CONTRACTORS PROCEDURES

Contractors Procedures

Contractors Procedures

Introduction

A conditional payment provision conditions the general contractor's obligation to make payment to its subcontractor upon the general contractor's receipt of payment from the owner for the subcontractor's work. While the terms "payif-paid" and "pay- when-paid" are often used interchangeably - both by contractors and by courts - these two types of conditional payment provisions differ substantially in the degree of risk of non-payment transferred from the general contractor to the subcontractor (Fishman 2008, pp. 6).

A contract is simply a promise that the law will enforce. Construction contracts are the means by which contracting parties designate and allocate the responsibilities and risks arising out of the performance of work. Attorneys' fees generally are not recoverable in a breach of contract action unless the contract contains a provision entitling a party to recover its attorneys' fees. Typically, fees shifting provisions are in the form of prevailing party provisions, which permit the prevailing party to recover its attorneys' fees from the non-prevailing party.

Discussion & Analyses

Construction contracts are the means by which contracting parties designate and allocate the responsibilities and risks arising out of the performance of work. The following are several important construction contract provisions: 1. Incorporation of documents. 2. Inconsistencies and omissions in design documents. 3. No damages for delay. 4. Change orders. 5. Conditional payment. 6. Indemnity (Levy 2008, pp. 6). Contract damages generally are awarded with the intention of placing the injured party in as favourable a position as if the contract had been faithfully performed. The most common remedy for a breach of contract is an award of money damages. A party damaged by a breach of contract must prove its damages with a reasonable degree of certainty. Damages that are remote or speculative are not recoverable. This does not mean, however, that damages must be proven with mathematical certitude. Instead, a contractor only need supply a judge or arbitrator with enough facts to support an intelligent and probable estimate of damages.

Contract negotiation strategies can vary substantially depending on the particular project, the general economic climate, each party's relative time constraints, and a host of other factors. A conditional payment provision conditions the general contractor's obligation to make payment to its subcontractor upon the general contractor's receipt of payment from the owner for the subcontractor's work. When a subcontract includes an enforceable pay-if-paid provision, the general contractor is not obligated to pay the subcontractor unless and until the general contractor receives payment from the owner for the subcontractor's work. Contracts almost always state that contractors must provide notice of changes, delays, and other claims. Additionally, some type of notice is usually required for certain statutory claims, such as mechanic's liens or Miller Act claims. Failure to satisfy notice requirements can be fatal for a claim, as contracts often state that failure to provide the required notice within the specified time period constitutes a waiver of the claim. Thus, notice provisions are among the most important provisions to contractors during the course of a ...