Quit Getting Screwed: Understanding and Negotiating the Subcontract

By Karalynn Cromeens

It's time for subcontractors to Quit Getting Screwed.

Every day, subcontractors across all trades face the same critical dilemma:

Should I sign a subcontract I don't understand—one that might even put my company at risk? Or should I refuse to sign and lose the job?

Attorney Karalynn Cromeens wrote Quit Getting Screwed to help every subcontractor, no matter how big or how small, understand what those subcontracts mean.

Know which provisions you should expect and which ones to avoid. Identify dangerous provisions that need to be removed, learn the best negotiation techniques, and come to the table armed with fair language that can be substituted for unfair clauses.

Signing a subcontract you don't understand can put your entire livelihood in jeopardy. If you're a subcontractor, don't sign another subcontracting agreement without knowing what it means.

Keep this book in your pocket, and quit getting screwed.

• Language: English
• Publisher: BookBaby
• Release date: Jan 12, 2021
• ISBN: 9781544517728

Book preview

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Copyright © 2020 Karalynn Cromeens

All rights reserved.

ISBN: 978-1-5445-1772-8

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For Brad, my best friend and partner forever.

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Contents

Introduction

1. The Bid

Your bid is a detailed explanation of the work you agreed to provide, but it does not become part of your subcontract.

2. Subcontract Documents

The subcontract is not the only document that describes what your obligations to the general contractor are.

3. Subcontractor Bonds

Danger! Danger! Danger!

4. Scope of Work

The scope of work described in the subcontract is not the same as what was in your bid; review the scope documents in the proposed subcontract as if you were reviewing a new project to bid.

5. Do Not Sign a Personal Guarantee

The importance of being incorporated and not signing the personal guarantee.

6. Prior Work and Field Conditions

These sneaky provisions need to be considered and negotiated before you sign the subcontract or you will be responsible for the work of the subcontractor before you, and you must visit the project site before you sign the subcontract.

7. Submittals and As Builts

These are helpful tools that are required by most subcontracts, and they can actually help limit your liability should something go wrong.

8. Daily Reports

These are great tools to tell your side of the story as it happens if there are any issues.

9. Pay When Paid Clauses

Understand what a pay when paid clause is and how to defeat them.

10. Retainage

What retainage is and why it matters.

11. When Can I File a Lien?

No matter what the subcontract says, you always have the right to file a lien, but you must follow the proper procedure.

12. Lien Waivers

There is a state form and process for lien waivers. Never sign an unconditional waiver if you have not been paid.

13. Trust Funds

Trust funds are the payments on construction projects and must be paid to the people who supply labor and material to the project.

14. Change Orders

Don’t work for free; make sure you have a signed change order before you do any extra work.

15. Assignments

There are two different types of assignments; understand what they are and why they matter to you.

16. Delay Damages

The schedule you provide will be used against you; understand how dangerous being behind schedule really is.

17. Warranties

Know where to find all of the terms of the warranty you are agreeing to and how to negotiate these terms.

18. Default and Termination

What is considered a default, how it can be cured, and who has the right to terminate the contract and for what grounds?

19. Attorney Fees and Costs

Love us or hate us, you need to make sure this is properly addressed in your subcontract.

20. Dispute Resolution

Understand the difference between mediation, arbitration, and litigation. Evaluate the pros and cons for each.

Conclusion

Acknowledgments

About the Author

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Introduction

Are you tired of being a general contractor’s bitch?

I hate to break it to you, but that is what you become every time you sign a subcontract you have not read or do not understand. I know, I know. Subcontracts are dense and hard to understand, and you need the job, so without reading the thing, you excitedly sign so you can get that paycheck.

Unfortunately, it doesn’t always work out that way. In fact, depending on what’s in the contract, you could be agreeing to cover ridiculous expenses completely outside of your skillset or services.

