Strategy, Legal & Operations
Don’t minimize miscellaneous contract items
Over the past few months, we have addressed the things you need to know about the various sections of construction contracts, such as lien requirements, hidden obligations, and warranty work. Most construction contracts will also have a catch-all “miscellaneous” section. This area of the contract, usually at the end of the contract, can be several pages long and often includes subjects not necessarily unique to construction agreements. Just a few common contract terms include:
- Governing law: This typically applies to the state where the construction takes place.
- Venue and jurisdiction for any dispute: This is also often the specific locale where the construction occurs.
- Merger of all prior agreements into the subcontract: These agreements, which can be written or oral, are what is now found in the agreement you are asked to sign.
- Waiver of trial by jury: Most contractors usually prefer the reduced expense of a nonjury trial.
- Prevailing party’s right to recover legal fees and costs: This addresses that the winner has his/her fees and cost paid by the other side.
There are also at least two miscellaneous provisions that are unique to construction contracts: temporary facilities and work obligations during a dispute. Let’s take a closer look at each.
Unless provided, temporary facilities such as utilities and storage are the subcontractor’s responsibility. Most subcontracts spell this out in a provision similar to this:
Contractor shall have no obligation to furnish or make available to the subcontractor any temporary facilities or services, it being specifically understood, without in any way limiting the generality of the foregoing, that the subcontractor is responsible for its own utilities, hoisting, parking, lighting, security, storage, mobilization, demobilization, and clean up.
To avoid any conflict, subcontractors should make sure they clearly understand if any temporary facilities will be provided and exactly what they shall be responsible for.
Work obligations during a dispute
General contractors don’t want work to stop when a dispute arises. To protect against this, a provision such as the following is often added to subcontracts:
In the event of any dispute as to whether any item or portion of the work is within the scope of the work to be performed by subcontractor or any dispute as to whether subcontractor is entitled to any extra payment or additional time, subcontractor shall continue to proceed diligently with the performance of the work, this subcontract, and any disputed work, pending any resolution. The existence of a dispute shall not be grounds for any failure to perform by subcontractor nor limit the right of contractor to proceed to remedy any default by subcontractor.
Subcontractors, understandably, will want to limit this type of open-ended requirement. As in so many contract provision, the best way to do that is to add a reasonable timeframe. In this particular case, subcontractors may insert that they will continue work for a certain number of days even if a dispute arises as long as “contractor is diligently and reasonably pursuing a resolution.”
However, subcontractors should have the right to stop work if they haven’t been paid. To insure this right, another provision should be added:
Subcontractor can slow or stop work without liability or penalty if it has not been paid its draw request within 30 days after submission.
The main thing for subcontractors to keep in mind is they do not want to stop work without knowing what their contract says about termination. Walking off a job comes with significant risks, including being sued for substantial damages.
Get it in writing
Above all, make sure you have a written agreement in place before you start work. Ideally, work with a construction advisor or lawyer to make sure what’s in your contract will support your best interests—from the first-page preamble to the last-page of miscellaneous items – and do so before you sign that agreement.
Recommended Next Read
Warranties: Your obligations once the work is done
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