A Contractors, Subcontractor’s & Supplier's Step-By-Step Guide to Getting Paid - Kansas - Webinar

In this webinar, learn in detail about the key steps that will help how contractors, subcontractors, and suppliers in Kansas ensure that they get paid for the work and materials they provide for a project.

ARIELA WAGNER

by

Ariela Wagner

Last updated:

Feb 24, 2023

Published:

Feb 24, 2023

WORKER SMILING

Attorney Reviewed

7 Mins

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When engaged in construction projects, it's crucial to establish a well-defined payment process to prevent payment disputes. You can take several measures even before commencing work on a project to safeguard your payment rights. Moreover, it is essential to know how to utilize your lien rights in case of payment disputes. Continue reading to discover the essential steps that you should undertake to ensure successful collections.

In thisblog, presented by SunRay Construction Solutions and Leslie A. Boe,Shareholder/Director, Dysart Taylor, we will provide you a step-by-step guidefor contractors, subcontractors, and suppliers in Kansas to get paid. This blogwill discuss in detail all the crucial steps that you need to take to ensurethat you are paid successfully for your work.

Steps to Take to Ensure Successful Collections

Manyconstruction professionals focus on their payment rights only when they findthemselves involved in a payment dispute. However, the right approach is totake some steps before you even start working on the construction project, sothat you are well-prepared in advance for any payment disputes that may comeup. In this blog, we will give you complete details about the steps that shouldbe taken before you start the project, why you need to document everything, howto preserve your mechanics lien and bond claim rights, and more.

secure your bond claim rights

Negotiate and Understand your Contract

Here aresome of the key contract terms that can impact your ability to get paid. Theseare terms which mostly get litigated.

a. Scopeof Work – Thefirst term to focus on is the scope of work. You must ensure that your scope ofwork is clearly defined in the contract. If you have a detailed scope of workin your proposal, bid, or estimate, ensure that you replicate the same in thecontract or add a reference to it. Also, remember that the scope of work notonly includes what work you will do but also exclusions that you may need tomake or things that are not included in your services.

b. ChangeOrder Procedures – Next termto focus on is change order procedures. You must be aware of what is requiredfrom you to get paid for any extra work. You must know what kind of noticesshould be sent if you encounter change conditions, whether you need formallyexecute a change order, etc. You must also check the contract to see if you arerequired to give details in writing about confirmation of your understandingagreement, the exact work that will be done, what are the prices, etc.  

c. NoticeRequirements – Noticerequirements, such as how much time do you have to get a notice as per yourcontract, how to deliver the notice, and to whom you should deliver the notice.Double-check your contract to ensure you are following the terms as diligentlyas possible.

d.Pay-if-Paid v. Pay-when-Paid – Check whether your contract offers the pay-if-paidclause or the pay-when-paid clause. If it is pay-if-paid, then as per the Kansas courts, the GC (General Contractor) or the upstream contractor must receive thepayment from the owner before they can make a payment to you. If the contractmentions the pay-when-paid clause, then it means that the payment should bemade to you within a reasonable time.

e.Dispute Resolution Clauses – Check for dispute resolution clauses in thecontract to see how you can effectively resolve the payment disputes withoutgoing ahead with litigation. Learn more about this in the next section.

file your lien

Bargain for and Use Effective Dispute Resolution

It ishighly recommended that you bargain for and use effective dispute resolutionclauses to ensure that you not only get paid but also get paid quickly. Thereare two types of dispute resolutions:

a.Non-Binding Dispute Resolution – Under non-binding dispute resolution, you havethree diverse types:

i. Directnegotiations between decision-makers – This means that the contract will have a clausestating that everybody is going to make a good faith effort to meet and try tosort out our differences.

ii.Initial decisionmaker – In this type, there may be a provision for an initial decisionmaker suchas an architect who will make decisions on whether a change order is appropriateor not, or any other type of dispute.  

iii.Mediation is an approach typically used before initiating any binding disputeresolution.

b.Binding Dispute Resolution – Under binding dispute resolution, there are twotypes:

i.Arbitration – Ideally,it is recommended to opt for arbitration in construction contracts because itis better to have an industry expert or somebody with industry knowledge settleyour dispute.

ii.Litigation is where, instead of an arbitrator, a judge or jury decides thedispute.

