If you had the same terms with your subcontractors as your customer with you, then you could launch the contract to your subcontractor, demand the same thing that the customer asks of you and take responsibility. They would be properly covered. If you didn`t have the same terms, you`d likely be held liable under your contract with your client and wouldn`t have another place to turn to. This is a real damage to your bottom line and not a situation you should think about recklessly. Common downstream terms include (but are not limited to) all limitations and warranties for the parties, payment terms (although these often vary depending on the party`s agreements), audits, interventions, restrictions on access to the customer`s website, privacy, information security, confidentiality and applicable legal provisions. Important indemnities, liabilities and insurances, as well as change requests, should be included in the downward flow – although they depend on the size of the work and the total share that the subcontractor delivers, they can be revised and scaled accordingly. Note that this is also a good practice for subcontractors and suppliers. The AEOI subcontracting form recognizes the importance of a reciprocal downstream provision that benefits subcontractors by explicitly including it. The legal form of the subcontract in Massachusetts, which is required for submitted sub-bidders, also includes a reciprocal flow provision. Any form of subcontracting that seeks equity should do the same. A very similar clause binds contracts in the standard ConsensusDocs 750 agreement between the designer and the subcontractor in section 3.1, Obligations. Downstream clauses may also include dispute resolution and payment terms. For example, a down payment clause may stipulate that a subcontractor is paid by the general contractor when the general contractor is paid by the owner.
Similarly, if an owner has agreed to resolve disputes with the general contractor through arbitration, a subcontractor may also be required to resolve the disputes through arbitration. In the construction industry, it all comes down to the contract. And that`s unfortunate because most people do. Subcontractors are not enthusiastic about taking responsibility for the prime contractor when they go to work on parts of the project. An important term that warrants careful consideration and implementation from all sides is the service levels to be applied. Creating mutually acceptable and logistically efficient SLAs (Service Level Agreements) is often a sticking point. To be successful, these discussions should take place at the beginning of the project with all parties. Failure to comply with SLAs will result in endless disruption and may have the option to terminate the contract. Your GC has little control over mandatory debit clauses, but can use discretionary downstream clauses to ensure that you are on the same page and that you offer the same remedies and guarantees under the general contract. Another example is the delay of the project. The subcontract may remain silent with regard to the recovery of late claims, which implicitly allows for such recovery.
However, if the general contract contains undue damages that exclude the general contractor`s claims against the owner, the subcontractor could also be blocked against the general contractor. In other words, a downstream clause is intended to bind a subcontractor under another contract (the main contract) between a general contractor and a customer. In the context of throughput declines, it is important that the parties clearly negotiate and define the scope of the obligations. All works contracts must give subcontractors access to the complete contract documents containing the general contract, drawings, specifications, change orders, construction modification guidelines and additional instructions from the architect, as well as to all facilities. John signs a contract with Mary to build a cottage for her (main contract). Let`s take a construction contract as an example of a situation where you can see downstream clauses from subcontractors. A downstream clause (also known as a downstream, transmission or conduit clause) is a contractual clause in which a party „transmits“ the terms of the contract it has in a separate contract to another party. A downstream clause is a contractual provision in which one party (prime contractor) legally binds another party (subcontractor) under the terms of the contract (the main contract) between the prime contractor and a third party (customer). John, as well as the 2-year warranty obligations contained in the main contract, will go through arbitration. The inclusion of the general contract in the subcontract through a downward flow clause binds the subcontractor to the agreement between the general contractor and the owner, sometimes with surprising or uncomfortable results.
For example, the subcontract may not provide for dispute resolution. However, if the general contract requires arbitration, the subcontractor may be required to settle its claims and disputes with the general contractor. Industry standard contracts, such as those of AIA and ConsensusDocs, essentially drain all the provisions of the main contract on subcontracts (and subcontractors). Subcontractors must therefore know what is included in this main contract. This is not specified in the AIA A401 (the subcontract) – but thanks to the downstream regulations, it still applies. Ultimately, the service provider chain is legally aligned through the use of downstream provisions and must all meet the same legal requirements in order to satisfy the end customer. On the one hand, you have a party (prime contractor) who has signed a contract with another (customer). Yes, contracts can be tedious, complicated and boring. But you still have to read and understand them.
And if you are a subcontractor or subcontractor, you should still read and understand the general contract. John signs a contract with Suzanne for the foundation and Bill for the electrical work. This means that any assumptions you may have made based on previous commercial contracts will disappear when it comes to government work – and you`ll need to take a very close look at the details of your subcontract. You (as an IT service provider) have a contract with the customer. This contract states that you provide the services to the customer exactly when you indicate it in your service description/scope of services. Let`s say you outsourced some of the services to your subcontractors to run them, and, yes, you guessed it, they delayed it for a while! The customer is angry, throws you the contract and your answer is? The main objective of these top-down flow provisions is to maintain consistency between the obligations owed by the general contractor to the owner and the obligations owed by the subcontractor to the general contractor for partial commercial work. .