Are you negotiating a subcontract?
If so, here are a few risk-reducing best practices from construction lawyer, Christopher G. Hill.
In Hill’s blog post, A Quick Checklist for Subcontractors, he provides 5 recommendations for subcontractors. Although the article is focused on contract negotiations, the advice transfers over to securing your mechanic’s lien rights.
First on Hill’s list is “always get a copy of the Prime Contract between the Owner and the General Contractor.” Hill advises that you can’t change the terms of this contract, but you can familiarize yourself with them so you are prepared as the job progresses.
Why is it beneficial to get a copy of the prime contract when securing mechanic’s lien rights? A copy of the prime contract may provide helpful identifying information about the project and parties in the contractual chain.
Hill also stresses the importance of reading every provision of the contract.
“I know this sounds simple, but not all subcontracts hide the red flags in the same places. Remember, the details of a subcontract can sink you later if you aren’t prepared.”
I agree with Hill. This seems like a no brainer as you should always read documents before you sign them. However, I also know that, in the internet age, we are quite desensitized to “terms and conditions” — I mean, when was the last time you truly read terms and conditions instead of quickly clicking “agree” so you could move on with your day?
Reading your contract is important, and it’s also important to obtain a copy of the payment bond and read the terms of that bond. While you are obtaining documentation, make sure you review copies of invoices, change orders, personal guarantees, joint check agreements, etc.
Rounding out Hill’s checklist, he suggests, “strike or at the very least soften any pay-if-paid contract language.”
Aside from the obvious benefit of eliminating a pay-if-paid provision, familiarize yourself with the state statute regarding payment clauses. Each state is different and, in some states, pay-if-paid provisions are not enforceable.
In this week’s blog post, we discussed a recent decision from a Washington appeals court. The subcontractor filed a mechanic’s lien and that lien was bonded off. When it came time to enforce their claim, the subcontractor only named the surety in their suit. The surety argued that the owner should have also been notified of suit — read the post here to find out who should have been named in the suit, according to the appeals court.
Upcoming Educational Opportunities
- 4/4/17 @ 1:00 pm: UCC Remedies Upon Debtor’s Default
- 4/18/17 @ 1:00 pm: Understanding Lien Waivers
- 5/2/17 @ 1:00 pm: UCCs Offer Security for Many Business Transactions
- 5/16/17 @ 1:00 pm: The Importance of Gathering Job Information
Conferences, Events & Tradeshows
- 4/11/17: FCFP Credit & Accounts Receivable Professional Retreat Day in Lafayette Hill, PA
- 4/12/17: CreditScape Spring Summit in Garden Grove, CA
- 6/11/17: NACM’s 121st Annual Credit Congress & Exposition in Grapevine, TX
NCS Spring Seminars
- NCS Spring Seminars are set — make sure you join us!
- 5/16/17 – St. Louis, MO
- 5/23/17 – Columbus, OH
- 6/6/17 – Orlando, FL
- 6/8/17 – Charlotte, NC
Bookmark our Calendar of Eventspage for up to date listing of all educational opportunities.