owner sues a GC, the GC will bring in the subcontractor under the contract provision that the subcontractor is obligated to indemnify the GC. Some subcontractors erroneously believe that a Certificate of Insurance provides the indemnity the GC requires. It does not.
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- Indemnification provisions can make or break your company. Work with a construction attorney to draft provisions that properly secure additional insured status for the GC.
The cost to defend problematic indemnification issues typically far outweighs the cost to provide additional insured coverage, so it’s in your best interests to work with a construction attorney to make sure you have the necessary provisions in your contract’s clauses.
Emalfarb Law Can Help You Avoid One-Sided Contracts
Emalfarb Law has established itself as one of the premier construction and lien law firms in the United States. Our legal team has decades of collective experience representing subcontractors, material suppliers, general contractors, and other construction professionals and businesses.
In addition to our in-house counsel, we also have an extensive nationwide network of construction and lien attorneys and legal resources. We effectively serve construction-industry clients in every state.
You can turn to us for help drafting initial construction contracts or revising current ones to help place you in a better position in your relationship with your project’s GC. We can also assist with enforcing contract terms to help ensure you get the favorable results you seek, either through arbitration or litigation. Moreover, we can defend you and your company against litigation for breach of contract, mechanics liens, construction liens, and other serious issues that threaten your company.
Contact Emalfarb Law today to find out more about how we can help with your situation. You can use our online reservation form to schedule a confidential consultation. This also gives us the detailed information we need to better serve you.