Entering into a contractual agreement with an owner can be a potentially lucrative or risky opportunity, depending on the true motives of the owner looking to invest in your services. You can’t always rely on your intuition to steer you clear of unscrupulous owners. After all, is a Rolls Royce with a Honda engine truly a Rolls Royce? Or is it a Honda putting up an impressive facade? You should be skeptical whenever you sit down at the signing table. One bad contract could compromise the future of your company.
If you’re hoping to find out whether or not an owner has the funds to pay you, you’ve come to the right place. In part one of this two-part series, a Tallahassee construction dispute attorney from Cotney Construction Law discussed the importance of prompt payments and why no excuse is a good excuse when it comes to late (or missing) payments. Now, we will continue this important lesson by highlighting your right to request information from an owner. Keep in mind that contractors are generally responsible for providing credit references, proof of quality work, financial data, and more before a contract can be executed. You should expect a similar level of transparency from the owners promising to fund your projects.
Does Your Contract Permit Information Requests?
You might not know it, but your contracts may come preloaded with provisions granting you the ability to ask an owner for proof of their ability to finance a project. And if they don’t, a Tallahassee construction dispute attorney can surely have them added to bolster protection for your business. That said, you’ll have to play by the rules when requesting this information.
According to the American Institute of Architects’ A201-2017 General Conditions of the Contract for Construction, there are two particular circumstances in which contractors are permitted to verify an owner’s financial resources. First, you can inquire before the project starts to ensure that you are comfortable proceeding with work before making any significant investments. Second, you can request this information at any point during the project if the owner exhibits signs that they are unable to keep up with their financial obligations.
Requesting Information Before and After Work Begins
Section 2.2 of A201, stipulates that, prior to the commencement of work, the owner must provide “reasonable evidence” proving that they can finance the project if the contractor submits a written request. If this information is withheld, the contractor may suspend work. While this would normally be viewed as a detriment to your success, you will remain eligible for a project extension based on the time it takes the owner to provide the requested information.
After work commences, you can request proof of financing if the owner has failed to pay you according to the terms of the contract. The same request can be made if there is a “reasonable concern” that the owner is unable to meet their financial obligations or if scope of work changes affect the value of the contract. If the owner is unable to provide the requested information within two weeks, you can suspend work and bill the owner for any costs dealing with demobilization and remobilization of your workforce. You can also charge interest.
The owner won’t be happy when they discover that you’ve taken action against them, and you’ll likely find yourself tied up in a dispute. Fortunately, a Tallahassee construction mediation attorney can help you resolve disputes in a quick and cost-effective manner.
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.