I have a client, who is a pretty sophisticated business person, who has problems because he never thought a general contractor's contract wording would actually be enforced.
I looked through a copy of the contract. I didn’t find the wording my client is concerned about.
So am I missing a page, or is he misreading the contract, or is it a misleading contract? Or is the GC throwing its weight around because it can?
No matter what, it’s a mess, and not getting paid promptly is always a mess!
How can a GC expect a sub to do the work in their subcontract AND be the GC’s bank at the same time? Did the GC run into problems on another job and get in a cash flow crunch and end up having to invoke this clause with their subs as an act of desperation?
Did it get passed down from the owner’s contract requirements?
Do you have a contract in your file that says, “Subcontractor assumes to Contractor all obligations that Contractor assumes to Owner in the Prime Contract.”
So if the GC is either not paying attention to their contract, or has to have the job and ignores it, a “Be My Banker Clause” may be in that Owner/GC contract and be passed down to the subs to deal with. It’s tough being at the bottom of the payment funnel!
If that clause doesn’t work, then this one on a lien release should do it:
“Such release shall also state that Subcontractor has paid all laborers, material suppliers and subcontractors through the date of the Release and will indemnify Contractor and Owner from any losses or damages arising out of such claims.”
Now, while some subs may make enough money to handle this burden to pay everyone before they get paid, nobody in their right mind would purposefully agree to such a clause. If it starts with the owner’s requirements, the owner ought to know better, too.
I have another client who’s a GC and told me he has a similar clause in his subcontracts, but has never used it because he doesn’t have any subs who also own banks!
So what’s the lesson here? Seems to me it’s,
“If you sign it the way it’s written, you’d better be willing to abide by it.”
And keep in mind, you commit your bonding company to the same contract on your bonded jobs.
Should the contracting process include a written test to be sure everyone (owner, contractor, and subcontractor/supplier – not their attorneys!) has actually read and understands their contract before they can sign it?
If they pass the exam, maybe they’d sleep better at night – until the first slow payment!
I looked through a copy of the contract. I didn’t find the wording my client is concerned about.
So am I missing a page, or is he misreading the contract, or is it a misleading contract? Or is the GC throwing its weight around because it can?
No matter what, it’s a mess, and not getting paid promptly is always a mess!
How can a GC expect a sub to do the work in their subcontract AND be the GC’s bank at the same time? Did the GC run into problems on another job and get in a cash flow crunch and end up having to invoke this clause with their subs as an act of desperation?
Did it get passed down from the owner’s contract requirements?
Do you have a contract in your file that says, “Subcontractor assumes to Contractor all obligations that Contractor assumes to Owner in the Prime Contract.”
So if the GC is either not paying attention to their contract, or has to have the job and ignores it, a “Be My Banker Clause” may be in that Owner/GC contract and be passed down to the subs to deal with. It’s tough being at the bottom of the payment funnel!
If that clause doesn’t work, then this one on a lien release should do it:
“Such release shall also state that Subcontractor has paid all laborers, material suppliers and subcontractors through the date of the Release and will indemnify Contractor and Owner from any losses or damages arising out of such claims.”
Now, while some subs may make enough money to handle this burden to pay everyone before they get paid, nobody in their right mind would purposefully agree to such a clause. If it starts with the owner’s requirements, the owner ought to know better, too.
I have another client who’s a GC and told me he has a similar clause in his subcontracts, but has never used it because he doesn’t have any subs who also own banks!
So what’s the lesson here? Seems to me it’s,
“If you sign it the way it’s written, you’d better be willing to abide by it.”
And keep in mind, you commit your bonding company to the same contract on your bonded jobs.
Should the contracting process include a written test to be sure everyone (owner, contractor, and subcontractor/supplier – not their attorneys!) has actually read and understands their contract before they can sign it?
If they pass the exam, maybe they’d sleep better at night – until the first slow payment!
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