I’ve seen this happen on too many occasions to count. In the sixteen years I’ve practiced construction, real estate, and business law, I have reviewed and explained thousands of subcontracts. I have tried to save companies that have signed problematic subcontracts, but by the time they came to me, it was too late. There was nothing I could do to help. As hard as I fought, I could not get them out of the poisonous, one-sided subcontract they had signed.

I hated feeling helpless for these hardworking individuals. I hated seeing my clients in legal disputes over the smallest of details. I hated seeing my clients lose money—sometimes their entire business—over language they did not understand.

Most of all, I hated seeing my clients become some general contractor’s bitch.

I thus realized the best way I could help was to educate subcontractors before they signed a subcontract—to give them the necessary tools to understand and negotiate a fair subcontract. That’s why I wrote this book.

My aim with this book is to give you confidence in signing subcontracts so that you can mitigate the risks and protect your company. I wrote this book because I want you to quit getting screwed.

What You’ll Learn

In the pages that follow, I will share some horrifying, true stories and how you can avoid finding yourself in similar situations. I will show examples of tricky language commonly found in subcontracts, as well as what you should replace them with. I will also share some best practices that will help you if you do ever find yourself in a court of law. This book is written from the perspective of Texas law. Everything in this book is good general information, but my experience with the law is only in the state of Texas.

I dedicated a chapter to each of the following parts of a subcontract, explaining what each means, why they’re important, and what you should do to protect yourself before signing any piece of paper:

The Bid

Subcontract Documents

Subcontractor Bonds

Scope of Work

Personal Guarantees (and why you should never sign one)

Prior Work and Field Conditions

Submittals and As Builts

Daily Reports

Pay When Paid

Retainage

When You Can File a Lien

Lien Waivers

Trust Funds

Change Orders

Assignments

Delay Damages

Warranties

Default and Termination

Attorney Fees and Costs

Dispute Resolution

By the end of the book, you will be equipped with the ability to properly evaluate your risks and negotiate your next subcontract with greater confidence and ease.

My Background

I come from a blue-collar background—or what I like to call the get shit done tribe. In this tribe, we worked with our hands, and we used our physical abilities to create and produce things. My father and my grandparents on his side were midwestern farmers, and let me just say, you do not know a hard day’s work until you have worked a day on a farm. My mom was a florist, a waitress, and whatever else it took to keep her three kids fed. My mom’s side of the family was (and still is) full of subcontractors. My grandfather moved dirt and built golf courses, one of my uncles and my brother own irrigation companies, and another uncle is an electrical subcontractor. Our families have relied on what we produced for survival.

While I was in law school, my husband and I started a material supply company that sold mostly to subcontractors. In the beginning, it was just the two of us running the company. He made the deliveries and I ran the warehouse. I had never worked so hard in my life. We worked endless sixty-hour weeks, always hustling to get the next sale. Despite its various challenges, however, I would not change it for the world. It taught me how excruciatingly difficult and stressful it is to start your own company. For example, it taught me how—despite putting in our time, energy, and effort to complete a job—if the check for that project did not come when it was supposed to, we were not going to make payroll for our people, let alone ourselves. We made a lot of sacrifices to build the company during this time.

As subcontractors, I know you make sacrifices too.

My experience also made me realize that when issues arise or you have legal questions regarding your company, you need action and answers immediately—you cannot wait. This inspired me to create a law firm that subcontractors and material suppliers can count on every time they call. So I did. I have taken all of my experiences and built the law firm I would want as a material supplier and subcontractor. I’m proud to say we will always answer your call and never make you wait three or four days for a response.

The Cromeens Law Firm, PLLC, has helped thousands of subcontractors understand subcontracts and strengthen their business as a whole.

I wrote this book to help subcontractors protect the sacrifices they have made by starting and growing their own companies. These sacrifices, including the thousands of hours away from their families, deserve to be protected. You should not have to risk everything just to be able to make a living.

With the knowledge and insight you’ll gain through the