The principal purpose of these flow down provisions is to maintain consistency between the obligation the general contractor owes to the owner, and the obligation the subcontractor owes to the general contractor for sub-trade work. This purpose is a practical one because no general contractor wants to risk liability to the owner on account of non-conforming sub-trade work without having the right to pass that liability on to the subcontractor responsible. But the legal effect of flow down clauses is greater than that.

Incorporating the general contract into the subcontract by a flow down clause binds the subcontractor to the procedural arrangement between the general contractor and owner, sometimes with surprising or uncomfortable results. For example, the subcontract may not provide for arbitration of disputes. But if the general contract requires arbitration, the subcontractor will be bound to arbitrate its claims and disputes with the general contractor.

A second example is claim notice. The subcontract may say nothing about the form or timing of written notice of disputed claims. But if the general contract requires written notice by the general contractor to the owner within certain time limits, a subcontractor owes the same obligation to the general contractor, and his failure to meet those notice requirements could bar any recovery by the subcontractor.

A third example is project delay. The subcontract may be silent with respect to recovering claims for delay, which implicitly permits such recovery. But if the general contract includes a no damage for delay provision barring general contractor claims against the owner, the subcontractor may likewise be barred against the general contractor no matter how long the delay or how blameless the subcontractor may be.

In short, a flow down clause in a subcontract imposes multiple obligations on a subcontractor beyond those enumerated in the subcontract form he signs. A subcontractor who accepts a flow down provision without insisting upon obtaining a complete copy of the general contract, including general and supplemental conditions, is blindly assuming obligations and potential liability, which is a foolhardy risk.

Many flow down clauses are one way streets benefitting the general contractor only. That is, they require the subcontractor to assume the general contractor's obligation to the owner under the contract documents, but do not require the general contractor to assume to the subcontractor the obligations which the owner owes to the general contractor. Unless these one way flow down provisions are amended by requiring the general contractor to assume a similar and reciprocal obligation to its subcontractor, the subcontractor will be denied the benefit of general conditions on which it may have bid.

The AIA subcontract form recognizes the importance of a reciprocal flow down provision benefitting subcontractors by explicitly including it. The statutory form of subcontract in Massachusetts required for filed sub-bidders also contains a reciprocal flow down provision. Every subcontract form which aspires to fairness should do likewise. No subcontractor should accept a flow down provision that is not reciprocal.

This newsletter is intended to provide general information of interest to the construction industry. It is not intended to provide specific legal advice or to address fact specific issues. For that you should consult your legal counsel. Corwin & Corwin LLP assumes no liability in connection with the use of this newsletter. The Supreme Judicial Court may consider this material advertising.
©1992-2003 Corwin & Corwin LLP. All rights reserved.