Payment issues are common in the construction industry, especially for subcontractors. Delays that occur during the commission of projects can make it challenging for subcontractors to honor the terms of their contracts and pay their vendors and own contractors.
Payment delays and nonpayment matters are contract breaches. Fortunately, there are actions subcontractors can take to ensure they receive timely payments and lessen the risk of complications. Besides including an arbitration clause in all contracts, below are some actions you can take to resolve subcontractor nonpayment issues.
Review the contract
Many construction contracts include special parameters for contractor payments. For example, a pay-if-paid clause allows the party that hires the contractor to issue payment only after they receive payment from the owner. Without proper subcontract provisions, the subcontractor or contractor is unable to utilize the benefits of a good contract to avoid unenforceable contract pay-if-paid stipulations and has fewer actions for legal recourse to pursue missing or delinquent payments.
Investigate the matter
It is imperative to investigate the cause of missing or delinquent payments in a timely manner. Verify the reason to ensure the issues are not due to easily resolvable misunderstanding or concerns. Pursue resolution tactics, such as launching a formal and polite inquiry into the matter, having a meeting to work out possible payment arrangements/terms or etc.
Owners often use promises and industry language to distract and get themselves more time to avoid providing payment. Before releasing payment, they might even resort to finding issues with the completed work or subcontractor’s contractual obligations. These tactics are not necessarily lawful and may require litigation.