Signing a contract for a large job can be both exciting and intimidating. The prospect
of working on a high-profile project conjures thoughts of increased visibility for your
company and additional work resulting from a job well done. Unfortunately, on almost any
medium to large project, each subcontractor will be required to sign and agree to a long and
complex subcontract. It would be difficult for any contractor to understand everything in
the standard subcontract agreement an overwhelming stack of documents including
general terms and conditions, special terms and conditions, plans and specifications, cross-
references to building codes and industry guidelines, and other confusing terms. Almost
every one of these terms is calculated to give an advantage to the general contractor.
Many contractors simply sign these contracts and hope for the best. Although such
blind faith can work on occasion, some simple steps can make the contracts more
1. Ask the General to Change Certain Terms. Remember, general contractors
like to use the same contract with each subcontractor for the sake of simplicity. As long as
they are using their standard contract, you can expect that it will favor them in almost every
detail. This does not mean that they are unwilling to negotiate. Remember, the general has
selected you as its subcontractor, and may agree to remove or replace a few of these one-
sided terms to close the deal. What the general loses in simplicity it makes up by getting the
subcontractor it wants.
2. Remember That Not All Contract Terms Are Enforceable. Some contracts
contain unenforceable terms. For example, most subcontracts contain a "pay-when-paid"
clause. A valid pay-when-paid clause means that the general has no obligation to pay you
until he is paid by the owner. Under Arizona law, however, these clauses are enforceable
only if they contain certain wording. Similarly, a contract which runs contrary to the prompt-
payment laws can only be enforced if it meets certain statutory requirements.
These are just two examples of contract terms which may not be enforceable.
Unfortunately, unless you know they are unenforceable, you are likely to simply accept them
at face value. For this reason, if you are concerned about a particular contract provision,
and if you have been unable to convince the general contractor to change it, consultation
with an attorney about the enforceability of those terms may be appropriate.
3. Be Willing to Walk Away From A Bad Contract. In the end, your best defense
may be your willingness to walk away from an unfavorable contract. It is true that even a
bad contract can have some good consequences it may allow you to keep your business
open and meet payroll until a good project comes your way. However, the negative effects
of entering into a one-sided contract will often outweigh the good. At best, a one-sided
contract will tie up your resources so you are forced to pass on the next good job that
comes along. At worst, such a lopsided agreement may cause you to lose your profit (or
even more), which in turn may force you into litigation or bankruptcy.
Be careful when entering into a new contract. Although you will never be able to
convince a general contractor to get rid of all the one-sided wording in a contract, with a
few prudent changes to the contract and an understanding of which terms will be
enforceable, you can go into the new project with confidence.