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Understanding Payment Provisions Part 1

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When you work on a construction project for an owner, you will likely face the burden of obsessive cost-saving pressure as a result of interactions with leery owners who are worried that they will be taken advantage of. Owner reluctance to “hand over the reins” to a contractor is justified when you consider the massive costs associated with a custom building project.

Fortunately, by drafting a Payment Provision into your contract, you can assure that the owner is aware of all building costs on a continuous basis. This provision can also detail how you will be paid by the owner. In essence, the Payment Provision helps level the playing field for both the contractor and the owner. Building projects require a lot of trust between parties, it’s an inherent, unavoidable truth of the construction industry. If you are interested in learning more about how utilizing these provisions can help you avoid a costly legal dispute, speak with our Fort Lauderdale construction lawyers.

What does a Payment Provision Include?

When you include a Payment Provision in a contract, you ensure that all provisions of materials and labor are assigned corresponding values. This is often drafted in the form of a schedule, with each item representing a single unit of work or supply order. As you make progress on the project, the contractor will verify that each item has been completed and that the payment has been delivered. Following the provision closely will help you avoid disputes with owners and provide written documentation binding your services with those chronicled on the schedule.

Detailing Your Payment Provision

It’s important to include the correct information on a Payment Provision. You want to be certain that you have covered all of your bases and supplied the owner with as much information as possible regarding the work to be completed and when and how you wish to be paid for any services rendered. Payment Provisions should include:

  • Clear descriptions of every unit of work either in progress or already fulfilled. It’s important to utilize clear designations so owners aren’t confused about things like vague or recurring items.
  • Completion percentages for every item on the schedule. The contractor should update these percentages as often as possible to ensure that all parties are on the same page.
  • Item values updated in accordance with the completion percentage.

Once you have drafted all of this information into your Payment Provision, you are ready to deliver it to the owner who will subsequently pay the contractor for all scheduled items that have been completed.

In part two, our Fort Lauderdale construction lawyers will explore common issues with Payment Provisions and how to prevent these issues from occurring.

If you would like to speak with a Fort Lauderdale construction lawyer, 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.