{"id":1757,"date":"2013-06-19T06:49:50","date_gmt":"2013-06-19T12:49:50","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=1757"},"modified":"2013-06-17T16:50:05","modified_gmt":"2013-06-17T22:50:05","slug":"important-contract-clauses-for-subcontractors-and-suppliers","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/important-contract-clauses-for-subcontractors-and-suppliers\/","title":{"rendered":"Important Contract Clauses For Subcontractors And Suppliers"},"content":{"rendered":"

Joe Virene – June 11, 2013<\/p>\n

Because of time constraints and the desire to get the business, subcontractors and suppliers routinely sign lengthy subcontracts and master service agreements without closely reading the terms and conditions.\u00a0 Below are some clauses that every subcontractor and supplier should review in a contract.<\/p>\n

1.\u00a0Payment Conditions\u00a0\u2013 You should minimize and narrow preconditions to receiving payment. \u00a0For example, you should strike any clause that makes your payment contingent on your customer getting paid (aka \u201cPay if Paid\u201d clauses). \u00a0Even more harmless preconditions (e.g., submitting certain paper work, invoice requirements)\u00a0deserve scrutiny because you should ensure they are practical and that you understand how to comply with them, so there is no delay in payment.<\/p>\n

2.\u00a0Change Orders\u00a0\u2013 The contract should define circumstances (especially for unforeseen events) in which you may receive a change order providing additional time and\/or pay for work under certain circumstances.\u00a0 The more circumstances that allow change orders, the better from a subcontractor\u2019s point of view.\u00a0 Some common examples include: owner or designer change of opinion or preference; code changes; unexpected weather conditions; change in the owner\u2019s available funding; and design error or omission.<\/p>\n

3.\u00a0Termination\u00a0\u2013 Most contracts differentiate between termination for cause and termination for convenience. Naturally each party wants broad discretion to terminate the contract, but \u00a0would prefer the other party have narrow discretion to terminate the contract. \u00a0It is best for all parties if \u201ccause\u201d is clearly defined to mean certain specific events. \u00a0The termination clause should also clearly identify how much money you will be paid if the contract is terminated for convenience or for cause. \u00a0The termination for cause provision should provide a right to cure the problem before the contract may be terminated.<\/p>\n

4.\u00a0Indemnity\u00a0\u2013 Subcontracts or MSAs almost always require subcontractors and suppliers to indemnify the contractor from damages arising from various claims. Such indemnities frequently shift a substantial amount of the risk to subcontractors and suppliers.\u00a0 Indemnities are very complicated and there is not a one size fits all approach.\u00a0 But as a general rule, look for mutuality and strike one sided indemnity clauses, especially where the subcontractor is indemnifying the contractor for its own negligence and the contractor is not indemnifying the subcontractor for anything.<\/p>\n

5.\u00a0Warranties\u00a0\u2013 Subcontractors are generally required to warrant that the work performed is free of material defects and has been performed in a workmanlike manner for some period of time after completion. As a general rule of thumb, take care that the warranty language does not go beyond what you actually did. \u00a0Also, review the time period covered by the warranty obligation (3 months, 12 months, etc.) and what the remedy is in the event of a defect.<\/p>\n

6.\u00a0Limitations on Liability\u00a0\u2013 Subcontractors and suppliers should negotiate for a broad waiver of consequential damages (e.g., lost profits, business interruption, etc.) and punitive damages.\u00a0 These clauses protect subcontractors and suppliers from unforeseeable and uncontrollable damages.\u00a0 In addition, consider requesting a cap on liability (e.g. contract price, contract multiple, a fixed dollar amount, or equal to insurance limits).<\/p>\n

7.\u00a0Flow down\u00a0– Many subcontracts contain clauses which impose the terms and conditions of the prime contract on the subcontractor.\u00a0 If you see such a clause, then request a copy of the prime contract so you know what you are agreeing to.<\/p>\n

8.\u00a0Arbitration\u00a0\u2013 Many construction contracts and Master Service Agreements require arbitration clauses.\u00a0 Arbitration by itself is not disadvantageous for a subcontractor or supplier, but there are many nuanced provisions that should be considered, such as, the scope of the clause, the procedural rules that will govern the arbitration, the number and selection of arbitrators.<\/p>\n

9.\u00a0Lien Waivers\u00a0\u2013 Although in some instances, mechanic\u2019s and materialmen\u2019s lien waivers cannot be enforced, subcontractors and suppliers should always strike lien waiver clauses.\u00a0 Waiving the right to perfect and enforce lien and bond claims can have a ripple effect and cost a subcontractor money in the long run.<\/p>\n

10.\u00a0Choice of Law and Venue\u00a0\u2013 Master Service Agreements and even subcontracts may choose a law or venue unrelated to the project.\u00a0 Always review governing law and venue clauses to avoid unintended consequences and being pulled into an unfavorable jurisdiction.<\/p>\n

Every clause in a construction contract is important and warrants your attention.\u00a0 Once you sign a contract, you are obligated to follow every word of it \u2013 it is important to understand your rights and obligations before you sign on the dotted line.\u00a0 And in many cases, it is wise to retain counsel.<\/p>\n

via Important Contract Clauses For Subcontractors And Suppliers | Looper Reed & McGraw, P.C. – JDSupra<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Joe Virene – June 11, 2013 Because of time constraints and the desire to get the business, subcontractors and suppliers routinely sign lengthy subcontracts and master service agreements without closely reading the terms and conditions.\u00a0 Below are some clauses that every subcontractor and supplier should review in a contract. 1.\u00a0Payment Conditions\u00a0\u2013 You should minimize and… Continue reading Important Contract Clauses For Subcontractors And Suppliers<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[72,364,121],"class_list":["post-1757","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-construction-contracts-2","tag-contract-clauses","tag-subcontractors","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nImportant Contract Clauses For Subcontractors And Suppliers - 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