Sage Advice US

Construction contracts: Pay attention to the preamble

I recently filed a lawsuit on behalf of a subcontractor who hadn’t been paid. The prime contractor named in the suit countered, saying that the company name listed in the contract’s preamble wasn’t the right company. When we looked into it, we found that the prime contractor had three nearly identical names, and the proper entity wasn’t the one listed in the contract’s preamble.

Pro-tip: You can usually verify company names by checking with your state’s online business registry. Florida, for example, provides an easy way to search business records on its site.

When you’re dealing with contracts that can be 15 to 80 pages long, company names and other information in the preamble may seem minor in comparison to other terms and provisions in the contract. But like any part of a legal document, a preamble’s significance shouldn’t be overlooked.

A preamble is a short explanation of the contract usually, but not always, found on the document’s first page. It typically includes:

A preamble will also include whether you are required to furnish a bond. When working with subcontractors, I’ve often been surprised at how many don’t know if the prime contractor also has provided a bond. If you are a subcontractor, this is important to know if you want to assure you will get paid. Also, if you provide a bond and the prime contractor doesn’t, it can create a tremendous amount of risk for you as a subcontractor if something goes wrong.

Correctly executed contracts set the stage for a project’s success while protecting your company’s rights.  Start your contract due diligence from the very beginning with the preamble.