Hold Up! Don’t Sign that Subcontract Until You Do These Things
Do you know the difference between education and experience? Education is when you read the fine print; experience is what you get when you don’t.
Pete Seeger
I can’t tell you how many times I have been contacted by small subcontractors who have worked on a project for months and found themselves in the unpleasant position of being responsible for something extra and unaccounted for in their contract that they are expected to get done. This spells disaster in many ways; spoiled relationships, reduced project revenue, and potential claims. But their call was made too late if they failed to secure their company’s position within the conditions of the subcontract they signed.
In order to avoid making that call for help after the mistake is discovered, protect your business from contract language faux-pas and don’t sign any contract before doing these things.
Read Your Contract
Thoroughly! Here are a few items to check.
- Confirm that a complete and accurate scope of work is included.
- Make sure that what you quoted in your bid is consistent with the scope of work in the contract.
- Does the subcontract include “incorporated documents”? When another document is included by reference, always read the incorporated document to make sure you understand additional requirements that may be expected.
- Check the payment terms. Conditional payment clauses may be included. These clauses are phrased as either “Pay If Paid” or “Pay When Paid” and can cause delays in subcontractor payments or sometimes result in non-payment.
Make sure to protect your business from these risks.
Understand How Any Disputes Will Be Resolved
You always hope that it will not come to this but it is better to be prepared. For dispute resolution, know whether you can go to court or must utilize arbitration.
Arbitration clauses in a contract are more common, however, they force subcontractors to pursue any claims through binding arbitration rather than a court. If possible, try to keep your options flexible.
When You Are Ready to Sign on the Dotted Line
Make sure to complete all blanks in the subcontract. If you do not, they can be filled in by someone else. It’s also a good idea to initial all changes or deletions on any preprinted forms. Confirm that signature lines refer to individuals who are authorized to sign the contract on behalf of the business, otherwise the contract may not be enforceable.
Remember, fully executed contracts are enforceable by law. Do not take them lightly or you could be caught in a position of no defense. If you have any lingering concerns or do not understand all the terms or conditions of your subcontract agreement, consult your attorney.
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