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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Real Property - Transactions

Date & Time
  • event Date

    Tuesday, July 9, 2024

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$297.00
CLE
ALL

This CLE webinar will provide an in-depth look at the powerful, though often overlooked, flow-down clauses in construction contracts that bind subcontractors to the terms and conditions of the prime contract. The panel will address the mistakes that many practitioners make when drafting these clauses and consider examples in recent case law of pitfalls to avoid. The panel will discuss negotiation and drafting strategies to protect the rights of prime contractors and subcontractors and offer best practices for mitigating client risk.

Faculty

Teresa Santin
Partner, Co-Chair Construction Contracting & Disputes Practice Group
Brouse Mcdowell Lpa

Ms. Santin primarily practices construction litigation, resolving disputes arising from public, industrial, commercial and residential projects. She represents general contractors, subcontractors, owners, developers and public entities in disputes involving construction agreements, unjust enrichment, mechanic’s liens and statutory violations. Ms. Santin frequently litigates claims of poor workmanship, incomplete or incorrect work, defective construction, schedule delay, unapproved change orders, payment and performance bonds and mechanic’s liens. She has significant experience resolving matters through alternative dispute resolution, particularly arbitration. Ms. Santin is a frequent author and lecturer on construction law topics.

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James T. Dixon
Miscellaneous

Since 1997, Mr. Dixon has helped members of the construction industry manage risk, avoid loss, and resolve disputes on projects throughout the country. He drafts and negotiates construction contracts, advises clients during the course of construction, and resolves disputes through mediation, arbitration and litigation. He has handled claims relating to defective construction, schedule delay, disruption and acceleration, differing site conditions, unapproved change orders, payment and performance bonds, and mechanic’s liens, among others. Mr. Dixon has unique experience in advancing bid protests on public projects, in resolving disputes on tunneling projects, and in addressing disputes on projects utilizing the integrated project delivery system. He also resolves transactional real estate disputes in residential and commercial contexts. 

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Description

One of the most powerful but often overlooked contract provisions in subcontracts is the flow-down or pass-through clause that applies the terms and conditions of the prime contract (between the prime contractor and owner) to the subcontractor. While these terms can help align all parties with the project's overarching requirements, they can put lower-tiered contractors at a disadvantage as they are often not part of the initial negotiations.

Practitioners often rely on boilerplate language for flow-down terms that are found in form documents much to their clients' detriment due to the significant legal obligations imposed by these clauses. Flow-down clauses may bind the subcontractor to terms and conditions that may not be addressed in the subcontract and may be specified in other documents outside the prime contract that are incorporated by reference in the prime contract.

Therefore, counsel for both prime contractors and subcontractors should know how to best negotiate and draft these clauses to protect their clients' interests and limit potential conflicts including thoroughly understanding what terms flow down, carefully reviewing all relevant documents that may be tied to the prime contract, using precedence clauses to limit contractual conflicts, and other strategies.

Listen as our expert panel discusses the importance of carefully negotiated flow-down clauses with a review of recent case law for examples of pitfalls to avoid. The panel will offer best practices for negotiating and drafting flow-down clauses for prime contractors and subcontractors to mitigate risks for both parties.

Outline

  1. Introduction
  2. Purpose of flow-down clauses
    1. Typical flow-down terms
    2. Filling gaps between the prime and subcontracts
    3. Risk-shifting
  3. When to use flow-down clauses
    1. Mandatory
    2. Discretionary
  4. Prime contractor considerations
  5. Subcontractor considerations
  6. Common contractual conflicts and litigated issues
  7. Best practices to mitigate risk for the parties

Benefits

The panel will review these and other key considerations:

  • What is the purpose of a flow-down clause?
  • When are flow-down clauses mandatory? When are they discretionary?
  • What are typical flow-down terms?
  • What documents should counsel review when negotiating the flow-down clause to ensure their clients are not subjected to obligations of which they are not aware?
  • How can counsel best limit conflicts between the subcontract and the prime contract?
  • How may using a precedence clause limit contractual conflicts between the parties?