The Construction Contract: Payment-for-Stored-Materials Provisions

Whether you are acting as owner, prime contractor or a subcontractor, payment issues associated with stored materials can arise.  For example, certain equipment or materials (i.e., HVAC equipment, custom counter-tops and commodities such as copper) may require long-lead procurement, or may offer significant cost savings to purchase early in the construction process.  Once acquired, however, these materials must be stored.

Who pays to store the material or equipment after procurement?  This question is one that typically requires an examination of the operative contracts and the contract documents as a whole.  Failure to adequately analyze the bid documents in addition to the contract documents can result in an unsuspecting subcontractor ordering materials or equipment under the mistaken belief it will receive payment for storage costs.  These contractors or  subcontractors may ultimately pay the entire cost of storage without reimbursement.  These types of errors can eliminate the cost-savings obtained by acquiring materials early, disrupt the construction process, and turn a profitable job in to a losing proposition.

In addition to being at risk for not getting paid for stored material costs, failure to obtain the right type(s) of insurance, or insurance in adequate amounts, can put contractors and subcontractors at further risk in the event of fire, theft or other perils that may arise on construction projects.

If you are confronted with stored material payment issues whether as an owner, prime contractor or subcontractor, please contact one of our lawyers to aid you through the payment and risk mitigation processes.