We came across an article on forconstructionpros.com written by Alex Barthet that addresses a situation we definitely don’t want to find ourselves in. This is the summary of the important concerns.
It’s unfortunately a more common problem than most of us would want to admit. You’ve taken on a job based on a simple one page agreement or even just a handshake. A lot of good business gets done just fine this way, but simple agreements virtually never include a clause for non-payment or conditions for a work stoppage.
You may be required to sign a contract that includes a work-stoppage clause, which favors the client. A fairly complex contract you might be asked to sign could have the following language:
“In the event of a dispute as to whether any item or portion of the work is within the scope of the work to be performed by Subcontractor or any dispute as to whether Subcontractor is entitled to an extra payment or additional time, Subcontractor shall continue to proceed diligently with the performance of the work, this subcontract and any disputed work, pending any resolution. The existence of a dispute shall not be grounds for any failure to perform by subcontractor.” *
If you agree to this, you will not be able to stop working and you will have to pay out of pocket for any expenses you incur for continuing the work. You will have to try to resolve your issues through the dispute resolution process in the contract.
If you have a simple contract you provide for your jobs, you might consider adding a “stop work” provision. It wouldn’t force the client to immediately pay, but it would allow you to stop working and might give you some leverage to get things resolved. This is a sample of what you could add to help:
“Subcontractor can slow or stop work, without liability or penalty, if it has not been paid its draw request 30 days after submission.” *
Limits to Your Right to Stop
Most often you would probably want to stop simply because you haven’t been paid on time, but you might also find yourself in a situation where the job or the client has simply gotten ugly and you just want out. You would need to look at whether you were paid for material or services in advance. If the client has paid for granite, or tile in advance for instance, you would need consider whether you have already delivered those items.
You also have to consider what agreements you have made with any sub contractors or suppliers. Is there a bond on the job? If there is a performance bond on the job, the stakes may be too great to risk damaging your ability to do work in the future.
If you are a sub-contractor working for a contractor and you haven’t been paid because he hasn’t been paid, you may have to look at the contract you signed. The Pay-when-paid provision provision might look like this:
‘Payment from the owner is a condition precedent to payment to subcontractor.’ *
If you have signed a contract with this kind of language, you will be unable to stop working without breaching the contract.
If you decide that it’s worth the potential fallout to walk off the job and you think you’re in a good position to do so legally, it still might be worth the time and expense to hire an attorney. The most important thing in any case is to make sure you have every aspect of the job that is relevant to your decision well documented. Besides physical documents, emails etc., make sure to take photos and any real-time documentation of the process, the phone calls, emails etc. It will likely get complicated, and the more evidence you have to explain and justify your side of the experience, the more likely you will be able to move on and away from the situation.