Water Well Journal
Issue link: http://read.dmtmag.com/i/752472
You can add an integration clause incorporating these duties to minimize ambiguity. Kimmel warns against any clauses disclaiming all implied duties. While some disclaimers can be beneficial, they should be done with the advice of counsel. Things to look out for When you're reviewing a contract, it's important to pay close attention to your ability to collect payment—particularly if you are a subcontractor. One of the big buzzwords in construction contracts is "pay if paid." This clause means—as a subcontractor—you only get paid if the owner pays the prime contractor first. "You can see what kind of mess that could create," Kim- mel says. "You do $50,000 worth of work for me; you've paid your employees and bought all of the materials. Then I look at you and say you did fantastic work, but I'm not paying you because the owner hasn't paid me. It makes the subcontractor the bank for the job." Many states now have strict prompt payment laws. In Ne- vada, for example, you're entitled to payment either within 10 days of the date the owner pays the contractor, or, if that never happens, payment within 30 days of submitting your payment request. Not all states have those laws, though. If yours doesn't, you have to be careful you're not agreeing to provisions stat- ing you're not entitled to payment unless the owner pays the prime contractor. "Pay when paid is definitely where the industry is going," says Tory Donnelly, president of Summit Drilling Co. in Bridgewater, New Jersey. "That's something I see a lot more of and it's a big change, at least for environmental drilling. It's difficult because you can't predict your cash flow with that." Other payment clauses can limit your ability to get paid. Kimmel has come across provisions saying if the prime con- tractor doesn't think the subcontractor will finish their work, they can withhold all payment at their sole discretion. Summit Drilling tries to negotiate stricter payment terms when possible, Donnelly says. "Someone may even put 250 days for payment in a con- tract and we'll cross it out and put 90 days," she says. "We'll mark it up and try to negotiate more acceptable terms." To ensure prompt payment, Tom Downey, CWD/PI, presi- dent of Downey Drilling Inc. in Lexington, Nebraska, also pays attention to retainages. If he's working as a subcontractor on a job and there's a retainage in the contract, he says he may negotiate on it if he feels it's high. For example, say you're providing the irrigation wells for a sports complex at a college. The wells might be a small part of a large project that stretches out over the course of a year or more. Your company goes in early and gets the work com- pleted, but they still hold a 10% retainage until the complex is fully complete. "We don't want our retainage tied up when we're done with a project," Downey says. "So we try to negotiate that down. Once we're done, we believe we deserve our money." Liquidated damage clauses are also important to Downey, especially if it would require work to be completed in colder months of the year. Liquidated damage clauses require the work to be completed within a certain time frame. You pay penalties for going past the deadline. If bad weather could delay the work, that's something Downey tries to negotiate. If there is a liquidated damage clause in a contract, pay close attention to all change orders. "If you have a liquidated damages provision that says if you don't finish by X date, every day after that date is a penalty of Y dollars per day, and you don't add those extra days into the change order, you may be out of luck," Kimmel says. "Change orders often are about more than extra work and money; a lot of times they're about extra time." Change orders are "mini contracts," Kimmel says. That's because it's changing the scope of work already agreed upon. So, like all contracts, they should be specific and all parties need to agree to their terms. Collecting payment Aside from your right to prompt payment, you have "mechanic's lien rights." This provides you a way to collect payment from an owner. Essentially, this means if you've done work to an owner's property for the benefit of their property, then you get a form of security interest in that property. For example, if an owner pays the prime contractor but that contractor runs off with the money, it gives you the right to collect your payment from the property owner. But there are certain steps you must comply with so you don't lose your security interest. "Those steps vary greatly from state to state," Kimmel says, "so you want to know what your rights are in your state and that you perfect them as you're going along so you don't lose that right." That's why knowing your state laws is critical to protecting yourself, whether you're trying to collect a payment or sign- ing a contract agreement. "The law may say one thing, but people could still try to contract something different," Kimmel warns. "If you don't know what your rights are in your state, you may accidentally waive important rights." WWJ Jennifer Strawn was the associate editor of Water Well Journal from 2004 to 2007. She is currently in the internal communications department at Nationwide in Columbus, Ohio. She can be reached at strawnj2 @gmail.com. NGWA Offers Documents to Help Contractors The National Ground Water Association has designed documents designed to aid water well contractors who are drilling wells, in- stalling pump systems, or who want to increase revenue by lock- ing in residential water well inspection and maintenance work. • Water Well Drilling Agreement and Instructions for Use • Water Well Pump System Installation Agreement and Instructions for Use • General Contract for Residential Water Well Inspection and Maintenance Services These can be found in the NGWA Bookstore at www.NGWA.org. waterwelljournal.com 24 December 2016 WWJ CONTRACTS from page 23