What Subcontractors Should Know Before Signing a Master Services Agreement
Master services agreements have become common in the construction industry, especially when a general contractor works with the same subcontractor on multiple projects. Instead of negotiating a full contract for every job, the parties sign one overarching agreement that governs the relationship, and individual work orders or task orders cover the specifics of each project. This can save time, but subcontractors sometimes sign these agreements without fully understanding just how much they are agreeing to upfront.
Understand What Applies to Every Job
Because a master services agreement is meant to govern multiple projects, its terms typically apply broadly, even to work orders that come months or years later. That means indemnification clauses, insurance requirements, dispute resolution provisions, and payment terms in the master agreement will likely apply to every job you take on under it, unless the work order specifically says otherwise. Before signing, read the agreement as if it will govern a job you haven’t even bid on yet, because it probably will.
Watch the Indemnification Language Closely
Indemnification clauses require one party to cover the losses or legal costs of the other in certain situations. Florida law places limits on how far these clauses can go in construction contracts. Under Florida Statutes, a contract provision requiring a subcontractor to indemnify another party for damages caused by that party’s own negligence, in whole or in part, is generally unenforceable unless the clause meets specific requirements, including a monetary limit tied to the subcontractor’s fees under the contract. If your master services agreement asks you to indemnify a general contractor or owner for their own negligence without those protections, that provision may not hold up, but it can still create confusion and costly disputes if it isn’t addressed clearly from the start.
Payment Terms Deserve a Second Look
Pay-when-paid and pay-if-paid clauses are common in master agreements, and they can significantly affect your cash flow. A pay-if-paid clause can shift the risk of the owner’s nonpayment entirely onto the subcontractor, meaning you may not get paid even after completing your work, if the general contractor never gets paid by the owner. Understanding which version is in your agreement, and how Florida courts interpret it, matters before you rely on the contract’s payment schedule for your own budgeting.
Termination and Scope Changes
Master agreements often give the general contractor broad rights to terminate work orders for convenience, sometimes with limited notice. Look closely at what you are entitled to if a job is cut short, including payment for work already completed and any mobilization costs. Also check how the agreement handles change orders, since a master agreement’s change order procedures will apply across every project unless a specific work order modifies them.
Get It Reviewed Before You Sign
A master services agreement can streamline your business relationship with a general contractor, but its broad, long-term nature means small unfavorable terms can repeat across every future job. A careful review before signing is far less costly than trying to renegotiate after a dispute arises.
We help subcontractors and contractors throughout South Florida review and negotiate construction agreements before problems start. Our Fort Lauderdale construction attorneys at Sweeney Law, P.A. are ready to help. Call us at 954-440-3993 to schedule a consultation.
Source:
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0725/Sections/0725.06.html
