How often have you read that the terms of the prime contract are incorporated into the subcontract? If you read your subcontracts, you’ve probably seen that language in every contract over the last 10 years. But, what does that mean? It means you are bound by the terms of the prime contract, even if you haven’t seen it.
Most construction subcontracts incorporate the prime or upstream contact. A typical provision will provide:
The contract between Contractor and Owner is hereinafter referred to as the “Prime Contract.” A copy of the Prime Contract and all contract documents have been made available to the Subcontractor and by this reference is made part of this Subcontract. Subcontractor acknowledges review of all such documents relevant to Subcontractor’s scope of work and the Subcontractor agrees to be bound to the Contractor and the Owner by the terms of the provisions thereof.
What’s that Mean?
When a subcontract incorporates a prime contract the subcontract now contains all of the terms contained in the prime contract. So, if the prime contract gives an individual or entity, such as the engineer, complete authority to approve all change order, requesting a change order to only the upstream contractor may not be enough. You may also have to send the change order request to the engineer or other individual with authority to approve a change order.
What can you do?
Read your contract and ask for a copy of the prime contract if it is incorporated into your contract. You need to know the procedures not only to request a change order, but to appeal a denial of a change order. For example, if the contract provides that the engineer has the authority to approve or deny change orders, it may also contain a provision or process to appeal the engineer’s decision.
If you are dealing with a complicated construction contract, we recommend you contact an experience construction attorney to preserve your rights.