With all the “hurry up and wait” that goes on when trying to get a contract out the door, it can be tough to slow down long enough to make sure to include all the appropriate provisions. There are a lot of things weighing on the mind of a general contractor during the buyout process, and there isn’t always time to be as thorough as one would like. But as Ben Franklin said, an ounce of prevention is worth a pound of cure: legal snafus can sneak up in many different places, and it’s essential to keep these things in mind before sending a contract rather than placing any hope in assumptions.
This post will detail a few critical items to keep in mind when writing a construction subcontract agreement.
Work with an attorney to make sure your subcontract template is up to par. There are indeed many templates available online, and those can work if the general contractor simply can’t afford to hire an attorney from the outset. Using standard contract language will cover the general contractor in most circumstances; however, a template will not necessarily address any unique circumstances that may apply. Every jurisdiction has different laws concerning payment, delays, etc., and it is worth making sure the correct language is in place.
Include provisions force majeure/Acts of God. The recent pandemic has been another reminder for companies in all industries to take another look at their contract language. Though no one could have predicted exactly how that situation unfolded, it certainly brought to mind the relevancy of these clauses covering unexpected catastrophes. Catch-alls don’t solve everything, but it is essential to include some.
Detail scopes of work. A good scope of work is almost an art form. If there’s too much detail, a subcontractor can argue that the GC didn’t include certain provisions in the contract. If it’s too general, there’s too much room for speculation on how to interpret it. It seems that it’s often the little things that create big headaches later on. Does the contract specify whether both labor and materials are included? Is there a plan outlined for cleanup and waste removal? Are there any materials that could be arguably included in two different subcontractors’ scopes? Any elements that overlap between the electrical and HVAC systems, for instance? Try to anticipate any confusion (or even deliberate avoidance) of some of these details with the subcontractor team.
Contracts include contract documents. Recent data by CRUX Insight provides an interesting perspective on the greatest causes of construction disputes. Scope of work disputes still top the list, however, design-related issues are creeping up there. General contractors should be allied with their clients - GC’s can be an invaluable set of eyes and ears when it comes to missing details or constructability issues in project plans and specifications. Anticipating design concerns as early as possible is critical to ensuring a successful project with limited costly surprises.
Include exclusions. Some general contractors ignore the exclusions a subcontractor includes on their quote, thinking that keeping the contract language more general is in the favor of the GC. This is not necessarily the case. Including the subcontractor’s exclusions creates a clearer picture of the agreed-upon scope of work, as long as they are reviewed carefully before including. Make sure to have a good subcontract review process in place, particularly if well-meaning but less experienced staff are charged with drafting subcontracts to ensure that major costly exclusions don’t slip through the cracks.
Don’t forget jobsite management. Another one of the little details that quickly becomes a big detail, if it’s not agreed upon beforehand, is jobsite management. Having well-attended weekly subcontractor meetings, for instance, can have a great impact on the outcome of a project. Superintendents and project managers can end up tearing their hair out over little or poor communication with subcontractors who never formally agreed to attend weekly meetings. Any housekeeping items can be included in a subcontract. It’s important not to bog down the contract with these details - that’s a way to ensure no one will read it, but some company-specific success strategies are a helpful addition.
Remember - legal disputes are expensive! No matter how reasonable the language in a subcontract, if two parties are committed to the dispute process, it is sure to be stressful and expensive. Little-known principles like the economic waste doctrine can render a “reasonable” subcontract insufficient or even unhelpful. Remember Ben Franklin - taking chances simply isn’t worth it!
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