Every contractor wants to get paid for their work. The starting point for protecting a contractor's rights to receive payment is the general contract between the owner and general contractor. This is true even for subcontractors in that the subcontractor generally agrees to be bound to the general contractor to the same extent that the general contractor is bound to the owner.

If the general contract is for a stipulated sum, the contractor should have performed a thorough evaluation in performing the estimate and left room for surprises. Remember, the contractor will be required to perform any work that falls within the scope of work as defined by the contract.

In regard to the scope of work provision, the contractor will want the clause to be drafted as narrowly as possible. For instance, it would be preferable for it to be defined as "the work as described in the contract documents" without the added phrase "and work that can be reasonably inferred as necessary to complete the project." The broader the language the more room for disagreement and having to perform work not included in the bid calculations. If the owner is adamant about including a broad scope of work clause, the contractor's bid price may need to be adjusted to offset the increased risk.

Other important provisions are the commencement and completion dates. The contractor should make sure that the commencement date is truly the date when the contractor will be prepared to begin the work. The owner will normally be anxious to begin the work and it may be tempting for the contractor to make promises to begin sooner than possible. Remember, if the contractor does not begin working on the commencement date this shortens the amount of time to complete the project which may result in delays. In regard to the completion date, it may be a specified date or a date at the end of so many calendar or workdays. If workdays are used, the term should be clearly defined in the contract.

This brings us to delay damages which can quickly offset and even supersede the contractor's claims for payment. Obviously, the contractor would prefer a no delay damages clause. This may even be beneficial to the owner in that it can possibly allow the contractor to bid the job at a lower price. The next best alternative might be to negotiate a liquidated damages clause setting a fixed amount to be paid for each day the project is delayed. This is beneficial to the owner who may otherwise have a difficult burden in proving these damages and to the contractor who can fix the amount of damages and in turn reduce the risk.

The contract should also allow for extensions of the contract time for delays caused by forces beyond the contractor's control. These forces can include weather, labor strikes, and material shortages.

The contract should also permit the contractor to suspend, and if necessary, terminate the work if payment is wrongfully withheld. At least this way, the contractor can stop the bleeding.

These are only some of the important provisions in the general contract that can affect payment rights. The general contract is often presented by the owner or the architect to the general contractor. A thorough review of this contract and necessary changes by the contractor's attorney could save the contractor a substantial amount of money in the long run.


This article is not intended to be a substitute for legal advice. If you have a legal problem, you should consult a lawyer.