SUBCONTRACTORS:
BEWARE OF THE SHIFTING OF RISKS ON A CONSTRUCTION PROJECT!
Every day, general contractors are demanding that subcontractors assume more risk on each construction project. In line with the often-quoted "food chain theory," the parties to a construction contract have become increasingly determined to shift certain construction risks to each other all the way down from owner to general contractor; from general contractor to subcontractor; and from subcontractors to lower-tier subcontractors and material suppliers.
In most subcontract agreements there are certain key clauses that every subcontractor must address, but many fail to do so. Some of these clauses involve: (1) the timing and right to payment; (2) waiver of certain damages; (3) indemnity requirements; (4) the right to be paid for change orders; (5) the right to file a lawsuit; (6) waiver of the right to file a lien; (7) payment of the other parties' attorneys' fees; and (8) “additional insured” insurance requirements. Failing to address and negotiate these clauses will undoubtedly increase the subcontractor's risk and/or decrease what may be a very slim margin of profit on the project.
These are just a few of the risks assumed by a subcontractor in a subcontract agreement. As the shifting of risks on a construction project becomes more and more prevalent, a subcontractor must be more diligent in reviewing and understanding ALL of the provisions of the subcontract agreement. Spending a small amount of attorney's fees in having your attorney review and negotiate the subcontract on the front end could save thousands of dollars on the back-end.
For questions related to the various provisions contained in a subcontract agreement, or advice on other construction issues, please contact Bryan L. Jeffries, The Jeffries Law Group, LLC, at [email protected], using our online form, or call us at 614.818.7660.