If a subcontractor fails or refuses to correct a construction default, the contractor has the right to take certain steps to protect themselves. In this article we will continue to discuss default termination for subcontractors and what contractors should be aware of. To view the first half of this article, please visit Part 1.
The Right to Terminate the Subcontract
In case of the possibility a subcontractor failing or refusing to correct a default, and the possibility of an inevitable termination, it’s recommended the subcontractor give the contractor the right to terminate the subcontract in whole or in part. This termination provision should allow the contractor to take into possession the subcontractor’s drawings, materials, and equipment needed to complete the subcontractor’s work, either with the contractor’s crew or another subcontractor. As Orlando construction attorneys, we know that it is especially important to have the language in the subcontract clearly specify the contractor’s choice to first pursue a few alternatives before terminating. This does not jeopardize the contractor’s right to later terminate the subcontractor or claim damages against the subcontractor.
The Right to Deduct Costs
The subcontract should also include a provision stating that if the contractor decides to pursue one or more of the previously mentioned alternatives to termination, the contractor has the right to deduct its costs, resulting in both losses or damages, from any money due or might become due to the subcontractor under the subcontract. It’s important that the subcontract clearly states that if there is an unpaid balance due under the subcontract that goes over the contractor’s cost of finishing the subcontract work, then the difference will be paid to the subcontractor. However, if that cost goes over the balance due, then the subcontractor is legally obligated to pay the difference to the contractor.
Because construction contracts can vary widely, and are factually and legally complex, it’s suggested that contractors get in touch with an Orlando construction lawyer to assist you when terminating a contract.
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.