If a GC has sent you a ConsensusDocs 751 Standard Short Form Agreement Between Constructor and Subcontractor, you will want to know what it says about getting paid. Many GCs will revise standard contract terms, so be sure to read your specific contract carefully before signing it. We’re going to save you some time, though, by translating the “contract-ese” into plain English.
Table of Contents
ConsensusDocs 751: A Short Form Alternative
The 751 is a short-form version of the more comprehensive 750 Subcontract Agreement, so it doesn’t contain quite as many provisions. For example, the 750 agreement has four different provisions about progress and final payments, while the short form version only has one.
Schedule of Values
10.1 Schedule of Values – “As a condition precedent to payment, Subcontractor shall provide a schedule of values satisfactory to Constructor not more than fifteen (15) days from the date of this Agreement.”
What it means
A schedule of values is a breakdown of the work you will do into phases or locations, and its purpose is to make it easier for the General Contractor to determine how much work is complete each month. For example, a drywall contractor may include metal framing, drywall hanging, and taping/texturing as the stages of the project. Each phase or stage is given a dollar value and the schedule is sent to the GC for review.
Progress & Final Payments
10.2 Progress and Final Payments – “Progress payments, less retainage, shall be made to Subcontractor, for Subcontract Work satisfactorily performed, no later than seven (7) days after receipt by Constructor of payment from Owner for the Subcontract Work. Final payment of the balance due shall be made to Subcontractor no later than seven (7) days after receipt by Constructor of final payment from Owner for the Subcontract Work. These payments are subject to receipt of such lien waivers, affidavits, warranties, guarantees, or other documentation required by this Agreement or Constructor. If payment from Owner for such Subcontract Work is not received by Constructor, through no fault of Subcontractor, Constructor will make payment to Subcontractor within a reasonable time for Subcontract Work satisfactorily performed.”
What it means
According to this clause the GC is required to pay you within seven days after they receive payment from the Owner for your completed work. This is what’s known as a contingent clause, or “Pay When Paid.”
Unless you live in New Hampshire, your state has a Prompt Payment law that sets deadlines for construction payments. Make sure the payment schedule in this section falls within the law.
Final payment will also be made within seven days of receipt after the owner pays the GC. Payments will be made in these timeframes if the required documentation has been turned in, either for a progress payment or final payment. Check your contract terms and any additional documents the GC provided so you know what is required when turning in a payment application.
The last sentence says that if payment from the Owner is delayed and it isn’t your fault, you can expect payment within a “reasonable time.”
10.3 Payments Withheld – “Constructor may reject a Subcontractor payment application or nullify a previously approved Subcontractor payment application, in whole or in part, as may reasonably be necessary to protect Constructor from loss or damage based upon the following to the extent that Subcontractor is responsible: (a) failure to timely perform the Subcontract Work; (b) failure to properly pay its subcontractors or suppliers, provided Constructor is making payments in accordance with this Agreement; (c) failure to promptly correct rejected, defective, or nonconforming Subcontract Work, or (d) uninsured third-party claims involving Subcontractor or reasonable evidence demonstrating that third-party claims are likely to be filed unless and until Subcontractor furnishes Constructor with adequate security in the form of a surety bond, letter of credit, or other collateral or commitment which is sufficient to discharge such claims if established.”
What it means
This clause lays out the reasons one of your invoices may be partially or wholly rejected. They include:
- Not performing the agreed upon work in a timely fashion,
- Failure to pay suppliers or lower tier subs,
- Failure to correct rejected or defective work, or
- Third-party claims on the project.
Stopping Work For Payment Delays
10.4 Payment Delay – “If Constructor has received payment from Owner and, if for any reason not the fault of Subcontractor, Subcontractor does not receive a progress payment from Constructor within seven (7) days after the date such payment is due, or if Constructor has failed to pay Subcontractor within a reasonable time for Subcontract Work satisfactorily performed, Subcontractor, upon giving seven (7) days’ written notice to Constructor, and without prejudice to and in addition to any other legal remedies, may stop work until payment of the full amount owing to Subcontractor has been received. The Subcontract Amount and time of performance shall be adjusted by Change Order for the amount of Subcontractor’s reasonable and verified cost of shutdown, delay, and startup.”
What it means
If the GC’s late paying you, this clause gives you the right to stop work until you are paid. Stopping work is only allowable under certain circumstances and after you’ve submitted proper written notice, so make sure you read this clause carefully. You also have the right to request additional time and money to cover the cost of stopping and restarting work.
Make sure you follow the notice requirements carefully, and only if the owner has already paid the GC:
- Seven days after your payment is due, send notice to the GC that you intend to stop work.
- Seven days after the notice you can stop work (so 14 days after payment is due as per section 10.2 above).
- If you add all those days up, you can stop work 21 days after the GC has been paid by the Owner, or 14 days after a “reasonable time” (as defined in section 10.2) has passed.
10.5 Waiver of Claims – “Final payment shall constitute a waiver of all claims by Subcontractor relating to the Subcontract Work, but shall in no way relieve Subcontractor of liability for warranties, or for nonconforming or defective work discovered after final payment.”
What it means
Once you receive the final payment for a project, you waive your right to file a claim or a lien relating to your work. The only exceptions are (1) warranty work and (2) faulty or defective work discovered after final payment. It is important to let the GC know of all payment issues and additional claims, such as outstanding change orders, before final payment is received, as accepting the payment closes the window on the opportunity to ask for more funds or file additional claims or a lien
Dig deeper: Is signing a lien waiver worth it?
Subcontractor’s Right to Project Information
10.6.1 Owner’s Ability to Pay and Lien Information – “Unless expressly prohibited by the Subcontract Documents, Constructor shall promptly provide, upon Subcontractor’s request, (a) information regarding Owner’s financial ability to pay for the Work, and (b) notice of any material variation in Owner’s financial ability to pay. Constructor, however, does not warrant the accuracy or completeness of information provided. Subcontractor also is entitled to request through Constructor any information necessary to give notice of or enforce mechanic’s lien rights and, where applicable, stop notices. This information shall include Owner’s interest in the real property on which the Project is located and the recorded legal title.
10.6.2 – If Subcontractor does not receive the information referenced in [section] 10.6.1, Subcontractor may request information from Owner or Owner’s lender.”
What it means
If you have concerns about the Owner’s ability to pay for the project, you have the right to request proof of ability to pay through the GC, unless it says differently in your contract. You can request information showing the Owner’s ability to pay and notice of any change in that status. However, the GC isn’t going to guarantee the accurateness of the information, so take it for what it’s worth. You also have the right to request the information you need to send preliminary notice or file a mechanics liens, if required. If the GC doesn’t provide the information you request, you can contact the Owner or the lender on the project directly.
Wrapping Up ConsensusDocs 751: Subcontractor Rights & Responsibilities
The ConsensusDocs 751 Standard Short Form Agreement should clearly lay out your rights and responsibilities when it comes to getting paid on the job. As with any legal document, you will want to review the contract carefully and ask questions about anything you don’t understand. Also, don’t be afraid to push back a little and suggest some changes that will be to your advantage. A contract is supposed to be a negotiated agreement, so you have a right to ask for what you need to feel comfortable doing the job.