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What should you do when a subcontractor defaults?

You need every member of a construction team to do their work in a timely manner. Sometimes, though, a subcontractor may fail to finish a project. In this situation, you need to understand the options available to you.

According to the Houston Chronicle, the way to handle a defaulting subcontractor depends on your situation.

Can you withhold pay?

There are certain situations in which refusing to pay is legal. A subcontractor may complete the work, but the quality may be poor. In this situation, you have an obligation to pay for the completed work. If the subcontractor has not finished the entire job, you do not always have to pay for the rest of the work. However, this step may not work in all situations. If you have a verbal contract, for example, a subcontractor could argue that you have no right to withhold pay.

What does the contract say?

When you have problems with your subcontractors, you should usually consult your contract. Because this document outlines the terms of the job, you can use it to demonstrate whether subcontractors have fulfilled their obligations. The document may specify the timeline for a project, for example. Additionally, the contract could list the consequences for failing to finish a project or for performing subpar work.

How can you prevent future problems?

For future projects, you might consider implementing a pre-qualification process. Engineering News-Record suggests that you examine financial records before hiring a subcontractor. You could ask to see financial statements for the past three years to determine if someone has a good track record. Additionally, you could consider how many people work for a subcontractor. Too few employees might suggest that a subcontractor does not have enough staff to finish every project.

Having clear expectations for your subcontractors can help you make sure that you hire someone capable of fulfilling these obligations.