Bruce Jervis, Esq., Senior Editor
Construction Claims Advisor
Subcontracts usually include so-called “flow-down” clauses. These broadly worded provisions purport to take all the terms, conditions, requirements, etc. of the prime contract and incorporate them into the subcontract. If read literally, the prime contractor assigns total responsibility for project completion to the subcontractor. This, of course, is not how flow-down clauses are interpreted.
Subcontractors usually argue that the only provisions incorporated into the subcontract are the definitions and descriptions of the applicable portion of the work. Prime contractors tend to pick and choose the allegedly incorporated provisions which suit their purposes in the administration of the project or the resolution of claims.
In one recent case, a prime contractor contended that a broad flow-down clause imposed a prime contract claim limitation period on the subcontractor, thereby extinguishing the sub’s claim. The sub responded that if that was the case, why did the prime contractor include a separate claim resolution procedure in the subcontract, a procedure incompatible with the limitation period?
The recent discussion of incorporation of external documents into the contract prompted some interesting comments.
I’d like input from both the contractor and owner perspective regarding strategies and defenses when it comes to the pricing of estimated units of work. Please feel free to comment below.
In next Monday's issue of Construction Claims Advisor:
- Layout Schedule Established Subcontract Completion Deadline
- Specification Prevailed Over Conflicting Drawing Note
- Unlicensed Subcontractor Allowed to Recover From Unlicensed Prime