As all general contractors are aware, problems often arise during the performance of a construction project with subcontractors or vendors who are improperly performing pursuant to the terms of their contract. The question becomes what is the best way to address these issues in order to contain them, and moreover, to ensure a smooth transition to replacement a contractor or vendor if necessary. This article shall give a brief overview of some steps that a contractor can take.
The first thing that a general contractor should be certain is that in the subcontract agreement contains clauses which clearly set forth the right to terminate a subcontractor. Two essential clauses that should be in a subcontract agreement are as follows. The first clause concerns the ability to terminate a subcontractor for cause. This means that a subcontractor may be terminated upon the presentation of proper notification to the subcontractor due to their failure to comply with the terms of the subcontract.
Equally important, however and perhaps more important, is the right to terminate a subcontractor for convenience. This clause typically allows a general contractor to terminate a subcontractor for any reason or simply for convenience. Under both of these clauses, however, it is suggested that notification in the form of hand delivery, certified mail, or other communication be presented to the subcontractor prior to their termination from the project, or simply advising them of the intent to terminate.
Prior to terminating a subcontractor for cause or for convenience, it is important that the general contractor carefully document the current status of the work of the subcontractor. Due to the availability of camera phones, this is often the best way to undertake such action. It is very easy to walk the project site and take detailed videos with a camera phone as to the issues with the subcontractor’s work.
Aside from the detailed videos, it is also suggested that a memorandum be prepared with regard to the issues with the contractor’s work, and furthermore, the suggested remediation of the work. All of this information should be presented directly to the subcontractor prior to terminating them either for cause or for convenience. If it is believed that the subcontractor may be able to correct the issues and more forward, it is in the interest of the general contractor to pursue that route.
On the other hand, if the subcontractor is simply incapable of remedying the issues, then the general contractor should use the videos and the paper documentation as the basis for a back charge to withhold any current or future payment which may be due the subcontractor.
Should a replacement contractor be hired, it is suggested that the subcontractor inspect the job site prior to the replacement contractor performing work so that any claim as to spoliation of evidence cannot be raised in the future.
If a contractor is having a difficult time with a subcontractor, it is suggested that they consult with an attorney. An attorney can help them document the above issues with the work and can provide the appropriate notification pursuant to the contract. The attorney can also guide them through the best way of terminating the subcontract and/or obtaining compliance from the subcontractor to complete the work.
Further, it is always suggested that any progress payments be strictly made in accordance with the contract and that the subcontractor not get out in front of you. The attorneys at Stark & Stark are well-versed in issues that a contractor may face with a subcontractor, and thus, are willing to consult with any subcontractor or general contractor.