National Roofing Legal Resource Center

Contract provision protects a roofing contractor concerned about an owner's ability to pay for work

From time to time, a roofing contractor may be faced with the dilemma of going under contract on a job where there are concerns about an owner's ability to pay for the work. Rather than turning the business away, the roofing contractor should include in its contract a provision, such as the one following example, which provides the roofing contractor with assurance from the owner of its ability to pay before the work begins. The provision requires that an owner at minimum demonstrate its financial ability to fund the project before work begins and ideally requires the owner provide the entire contract sum up front. If the owner is unable to do so, the contractor is not required to begin the work. Additionally, this provision ensures the roofing contractor may cease working if an owner fails to make an interim payment.

Owner's Financial Assurance Provision to Protect Roofing Contractor Concerned about Owner's Ability to Pay for Work: Prior to Roofing Contractor's ordering materials and the start of Work, Owner shall make an initial payment to Roofing Contractor of __________. Owner shall deposit the remainder of the Contract Sum in an escrow account, which shall be disbursed by an Escrow Agent to the Roofing Contractor in the amount of __________ when the job is 1/3 complete and an additional __________ when the job is 2/3 complete. The Escrow Agent shall make a final payment of the remaining Contract Sum when the job is completed. The amount of final payment shall be adjusted based on changes in the Work. Upon Roofing Contractor's receipt of notice from the Escrow Agent that the Contract Sum has been deposited in the Escrow Account, Roofing Contractor shall order materials and proceed with installation. In the event the remainder of the Contract Sum after the initial payment to Roofing Contractor is not immediately available for deposit in escrow, Owner shall provide evidence satisfactory to Roofing Contractor that Owner has the financial resources and has made the necessary financial arrangements to pay in full the Contract Sum and to timely deposit into the escrow account the amount of __________ on or before ____________, and the amount of __________ on or before ____________. Provision of such financial assurance to Roofing Contractor is a condition precedent to Roofing Contractor's ordering of materials and commencement of the Work. If Owner fails to timely deposit the amounts owed into escrow, Roofing Contractor shall be entitled to immediately stop work and recover costs of shut-down and remobilization. Roofing Contractor is entitled to interest at the rate of 1% per month and costs of collection, including reasonable attorneys' fees. The Owner's financial data is to be kept confidential and made known only to those people necessary to verify the authenticity of the information provided therein.


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