Payment Dispute Resolution
Payment disputes between general contractors and subcontractors are unfortunately common in the construction industry. As a subcontractor, not receiving payment for work you have completed can severely impact your business's cash flow and even threaten its survival. As a general contractor, payment disputes can damage relationships with subs and delay projects.
However, there are steps both general contractors and subcontractors can take to resolve payment issues efficiently while preserving working relationships. The construction lawyers at Davis Bucco & Makara have extensive experience helping contractors navigate payment disputes. Call today at 610-238-0880 for more information.
Here are our top 5 tips:
1. Review the Subcontract Terms Thoroughly
Before starting work, subcontractors in Philadelphia handling disputes should carefully review the payment terms in their contracts. Confirm payment schedules, retention policies, requirements for submitting invoices or change orders, and notice periods. Ask the general contractor about their standard procedures as well. Clear terms and open communication early on can prevent misunderstandings. It is also important to consult a construction lawyer if you do not understand the stipulations within your contract.
2. Document Your Work Extensively
Subcontractors should meticulously document all work performed and materials used on a job. Keep detailed records of hours worked, photographs of work progress, material invoices and delivery slips, and any change orders. Thorough documentation ensures you can justify invoices submitted to the general contractor.
3. Send Invoices Promptly
Subcontractors should submit invoices according to the agreed-upon schedule in the subcontract. Include required details and documentation. Send a reminder if you do not receive payment by the due date. Waiting until the end of a project risks non-payment, and “out of sight, out of mind” delays can damage business relationships.
4. Seek to Settle Disputes Directly at First
If issues over payment do arise, subcontractors should first seek to settle matters directly with the contractor. Likewise, contractors should give subs a chance to address disputed billings. Start by checking for miscommunications on either side - incorrect paperwork can happen. Calm, professional resolution should be the priority before turning to legal action.
5. Retain Experienced Legal Counsel
If a contract payment dispute persists and begins affecting your operations, it may be necessary to retain legal counsel experienced in construction contracts. An attorney can assess compliance with contract terms, bring their experience in industry practices, and assist with settlement or mediation. If those prove unsuccessful, counsel can represent your interests in arbitration or litigation.
Frequently Asked Questions
1. What steps can a subcontractor take before starting work to prevent future payment issues?
Before starting work, a subcontractor should thoroughly review the payment terms and documentation requirements in their contract with the general contractor. They should also clearly communicate and confirm schedules, retention policies, required details for invoices and change orders, and notice periods for submitting invoices, disputes, etc.
2. How should subcontractors track their work progress throughout a project?
Subcontractors should diligently document all labor performed and materials used. This includes recording daily activities, photographing work progress, obtaining and retaining material invoices and delivery documentation, and maintaining detailed records of hours worked by employees and staff. This ensures justification for invoices to the general contractor.
3. What details should subcontractors include on invoices submitted to a general contractor?
Subcontractor invoices should include a detailed breakdown of all completed work according to the project’s specifications. List tasks performed, materials supplied, man hours expended, site photos, and applicable dates clearly. Reference any change orders or contract amendments. Include copies of material invoices and proofs of delivery.
4. When is it appropriate for a subcontractor to retain a construction lawyer for payment disputes?
Subcontractors should first seek prompt direct resolution with the contractor when possible. If genuine efforts fail to resolve the issue and it threatens the subcontractor’s finances or operations, retaining construction attorneys can help negotiate a settlement or pursue action through arbitration or litigation if necessary.
5. What experience should subcontractors look for when hiring a lawyer to handle payment disputes?
Look for construction lawyers with extensive specific experience in construction contracts and representing contractors in payment conflicts. Deep understanding of industry standards and state prompt payment laws are essential. Construction litigation experience and familiarity with dispute resolution alternatives like mediation and arbitration are also ideal.
Selecting a Construction Lawyer to Handle Your Dispute
The construction lawyers at Davis Bucco & Makara have decades of combined experience specifically with contractor payment disputes.
There are always two sides to complex business disagreements, but prompt and thoughtful actions by both general contractors and subcontractors can keep most payment issues from escalating into serious conflicts. When unresolved disputes do arise, experienced construction attorneys can protect your rights and interests as a contractor in Pennsylvania. Reach out today to schedule your initial consultation at 610-238-0880.