Bob Milford, Drewry Simmons Vornehm, LLP

Concrete Facts recently featured several articles regarding subcontractor agreements. In one of these articles, Doug Staebler of Custom Concrete Company, Inc. pointed out that both the large national builders and the smaller local builders are insisting on the use of subcontractor agreements. Builders utilize these agreements to shift as much liability as possible downstream to their subcontractors (including foundation subcontractors). The subcontractor needs to be aware that the builders’ agreements are generally not fair or reasonable. These agreements are prepared with the goal of limiting the builder’s liability and are one-sided in favor of the builders. In order to protect your business, you must attempt to negotiate with the builders to modify these agreements. In our practice, we have found that most builders, even the large national ones, will make some changes to their subcontractor agreements if they are approached properly. In a future article, Doug Staebler will provide detailed suggestions on the best approach to take with builders in order to make changes to their subcontractor agreements.

Although builders are very busy, most of them will make some effort to be fair if they are approached properly. In dealing with builders, you should focus on the major issues (they aren’t going to make a lot of changes). You should also try to get a face to face meeting. Most people are more agreeable to making changes in a meeting. On a telephone call or by e-mail, it is very easy to just say no.

After you have met with the builder and tried to limit your liability upstream, what do you do now? Do you have a subcontractor agreement with your subcontractors? Most foundation subcontractors subcontract at least part of their jobs including excavation work, backfill, dirt hauling, flat work, etc. You should have a subcontractor agreement with each of your subcontractors for the same reasons a builder wants to have a subcontractor agreement with you. This agreement should specify business-related terms (including the scope of their work, the term, price and payments, their duties and responsibilities, changes to the work and the timing of the work) and, also legal-related terms (including remedies, indemnity and insurance).

You want to shift as much liability downstream as possible to your subcontractors. At a minimum, you want them to at least be responsible for all of their work. They should be required to maintain insurance coverage and provide you with certificates of insurance to back up their work. Without limiting your liability upstream to the builder and without shifting as much liability as possible downstream to your subcontractors, you can get caught in the middle.

Bob Milford is a partner with the law firm of Drewry Simmons Vornehm, LLP in Indianapolis, Indiana. You can contact Bob at (317) 580-4848 or e-mail him at rmilford@drewrysimmons.com.