The construction industry is ruled by regulations at the local, state, and federal levels, unfortunately, this is not the case with joint check agreements. Legally speaking, there is no standard joint check agreement which means detrimental mistakes can happen if agreements are handled properly. This article will discuss avoidable mistakes construction professionals often make when entering a joint check agreement.
Subpar Contract Language
A weak contract agreement is a magnet for legal issues. Have you specified whether the your joint check agreement is obligatory or permissive? An obligatory agreement means the paying party is required to issue a joint check whereas a permissive agreement means that the paying is only given permission to issue a joint check. Have you used the word “And” in your joint check agreements and on your joint checks? Doing so secures both parties interest when it comes to endorsing checks. With guidance from a St. Petersburg construction attorney, you can avoid these common contract pitfalls.
Not Securing Against Fraud
Due to economic pressure and tight budgets, construction fraud is on the rise. Now more than ever, construction professionals need to be vigilant about preventing fraudulent activity. Joint check fraud occurs when lower-tier workers are desperate to keep the project going. They may forge a signature on a joint check agreement or on the joint check itself to deposit it into their account. To prevent this from happening, verify that the appropriate party signed off on the agreement or check. If fraud has occurred you are within your rights to contact a St. Petersburg construction attorney to file a civil suit.
Failing to Understand the “Joint Check Rule”
Sadly, many enter into an agreement without understanding what a joint check agreement is, what their obligations are, or what the “joint check rule” is. This oversight can cost you big time.
For example: if a subcontractor is owed $75,000 for services and an owner submits a $50,000 joint check payment to the subcontractor who then endorses the joint check, that supplier will be deemed paid up to the date of the check under the “joint check rule.” This means the supplier loses out on the extra $25,000 debt owed and cannot seek a lien against the property for the debt. The exception to this rule is if some other agreement is already in place specifying how the proceeds are to be allocated.
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.