What GCs need to know about flow clauses

Flow clauses are an ubiquitous part of the agreement between main and subcontractors contractors, to the point that the parties often sign them without careful reading.

But they are not always as effective as they could be, especially when they are understood or not explained, according to lawyers.

And, although these clauses may be exhaustive: government construction contracts may be especially heavy, they rarely encompass enough to protect GC from the actions of the sub -tracks.

How flows work

Flow clauses are a blanket provisions that ensure that the terms and conditions agreed by a GC and the owner also apply to subcontractors. It is a way for a general contractor to manage risk and reduce the possibility of disputes.

“Essentially all the obligations due to the general contractor are reflected in Sub,” said prosecutor Phillip Parham, associated with Jones Walker, in Atlanta.

Although precisely what obligations are reduced, they can generally cover almost all aspects of the main agreement between the owner and the general contractor, said Parham.

“In this situation, in general, the terms of insurance coverage would lower, the requirement to follow the state and federal laws would be reduced and many others,” he said.

This could also include the responsibility of conducting on -site research on the conditions of the project site, the duration and the breadth of guarantee that the subcontractor must provide, the obligations of liquidated damage and even the extent of the obligations of compensation of the subcontractor towards the general contractor, he added.

Although the flow clauses are standard in GCS and SUn contracts, they should not be the only legal protection for the main contractors, according to lawyers. Based on the blanket fall clauses is like sending a soldier to battle with only one helmet, said Parham.

“The provision of itself is not enough to address all the circumstances that may occur between the subcontractors and the CG that trigger the contractor’s obligations to the owner,” he said.

But perhaps because of the fact that they are almost very standard, subcontractors do not often read or understand the responsibilities that the download clauses are on top, said William Wilson, a commercial lawyer of Robinson+Cole based in Hartford, Connecticut.

“They only sign it,” he said, which can lead to problems for both the sub and the GC when a conflict occurs.

Potential problems

If a Sub -Sub does not understand its responsibilities for alerting the GC for a possible delay, for example, the GC may not notify the owner within the period stipulated in his contract, said Parham. This can lead the GC to be in the hook for the delay.

There are some other common areas where GC can be shot in a flow clause if they are not adapted to the specific project, he added.

The most common are the provisions of incoherent notes.

For example, a GC may be obliged to notify an owner any additional compensation claim within seven days of the event that causes the claim. But the subcontractor’s flow clause could say that the requirement is 10 days. Now what?

Another instance may be when a flow clause includes a 48 -hour notice period. But what about an event that happens on a Friday? Sub and GC negotiate the weekend to submit to the owner Sunday?

“You have a really great exhibition area,” said Parham. “It is a war on two fronts where he is responsible for the subcontractor, but the owner is no longer responsible.”

How GCs can be protected

GCs may take some steps to ensure that if a dispute occurs, they are protected beyond the provisions of the flow clause.

“After having litigated many of these cases of contract, it can be confused when you only say that” we will incorporate all the terms of the main contract, “Wilson said.” Often conflict and they are not clear who is responsible for what and if this would extend the GC’s responsibilities in the sub. ”

For example, a dispute resolution provision in the main contract could request arbitration, while the subcontract could request litigation.

Contractors should look for this type of desalineation in advance, so they do not discuss them later, when a dispute has already created tension between the parties. “Better to solve -everything in a place if possible,” said Wilson.

“Order of Priority”

Parham also recommends that GC be careful about what is called the “priority order” listed in documents. This language clarifies which clauses or items have priority over others. For example, a tailor -made modification to a form contract may have a higher priority than the original language of the boiler plate.

Also ensure that the contract and subcontract flow provisions agree. This is essential to ensure your substance what you expect from them.

“Thus, when there is a flow clause in a subcontract, a subcontractor should review both the subcontract and the main contract to understand all the extent of its obligations to the general contractor,” he added.

This does not mean that conflicts will not happen. “There will still be disputes,” Parham said, but ensuring that there is an order of priority in a GC place in a better place.

The required flows in federal contracts

The GCs that are doing federal government work, however, must keep in mind that they often cannot adapt the flows established in their contracts.

Instead, they and their subts are obliged by the clauses that come off Gar 52.244-6which is a regulation of federal acquisition required by subcontracts for commercial products and services.

Some clauses may not seem relevant to the work there is, but they are still needed, said lawyer Merle Deancey, a Blank Rome partner based in Washington, DC

For example, a clause requires privacy training for contractors who perform private security functions outside the United States, which is even included in the jobs that occur in the country.

“This is a mandatory flow and will have nothing to do with your work,” said Deancey. But if a GC and its subs (and its subs) want to do government work, they must agree.

GCs can say that their substances understand that these clauses are mandatory, even if they will never affect their work, and that the GC cannot negotiate with the first, because the first is the United States government.

“You have to read them closely because you may have bought some obligations of fulfillment that you would not normally have,” said Deancey.