Construction Law

Important Clauses for Your Nashville Construction Lawyer to Review Part 2

When you’re working with a Nashville contractor lawyer, you can take advantage of a variety of services to help you reduce your chances of falling victim to a costly payment dispute. Among a broad range of services that include filing mechanic’s liens, compiling bid packages, disproving Occupational Safety and Health Administration (OSHA) violations, and representing contractors in arbitration and litigation, our contract review services stand out because they can be applied to any project to provide peace of mind before you sign on the dotted line. As we discussed in part one of this three-part series, our Nashville contractor lawyers can spot critical clauses and ensure that your interests align with the language of the contract. 

Flow-Through

Subcontractors don’t contract directly with the owner of a project, but when a flow-through clause is included in your contract, the owner can create additional obligations or restrictions that affect you anyway. This is achieved by implementing a flow-through clause in the contract you signed with the contractor. It asserts that the subcontractor is responsible for meeting project parameters established in the owner-contractor contract under the premise that the subcontractor’s agreement is, by proxy, a piece of this contract. This clause can be troublesome because it is hard to define and subcontractors are often unaware of how it will affect them at the beginning of a project. A Nashville contractor lawyer can review the contracts of both subcontractor and contractors to help you understand how a flow-through clause could affect your business.

No Damages for Delay

Contractors and subcontractors alike can typically recover any additional expenses incurred when an owner hinders the progress of a project. To protect themselves, owners often implement a no-damages-for-delay clause into their contracts. By rule of the flow-through clause, this could also affect subcontractors. Subcontractors could be offered additional time to complete the project, but this doesn’t help them recover costs associated with lost time, especially when additional projects are already underway. Our Nashville contractor lawyers can help limit the power of this clause to mitigate the chance of your profits suffering when an owner perpetrates delays.

Contingent Payment

Contingent payment clauses can have a significant effect on subcontractors. It establishes the conditions under which payment can be made to a subcontractor for completed work. There are two common payment provisions that are frequently confused with one another: “pay when paid” and “pay if paid.”

• Pay When Paid: this type of clause stipulates that the timing of a subcontractor’s payment is contingent on the timing of the payment between the owner and contractor. Essentially, once the contractor is paid they have a duty to pay their subcontractors in a reasonable amount of time.
• Pay If Paid: this type of clause should be avoided at all costs. The subcontractor assumes the risk of nonpayment if an owner fails to compensate the contractor. Your attorney will know which words and phrases to look out for, such as “condition precedent” and “subcontractor assumes risk of nonpayment by owner.” 

In part three, our Nashville contractor attorneys will conclude this article on important clauses that subcontractors should be aware of.

If you would like to speak with a Nashville contractor attorney, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.