Home>Levelset Community>Legal Help>need help. Job finished. partial payments made to us But now contractors (2 different ones) are sending change orders telling us they are reducing what they owe us because we were late and they are charging close to 5,000 for supervision fees.

need help. Job finished. partial payments made to us But now contractors (2 different ones) are sending change orders telling us they are reducing what they owe us because we were late and they are charging close to 5,000 for supervision fees.

We did casework as a sub for two contractors in Louisiana for a hospital medical offices. Job and punchlist completely finished end of December. Partial payments made to us. We received a change order from each of them saying because we were late, they were charging us between them almost $5,000 for supervision fees. Is this something that is legal? Nothing in writing from them to show us how they can charge these amounts and take them off our contract balance due. Please help

1 reply

Feb 22, 2019

I'm sorry to hear about that. Whether or not a contractor is able to make back charges to their subcontractor will likely come down to the terms of the contract between the parties. If the agreement allows for a contractor to back charge their subcontractor for finishing late, and if the back charge is founded on a fair calculation, then that may be appropriate. If the agreement does not allow for back charges, or if there's no basis given for the amount being charged (i.e. reasoning for back charging and/or an itemized list justifying the amount of the back charge), then a back charge could be considered invalid, should the matter make it to court. In order to determine whether or not a specific back charge is appropriate, that would require review of the contract to determine whether back charges are allowed, as well as reviewing the information, documentation, and/or communication leading up to that back charge. Thus, in order to be sure, one way or the other, whether a back charge is appropriate, it might be necessary to hire an attorney to review the situation. Finally, note that even where a contractor holds payment, they don't hold all leverage over their subcontractor when it comes to the close of a project. Subcontractors have tools at their disposal - such as the ability to threaten or file a mechanics lien or to make legal claims - that act as strong leverage in order to compel final payment. So, where a contractor attempts to bully their subcontractor with back charges, the subcontractor could always fight fire with fire. On top of that, before some claim is even made, merely threatening to file a lien (via Notice of Intent to Lien) or to file suit could be enough to make a contractor be reasonable. Of course, before doing so, it'd be wise to determine the validity of any proposed back charges. For more background on back charges, this resource should be valuable: What Are “Back Charges” in Construction?

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