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The Securing the Parties’ Performance Provision Part 1

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The Securing the Parties’ Performance Provision is a common contractual device utilized by owners to bolster confidence in the contractor. This provision can be used to accurately detail your credit relationship with an owner.

Similar to the Performance Duties Provision and Payment Provision, the Securing the Parties’ Performance Provision is largely concerned with guaranteeing payment and performance on a rolling basis as various portions of the project are completed. In this two-part series, our Miami construction litigation attorneys will introduce the Securing the Parties’ Performance Provision and explain how it can hurt or benefit contractors and owners.

What is the Securing the Parties’ Performance Provision?

This provision is an essential component of any commercial contract because it details the monetary assurances between the owner and the contractor to facilitate a high-level of workmanship on commercial construction projects. The precise function of the Securing the Parties’ Performance Provision is to clearly outline the post payment and performance bonds being utilized to ensure that you (the contractor) complete the project according to the design plans and specifications mentioned in the contract. More importantly, it assures the owner that the contractor will continue to perform his or her duties until the project is completed regardless of disputes or disagreements between both parties.

Does this Provision Help or Hurt Contractors?

Most contractual provisions are designed to protect both parties. In many cases, these provisions simply ensure payment once work is completed. Logically, both contractors and owners should be interested in using provisions to help complete projects and guarantee payment for services rendered.

When discussing the Securing the Parties’ Performance Provision, the major benefit for contractors is that this provision acts like a covenant to ensure that contractors have the necessary capital to meet their building goals while simultaneously defending the contractor against potential nonpayment. In the provision, contractors can outline how they intend to collect payment from the owner. When owners fail to pay the contractor, the contractor can utilize prepayment clauses or mechanic’s liens to secure any withheld compensation.

The Securing the Parties’ Performance Provision is an effective method of fostering accountability between the contractor and the owner. Like most contractual provisions, transparency is the key to avoiding a dispute over quality of work, timelines, or other work-related conflicts.

In part two, our Miami construction litigation attorneys will continue exploring this important provision, focusing on common issues that arise when utilizing it, and how to prevent these issues from negatively affecting your relationship with an owner.

If you would like to speak with a Miami construction litigation attorney, 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.