Does signing a contract make you feel like you're
stepping off of a cliff??
Contract Clauses to Watch Out For in Construction
3. Payment terms (continued
from page five):
If you can, try to find out what the General Contractor does when
the payment from the Owner to the General Contractor is late.
know I know, the obvious response SHOULD be that the General Contractor
will contact the Owner immediately upon delinquency of payment
would you believe that some General Contractors will not contact
the Owner out of fear that the Owner will be offended?
Excuse me!!!, but if anyone should
be offended, it is the General Contractor, the Subcontractors and
all of the material suppliers on the project, for not having received
payment when due.
Most often, the General is concerned about offending the Owner
because the General hopes to do more work for the Owner. Would
want to do more work for a non-paying (or late paying) customer?
I know I would not want to!
Anyhow, I got caught in this nightmare through a general contracting
company we were doing work for. The president of this firm (who
is also the Accounts Payable/Receivable person) refuses to contact
the Owner when payment is late.
I had to contact the Owner myself. Unfortunately, the 'Owner' was
the Desert Sands Unified School District in Indio, CA and the people
in the office refused to provide me with any information, they chose
to hide behind legalities.
So, the payment to the General Contractor is late and the school
district, which is responsible for payment, won't talk to subcontractors.
Well, when I have done work for somebody and/or entity, that somebody
and/or entity owes me.
Since I cannot threaten to file a lien on the property (because,
as a school, it is a Public Works project and liens cannot be filed
on public works projects) what could my next plan of attack entail?
Making lots of noise! I called the Owner (the school district)
several times daily, as did my partner, asking for information on
payment. Sooner or later the Owner will get tired of my phone calls
and either pay the General Contractor so that the General Contractor
will pay me or call the General Contractor and tell them to call
me to answer my questions.
Frankly, I don't care what they do as long as I either get paid
or at least get an update that I am satisfied with.
Will the General Contractor want to do business with me again?
Probably not. Do I want to do business with the General Contractor
or Desert Sands Unified School District again? Definitely not!
When people owe you and won't talk to you, you need to do whatever
is within your legal rights to get the information and/or payment
that is due you. If you don't, you might just find out (too late)
that there is a problem on the job that will cut your chances of
Guess what I found out when I started making noise about this particular
project? The electrical subcontractor on the project had already
filed a Stop-Notice on the project. This is SERIOUS business, and
if you don't know that this is happening when it is happening (instead
of long after it has happened) it is very probable that you will
not collect 100% of what is owed to you.
Everyone lines up, the first in line usually being the first to
file a stop notice, then second, then third, and so on and so on.
By the time the line moves forward and it's your turn, there may
not be any money left to pay you!
The moral of this sordid story is as follows:
If you can find out how the General handles his receivables before
you put a number on your bid, you can adjust your numbers accordingly.
A payment that is just one day late is worth less than it was the
day it was due. Also, stay on top of the project so you don't
any surprises. (For more information on collecting payment due
to you, please
Contracts Continued on Page 7