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Norman Oklahoma
(@norman-oklahoma)
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October 10, 2018 2:15 pm  
Posted by: Adam

“Client agrees  to pay Surveyor for a reasonable attorney fee (15% of the outstanding amount due and owing) if any attorney is required to collect any past due amount under this Agreement.” 

To remove or Not to remove?

It's poorly worded. I agree with them. Suppose you bill something in error, and you lawyer up to collect, and lose your case? With this clause they would have to pay your attorney, as well as their own, to fix your screw up. That's not fair.

Nevertheless I get what you are trying to say, so reword it.   

"Convention is like the shell to the chick, a protection till he is strong enough to break it through." Learned Hand


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JKinAK
(@jkinak)
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Posts: 248
October 10, 2018 2:18 pm  
Posted by: Adam

I do have the expectation of payment stated pretty clearly.

...Progress invoices are considered past due 15 calendar days after the date of invoice at which point past due amounts shall accrue interest at the highest rate (percent per annum) amount allowed by applicable law. ...

I think past due at 15 days is unreasonable for this type of contract.

I don't know of any firm we've worked for who was prime on a government/municipal project that wouldn't have been subject to interest as you've got it written - nobody likes to pay interest. Our approach is to give them 30 days to pay before any interest charges accrue and we reserve the right to suspend all work at 60 days. Here's our language (but we rarely use it - only when the prime doesn't give us their language - which we edit to make it mostly conform to this.):

Payment on undisputed invoice amounts is due upon receipt of invoice by CLIENT and is past due thirty (30) days from the date of the invoice. CLIENT agrees to pay a finance charge of one and one-half percent (1-1/2%) per month, or the maximum rate allowed by law, on past due accounts. If payment remains past due sixty (60) days from the date of the invoice, then [Adam's Company] shall have the right to suspend all work under this Agreement, without prejudice. CLIENT shall pay all reasonable demobilization and other suspension costs. CLIENT agrees to pay attorneys’ fees, legal costs and all other collection costs incurred by [Adam's Company] in pursuit of past due payments. Our hourly rates do not include a sales tax and these will be added if they become applicable in any jurisdiction. CLIENT shall pay final invoice prior to [Adam's Company's] signature or delivery of final document(s).

 

And the insurance amount has never been set in stone - when the prime insurance language gets too complicated I just cross it all out and say something like "Insurance coverage shall be as shown on the attached Certificate of Insurance Coverage" and I attach an ACORD Cert with the client identified as the Certificate Holder. It's easier for them to accept as-is than to try to get us to do something different (we have insurance that has worked for most every contracting agency - 2m umbrella).

This post was modified 2 weeks  ago by JKinAK

- John


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Norman Oklahoma
(@norman-oklahoma)
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Posts: 3909
October 10, 2018 4:19 pm  
Posted by: Adam

I sent out a survey agreement to a large firm in this area yesterday. The price I put on the agreement was very good in my opinion and hasn't been questioned at all. This project will keep me busy for a month and will lead to other work on this project later. I have terms of payment on there stating payment in full is required before the final survey is delivered.....

BTW - Not that you have asked, but demanding payment on delivery from a property owner is one thing. Giving another firm - who you hope to do continuing business with - some time (30-60days) to turn the bill around is standard business practice.  

"Convention is like the shell to the chick, a protection till he is strong enough to break it through." Learned Hand


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Adam
 Adam
(@adam)
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October 10, 2018 5:08 pm  

All well noted and greatly appreciated guys!!! Thanks for your wisdom.

Adam Plumley, PLS
AP Surveying, PLLC
Javad GNSS 5PLS Team Member


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Adam
 Adam
(@adam)
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Posts: 1054
October 10, 2018 5:27 pm  

Thank you JK for letting me see your wording. It's a big improvement on what I had and they may be okay with it.

Adam Plumley, PLS
AP Surveying, PLLC
Javad GNSS 5PLS Team Member


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spledeus
(@spledeus)
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Posts: 2670
October 10, 2018 5:38 pm  

The Frame Bank, 0% interest for short term loans.

I have my own bank with the same rate.

J. Thaddeus Eldredge, PLS, CFM
East-SouthEast, LLC


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Precision Geosystems, Where Precision Meets Value.

spledeus
(@spledeus)
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October 10, 2018 5:38 pm  

The Frame Bank, 0% interest for short term loans.

I have my own bank with the same rate.

