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PCCA Journal|1

st

Quarter 2010

27

a period of 30 days by the contrac-

tor because the architect has not

issued a certificate for payment .

. . or because the owner has not

made payment thereon..., then

the contractor may, upon seven

additional days’ written notice

to the owner and the architect,

terminate the contract and recover

from the owner payment for all

work executed for any proven

loss sustained upon any material,

equipment, tools, construction

equipment and machinery, includ-

ing reasonable profit and damages.

Termination by the Owner

If the contractor is adjudged a

bankrupt, or if he makes a gen-

eral assignment for the benefit

of his creditors, or if a receiver

is appointed on account of his

insolvency, or if he persistently or

repeatedly refuses or fails, except

in cases for which extension of

time is provided, to supply enough

properly skilled workmen or prop-

er materials, or if he fails to make

prompt payment to subcontractors

or for materials or labor, or persis-

tently disregards laws, ordinances,

rules, regulations or orders of any

public authority having jurisdic-

tion, or otherwise is guilty of a

substantial violation of a provision

of the contract documents, then

the owner, upon certification by

the architect that sufficient cause

exists to justify such action, may,

without prejudice to any right or

remedy after giving the contrac-

tor and his surety, if any, seven

days’ written notice, terminate

the employment of the contrac-

tor and take possession of the site

and of all materials, equipment,

tools, construction equipment

and machinery thereon owned

by the contractor and may finish

the work by whatever method he

deems expedient. In such case the

contractor shall not be entitled to

receive any further payments until

the work is finished.

Termination clauses are impor-

tant because of the significance of

their impact and the finality of their

effect. Contractors must be aware

of the notice provisions in termina-

tion clauses when developing their

agreements with subcontractors.

The contractor should allow itself

ample time to cure a subcontrac-

tor’s default before the owner is

permitted to terminate the general

contract.

Greg Spalj is a member of the PCCA

and represents many of its members.

He has a national law practice repre-

senting construction contractors. He

can be reached at (612) 359-7631 or

gspalj@fwhtlaw.com. www.GMPtools.com

+1.215.357.5500

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