Are You Prepared to Prevent and Recover From a Subcontractor Default? Part 1
As experienced Bradenton construction lawyers, we can assure you that subcontractor defaults don’t just happen. A subcontractor will show signs of default earlier in the construction process than some may realize. Just a few red flags you should take note of include incomplete contract documents, a fluctuating workforce, or an influx of change orders, just to name a few.
Some of these signs may be missed and some of them may be more glaring, either way, you will be left with a failing project on your hands that might have been avoided with a little more discernment. In this two-part article, we’ll give some helpful tips to help you prevent and recover from a default. Part two will conclude the series.
The Impact of Subcontractor Default
Dealing with a defaulting subcontractor can be a real nightmare for general contractors. A non-performing subcontractor or one that isn’t meeting their contractual obligations can wreak havoc on a project. A subcontractor’s failure can impact the project in multiple ways including schedule interruptions that may result in costly reworks. Having to replace a terminated subcontractor or supplement their work can kill a project.
When a subcontractor is negligent, not only do they default on their obligations to the general contractor, they also neglect their own subcontractors and suppliers in areas such as pay, for example. Although you can prevent some construction mishaps, all are not preventable. If a subcontractor is showing signs of defaulting, be proactive and use strategies to resolve any issues before they escalate.
Make Sure Your Contract is Solid
The contract is your first line of defense if a subcontractor defaults. Be sure that you provide a defaulting subcontractor with written notice of their default as well as their right to correct the default within a specific timeframe. One of our Bradenton contractor lawyers can review your contracts to ensure you are protected against legal challenges down the line. Does your contract include clauses outlining your rights to supplement work or terminate the contract? What about a clause that suspends the subcontractor’s performance? If they fail to pay their subs or suppliers does your contract give you the right to be reimbursed if you have to step in and supplement their work?
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.