Tips for Contractors

a. Insist on mediation as aCondition Precedent to use of Arbitration or Litigation.

b. Depending on the contract size,normally specify arbitration as the preferred method of binding dispute.

c. Incorporate provision allowing awardof attorneys’ fees for prevailing party.

SunRay free webinars

Investigating and Obtaining Assurance of Payments

Ideally,one should investigate and obtain assurance of payments before they startworking on the project, but sometimes you may need to revisit it if extra workis requested or if the cost of the work goes up. So, construction contractseither use AIA or ConsensusDOCs.

a. AIA – AIA requires owners to providetheir financial project information on whether they will be able to finance theproject before the execution of the project. It can be requested after workbegins but only under specific circumstances.

b.ConsensusDOCs – As perthe ConsensusDOCs, the owner’s financial project information can be requestedbefore and during the work. Most of the owners prefer using AIA but it issomething that can be negotiated.

Now, ifyou have the right to do so in your contract, then once you have theinformation, you must follow up and make all the proper investigations.  

a. Tipfor Contractors –Condition you bid on approval of owner’s credit.

b. Tipsfor Suppliers –Suppliers should educate their salespeople so that they are aware of wheretheir materials are going, and they must also find out as much as possibleabout who the key players are in the project. You must establish your place inthe contractual chain. It is recommended that suppliers get a creditapplication, a detailed contract with all the terms and conditions and apersonal guaranty. Also, you must perform due diligence in checking the creditapplications so that you have all the information if it is required later.

Document, Document, Document!

The abovesteps are crucial steps on the front end of a construction project to protectyour payment rights. But your due diligence does not end here. One of the keysteps to perform while working on construction projects is to document yourwork on the project. While creating the documentation, it is best to ensurethat the document is in the standard, company-wide format and is consistentwith all the internal practices and forms. A good practice would be to educateyour staff and let them know what are the items that should be documented andwhat information should be captured. The best way to do so would be to providethem with a form which they can fill in, thus ensuring that they do not misskey details.

statutory document deadline calculator

Gooddocumentation also helps in establishing the cause of events, identifyingactual costs and delays, and preserving and reserving your rights. Finally, your documentation should be contemporaneous which means that you must maintainyour documents in the right order, as and when the events occur. If thedocumentation is not contemporaneous, it may not be considered as reliableevidence in the court.

a. DailyReports – Dailyreports are considered as the backbone of project documentation. Here are somethings to keep in mind:

i. Allmajor and minor events should be reported.

ii.Follow the contract terms and try to submit your reports daily.

iii.Ensure that you are recording all delays and inefficiencies, irrespective ofhow many times they occur.

iv. Callout other subs that are materially interfering with work.

v.Document material deliveries, workforce, equipment, weather, etc.

b.Documentation Rules – Withthe usage of emails and electronic communication, the way we do business hasevolved. However, there are some documentation rules that you must follow,irrespective of what communication channel you use:

i. Ensurethat your document looks and sounds professional.

ii. Avoidbeing self-critical.

iii.Avoid using foul language or off-color humor.

iv.Ensure that your document contains only facts and not your feelings.

v. Keepthe content of the communication limited to one project.

vi. Lookout for attorney-client privilege issues.

In the Event of Non-Payment

If youfeel that the payment may not be forthcoming or you might not get paid, thereare some steps that you can take to protect your payment rights. The mostcrucial step is to be aware of your right to suspend the work for non-payment.Although the fact that you are stopping work may sound a bit scary, it isconsidered a valuable tool to nudge the parties to make the payment.  

a.Pay-when-Paid – If thesubcontractor does not receive the payment and if the contract has apay-when-paid clause, then suspension of work is justified.  

b.Pay-if-Paid – If thecontract has the pay-if-paid clause, then there is a substantial risk on thesubcontractor for suspending or termination of work due to nonpayment.

