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Protecting Your Business From Subcontractor Mistakes

Both general contractors and building product dealers have a lot on the line when they use subs, so it's important to understand subcontractor liability. It's common for both dealers and Big Box retailers to hire a subcontractor to install materials like hardwood flooring purchased at their stores. GCs likewise have relationships with many trade subcontractors.

When selecting a subcontractor, take the time to properly vet them. Here are some areas where you can learn more in order to help mitigate risk and avoid potential issues later on down the line.

  1. Talk about their past, present and future. Do your research to find any public information about lawsuits, bankruptcies or complaints from former projects. Ask for specific details on previous projects, including contact information of previous clients. Whether you receive references from the subcontractor or find them yourself, reach out to get a third-party point of view. Ask for clarity on current projects and those in the pipeline so you can be sure that your project will have sufficient staffing per agreed upon timelines.
  2. Understand their team’s training and capabilities. If you are working with a subcontractor who will be using a product for the first time, gain an understanding of their learning curve. For example, are you searching for a crew to hang siding? Engineered wood siding cuts and installs just like traditional wood siding, so there is less of a learning curve than if they previously worked with other products. Air and water barrier systems work similarly, but they don’t all install alike. Encourage subcontractors to be properly trained by experts, like LP field techs, before using new products or techniques. This will help the product perform to its peak; plus, you will want to know that the warranty is not voided from improper installation.
  3. Ask about their safety protocols and practices. Don’t let risky behaviors on the jobsite haunt you. Get a full understanding of past safety violations, corrections and steps put in place to avoid recurrence. Safety on the jobsite should be a core value for everyone. Additionally, confirm that the subcontractor carries proper insurance (including workers compensation insurance) to cover any liabilities.

Once you've vetted your subcontractors, you'll want to get your agreement confirmed. There's usually a written contract in place, but if not - or if the contract isn't comprehensive enough - dealers and GCs can face major costs and construction legal issues if subcontractor work goes wrong. To avoid a legal and financial mess, it's always wise for builders and dealers to consult with a construction industry attorney and their insurance carrier.

"It's wishful thinking to assume that all builders and dealers have a written contract with subcontractors," says Patrick Barthet from the Barthet Firm, a Miami-based construction law firm with clients in Florida and many other states. "It's more likely that they're willing to take a lot on faith. We always recommend that our clients document all transactions, possibly through a master agreement signed once followed by purchase order triggers."

"There are plenty of form contracts in construction," says Trent Cotney, president of Cotney Construction Law, a national firm with 14 offices across the U.S. "AIA contracts are a great example. However, there's never a one-size-fits-all contract. Most form contracts miss key provisions that are critical or region-specific. For example, AIA contracts lack an attorney's fees provision entitling a party to recover those fees in the event they succeed in a dispute. Most form contracts contain 85 percent of what's needed, but you need to understand the laws of your state, the scope of work and the schedule for a specific contract in order to add provisions that will protect contractors and trades."

Both the Cotney and Barthet firms put clients at ease because they're industry specialists. "Most of our lawyers worked in construction prior to going to law school," says Cotney. "We know construction law not because we learned it from a book but because we've worked in and support the industry that supports us."

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