General contractors and owners often time include language in construction contracts that provides them with sole discretion to make decisions. These provisions can severely limit a subcontractor’s ability to negotiate changes or increased pay applications.
What do these phrases look like?
The “sole discretion” language can take a number of forms, including:
Contractor reserves the right, in its sole discretion to . . .
As solely determined by Contractor
____ shall be determined by the Contractor in its sole discretion.
What do these phrases mean?
For subcontractors, these phrases strike fear in your heart. Depending on the topic of these phrases, your ability to negotiate aspects of the job may be severely limited, if not eliminated. For example, if the contact provides that the contractor shall, in its sole discretion, determine adjustments to the contract for extra work, a subcontractor has given up all right to demand more time or more money on the job.
What can you do about this language?
Your first step should be to eliminate these phrases and try to replace them with language that allows for discussion between contractor and subcontractor. If that effort fails, try to insert language that requires a “reasonable” application. For example, “Contractor shall reasonably determine pay increases or time extensions”. Although not ideal, a subcontractor will at least have an opportunity to discuss, and perhaps argue later in litigation, that the contractor was not being reasonable in denying the change request.
Take Away: Watch out for contract language that provides the upstream contractor or owner with the sole discretion to make decisions. This language could allow the upstream contractor or owner to make decisions relating to your work without consultation or even discussion.
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