SUBCONTRACT GUIDANCE FOR THE CONTRACTOR:
HOW TO BE STUCK IN THE MIDDLE, WITHOUT GETTING STUCK

1. Introduction
2. Scope Risk: Allocating the Scope of Work Between the General Contractor and the Subcontractor
3. Managing the Financial Risk of Owner’s Inability or Failure to Pay for the Subcontractor’s Work
4. The Right to Offset Sums Due to Subcontractor Under One Subcontract Against the Subcontractor’s Liability on Another Subcontract
5. Express Right to Withhold Payment During an Anticipated Condition of Default
6. Express Right to Withhold Payment for Failure to Maintain Insurance
7. Limiting the Subcontractor’s Right to Terminate for Contractor’s Default
8. Continuation of Work Pending a Contended Default or Dispute
9. Dispute Resolution – To Arbitrate or Not to Arbitrate
10. Getting an Effective Warranty from the Subcontractor
11. Termination for Convenience
12. Safety Considerations in Preparing the Subcontract
13. Conclusion

Attachment - Contractor’s Supplemental Safety Requirements

This paper focuses on several areas where counsel may find opportunities to help advise the Contractor who wants to improve the language of its Subcontract form, or to adapt the language to achieve compromise with a critical Subcontractor who refuses to accept some clauses that are considered customary. It also suggests some clauses that may help protect the interest of the Contractor in ways that are not typically observed in many Subcontract forms. This paper does not attempt to address every risk that a Contractor should consider in the process of preparing a comprehensive Subcontract.

It is most important for the parties to a Subcontract to thoughtfully consider how each of them will manage and assume risk on a construction project in the context of the Prime Contract. For the Contractor, the objective is to conscientiously identify each risk of liability to the Owner or others if the Subcontractor fails to perform, and to ensure that the Subcontractor assumes, and is capable of assuming , such risks. To achieve this objective, the Contractor must pass on to the Subcontractor each such identified Prime Contract risk.

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