When Contractors Fail to Pay Subcontractors Part 1
Owners and contractors alike must make strides to uphold the integrity of the owner-contractor agreement. Contractors that fail to pay subcontractors, suppliers, or any other key people they are responsible for paying places owners at risk for the legal repercussions. This is where an Orlando construction lawyer can be an asset. This two-part article series will share why contractors fail to make payments, red flags to look for, and solutions for preventing nonpayment. Visit Part 2 for the conclusion of the article.
Why Contractors Fail to Pay
By law, even when owners fail to pay or delay payments to contractors, the contractor is still obligated to pay those they hire to work on the project with them. Contractors fail to compensate suppliers and subcontractors for various reasons. For one, they may not know how to run their business properly; this includes the mismanagement of their finances. Consequently, subcontractors and suppliers may take the hit. Unfortunately, there are times where a contractor intentionally chooses not to compensate subcontractors and suppliers. Either way, this leaves owners at an increased risk for legal disputes.
Red Flags to Look For
To ensure your project goes smoothly and to decrease the likelihood of the contractor failing to make payments avoid the following:
- Paying contractors the full project payment upfront
- Paying for work before it’s completed
- Obtaining the building permit for contractors
- Contractors who require cash only payments
- Contractors that bid low on projects
- Contractors who refuse to disclose their subcontractors and suppliers
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.