1. Educate Yourself About the Project. If you are working with an owner that is new to you or if you are a subcontractor working with a general contractor with whom you have not worked previously, ask others about their reputation. Before venturing into a relationship, investigate the project’s financing and the reputation of those holding the purse strings.
  2. Condition Your Bid. Condition your bid on fair contract terms. This need not be limited to boilerplate exclusions and clarifications. Instead use the bid process as an opportunity to set the stage for contract negotiating.
  3. Read Your Contract Before Signing It. Even if the contract appears to be a standard AIA or Consensus Doc, read it. Scrutinize it. Make sure you understand it and make efforts to negotiate those terms that ask you to take on unbalanced risk.
  4. This Means Read All of the Contract Documents. Read all exhibits as closely – if not more closely – than the contract itself. Exhibits can include lien waiver forms, broad indemnity agreements and change order forms that release various rights otherwise set forth in the contract. If you are a subcontractor, ask for and review the prime contract as most subcontracts incorporate the prime contract, plans, specifications and all addenda thereto.
  5. Be on the Lookout for Risk-Shifting Clauses. As part of your risk management practice, develop a list of contract provisions that have caused you problems on past projects. Examples include: pay-if-paid vs. pay-when-paid clauses, overbroad indemnity clauses that ask you to indemnify against the indemnitee’s own negligence or to indemnify direct rather than third-party claims, no damages for delay clauses where the delay was caused by the owner, etc.

  1. Follow Your Contract. If your contract requires that you submit a pile of paperwork with each pay application, do it to avoid delays in payment. If your contract requires that you provide written notice of changed or increased work, give it. Despite the ever increasing use of email and text messaging – this might not be sufficient to preserve a payment claim.
  2. Do Not Waive Lien and Bond Rights Without Payment. Read before you sign. Contrary to popular belief, Oregon law is ambiguous as to whether you can waive your rights before commencing work. Some forms do not require payment as a condition to the waiver. Lien waivers should be treated as a receipt for payment actually received.
  3. Do Not Perform Additional Work Absent Written Authorization. Review the changes provision of the contract. Although many might require you to proceed in the event of a dispute as to the price for additional work – document the fact that you have been asked to perform the work or that you believe such work constitutes additional work.
  4. Reserve Your Rights on All Pay Application, Lien Waiver, and Change Order Forms. More and more pay application, lien waiver and change order forms are including broad release and waiver language that many contractors fail to identify at the time of execution. To avoid the risk of inadvertently waiving your right to delay damages or claims for additional work not included therein, make it a habit of including standard reservation of rights language on each form.
  5. Educate Your Personnel. It’s great if you are familiar with the traps discussed above. It does you no good, however, if the personnel signing the pay applications, lien waivers and change order forms aren’t also aware of the associated risks. Simple reminders at your kickoff meeting and throughout the project can make all the difference.