J. Thaddeus Eldredge, PLS, CFM
East-SouthEast, LLC


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spledeus
(@spledeus)
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October 10, 2018 5:39 pm  

We pay our subs immediately.  We want them to respond immediately.

J. Thaddeus Eldredge, PLS, CFM
East-SouthEast, LLC


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John Putnam
(@john-putnam)
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Posts: 1068
October 11, 2018 8:01 am  

Spledeus,

I will say that you are definitely in the minority on that.  Every contract I sign seems to have a paid when paid clause.  I was recently a sub on a state funded project that it took over a year to get payment on.  It seems that before I submitted my invoice the prime had gone over their portion of budget.  They would not pay me, or any of the other subs, until after the negotiated additional fees with the State.  What I really need is some verbiage to ensure that paid when paid does not turn into never being paid.  I don't get to tell my employees or vendors that I will pay them when I get paid.

As for interest, I have never seen a government type contract that allows for interest.  My standard contract starts the clock 30 days after the due date which is usually 30 days after receipt.

John Putnam, PLS
OR, CA, WA & ID


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Jon Payne
(@jon-payne)
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Posts: 788
October 14, 2018 12:20 pm  

I like that you have the interest set at the highest allowable by law, but you might double check the time frame for when that interest rate can kick in.  It may also be covered in statutes for your state.  In addition, you might want to double check just how much you can re-coup (by statute) if it ends up going through the court system - the 15% may or may not be enforceable.

 

Question - was this agreement language prepared in house or by an attorney on your behalf?  If not by an attorney, might be wise to consult with a good attorney with experience having professional service businesses as clients to see if there may be valid reason for the request to remove the language.  If it ends up being unenforceable in court, no need to worry about if it is in there or not.


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Adam
 Adam
(@adam)
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Posts: 1054
October 14, 2018 2:18 pm  

If i recall correctly it was actually written by the counsel for NCBELS and was provided as a sample contract for surveyors in a seminar I attended a while back. 

Adam Plumley, PLS
AP Surveying, PLLC
Javad GNSS 5PLS Team Member


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Jim Frame
(@jim-frame)
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Posts: 5656
October 14, 2018 5:42 pm  

Every contract I sign seems to have a paid when paid clause.

That clause is not enforceable in California.

All the contract language about interest and legal fees is nice, but actually collecting those is another matter.  Getting a judgment on a failure-to-pay charge is feasible if the amount is small enough to bring the action in Small Claims Court, but if the amount throws you into Superior Court (or whatever your state calls it), the practicality level drops precipitously.  I've been told that litigating anything in Superior Court in CA will cost a minimum of $50k.  You have to get stiffed pretty badly to make it worthwhile.

Once you get a judgment you're faced with the task of collecting on it.  I've brought suit in Small Claims Court 4 times in 25 years.  2 of those paid up before the hearing, the other 2 produced judgments in my favor.  Of those I was able to collect on 1, the other was a judgment-proof guy.

Jim Frame
Frame Surveying & Mapping
609 A Street
Davis, CA 95616


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JKinAK
(@jkinak)
100+ posts Member
Joined: 6 years  ago
Posts: 248
October 14, 2018 10:49 pm  
Posted by: John Putnam

What I really need is some verbiage to ensure that paid when paid does not turn into never being paid. 

I found (and have used) language from the Washington Association of General Contractors that seems pretty fair. 

Their language is "Under the “pay when paid” alternative, the subcontractor agrees that payment is not due until 10 days following receipt by the general contractor of the owner’s payment, or until after passage of a “reasonable time” after such payment is due, which under the clause is deemed to be 90 days."

I've modified a number of contracts by putting an asterisk next to the term "pay when paid" and adding a footnote that says something like "pay when paid means that payment is not due until 10 days following receipt by the general contractor of the owner’s payment, or until after passage of a “reasonable time” after such payment is due, which under the clause is deemed to be 90 days." 

Everyone has been fine with this until just recently that one prime pushed back on my edit. I explained that we have no contractual relationship with the client and no ability to pursue payment from them - that if they negotiate some kind of deal to accept no payment in exchange for something - then we get nothing. I explained that our business model wouldn't support not getting paid.  Fortunately, our workload was such that we'd be happy to walk on this one - the client ultimately agreed and I kept the discussion upbeat and positive - they agreed to the language and hopefully, they won't view us as "difficult".  Regardless - we won't work under a "pay when paid" clause unless that term is defined to have an acceptable time frame. We can wait a bit but we can't work for free.

 

 

- John


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