c. KansasActs – Underthe Kansas Fairness and Public Construction Contract Act and PrivateConstruction Contract Act, you have statutory right to suspend payment.

d.Mechanics Lien and Bond Rights – It is crucial that you preserve your mechanicslien and bond rights, however, remember that they are timesensitive.  

i. KansasLien Deadlines –Subcontractors have 3 months and general contractors have 4 months to filetheir liens on commercial projects. The timeline can be extended to 5 monthsfor both provided you file your notice of extension with the district courtwhere the project is as per the original deadline.

ii.Kansas Bond Deadlines – Forfederal projects, the deadline is 90 days from the last day at work. For stateand private projects, there are no notice requirements by statute that you needto review the bond.

e.Preserving Claims Against Downstream Subcontractors and Suppliers – Finally, you need to preserveclaims against downstream subcontractor and suppliers, so you will need to beable to take care of the cost down to whoever may have caused the actual delayor defective work.

Tips for Contractors

a. Get acopy of the payment and performance bonds at the beginning ofthe project.

b. Reviewthe bond language and make a note of all the applicable timelines.

c. Do notwaive your bond rights by signing bond waivers.

d. Makesure that you follow all the requirements to make your bond claim.

Preserving Claims Against Downstream Subs and Suppliers

Here aresome tips to consider preserving your claims against downstream subs andsuppliers.

a. Ensurethat you are doing business with only reputable and financially-sound subs andsuppliers.

b. Alwaysmake sure that you use written contracts/purchase orders with your subs andsuppliers.

c. Also,remember to include flow-down clauses in the contracts/purchase orders so thatyour contractual obligations to your higher ups are also carried down to yoursubs and suppliers.

d. Do notwaive or limit your ability to seek reimbursement downstream.

We hopethis detailed blog helps contractors, subcontractors, and suppliers in Kansasunderstand how to preserve and use their payment rights and successfullyresolve their payment disputes.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

About Author

ARIELA WAGNER

Ariela Wagner

Ariela is the president and founder of SunRay Construction Solutions. She has over 13 years of construction industry experience. Read More>

WORKER SMILING

Stop waiting to Get Paid! Send a Notice to Owner today!

Get Paid

When engaged in construction projects, it's crucial to establish a well-defined payment process to prevent payment disputes. You can take several measures even before commencing work on a project to safeguard your payment rights. Moreover, it is essential to know how to utilize your lien rights in case of payment disputes. Continue reading to discover the essential steps that you should undertake to ensure successful collections.

In thisblog, presented by SunRay Construction Solutions and Leslie A. Boe,Shareholder/Director, Dysart Taylor, we will provide you a step-by-step guidefor contractors, subcontractors, and suppliers in Kansas to get paid. This blogwill discuss in detail all the crucial steps that you need to take to ensurethat you are paid successfully for your work.

Steps to Take to Ensure Successful Collections

Manyconstruction professionals focus on their payment rights only when they findthemselves involved in a payment dispute. However, the right approach is totake some steps before you even start working on the construction project, sothat you are well-prepared in advance for any payment disputes that may comeup. In this blog, we will give you complete details about the steps that shouldbe taken before you start the project, why you need to document everything, howto preserve your mechanics lien and bond claim rights, and more.

secure your bond claim rights

Negotiate and Understand your Contract

Here aresome of the key contract terms that can impact your ability to get paid. Theseare terms which mostly get litigated.

a. Scopeof Work – Thefirst term to focus on is the scope of work. You must ensure that your scope ofwork is clearly defined in the contract. If you have a detailed scope of workin your proposal, bid, or estimate, ensure that you replicate the same in thecontract or add a reference to it. Also, remember that the scope of work notonly includes what work you will do but also exclusions that you may need tomake or things that are not included in your services.

b. ChangeOrder Procedures – Next termto focus on is change order procedures. You must be aware of what is requiredfrom you to get paid for any extra work. You must know what kind of noticesshould be sent if you encounter change conditions, whether you need formallyexecute a change order, etc. You must also check the contract to see if you arerequired to give details in writing about confirmation of your understandingagreement, the exact work that will be done, what are the prices, etc.  

