Kevin J. Taylor, P.A.

Back To Basics

Kevin J. Taylor, Esq.

Added: 07/07/09 

 John Wooden is one the best college basketball coaches ever. His UCLA Bruins won 10 NCAA Basketball Championships, including 7 in a row.  What was the subject of Coach Wooden’s   first practice every year:  How to put your socks on!   Why? Because if his players didn't get that simple act perfected then they might get a blister. If they got a blister they'd miss practice time. If they missed practice time they wouldn't win championships.
I tell this story as a reminder that we can never forget the fundamentals that got us where we are.   Sometimes in the whirlwind world we live in, we forget the simple, basic things.  Hopefully this article will be a refresher in some fundamentals.
PAY WHEN PAID
The pay when paid clause is one of the more important clauses for General Contractors to include in their subcontracts. Pay when paid clauses are enforceable in Florida.  However, the courts have ruled that the pay when paid language must be abundantly clear to make the clause enforceable.  While there is no magic language, the words “condition precedent” are as close to abra cadabra as it gets. These two simple words can mean the difference between coming out of pocket to the subs before you are paid by the owner or being able to hold off paying until the owner pays you.
Non-enforceable pay when paid language: “The Subcontractor shall be paid within 7 days of the Contractor receiving payment from the Owner”
Enforceable pay when paid language:  “Receipt of payment from the Owner to Contractor is a condition precedent to Subcontractor receiving payment”. 
LIQUIDATED DAMAGES
Similarly, courts have ruled that to have an enforceable liquidated damage clause in the subcontract, the language must explicitly express this.  Simply suggesting that the subcontractor will be subject to damages for its delay will not act to pass down liquidated damages. The contract must explicitly state that the subcontractor will be liable for liquidated damages suffered by the GC.
ATTORNEY FEES
There are two ways to be reimbursed prevailing party attorney fees; by statute and by contract.  You may be surprised how many contracts, from even the most sophisticated businessmen, that do not contain an attorney fees provision.  Something as simple as “In any dispute arising out of this contract the prevailing party shall be entitled to his attorney fees and costs” can dramatically effect dispute resolution recovery and strategies.
ARBITRATION CLAUSE
There are pros and cons of arbitration versus using the court system. Your legal counsel can advise you of their preference, and the advantages and disadvantages of both. Generally speaking, arbitration is faster and the odds of having a Trier of Fact who understands construction specific issues is greatly increased in arbitration.  Be mindful that arbitration is only available “if the parties agree to it”.  Often the agreement of the parties is contained within the contract itself in an arbitration clause.  The arbitration clause can be as specific as you care to make it, setting forth the venue for the arbitration, any particular rules you want to follow, the number of arbitrators or their specialties, who will hear your case, etc.  It is in your best interest to have as much of the dispute resolution procedure determined before the contract is signed and before the dispute arises.
CONCLUSION
There are many fundamental issues which may need to be revisited from time to time. The world we live in, and the rules governing contracting and construction, are constantly changing.  This article is intended to encourage a review of your basic procedures to ensure you and your staff “have correctly put on your socks” before you contract or start a project.