Phone

Does Your Construction Contract Protect Your Payment Rights? Part 1

Many contractors are known to bet it all on a single project in the hopes that the significant resources they invest will pay dividends by project completion. While you should hope for the best, you must plan for the worst: a vicious payment dispute. The best way to combat a payment dispute is to prevent its occurrence with a comprehensive construction contract. 

In this two-part article, we will discuss often overlooked contract provisions that can have a big impact on your bottom line. If you are concerned with the contents of your construction contract, have it reviewed by a construction lawyer in Wilmington, NC, before the figurative ink has dried on your payment rights.  

Pay-if-Paid Clauses 

Depending on if you’re a contractor or subcontractor, this provision is either incredibly useful or downright dreadful. Unlike pay-when-paid clauses, pay-if-paid clauses stipulate that a contractor is only responsible for paying their subcontractors IF they themselves have received payment from the owner. These provisions can have an incredible impact on subcontractors looking for payment on services or materials provided. Fortunately, if you’re contracting in North Carolina, you don’t have to worry as much about pay-if paid clauses. 

In the State of North Carolina, pay-if-paid clauses have been ruled invalid. As North Carolina General Statute 22C-2 states, “Payment by the owner to a contractor is not a condition precedent for payment to a subcontractor and payment by a contractor to a subcontractor is not a condition precedent for payment to any other subcontractor, and an agreement to the contrary is unenforceable.” Furthermore, once a subcontractor has completed work, a contractor has seven days of receipt to pay them. If it has been longer than seven days since you were due a periodic or final payment, consult a construction attorney in Wilmington, NC, from Cotney Construction Law for assistance. 

How Are Change Orders Processed? 

There will always be unforeseen developments on a construction project. That’s where change orders come in. Your contract should stipulate that change orders must be in writing and signed by the owner and all parties involved. In a perfect world, all change orders would be processed in this manner. However, oral change orders may be unavoidable when addressing time-sensitive construction issues. 

While oral change orders are enforceable in North Carolina under certain circumstances, you must negotiate contract provisions to ensure that there is a clear mechanism for processing change orders. Do your best to only accept written and approved change orders, and have oral change orders put in writing as soon as possible. When in doubt, consult a contractor attorney in Wilmington, NC, from Cotney Construction Law. 

For more information on protecting your right to payment, read part two

If you would like to speak with a contractor lawyer in Wilmington, NC, please contact us today.

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.