If you had just purchased several hundred square yards
of decorative interlocking paving stones for a project and they were
damaged in an automobile accident, would you have to pay out-of-pocket to
replace them? Maybe yes, and maybe no — depending on whether you had
already received payment for the stones, and depending on your
subcontract, insurance coverage, and the insurance coverage of the prime
contractor and owner. One thing is certain, however: Subcontractors can
take certain steps to ensure that they are appropriately paid for storing
materials purchased in advance, and to ensure that they don’t take on
excessive liabilities.
Luckily for you, virtually the entire construction
industry accepts the practice of owners and prime contractors paying for
materials procured in advance of installation. During contract
negotiation, there should be no hesitation on the part of prime
contractors to accept the responsibility to pay you in a timely manner for
materials procured in advance and associated storage expenses. You may
want to use language such as that contained in Paragraph 10 of ASA’s Addendum
to Subcontract (2003):
The key for you is to clarify your responsibility about
what the owner’s and/or prime contractor’s expectations are for
"suitable" or "satisfactory" storage, exactly. As
always, it is best to obtain written, authorized confirmation of what
these expectations are. Otherwise, you risk payment delays and claims
allegedly because you have not properly stored the materials. It is
especially important to clarify and obtain written authorization when
storing materials off-site.
In general, handling the risk involved with stored
materials is more complicated than handling the payment terms. For
example, usually you will be considered the owner of the materials until
they are installed. At the same time, you may also be storing the
materials off-site and may already have been paid for them. So will your
installation floater policy or the owner’s or prime contractor’s
builder’s risk policy respond if the materials are damaged?
There are many factors at play in answering this
question: legal ownership, transfer of title, custody and care of
materials, subcontract provisions, and so on. The best idea is to consult
your insurance agent about obtaining the proper coverage for the different
scenarios that you may be facing.
These are just a few ideas to help improve the
experience of getting paid on time and in full for stored materials. ASA’s
Payment Advocacy Year (PAY!) Web page at
www.asaonline.com/pay.htm
