August 28, 2010
By Bob Incollingo
In the lousy economy we’ve all endured for the last two years, especially in the construction business, it seems like nobody is paying anybody. We’re looking at the proverbial vicious circle here, where nobody wants to spend money to chase money, so nobody gets paid. No one wants to throw good money after bad, but whatever happened to priming the pump? Unless you’re prepared to force the issue in court, don’t expect to get paid with anything but baloney on a bill that’s late. That’s just how bad things have become.
Too many general contractors depend on slow paying their subs. In bad times like these, they rob from the next job to pay for the last job. If there is no next job, the last job goes begging. Unpaid subcontractors carry balances not for months but for years, each afraid he’ll be denied future work if he sues to get paid or, Heaven forbid, if he liens a job. This is a real fear, and it’s backed up by every trick in the law of contract. Already last in line, suppliers and subs must brave one-sided “pay when paid” contract clauses, trumped-up claims of offset, and procedural barriers of every stripe on the way to collecting money rightfully due and owing.
It’s like we’re on leaking boats in a sea of debt, where everybody’s sinking but nobody wants to pick up a paddle. Desperate to stay afloat, you cut corners on quality, lay off skilled crews, and slow pay or stiff the sub-subs and suppliers. You gradually go under without cash flow, or get sued out of business without the resources to resolve your debts. The sub-subs and suppliers and mechanics go under as well, as businesses choke and families suffer. Maybe your business, maybe your family.
Ask why nobody forces the issue of late payment, and you’ll hear everything but the real reason – that people are afraid of what they don’t know, with lawsuits and lawyers near the top of the list. Instead, they’ll tell you they don’t want to make their customers mad. Guess what? A customer who owes you money isn’t coming back, or if he does, it’s just to sink you deeper with more worthless promises. It’s disrespectful and it’s predatory and it’s against the law. And what do you need to enforce the law? That’s right – lawsuits and lawyers. The heck with getting a reputation as a trouble maker – your family needs to eat. If you’re supposed to be paid for your work then do what you need to do to get paid.
It’s time to act before it’s too late, because business owners everywhere are deciding to sell out before they’re forced out. Sometimes they go bankrupt, but more often they simply walk away from the business. If you move now, you there may be something there to collect before your debtor evaporates. This is why a lawyer shouldn’t represent two creditors against the same debtor – because it’s always a race to recovery. The first to get a judgment and get it paid may take all that’s left. Will it be you?
Robert J. Incollingo is a construction, business and real estate litigation attorney in Glendora, New Jersey. His website RJILAW.com is filled with useful information.