Category: Construction Law

You have reached the end of a project and you submit your final payment request. Instead of just paying you the amount you have invoiced, the general contractor tries to lowball you. Maybe he claims he doesn’t have to pay you any retention until he is paid retention by the owner. Maybe he tells you there is something wrong with part of your work. Maybe he knows you are desperate for cash and would prefer a partial payment to a fight over full payment. Whatever the situation, the following strategies may help when you are faced with the prospect of… Read More

General contractors are often reluctant to withhold payment owed under a subcontract because each party’s obligations are clearly spelled out. This clarity is often lacking when additional work is done, either because the additional work was never requested in writing, or because appropriate signatures were not obtained, or the like. Many of these problems can be avoided or minimized by following these practical tips. 1. Don’t Start Any Work Until You Have a Signed Contract. If you never had a signed contract, to begin with, how will you prove that the additional work was not included in your original agreement?… Read More

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,… Read More

Many construction contracts are written so that the owner will pay for labor and materials by way of joint checks. In the typical scenario, a contractor will submit a payment application itemizing work performed by various subcontractors during that month’s payment cycle. The owner will then issue checks payable jointly to the general contractor and to the subcontractor whose work was listed on the application. This process can work to the subcontractor’s advantage, because it prevents the general contractor from using payments earmarked for the subcontractor to satisfy other obligations. Unfortunately, joint check payments can also present problems to those… Read More

Very few things can send a successful business into a tailspin more effectively than a lawsuit. Whether a construction business is forced to file a lawsuit or whether it is being sued, the litigation process will drain the company’s resources, including money, time, and energy. Therefore, a few simple strategies to avoid litigation should be employed. 1. Negotiate A Favorable Contract. Surprisingly, many business owners enter into substantial agreements without reviewing the contract documents in detail. Others submit proposals on generic forms not specific to their business. The temptation is great to accept the contract as written to expedite the… Read More

The Arizona Prompt Payment statute requires a contractor to pay “within seven days of receipt by the contractor or subcontractor of each progress payment or final payment, the full amount received for such subcontractor’s work and materials supplied based on work completed or materials supplied under the subcontract.” See A.R.S. 32-1129.02(B). As long as a subcontractor or supplier submits an invoice or payment request, and as long as there is no dispute over the quality of the work or materials, then the law demands that payment is made within seven days after the general contractor has been paid. As any… Read More

Under Arizona’s Stop Notice statutes, a contractor may serve a notice on the owner and/or construction lender to let them know that a payment is still owed. The owner or construction lender must then withhold that amount from the next disbursement until the dispute over payment is resolved. In reality, the construction lender often stops all payments to anyone until the payment dispute described in the Stop Notice is resolved. This practice gives a contractor immense leverage through the proper use of a Stop Notice because the owner or general contractor must resolve the dispute before the money will start… Read More

Mechanic’s liens are useful when properly implemented. However, an improperly executed lien will waste time and money, and the lienholder will never reap the expected rewards. To avoid these pitfalls, consider the following misconceptions about liens: Myth 1: Any Contractor or Supplier Can Claim a Lien. Only those who properly complete lien documents, including a Preliminary Twenty-Day Lien Notice, may claim a lien. In addition, a subcontractor or supplier to a sub-subcontractor (i.e., a third-tier subcontractor), as well as contractors not licensed to perform the work, may not be entitled to a lien. See A.R.S. 33-981(B) & (C). Myth 2: Payment Is Guaranteed… Read More