The success of general contractors in completing a construction project is often dependent upon the performance of their subcontractors. Traditionally, the key subcontractors on a project are the electrical, plumbing, HVAC and structural shell subcontractors. Due to the fundamental nature of the work performed by these trades, the risk of defaulting and terminating one or more of them is likely to have a substantial impact on the project.
There will inevitably arise occasions when even a once reliable subcontractor fails to perform and it becomes necessary to invoke the remedies of default and termination. Areas ripe for controversy with subcontractors that often can lead to default and termination routinely involve disputes over change orders and the scope of work, the installation of defective work and backcharges that ensue therefrom. Other areas of conflict arise from ambiguous plans and specifications and the extra work and delays caused by the discovery of unforeseen site conditions.
PREPARATION IS ESSENTIAL
The old saying that an ounce of prevention is worth a pound of cure is especially appropriate when it comes to subcontractor defaults. General contractors will want to be in the best position possible in the event they have to default and terminate a subcontractor. When this occurs, the general contractor’s first line of defense is a well written subcontract agreement that clearly spells out both parties’ rights and obligations.
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