| Every construction contractor and subcontractor | | | | beyond what appears on the plans and in the |
| has heard the term flow-down. A few probably | | | | specs. That trashes most of the contract: |
| feel they were washed away by flow-down. I | | | | payment, liens, delay, insurance, extra work, |
| don't think that's necessary and will suggest a | | | | termination, call-backs, claims, warranty, statute |
| better way. | | | | of limitations, indemnification, and a host of other |
| Flow-down is what general contractors do in | | | | common trouble spots. |
| subcontracts. They incorporate into a subcontract | | | | If you're a general contractor, staple-based |
| all the terms of the prime contract - usually by | | | | flow-down can be poison. |
| stapling the prime contract to the subcontract. | | | | But don't misunderstand. Courts aren't saying that |
| That saves a lot of typing. It also offers a (false) | | | | subcontractors can't be bound by terms in the |
| sense of security to general contractors. In | | | | prime contract. They can. But those terms better |
| theory, flow-down obligates the sub to do | | | | be in the subcontract and over the signature of |
| everything for the sub's portion of the work that | | | | the subcontractor. |
| the general contractor has to do under the | | | | Fortunately, that's relatively easy today. Just get |
| contract. | | | | a digital copy of the prime contract. Replace |
| So if the owner has a legitimate complaint about | | | | every occurrence of "owner" with "contractor" |
| a sub's work, and if the prime contractor is | | | | and every occurrence of "contractor" with |
| obligated to make repairs, the sub has the same | | | | "subcontractor." That's a real flow-down |
| obligation. That's perfect symmetry and should | | | | subcontract and should be enforced by every |
| protect general contractors. Flow-down is great | | | | court in the land. |
| for general contractors. Right? | | | | But read the subcontract carefully before getting |
| Well, not quite. | | | | a signature. Add anything that applies to |
| Courts don't like flow-down for a couple of | | | | subcontracts only (i.e. payment terms, release of |
| reasons. First, it's an adhesion contract between | | | | retainage) and eliminate anything that doesn't |
| parties with different levels of bargaining power. | | | | apply (i.e. notices and disclosures). Then make the |
| Second, flow-down binds subcontractors to terms | | | | changes required by state law. Many states have |
| they may not have read, probably don't | | | | special rules for subcontracts. |
| understand and make no sense whatsoever in the | | | | If you want to see how this is done, there's a |
| context of a particular subcontract. Worse, the | | | | website with sample prime contracts and cloned |
| stapled prime contract may have terms | | | | flow-down subcontracts for both commercial and |
| completely inconsistent with the signed | | | | residential jobs. It's free. |
| subcontract. | | | | If you write both prime contracts and |
| The result: Courts simply don't enforce flow-down | | | | subcontracts, you can makes flow-down easy. |
| as general contractors expect. Instead, flow-down | | | | When the prime contract is done and signed, just |
| binds a "subcontractor only as to prime contract | | | | turn that prime contract into a perfectly valid |
| provisions relating to the scope, quality, character | | | | subcontract covering all the same issues - |
| and manner of the work to be performed by the | | | | automatically deleting what doesn't apply, adding |
| subcontractor." (2007 NY Slip Op 2981) | | | | what's unique to subcontracts and accounting for |
| What does that include? Your guess is as good as | | | | any special state requirements. |
| mine. But some would insist it doesn't go much | | | | |