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CTI CONTRACTING RE UCS-METROHEALTH INTERIOR

Im a subcontractor working on a large commercial project. We were slightly behind on one of our scopes of work-drywall. The contractor hired in supplemental labor without any agreement from us. Contract calls for certified mail and 48 hours notice to remedy the situation. We were given a bill for $58,000 for the work which is three times the proper rate. The contractor is contending he has not received payment for the draw submitted on 12/9/19. This is likely to place additional pressure on us to concede to the bill. What are my rights and how do i find out if the client has been paid for that draw?

1 reply

Feb 27, 2020

Unless the contractor has reserved the right to supplement work in the contract, then they're generally not able to simply supplement their subs without an agreement in place to do so. Rather, delays should be managed however the contract allows for - whether that be through extension of time, liquidated damages/deductions to the contract price, accelerating, etc. So, before even looking at the price of supplementing work - there may be a fair enough basis for disputing charges relating to your work being supplemented. This would seem especially true where the party whose work was supplemented never had the opportunity to remedy the delay. Further, where the unfounded supplementary work is being charged at an exorbitant rate - it might make a lot of sense to dispute the charge, or at least to negotiate a lower bill for the supplementary work. Even if the contractor is entitled to supplementing the work, there's a limit as to what can be charged for that supplementary work. A contractor will generally be required to keep that work at a reasonable price.

Finding out if a customer has received payment

It can be hard to know if a customer has been paid by their customer, especially when the relationships on the job are less than ideal. However, a sub may be able to use leverage against their contractor to try and determine if payment was actually made and/or to force payment on their invoice. So, threatening to proceed with one of the below claims could force a contractor to be honest about whether they've actually been paid or whether they're simply withholding payment to create a sense of urgency.

Ohio's prompt payment laws

For one, under Ohio's prompt payment laws, a contractor must pay their subs within 10 days of receiving payment. So, if the contractor received payment more than 10 days ago - then interest penalties may begin to accrue (at the rate of 18% per year). Now, a contractor is able to withhold some amounts if there's a dispute present - but that's different than them not being paid. So, reminding a contractor of their duties under prompt payment laws might speed along payment. More on those laws here: Ohio Prompt Payment Guide and FAQs.

Leveraging mechanics lien rights

Further, note that the potential for a lien filing may help to speed up payment, too. If a contractor understands that a lien will be filed if payment isn't made, then they may be more inclined to make sure that payment gets made. So, sending a document like a demand letter or a Notice of Intent to Lien could move things along. There's obviously risk involved with escalating a dispute, but threatening to file a lien could put enough pressure on the contractor that they'll be more honest about the payment status of the job. More on Ohio lien rights here: Ohio Mechanics Lien Guide and FAQs.

How to contest charges for supplementing work

As a first step, it'd be wise to review the contract to see if there's any guidance there about disputing charges or resolving disputes. Further, bringing in an attorney to review the agreement and then advise on how to dispute a specific charge would help, too. They may be able to find something in the contract that's relative to the dispute and could end up providing a lot of value. What's more, it will also be wise to ask for an accounting, receipt, contract, etc. for the supplementary work. That will help to show why the markup was so high or if the charge was overstated. Ultimately, though, if a contractor's charge for supplementary work will be challenged - the sub challenging the charge should typically provide that in writing, and they should usually support that challenge with arguments based on the contract and in law. And, as mentioned above, having a local Ohio construction attorney help with that could be really valuable.

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