Prompt payment laws and court cases about payment clauses
are extraordinarily important to a CFM trying to diffuse a
payment dispute or neutralize an assertion of leverage. The
general “playing field” as outlined by the statutory laws,
requirements, and court cases are key factors to consider in
analyzing a company’s situational position. If unknown, it will
be difficult for the CFM to analyze the pros and cons of any
responses and action.
Most construction contracts are loaded with varying notice
requirements (e.g., if X occurs, then the party must provide
written notice within XX days, otherwise all claims related
to X are waived).
A contract may contain a number of these notice require-
ments, and the timing is often short, arbitrary, and incon-
sistent with how jobsite problems organically arise and are
handled. Arcadis’ Global Construction Disputes Report
also hints at these clauses being a serious cause of disputes
themselves, with North America’s third most common dispute
reason listed as the “failure to understand and/or comply with
contractual obligations,” and the fourth reason being the “fail-
ure to properly administer the contract.” 7
Oftentimes, a notice provision is used to hold another party
accountable for not following that provision, which creates
opportunistic or malicious leverage. And, when parties in a
preliminary dispute overlook a notice requirement, it’s common for bad situations to become worse.
CFMs should understand and be prepared to follow notice
requirements within their contracts to prevent problematic
leverage from starting – or getting worse.
Supply Chain Finance & Capital Access
One way to extinguish a leverage fire is to be capable of
delaying it. Leveraging a situation is not necessarily about
being correct, it’s about being in a good position – usually, a
good financial position.
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