Does signing a contract make you feel like you're
stepping off of a cliff?? continued
from page three
Contract Clauses to Watch Out For in Construction
3. Payment terms:
Pay attention to the payment clause in construction contracts.
Many times it states the following (or words to the effect of the
The general contractor does not have to pay the subcontractor
if the owner does not pay the general contractor.
this clause have been ruled by the courts to be illegal, but
there is a way that the general can make the clause legal,
to include the words "condition precedent".
At last check (February 2008) California Law requirements on payment
are that the general contractor pay
within 10 days of receipt of payment from the owner "unless
the parties have agreed to other payment arrangements in the contract".
From the California Business and Professions
7108.5. A prime contractor or subcontractor shall pay to
subcontractor, not later than 10 days of receipt of each
progress payment, unless otherwise agreed to in writing,
the respective amounts allowed the contractor on account
of the work performed
by the subcontractors, to the extent of each subcontractor's
interest therein. In the event that there is a good faith
dispute over all or any portion of the amount due on a
payment from the prime contractor or subcontractor to a
then the prime contractor or subcontractor may withhold
no more than 150 percent of the disputed amount.
Any violation of this section
shall constitute a cause for disciplinary action and
shall subject the licensee to a penalty, payable to the
of 2 percent of
due per month for every month that payment is
In any action for the collection of funds wrongfully withheld,
the prevailing party shall be entitled to his or her attorney's
The sanctions authorized
under this section shall be separate from, and in addition to, all other
remedies either civil, administrative, or criminal.
This section applies to all private works of improvement
and to all public works of improvement, except where Section 10262 of
the Public Contract Code applies.
The general contractor can put whatever payment terms he wants
to into the construction contract and it is up to you to decide
if those terms are acceptable or not.
Be aware that even though some general contractors might write
into their contract that they will pay you within 30 days of your
invoice, most of them don't unless they have been paid by the owner.
If the construction contract states that you will be paid within
30 days of your invoice but you are not paid by that time, then
contractor is in breach of his contract with you regardless of
whether he has been paid by the owner or not.
Contracts Continued on Page 5
[Because contract law seems to constantly change,
you really do need someone in the know on your side. Please don't
take the info
I have posted here at my site and use it as a substitute for legal
advice. Do consult with an attorney or legal expert.]