As I sit down to write my annual list of resolutions for contractors, I am amazed at how much things changed in 2020. Construction was going well and then, in March 2020, COVID-19 hit. At first, we thought it was going to be a disaster for the construction industry. States, cities and towns shut down projects and many applied for PPP loans. Then, something amazing happened. Construction was considered an essential service and everyone was back to work.  That said, the work world changed: companies were donating their PPE to frontline workers, COVID-19 protocols had to be followed and paperwork had to be filed. Everyone was scrambling to figure out how to comply and keep their businesses going. So, you may or may not ask, what was I, as a construction lawyer doing? I spent March and April thinking about the new risks contractors/construction companies were facing and developing contract clauses to protect the industry. I wrote a number of blog posts with clauses to add to your contra

How to Get Paid

It seems as though clients' disputes come in waves.  The latest pattern that has emerged is contractors are finding that they are having trouble getting paid.  As usual, the best way to deal with this problem is by preventing it entirely.  The two tools in your arsenal are your contract, and written change orders.

Prior to starting any job, a contractor or construction company should negotiate a clear-cut payment schedule that makes payment conditioned upon milestones. The work should never get ahead of the payment and vice-versa.  Payments should be broken down into numerous, frequent payments.  That way if either side is having money trouble, it will be discovered before huge receivables accrue.

The contract should also have a clause that the contractor is entitled to stop work if payment is not made within a certain time period.  That way the contractor will not be accused of breaching the contract or abandoning the job if he refuses to work due to nonpayment.

Contractors should not allocate all of their profit to the last payment.  They should also also not cut their margins so close in order to be able to win a bid that any failure to get payment in full results in a loss on the job.

Finally, as always, all change orders must be in writing and reflect the change in price and any extension in the date of substantial completion.  Oral change orders are frequently not honored, and memories conveniently fade.  At minimum, confirm all change orders through email.

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