Pass-through agreements offer a variety of benefits to both the contractor and the subcontractor. However, the parties must carefully adjust the terms of the agreement to overcome not only traditional contractual defenses, but also the practical difficulties inherent in such an agreement. Here is an overview of some of the key elements of a transmission agreement. The location of the project plays an important role in how the passing language can be interpreted and applied. Therefore, it is important to understand the nuances of applicable state laws in the drafting and implementation of passage clauses. The complex combination of contracts and risk allocation for a construction project creates the opportunity for project stakeholders to retreat to their respective risk silos at the first sign of difficulties. While this is a practical and logical response, it can deprive participants of the opportunity to expedite the resolution of claims, eliminate duplicate litigation, and bring all responsible parties to the table by turning apparent contractual “enemies” into allies through sweeping agreements. Just as important as the allocation of costs and the right of settlement is how recoveries are allocated to the transit debt and when they are paid. This is particularly important if the subcontractor`s right of way is presented under a number of other direct claims of the main contractor and/or other transit claims of the subcontractor. From the subcontractor`s point of view, it is important, in such a situation, that the main contractor is required to clearly present the subcontractor`s right of way from its own claims or other licence applications of the subcontractor in order to allow a better identification of the recoveries specific to the subcontractor`s claims.
In the absence of a judgment or award that does not pre-award per claim, it can be difficult to determine which portion of the judgment or indemnity is due to the subcontractor`s claim. In the event of a relapse in such situations, a recovery ratio based on the percentage of the subcontractor`s claim in the total claim may be an alternative. It is also important to reward when the prime contractor`s obligation to pay the subcontractor arises, either at the time of judgment or award, or only after the actual recovery of funds for judgment or attribution. These issues should also be addressed in the winding-up agreement in order to avoid subsequent disputes over the award and payment of recoveries. A pass-through agreement is used when a subcontractor claims damages. Both parties must agree that the owner of the property is liable for such damages. These agreements allow the general contractor to submit his claim through the general contractor. The general contractor makes a claim against the owner.
The general contractor also undertakes to hand over the funds collected to the subcontractor. Pass-through agreements can take many forms. Although verbal pass-through agreements have been applied, a written agreement is much stronger from a legal point of view. It is not necessary for a liquidation agreement to form part of the original subcontract. On the contrary, “the general contractor may be liable for the subcontractor`s claims for passage by means of a separate liquidation agreement”. Rad & D`Aprile Inc. v Arnell Constr. Corp., 2015 NY Slip Op. 25191 (June 5, 2015). However, a subcontract is established well in prior to the dispute and may not reflect the needs and wishes of the parties when a claim has been made. Therefore, it is desirable to reach a separate agreement that includes a provision that iterations the intention of the parties to replace the conflicting subcontracting provisions.
The courts have accepted that a pass-through agreement can modify the rights and obligations of the parties as imposed by the subcontract. .