Part 1: Allocation of Construction Risks Through Contract Clauses

In the first of a two-part article published on October 31, 2023, in Colorado Real Estate Journal, construction law attorney J. David Arkell outlines some of the most significant risk allocation-related clauses and their importance to parties from a general contractor’s standpoint.  
 
“Certain payment clauses in subcontracts, frequently called conditional payment clauses, can be generally categorized either as ‘pay-when-paid’ or ‘pay-if-paid’ provisions. The difference is the entity that bears the risk of the developer not paying the general contractor for the subcontractor’s work.” 
 
He discusses other powerful tools for allocating the risk of a developers’ nonpayment from a general contractor to a subcontractor, such as waivers of lien and bond rights, indemnity, and secured bonding. 
 
“A general contractor should consider the wisdom of a clause in a subcontract requiring the subcontractor to obtain payment and performance bonds on its work. Bonding could provide additional security for the general contractor, assuring that the subcontractor will perform its obligations to the general contractor (under the payment bond).” 
 
Read the full article in Colorado Real Estate Journal.