Conference Attendees Gain More Knowledge of Contract Negotiations
Contract clauses and bid qualifications are always important topics for glazing contractors. Attendees of the Glass Association of North America’s (GANA) Contract Glazing Educational Conference, which took place May 18-20 at the Hyatt Regency DFW International Airport Hotel, heard a presentation on the subject titled “Killer Contract Clauses and Bid Qualifications” by Brian Cooper of the Dallas-based law firm of Canterbury Stuber Elder Gooch & Surratt PC. He provided insight and information regarding high-risk bid/contract situations.
“A concern with financially-significant projects is when subcontractors sign [the contract] and overlook a lot of the important clauses that may come back to hurt them,” said Cooper. “My hope is that I can give you the knowledge that will result in making you more prepared to deal with these risks you are assuming.”
Some of the key subcontract provisions he discussed included:
• Flow through clauses. These are typically very broad in scope; subcontractors are agreeing to be bound to the contractor by all of the terms of agreement between the contractor and the owner, as well as by the contract documents, and to assume toward the contractor all of the obligations and responsibilities the contractor assumes toward the owner. “You are assuming a risk in that there could be something in the contract that may hurt you and you will ultimately deal with it,” Cooper said. He explained that the primary purpose of the clause is to maintain consistent contractual obligations, and the documents are always available, but rarely requested by subcontractors. When faced with such clauses Cooper advised limiting them to technical performance and to the subcontract scope only.
• Scope of work clauses. These clauses can be either specific or general, and general contractors tend to always push for general. In such cases, the subcontractor’s bid proposal is often excluded. Cooper suggests glazing subcontractors limit the scope to work that is included in the bid proposal.
• Contingent payment clauses. Often called “pay if paid” and “pay when paid,” theses clauses are drastic, Cooper explained. “Pay if paid” basically says the general contractor will pay the subcontractor only if he is paid. “This shifts the risk of the owner’s non-payment from the general contractor to the subcontractor,” said Cooper. On the other hand, “pay when paid” clauses ensure the subcontractor will be paid when the contractor receives payment; the contractor is still bound to pay the subcontractor.
• No damages for delay. “These clauses prohibit you from recovering impact damages caused by delay,” said Cooper. He said these are often inserted into contracts and fair notice requirements may not apply. “Be cautious of hidden provisions,” he warned. There are, however, four common exceptions to this clause: delays not intended or contemplated by the parties; delays resulting from fraud, misrepresentation or other bad faith; delays that have extended such an unreasonable length of time that the party delayed would have been justified in abandoning the contract; and delays not within the specifically enumerated delays to which the clause applies. “But don’t rely on them,” Cooper added.
• Release/waiver of lien rights. The intended purpose of this is to release rights/claims for amount paid. These forms are often incorporated into the subcontract. Again, Cooper advises subcontractors to limit the scope to the amount being paid.
• Indemnity/additional insured. “This [indemnity] is a hot issue,” Cooper said. “Many states have outlawed such provisions.” Under an indemnity clause one party promises to safeguard/hold harmless another party from existing and/or future loss or liability. There are three forms of indemnity clauses: broad, intermediate and limited. A broad indemnity clause is the worst type for subcontractors, as it makes them liable for everything. “Even for the general contractor’s sole negligence, ” said Cooper. Under the intermediate clause, a subcontractor assumes all liability except the general contractor’s sole negligence. “The limited clause is the one you want, but have the most trouble getting,” said Cooper. This clause imposes liability only to the extent of the subcontractor’s fault or negligence. Additional insured clauses are also a big risk. These have no bearing on whether the general contractor has indemnity coverage; it gives him back broad form indemnity. “Don’t agree to this,” said Cooper.
• Change orders. These clauses result in extra work outside the scope of the contract. Cooper advised having a written order for the extra work to be assured of payment. He also said the contract price may be adjusted for extra work or deletions from the scope.
• Termination for default. Termina-tion is allowed as a matter of law, Cooper said. “One party must be in default and whoever materially breaches first will lose,” he said.
As Cooper concluded his presentation, he ended with these final considerations: give and take in negotiations; understand your money and risk positions; know that there will be problems, both unanticipated and unavoidable; and make sure the project management staff know the subcontract.
Charlotte, N.C. Service Center
Vistawall Architectural Products, headquartered in Terrell, Texas, has opened a service center in Charlotte, N.C. Scott Huff will serve as general manager of the company’s newest distribution facility, one of 19 throughout the country.
According to a company announcement, the new center will offer glazing contractors a variety of storefront systems, stock entrances and a wide selection of hardware and accessories. It also will provide quick turnaround on modified doors and
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