Contract formation and the impact of contingent payment provisions. (Selected Topic).(Brief Article)

Introduction

The construction industry is filled with both performance and payment risks. There are a number of reasons why an owner, construction manager, general contractor or subcontractor refuses to make payment to the party with whom it has a contract. The reasons range from insolvency of the party responsible for payment to the non-performance of any party on the project. Construction managers, general contractors and subcontractors commonly use conditional payment clauses to shift the financial risk, and sometimes performance risk, of a project to lower-tier subcontractors and suppliers.

By accepting a contingent payment provision, a lower-tier ...