Important Contract Terms and Conditions
Subcontractors and Suppliers: When Negotiating Your Next Contract, Pay Close Attention to These Contract Terms
Payment Conditions: A subcontractor/supplier should always attempt to limit and/or eliminate any conditions to receiving payment (Some of these conditions may include “pay if paid” clauses, and the submission of certain paperwork).
Change Orders: A subcontractor/supplier should always assure that the subcontract clearly defines the procedure and circumstances of when a change order is allowable.
Warranties: A subcontractor/supplier should always ensure that any warranty provided is clear, concise, for a finite period, and only covers the work performed by the subcontractor/supplier.
Indemnity/Hold Harmless: A subcontractor/supplier should always ensure that any indemnity/hold harmless provisions are mutual and not one-sided.
Limitations of Liability: A subcontractor/supplier should always attempt to include limitations of liability in favor of the subcontractor/supplier. Examples may include caps on liability (such as the contract amount) and waivers of consequential damages and/or punitive damages.
Lien Waivers: A subcontractor/supplier should always ensure that they do not waive their right to file a lien.
Flow Down: Many subcontracts contain clauses which impose the terms and conditions of the prime contract on the subcontractor. If such a term exists in a subcontract, the subcontractor/supplier should always ensure that they request and review a copy of the prime contract.
Termination: A subcontractor/supplier should always attempt to have a termination clause, which is very detailed and unambiguous. For example, does the provision clearly identify whether termination may be with cause, without cause, for convenience, etc? Does the provision detail the process for termination and whether there is the ability to cure any breach prior to termination? Does the provision set forth the amount to be paid to the subcontractor/supplier if they are terminated?
Choice of Law and Venue: A subcontractor/supplier should always review what law will govern their contract and what venue will be applicable should a dispute arise in the future. If the choice of law and venue are not advantageous to the subcontractor/supplier, then negotiation of those terms would be recommended.