You Did the Work, How Do You Make Sure You Are Paid?

At Rosenbaum & Taylor, we know that construction professionals don’t want to worry about whether they will get paid – and they shouldn’t have to. Our construction-industry clients want to be able to focus on their trade or craft and on providing quality service that meets or exceeds their clients’ expectations. We know that contractors and subcontractors don’t want the uncertainty, or the hassle, of collecting payments when they are due, or overdue, or stressing overpaying for labor or materials. We know that overdue or unpaid invoices impact our construction-industry clients’ ability to meet their professional and personal financial obligations, pay subcontractors they have hired, purchase materials, pay vendors, and manage cash flow. We understand the effect late or missed payments have on our clients’ upfront cash needs, lines of credit, and profit margins and we work with them to draft the strongest contracts possible to minimize the risks inherent in construction contracts. We will leave construction to you. Leave the contract drafting to us.

The way in which contracts are drafted often determines how easy, or difficult, it will be to resolve a payment issue. The contracts lay out the parties’ obligations and expectations and minimize the risks of miscommunication. At Rosenbaum & Taylor, we recommend to all of our construction-industry clients, whether they are general contractors or subcontractors and whether they are electricians, carpenters, painters, labor providers, plumbers, masons, bricklayers, roofers, structural steel installers, HVAC contractors or involved in other trades, that before they begin a project, they take the necessary steps to protect themselves and reduce the chance of payment issues or disputes. Making sure that their contracts are drafted properly and with the appropriate strong language helps our clients avoid payment disputes from arising and helps them resolve issues more quickly if they do arise.

We work with our clients to determine whether industry-standard contracts like AIA contracts provide them with adequate protection, whether they want modifications to the standard language in those contracts, or whether their interests are best served by the use of a contract specifically-drafted to meet their individual needs and circumstances. We generally discourage the use of free agreements or contract templates available online, which rarely fit the clients’ needs well and which do not offer the same protections that can be written into custom agreements. We work with clients to draft custom contracts specifically tailored to meet their needs and to fit their individual circumstances. We also review existing contracts to identify issues before they arise, so that our clients can understand their risks and how they may minimize them.

We know that any contractor’s goal is always to be paid, on-time, and in-full. We work with our construction-industry clients to make sure that, in their contracts, there are no ambiguity about the estimated cost of services, and/or materials, both within and beyond the identified project scope, and no ambiguity about the payment schedule and terms of payment. We work with our clients to develop strong contracts. Strong contracts clearly set forth financial obligations, which may include a payment schedule or progress milestones that trigger the next payment. Strong contracts set forth the procedure for change orders and for add-ons, including what the request process is, what the approval process is, and what effect they will have on project cost and on the project schedule. We encourage our clients to document not only the progress of work, but requests for changes to the scope of work, to the materials used, to the project schedule, and to other aspects of the work that affect cost. Doing so should deter, if not prevent, disputes about payment for changes requested during the course of a project. Strong contracts also set forth penalties for late payments, for finance charges, for liquidated damages, for the collection of attorneys’ fees if you need to take legal action, for cancellation, or the right to suspend work until payment is rendered.

A liquidated damages provision in a contract provides for the payment of a specified amount should one of the parties to the contract breach the contract. We draft contracts for our clients that provide for liquidated damages in the event of a breach of the contract so that our clients are compensated for damages they will incur in the event the other party cancels the contractor fails to meet its obligations. Liquidated damages provisions need to be carefully crafted because provisions that are too strong, or provide for too much money, may be found to be unenforceable by a court, and provisions that are too weak do not offer adequate protection. The attorneys at Rosenbaum & Taylor also help our construction-industry clients develop good practices sending timely past-due notices, sending clear demand letters, and considering liens, or lawsuits, where necessary.

When we draft construction contracts for our clients, we always recommend that our clients consider whether they are contracting with a client or company they have worked with before. We recommend that for new relationships, our clients demand a higher upfront down payment, with more frequent progress payments. While most people and companies enter into contracts, in good faith, with the intention of fulfilling all of their obligations timely, strong contract language protects our clients in the event obligations are not being met. Not everyone acts in good faith and even if they do, circumstances sometimes arise that cause problem related to timely payment. Our clients want to be fair to their customers, but we encourage them to be fair to themselves by properly protecting their interests with proper contract language. For clients of ours working with trusted repeat customers of theirs, or who are contracting with companies they have successfully worked with in the past, we help them to evaluate the risks inherent in a new project and to set financial obligations accordingly. We always want to encourage good deals to close and never want to stand in the way of business, but in our experience, the best deals and smoothest projects are the ones with the best contracts.

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