C O N S T R U C T I O N L A W www.acpa.org Thomas Olson is the founding partner of Olson Construction Law. Tom’s commitment is to provide guidance on how to resolve issues on the jobsite, not in the courtroom. Tom has worked on highway heavy projects throughout much of the United States for more than thirty years. A prolific speaker and writer as well as attorney, his expertise is in concrete and asphalt paving, utility, earthwork and bridge construction, schedule analysis, material testing, and the technical and legal obligations of both engineers and contractors. Rielly Lund is a committed advocate for contractors, with the ability to quickly and accurately analyze a client’s issue within the parameters of each specific contract. Rielly works with contractors through all stages of construction, from bidding to acceptance, with the goal of minimizing risk and maximizing profits for contractors. With this in mind, Rielly enjoys discussing various contractual requirements with contractors before issues arise, so they are best able to meet any challenges head on. ABOUT THE AUTHORS won’t be paid by the owner if the general is the one who delayed the project). We recommend that any waiver of liability makes it clear that if the general contractor is the one that causes delay, it is still liable despite the “no damage for delay” clause. Again, this comes down to fairness in contracting: if the subcontractor delays the general, it makes sense that the subcontractor needs to pay for the damages, so doesn’t it also make sense that the general should likewise pay the subcontractor for delays it causes? Payment Terms Very often payment clauses include language such as: “payment to the subcontractor is expressly conditioned upon payment from the owner for the work.” While this certainly seems fair on its face, payment being conditioned on acceptance and payment by the owner, it fails to recognize instances inwhich the work was accepted but not paid for due to a delay or other damage caused by the general. While it can generally eventually be worked out through a payment bond, direct payment from the owner, etc., subcontractors will often be hit with the blanket defense of “payment is not due until the owner pays, regardless of who caused damage.” A simple inclusion of the phrase “unless the general is the cause for nonpayment by the owner” can cut out the time that would be required to fight over the right to payment. Disputes Finally, the dispute resolution clause can cause issues if you don’t read it carefully. First, review to see what the clause requires, mediation, arbitration, litigation, etc. While the clause likely incorporates the general contract dispute clause should the owner also be involved, what happens when it is a dispute between just the general and subcontractor? While the time and expense of litigation has made our office a fan of arbitration, that process isn’t for everyone, and you should be clear on your preferences. The clause likely includes a venue clause, i.e., where the dispute will be settled. Often, general contractors include the location of their office, which can be a problem for the nationwide nature of contracting. If you cannot come to agreement, we recommend requesting the location of the project as venue, as that is where the project is and most of the witnesses will be. Additionally, the clause may address attorney’s fees. We typically see the subcontractor liable for attorney’s fees regardless of who the prevailing party is, liable for defense costs regardless of who the prevailing party is, and zero liability for the general contractor. We typically recommend that the attorney fees either be completely taken out, or that it is adjusted to only award fees to the prevailing party, and allowing both the general and the subcontractor to recover when they are the prevailing party. Conclusion The above is just a small sampling of issues we regularly see. There are numerous others that come up, and we want to again highlight that this is not legal advice and that you should consult with an attorney. The above is meant as an example as towhy it is so important for subcontracts to be reviewed before signing. And again, while generals can hold subcontractors to the bid price, subcontractors cannot just be required to sign any subcontract that could shift liability and responsibility fromwhat was bid on. If you work towards a position of the party causing the issue being responsible, you will be on the right path towards negating the subcontract. Subcontracts should be based on fairness for both parties. 23
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