In March 2022, a trial court in New York ruled that a construction manager (“CM”) on a project for construction of a Burlington Coat Factory in Manhattan was responsible to pay its trade contractor Quest Builders Group (“Quest”) directly. Quest Builders Group, Inc. v. KSK Construction Group, 2022 NY Slip Op 31012(U) (Sup. Ct. NY 2022).
The court rejected the CM’s argument that because it was the “agent" of the Owner [as CM] it was not responsible for making direct payment to Quest for its services on the project. Instead, the court relied on the specific language of the Trade Contract between CM and Quest that provided that "Construction Manager [KSK] shall pay Trade Contractor [Quest] the Contract Price upon such terms and conditions that are set forth in the contract between the Owner and [KSK]".
If is not uncommon in the construction industry for a CM to attempt to shield itself from making direct payments to trade contractors by claiming that it is acting solely as the Owner’s “agent” and therefore the trade contractor must look to the Owner. However, as held by the court in this decision, the specific language employed in the trade contract will govern whether the CM is, in fact, the owner’s agent for payment purposes.
Prior to signing, Trade Contractors should review their contracts with CM’s carefully and through negotiation seek to revise any payment provisions that attempt to shield the CM from the obligation of making direct payments for work performed on the project.
About the author: George Marco is an attorney practicing in the field of construction law. He also holds a Bachelor of Science in Mechanical Engineering and was previously employed as a Project Manager for a public improvement contractor.
Disclaimer: This article is for informational purposes only and not intended to serve as legal counsel.