Key Considerations in Subcontract Negotiations
Negotiating subcontracts presents challenges for both general contractors and subcontractors. General contractors must balance responsibilities to owners and subcontractors while managing risk. Subcontractors, often with limited negotiation power, should focus on key risk-shifting provisions.
Prime Contract Role
Subcontracts often include “flow down” clauses, requiring subcontractors to assume general contractor obligations. General contractors should clarify precedence clauses and key terms, while subcontractors should request the prime contract early to understand their responsibilities.
Contingent Payment Clauses
General contractors may use “pay-when-paid” or “pay-if-paid” clauses to align payments with owner payments. Subcontractors should identify these clauses early to assess their risk if the owner fails to pay.
Dispute Resolution
Conflicting dispute resolution terms can create legal inefficiencies. General contractors should ensure consistency, while subcontractors should review claims processes and pre-dispute requirements like mediation.
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