Caution: Thin Ice: Do not let your downstream subcontractors on a project without signed contracts. While we all know that construction contracts do not always have to be in writing to be enforceable (that even oral contracts can be enforced), having a signed contract will go a long way to avoid time consuming and costly disputes. Now, more than ever, we are seeing erectors refuse to sign contracts after they are on site, and once they are on site, after they have started working, they:
- seek unreasonable changes to the contracts;
- fail or refuse to provide contractually required bonds;
- cause catastrophic accidents and refuse to defend and indemnify the steel fabricator and others for such damages;
- refuse to perform work per the schedule or walk off the project and refuse to defend and indemnify you for delay and liquidated damage claims;
- and the list goes on. . .
The Gordon & Rees Steel Team recommends that all steel fabricators please take the time to get your downstream contracts in order and signed prior to letting the downstream subcontractors mobilize to the jobsite.
The firm also encourages you to update your agreements with the following language:
For the Progress Payment Section:
Subcontractor agrees that progress payments are subject to the absolute condition precedent that (1) Owner, Contractor, and Steel Fabricator have approved the Work as being in accordance with the Subcontract (including applicable Contract Documents requirements); (2) Subcontractor has provided Steel Fabricator with satisfactory proof it has paid all amounts it owes in connection with the Subcontract, including providing lien waivers in a form acceptable to Steel Fabricator and Contractor, which include the lien waivers in Exhibit 1; (3) Owner or Contractor has actually paid Steel Fabricator for that Work; (4) Steel Fabricator has received a signed copy of this Agreement from Subcontractor;
Another Clause to Consider Adding:
“Subcontractor shall be liable for any and all costs incurred by Steel Fabricator associated with any delays caused by Subcontractor or those under its control, including any delays arising out of Subcontractor’s unreasonable refusal to execute this Subcontract. Steel Fabricator shall have the right to, in accordance with the provisions of this Subcontract, backcharge and withhold any and all costs arising out of delays and/or damages caused by Subcontractor or those under its control.”
Although the above terms can help if a dispute arises, the best policy is to ensure all downstream agreements are signed well in advance of work commencing.