c. NoticeRequirements – Noticerequirements, such as how much time do you have to get a notice as per yourcontract, how to deliver the notice, and to whom you should deliver the notice.Double-check your contract to ensure you are following the terms as diligentlyas possible.

d.Pay-if-Paid v. Pay-when-Paid – Check whether your contract offers the pay-if-paidclause or the pay-when-paid clause. If it is pay-if-paid, then as per the Kansas courts, the GC (General Contractor) or the upstream contractor must receive thepayment from the owner before they can make a payment to you. If the contractmentions the pay-when-paid clause, then it means that the payment should bemade to you within a reasonable time.

e.Dispute Resolution Clauses – Check for dispute resolution clauses in thecontract to see how you can effectively resolve the payment disputes withoutgoing ahead with litigation. Learn more about this in the next section.

file your lien

Bargain for and Use Effective Dispute Resolution

It ishighly recommended that you bargain for and use effective dispute resolutionclauses to ensure that you not only get paid but also get paid quickly. Thereare two types of dispute resolutions:

a.Non-Binding Dispute Resolution – Under non-binding dispute resolution, you havethree diverse types:

i. Directnegotiations between decision-makers – This means that the contract will have a clausestating that everybody is going to make a good faith effort to meet and try tosort out our differences.

ii.Initial decisionmaker – In this type, there may be a provision for an initial decisionmaker suchas an architect who will make decisions on whether a change order is appropriateor not, or any other type of dispute.  

iii.Mediation is an approach typically used before initiating any binding disputeresolution.

b.Binding Dispute Resolution – Under binding dispute resolution, there are twotypes:

i.Arbitration – Ideally,it is recommended to opt for arbitration in construction contracts because itis better to have an industry expert or somebody with industry knowledge settleyour dispute.

ii.Litigation is where, instead of an arbitrator, a judge or jury decides thedispute.

Tips for Contractors

a. Insist on mediation as aCondition Precedent to use of Arbitration or Litigation.

b. Depending on the contract size,normally specify arbitration as the preferred method of binding dispute.

c. Incorporate provision allowing awardof attorneys’ fees for prevailing party.

SunRay free webinars

Investigating and Obtaining Assurance of Payments

Ideally,one should investigate and obtain assurance of payments before they startworking on the project, but sometimes you may need to revisit it if extra workis requested or if the cost of the work goes up. So, construction contractseither use AIA or ConsensusDOCs.

a. AIA – AIA requires owners to providetheir financial project information on whether they will be able to finance theproject before the execution of the project. It can be requested after workbegins but only under specific circumstances.

b.ConsensusDOCs – As perthe ConsensusDOCs, the owner’s financial project information can be requestedbefore and during the work. Most of the owners prefer using AIA but it issomething that can be negotiated.

Now, ifyou have the right to do so in your contract, then once you have theinformation, you must follow up and make all the proper investigations.  

a. Tipfor Contractors –Condition you bid on approval of owner’s credit.

b. Tipsfor Suppliers –Suppliers should educate their salespeople so that they are aware of wheretheir materials are going, and they must also find out as much as possibleabout who the key players are in the project. You must establish your place inthe contractual chain. It is recommended that suppliers get a creditapplication, a detailed contract with all the terms and conditions and apersonal guaranty. Also, you must perform due diligence in checking the creditapplications so that you have all the information if it is required later.

Document, Document, Document!

The abovesteps are crucial steps on the front end of a construction project to protectyour payment rights. But your due diligence does not end here. One of the keysteps to perform while working on construction projects is to document yourwork on the project. While creating the documentation, it is best to ensurethat the document is in the standard, company-wide format and is consistentwith all the internal practices and forms. A good practice would be to educateyour staff and let them know what are the items that should be documented andwhat information should be captured. The best way to do so would be to providethem with a form which they can fill in, thus ensuring that they do not misskey details.

