In the construction industry, contracts between a prime/general contractor and their subcontractor (“sub”) are extremely vital links in the construction project chain. Whether you are a prime or sub, you need to make sure to draft a well-crafted contract to better protect your interests down the road. As a subcontractor, you are a particularly vulnerable party.
Here are some of the most frequently litigated clauses we hope you pay particular attention to in your next prime/sub contract:
Incorporation by Reference Clauses (“flow-up & flow-down provisions”)
- a Flow-down provision in a prime/sub contract will incorporate by reference terms and provisions of the owner/prime contract; conversely,
- a Flow-up provision incorporates the duties owed by the owner to the prime into the prime/sub contract.
- Enforcement of these provisions depends on the reciprocality of the provisions and lack of ambiguity. As a result, it is extremely important to have a well-drafted contract that properly outlines these sort of provisions.
Scope of Work Provisions
As a prime contractor, you may want a broad scope of work provision with subs so that they can pin other work to them later on if needed. As a sub, you will likely want very specific scope of work provisions so as to know exactly what work is expected and what exactly you have bid on. It is important to come to a clear agreement between the parties regarding the scope of work provision. You should also make sure to include a provision for extra work or change order, as discussed below, if work called for is outside of the scope of the contract.
Change Order and Extra Work Provisions
Change orders provisions discuss modification work already contemplated by the agreement. Extra work provisions discuss items of work beyond the original scope of work that was contracted for. These are some of the most popular dispute areas in construction contract. Always make sure change orders and/or extra work provisions are in writing.
Notice provisions are extremely important risk-shifting clauses that can determine whether you win or lose a claim. This is the type of provision that explains how each party to the contract is to be notified in the event there is a breach of the contract. Many times written notice is required and often there is a requirement on how the notice needs to be sent.
No Damages for Delay Clauses
A prime contractor may want to insert a “no damage for delay” provisions in order to protect against unforeseen delays. Make sure to check all referencing documents to see if this provision is incorporated.
These are just some of the important clauses to keep in mind in your next construction contract. Contact the attorneys at Smiley Law for all your construction contract questions.