"My brothers and I started a construction business earlier this year. We just got our first job -- as one of about a dozen subcontractors on a major construction project -- and we're really excited about it.
"The general contractor just handed us our contract. It's a 50-page monster, with lots of fine print. He also told us we wouldn't be able to negotiate it because he needed all of the subcontractors to be 'on the same page' when it came to contract terms.
"We don't really know even where to begin looking at this contract. Can you help us?"
The short answer is "no I can't." You will need to speak to a local attorney who is familiar with construction contracts (and good luck finding one who isn't already representing either the general contractor or one of the other subcontractors).
Having said that, though, I think your general contractor is wrong, and may be taking advantage of your "newbie" status. You absolutely can -- and should -- review and raise questions about the contract. Here are some things to look for.
Description of Work: The job description should be based on specific tasks, specific results or specific deliverables. Anything else is too vague. Results and deliverables should always be quantified, never subjective and timetables should be reasonable. State clearly that any work not spelled out in the contract requires a change order and an additional fee.
When Do You Get Paid? Your invoices should be paid within X days of delivery (or achievement of a project milestone) unless disputed in good faith, and you should have the right to stop work until any dispute over a bill is resolved. Payment upon completion or upon acceptance may be OK if the criteria for completion or acceptance are clearly defined. But payment upon client satisfaction (even reasonable satisfaction) is never okay. Some clients are never satisfied.
When Do You Get the "Holdback"? Construction contracts typically allow for a "holdback" (usually 10 percent of the contract price) at the end so everyone can verify that everything is working properly and was properly installed. Your contract needs to be crystal clear about when the "holdback" will be released, and any lien waivers (more on that below) should be conditioned upon your receiving full payment for your work.
Are There Penalties for Delay? There shouldn't be, unless you caused the delays. Put a time limit on delays you don't cause (such as materials arriving late, or your sub-subcontractor not showing up on time), and provide for a fee increase if delays exceed the time limit. Watch out for "time is of the essence" language giving the general contractor the right to dock your pay if you are even one day late getting the job done.
What Happens if the General Contractor Doesn't Get Paid? The general contractor understandably doesn't want to be on the hook to pay you if the client is not paying him. Still, if you've done your work, you should get paid. Insist on an outside cutoff date beyond which the general contractor must pay you out of his own pocket. If the GC refuses, insist that you will file your mechanic's lien if you are not paid within X days of the due date.
When Can I File My Mechanic's Lien If I Don't Get Paid? If you do not get paid for any reason, often your only recourse is to file a mechanic's lien against the project. This is a "cloud on title" (a copy of the lien is usually recorded in the local land offices) and will prevent the project owner from getting a mortgage or a certificate of occupancy until the lien is removed.
Your subcontract must be crystal clear about when you can file your lien if you don't get paid. If your general contractor requires you to waive the right to file a mechanic's lien before you begin work (many do), make sure it's a conditional waiver of lien that will allow you to file your lien if you are not paid within X days of completing your work or submitting an invoice to the general contractor.
Are the Performance Warranties Overly Broad? You should never warrant anyone's work but your own, or that the client will be satisfied. You should only warrant that work will be performed in a good and workmanlike manner. You should indemnify the general contractor only for your gross negligence and willful misconduct, and limit your liability to the fees you received for your work.
Avoid a "Battle of the Forms" Have your attorney look at the other project documents to make sure they are consistent with yours. Frequently in large construction projects there's a "battle of the forms," with contracts containing inconsistent or contradictory language. Make sure your contract has a traffic cop provision saying clearly that in case of a dispute between your contract and someone else's, your contract governs.
Cliff Ennico (email@example.com) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com.
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