statutory document deadline calculator

Gooddocumentation also helps in establishing the cause of events, identifyingactual costs and delays, and preserving and reserving your rights. Finally, your documentation should be contemporaneous which means that you must maintainyour documents in the right order, as and when the events occur. If thedocumentation is not contemporaneous, it may not be considered as reliableevidence in the court.

a. DailyReports – Dailyreports are considered as the backbone of project documentation. Here are somethings to keep in mind:

i. Allmajor and minor events should be reported.

ii.Follow the contract terms and try to submit your reports daily.

iii.Ensure that you are recording all delays and inefficiencies, irrespective ofhow many times they occur.

iv. Callout other subs that are materially interfering with work.

v.Document material deliveries, workforce, equipment, weather, etc.

b.Documentation Rules – Withthe usage of emails and electronic communication, the way we do business hasevolved. However, there are some documentation rules that you must follow,irrespective of what communication channel you use:

i. Ensurethat your document looks and sounds professional.

ii. Avoidbeing self-critical.

iii.Avoid using foul language or off-color humor.

iv.Ensure that your document contains only facts and not your feelings.

v. Keepthe content of the communication limited to one project.

vi. Lookout for attorney-client privilege issues.

In the Event of Non-Payment

If youfeel that the payment may not be forthcoming or you might not get paid, thereare some steps that you can take to protect your payment rights. The mostcrucial step is to be aware of your right to suspend the work for non-payment.Although the fact that you are stopping work may sound a bit scary, it isconsidered a valuable tool to nudge the parties to make the payment.  

a.Pay-when-Paid – If thesubcontractor does not receive the payment and if the contract has apay-when-paid clause, then suspension of work is justified.  

b.Pay-if-Paid – If thecontract has the pay-if-paid clause, then there is a substantial risk on thesubcontractor for suspending or termination of work due to nonpayment.

c. KansasActs – Underthe Kansas Fairness and Public Construction Contract Act and PrivateConstruction Contract Act, you have statutory right to suspend payment.

d.Mechanics Lien and Bond Rights – It is crucial that you preserve your mechanicslien and bond rights, however, remember that they are timesensitive.  

i. KansasLien Deadlines –Subcontractors have 3 months and general contractors have 4 months to filetheir liens on commercial projects. The timeline can be extended to 5 monthsfor both provided you file your notice of extension with the district courtwhere the project is as per the original deadline.

ii.Kansas Bond Deadlines – Forfederal projects, the deadline is 90 days from the last day at work. For stateand private projects, there are no notice requirements by statute that you needto review the bond.

e.Preserving Claims Against Downstream Subcontractors and Suppliers – Finally, you need to preserveclaims against downstream subcontractor and suppliers, so you will need to beable to take care of the cost down to whoever may have caused the actual delayor defective work.

Tips for Contractors

a. Get acopy of the payment and performance bonds at the beginning ofthe project.

b. Reviewthe bond language and make a note of all the applicable timelines.

c. Do notwaive your bond rights by signing bond waivers.

d. Makesure that you follow all the requirements to make your bond claim.

Preserving Claims Against Downstream Subs and Suppliers

Here aresome tips to consider preserving your claims against downstream subs andsuppliers.

a. Ensurethat you are doing business with only reputable and financially-sound subs andsuppliers.

b. Alwaysmake sure that you use written contracts/purchase orders with your subs andsuppliers.

c. Also,remember to include flow-down clauses in the contracts/purchase orders so thatyour contractual obligations to your higher ups are also carried down to yoursubs and suppliers.

d. Do notwaive or limit your ability to seek reimbursement downstream.

We hopethis detailed blog helps contractors, subcontractors, and suppliers in Kansasunderstand how to preserve and use their payment rights and successfullyresolve their payment disputes.

Disclaimer
THE INFORMATION ON THIS WEBPAGE IS NOT THE SAME AS LEGAL ADVICE. SUNRAY CONSTRUCTION SOLUTIONS, LLC IS NOT AN ATTORNEY OR A LAW FIRM. WE RECOMMEND THAT YOU CONSULT WITH AN ATTORNEY.
Ariela Wagner
Ariela Wagner
Preliminary Notice| SunRay Notice
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