A major concern any contractor or sub-contractor has when working on a project is being paid for the materials and services that they have provided. When the project is progressing without any financial difficulties, payments are timely issued and the sub-contractor or contractor is paid for all the work that they perform. At times, however, there may be concerns as to the financial stability of a sub-contractor or contractor who hires your company to provide materials and services. In such cases, when a party is experiencing a financial difficulty, it becomes important to try to make arrangements to ensure that your company receives payment. If the financial situation concerning the contractor or sub-contractor who retained your company is fairly dire, there are two different vehicles by which your company may attempt to secure payment for the materials and services it has provided without filing a lien claim which might affect the project being completed. This could be in either the form of a Joint Check Agreement, or in the alternative, the issuance of direct payments from the owner or the primary contractor directly to your company.
Should the party which hired your company be experiencing financial difficulty, one potential arrangement would be a Joint Check Agreement. Pursuant to a Joint Check Agreement, payments would be issued directly to both the company which retained your company, as well as your company directly from either the owner or the primary contractor. The fact that checks are issued jointly in your company’s name, as well as the company that retained your company, it would prevent the other company from cashing the checks without your authority and/or consent. As a result, this ensures that your company receives payment for the materials and services it provided.
Another arrangement whereby your company could receive payment when the financial stability of the company which hired your company is in question concerns direct payments being issued from the primary contractor or the owner. In such circumstances, in lieu of paying the party which retained your company, and thereafter, you receiving payment, the owner or primary contractor would pay your company directly. In order for payments to be directly issued, the primary contractor or the owner would have to obtain the consent of the company who hired you in this regard.
Both a Joint Check Agreement, as well as a direct payment from the primary contractor owner are two vehicles by which your company can receive payment without the risk of the contracting party which hired your company from taking the payment for its own use and benefit. These vehicles would typically require the consent of the party which retained your company.
It is suggested that if you have concerns as to payment from the primary contractor or a sub-contractor that you contact an attorney to discuss the possibility of a Joint Check Agreement or direct payments. If you wait too long in the process, you may end up not receiving any payment for materials and services you’ve provided. As such, it is best to consult with an attorney early and often.