Every Friday, we select a few articles from the week that we think are worth your time as a construction financial manager (CFM). We look for compelling articles not only about financial topics, but about business, technology, and life, that challenges you to think about your role as a CFM…Read More
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Construction contracts are oftentimes lengthy and complicated. The contracts underlying a construction project form the basis of the relationships between the signing parties, and provide an outline to how the project will go. A review of the contract not only provides insight into the work to be performed and its…Read More
Every day, credit professionals are challenged to handle sensitive financial situations for businesses. They are trusted to analyze complex situations and to make an educated judgment about how to financially interact with other companies. This is a big job. It can make drastic impacts on a company; that is, drastically good, or…Read More
Have you ever come across the words “Pay-When-Paid” or “Pay-If-Paid” in your construction contracts?
These provisions are ultimately about determining who will bear the financial risk of a construction project. In other words, if the property owner doesn’t pay, who’s out of luck?
America’s public policy generally favors those lower on the chain when…
The Ohio Supreme Court chimed in on “pay if paid” clauses last week, and it’s not good for subcontractors.
In Transtar Elec., Inc. v. A.E.M. Elec. Servs. Corp., the court decided that a pay if paid clause within a construction contract was enforceable, and thus, a subcontractor was without any claim for…Read More
Pay when paid, and pay if paid clauses are pretty common, but can be misunderstood – both in operation and purpose. Below, I’ll attempt to provide some answers and clarifications to common questions and misconceptions about these contract provisions. First, however, before pay when paid and pay if paid clauses are…Read More
ENR.com and the Construction Financial Management Association (CFMA) recently published some articles suggesting that “cash-strapped public and private owners are shifting greater risk onto contractors through onerous deal terms” [Owners Shift More Financial Risk as Recovery Remains Sluggish]. This is true, but it’s not necessarily new. As this article will…Read More
Most states prohibit parties from contracting out of their mechanics lien rights. A supplier or a subcontractor, in other words, cannot agree before starting a project that they will waive their lien rights. These provisions – referred to as ‘no lien clauses’ – are invalid in most jurisdictions because they violate…Read More
In 1791, Thomas Jefferson introduced the first mechanics lien law legislation and invented a public policy interest in the United States to always protect contractors, suppliers, and subcontractors from the risk of non-payment. As we’ve explored in previous posts, the ensuing 220 years brought epic battles between legislatures, courts, and…Read More
Sometimes, it seems as if determining whether pay if paid clauses and/or pay when paid clauses are enforceable in a certain state is nearly impossible. In many states, the question is only resolved by an analysis of the specific language of the individual clause itself, a labor intensive proceeding that,…Read More