A subcontractor discovers that the general contractor has not paid the material supplier, and the supplier threatens to file a lien. What is the subcontractor's best course of action under a typical subcontract agreement?
Correct Answer
C) Notify the general contractor in writing and request proof of payment
The subcontractor should first notify the general contractor in writing of the payment issue and request documentation showing payment has been made. This follows proper contract administration and gives the GC opportunity to resolve the issue.
Why This Is the Correct Answer
Option C follows proper contract administration procedures and maintains the contractual relationship between parties. Written notification creates a documented record of the issue and gives the general contractor an opportunity to resolve the payment dispute before more drastic measures are taken. This approach protects the subcontractor's interests while following standard industry practices and contractual obligations for dispute resolution.
Why the Other Options Are Wrong
Option A: Pay the supplier directly and deduct from payments to the general contractor
This action could constitute a breach of the subcontract agreement since the subcontractor would be unilaterally modifying payment terms without authorization. The subcontractor typically doesn't have the right to make direct payments to suppliers and offset against the general contractor's payments without prior agreement.
Option B: Stop work immediately until payment issues are resolved
Stopping work immediately could constitute a breach of contract and may not be justified at this stage. Most subcontract agreements require written notice and opportunity to cure before work stoppage is permitted. This action could expose the subcontractor to liability for delays and additional costs.
Option D: File a lien against the property for the unpaid amount
The subcontractor typically doesn't have lien rights for amounts owed by the general contractor to suppliers unless the subcontractor is directly responsible for those payments. Filing a premature lien without following proper notice procedures could result in an invalid lien and potential liability.
Memory Technique
Think 'CYA' - Cover Yourself with written notice And documentation before taking any drastic action
Reference Hint
Florida Construction Lien Law Chapter 713, Florida Statutes - Subcontractor rights and notice requirements
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