USA – ALABAMA Law and Practice Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser, Katie Sinclair and Courtney Bradshaw, Dentons
eral contractor then delegates subcontracts as necessary, often without being subject to owner approval, unless the owner contractually retains that right. 7.3 Management of Construction Risk Owners and general contractors frequently utilise insurance policies and indemnification agreements in their contracts with each other, and in particular with their subcontractors. Since contribution among joint tortfeasors is unavail - able, the only method for obtaining contribution is to contractually oblige the counterparty to indemnification. Waivers are generally accept - able, and interim and final lien waivers are highly recommended. Each payment on a pay application should be accompanied by an interim lien waiver, and the final payment (including retainage) should be accompanied by a final, unconditional lien waiver and hold harmless agreement. Furthermore, limi - tations or caps on liability can be negotiated into the contract, in addition to provisions requiring the contractor to post payment and performance bonds from a reasonably acceptable surety. 7.4 Management of Schedule-Related Risk Delays in construction should always be addressed in the contracting documents. While a penalty is not available, the contract can pro - vide for an agreed-upon “liquidated damages” provision for a certain amount to be allocated for each day, week or month that the project is behind schedule or for each milestone missed. Delay damages can be accounted for as a back charge to the contractor to be deducted from payments due. As additional security for paying material suppli - ers or remedying defects and delays in construc -
tion, owners and general contractors are entitled to hold back retainage; see Section 8-29-3. An owner or general contractor may retain 10% of payments to the general contractor or subcon - tractor, respectively; see Section 8-29-3(i) and (j). The retainage may only be taken from the first 50% of the payments for completion, after which “no further retainage shall be withheld” ; see again Section 8-29-3(i) and (j). 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Depending on the project’s size, payment and performance bonds are the most common form of security to guarantee a contractor’s perfor - mance on a project. As a general rule, the larger the project, the more likely it is for an owner to require more expensive security on a project. Public works are required to be bonded (see Section 39-1-1), but there is no requirement for any security or bonding to be posted by a con - tractor on private work. The most common method is for the owner to require both a payment and a performance bond from a reputable surety. Other layers of security may be negotiated into the relevant contract if risk is increased. 7.6 Liens or Encumbrances in the Event of Non-Payment Any party who contributes work to the property that improves the property is eligible for a mate - rialman’s lien (Section 35-11-210 et seq). The work provided must be a lasting improvement, not temporary. For example, an architect’s work in providing plans would be lienable, whereas a surveyor’s work would not; Wilkinson v Rowe, 98 So 2d 435 (Alabama1957).
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