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Agreements – Changing the “Take It or Leave It” Format

Doug Staebler, Custom Concrete
Company, Inc., Westfield, IN

In previous articles, we looked at the growing use of Subcontractor agreements by builders. In addition to the typical clauses dealing with schedules, work defects, payment provisions, and other construction related matters, most of these agreements contain extremely potent indemnification clauses, which impose nearly unlimited liability on subcontractors. Most often, these agreements seem to be presented in a “take it, or leave it” format, and we often feel that we will jeopardize our chance to work for the customer if we refuse to sign the agreement as drafted. The reality is that there is usually significant opportunity to negotiate changes to the agreement, if the proper strategies are used. In this article, we will look at the key steps you can take to increase the chance of successfully securing the necessary changes to your customers’ agreements.

Before we begin, it’s important to understand certain realities that we must overcome to achieve the desired outcome. In most cases, the builder, or the person you are dealing with has not read the agreement, and has very little idea about what is in the agreement. It was probably provided by an insurance company, or the home office, with instructions to get it signed by every subcontractor. There is usually very little awareness of what is in the agreement, or how it affects subcontractors, and there will be little interest or willingness to get involved making changes to the agreement due to other more pressing tasks or responsibilities. Additionally, most other subcontractors have signed the agreement without expressing any objections to the agreement.

Given these factors, here are ten tactics that will help you negotiate the changes you need:

1. NEGOTIATE IN PERSON

If at all possible, avoid discussing this matter by telephone. Our objective is to convey key issues and concerns, and to gain a willingness to work together. This is difficult to do by telephone, but in person meetings will create a far better opportunity to work together with your customer.

2. UNDERSCORE YOUR COMMITMENT TO THE PROJECT

Explain that you intend to honor the agreement completely, and accordingly, want to make sure the agreement is workable. Your competitors may have no intention of complying with the agreement, and not be around long enough to back up what they agree to. Your customer should be glad to see that you will be around to back up your commitments and stand behind your work.

3. EXPLAIN THE REASONS BEHIND REQUESTED CHANGES

The person you are dealing with probably does not understand the issues involved. It may be necessary to explain the issues involved, and how unintended consequences could result from the proposed agreement.

4. DON’T OVER-NEGOTIATE

Pick the three or four most important items. There is usually a limit to how many changes you can secure. Focus on the most important issues, the ones that could create the most severe problems in your business.

5. LET ROUTINE THINGS SORT THEMSELVES OUT IN THE FIELD

In general, most construction details work themselves out as they occur in the field. In many instances, contractual provisions are not followed in the field. Ultimately, your ability to create a long-term customer will depend on finding workable solutions in the field, regardless of what is in the contract.

6. OFFER PROPOSED MODIFICATIONS

It is essential to offer the solution. Your chances of success are greatly reduced if its up to the customer to draft modifications or otherwise find the solution. If at all possible, propose a draft containing alternative language in the form of an addendum that can be agreed upon, and simply added to the original agreement.

7. REDUCE OR ELIMINATE THE NEED FOR AN ATTORNEY

Your customer is probably not interested in using his attorney to draft alternative agreements to address your concerns. Your chances are much better if you can provide the solution that does not require additional involvement of your customer’s attorney.

8. BE AVAILABLE TO DISCUSS PROPOSED CHANGES

It may be necessary to explain proposed modifications to an attorney, insurance agent, or home office personnel. If so, be prepared, and offer a clear concise reason for the proposed changes.

9. EXPLAIN THAT OTHERS HAVE AGREED TO THE SAME CHANGES

It’s amazing how much easier it is to get cooperation from customers, if they think others are doing the same thing. Explain that other customers have agreed to essentially similar changes. This is especially helpful if the other builder is a large, well known builder.

10. BE PREPARED

It is important to understand the issues involved. You will likely see the same clauses and issues in most of these agreements. Designate someone in your organization to learn about these agreements, and be able to discuss them intelligently with customers. Get training on the important issues from your attorney. Have substitute language or addendums prepared ahead of time ready for use when the need arises.

Following these key strategies will greatly increase your chances of securing important changes to the agreement. Most builders, at some level, will appreciate your concerns, and your commitment to abide by the agreement you are signing. The effort you take to secure these changes could save you some day from litigation that could threaten the survival of your business.

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