Five Things to Keep Out of Your Subcontract Agreement
Roofing contractors often serve as subcontractors for general contractors or project managers under subcontract agreements. Unfortunately, as a subcontractor, you do not always have the ability to have much say in the form of subcontract agreement adopted by the general contractor. Depending on economic and market conditions, general contractors may have the ability to tell subcontractors who want to renegotiate agreement terms to "take it or leave it." This is a reality of the market place. However, unreasonable subcontract terms should not be agreed to and you should be on the lookout for general contractors who try to force them upon you. You should be especially aware of general contractors with whom you have no prior business relationship and, if the general contractor is unwilling to change unreasonable terms, it is usually a good indication that it is a company with whom you do not want to do business. There are countless ways in which general contractors slant their agreements to their advantage. However, there are common contract terms that can be particularly hazardous to subcontractors such as those that are described below.
Overreaching IndemnificationBy indemnifying, the subcontractor promises that it will stand by its work and protect the general contractor from all claims, including those for defective work, injuries and property damage. General contractors generally will not hire subcontractors without the inclusion of such a provision, and they are not unreasonable. Special care must be given to the language it contains, however. What the subcontractor must avoid is a provision that obligates it beyond acts and omissions arising from which it or its employees performed. Indemnification clauses that require the subcontractor to indemnify the general for work beyond the subcontractor's control is not reasonable, and in many states, not enforceable. A reasonable general contractor will agree that the indemnification clause should be limited to only those damages caused by the subcontractor or those under its control.
"No Damage for Delay" ProvisionDelays on construction projects can cause a subcontractor increased material and labor costs that severely impact anticipated profit. Obviously, delays caused by the subcontractor are the subcontractor's own responsibility. However, subcontractors may be delayed on a project as a result of the general contractor's disputes with other subcontractors, poor project coordination, lack of funding, or other reasons completely beyond the control of the subcontractor. If a subcontractor is delayed for reasons beyond its control, it should be able to seek compensation for damages sustained. It is not uncommon for a general contractor to try to include a "no damage for delay" clause that states the subcontractor cannot recover for any project delays, regardless of the cause. This type of clause is not favorably looked upon in many states and is usually strictly construed against the general contractor.
If a subcontractor is devoting significant manpower and resources to a project, an unexcused delay can be critical. As a subcontractor, you should do your best to limit the delay provision so that delays beyond the subcontractor's control are compensated.