When thinking about payment and a construction contract, most subcontractors will likely only focus on the payment section of the subcontract. But did you know that there are other sections of the subcontract agreement that can significantly affect your ability to collect payment? It is always important to review and understand the entire contract, but there are two sections we want you to pay close attention to.
1. Project Scope:
All subcontracts contain a section that describes the subcontractor’s scope of work. It is imperative to make sure that the scope described is an accurate description of the work you are offering to perform for the price contained in the payment section. In our practice, we have faced many situations where the subcontractor did not carefully review the scope of work section, and only realized later that the scope of work contained in the contract will end up costing them significantly more money. If you see that the scope of work is more than what you bid, the time to negotiate is before you sign the contract, not after!
2. Dispute Resolution:
Almost all subcontracts now contain a section describing the process for resolving disputes. Most of these provisions contain an arbitration clause, which requires the parties to submit to arbitrations instead of resolving disputes in courts of law. These provisions could end up costing the subcontractor substantial amounts of money to pursue a payment that is owed to them. This is counterintuitive and works in favor of the general contractor. For the subcontractor, it’s a lose-lose situation, because if they are already not receiving payment, they often cannot afford to spend substantial amounts of money to fight it in arbitration. If you see a dispute resolution section mentioning arbitration in your contract, it is best to try and negotiate that out of the agreement, or at the very least, settle for mediation or another less costly alternative to arbitration.
Here at The Cromeens Law Firm, we fight daily to protect subcontractors from signing subcontracts that will end up hurting them in the long run. We can help you navigate the various provisions in your subcontract agreement that could end up costing you significant amounts of money should a dispute arise in regards to payment. Give us a call today at 713-715-7334 to learn more.