Recently, a contractor asked me to sign a $90,000 unconditional waiver for materials supplied to a large project in Central Florida, with a promise to pay in 10 days. I explained to the contractor that I could not give him a waiver in advance of payment because that would strip us of all legal recourse against the project, the property, and the customer. He then informed me that we were the only company supplying this job to not sign the waiver.
I was stunned. Who in blazes would sign an unconditional waiver before getting paid? Then it hit me—employees who do not understand what they are signing! They don’t have a vested interest in the company and are doing whatever the customer says in order to continue the relationship. This willy-nilly signing of documents by inexperienced personnel can expose companies to huge financial liabilities.
Shortly after the waiver incident, another contractor’s construction manager told us his firm would accept re-pricing of materials every 60 days, but the contract presented for our signature declared that pricing would be good until the entire project was completed. When my salesperson questioned why we marked up the contract instead of taking the word of the construction manager, I had to explain that unless it was in writing, it was never said. Promises by local field managers do not take the place of signatures on a contract.
Probably the most bizarre contract I have ever seen was presented just a few weeks ago. The contract stated that if we did not get paid for a $60,000 truss job, we waived our rights to go against the project owner’s surety bond or property and we couldn’t go against the contractor if the project owner didn’t pay the contractor. Essentially, the contractor and owner could decide not to pay us and we could do nothing legally to collect our money.
I wonder how many companies have branch managers, salespeople, and local clerks sign project payment waivers without any understanding of the legal ramifications. Based on what I see and hear in Central Florida, I believe it is epidemic. In the last year or so, the agreements, contracts, and other documents I sign daily have gone up at least tenfold. All commercial jobs and large construction companies have construction documents that must be signed. Many times these documents reference master agreements or contracts with other parties. Unless you read and understand those other documents, you have no idea what liability you have just assumed for your company.
In my 36 years in the business, I have never seen business relationships become so litigious. Suppliers and tradespeople have to understand that large construction companies are being trained to write contracts that will take advantage and hold you liable if you unwittingly sign them. They build in clauses and phrases with traps and references to documents that are not given to you so that if something goes amiss, you are left holding the bag. The number of these documents has become so great that we now have one full-time person just handling construction documents and the special billing they require.
Here’s the epiphany that every executive in our industry must have: The reason these crazy construction documents are proliferating is that untrained people are signing them without permission from their corporate officers. I honestly believe the executives of many of the top companies in our industry have no idea what is being signed locally or the financial exposure it is creating for their company.
My advice to all executives is to have all construction documents reviewed by a lawyer or someone else with a deep understanding of construction law, and be sure you know who is signing what. It should scare you that a little independent lumber dealer in Central Florida was the only company smart enough to not sign an unconditional waiver before getting paid.