The responsibility to the client ultimately lands on the GC, but that does not mean that you are liable for the cost. The sub is responsible to replace any damaged materials. It doesn’t matter who paid for the materials, the sub is hired to complete a job based at a certain price. If you own the materials and they damaged it, that is the exact same situation as someone damaging your property. Regardless of what the contract says, this is common law.
The proper way to amend the contract is to write a backcharge to your sub and then send them a deductive change order to the contract for the amount of the material cost plus any delays. This is the legal way to reduce the payment owed to them. If you are withholding 10% retention and the material is less than the 10% then you can take the cost out of it. If they disagree for any reason then they will need to take you to court. Hopefully, your contract has a clause stating that disagreements go to mediation or arbitration prior to court.
- Since you’re making the payments to the sub, you should always have the upper hand in regards to any sub damages occurring on the project; withhold payment to force action.
I can think of three reasons why a GC would agree to purchase the materials for a sub. At times this is worthwhile.
#1 to save money. Since subs put a % markup on materials bought, it’s beneficial for the GC to make the purchase at times.
#2 to accommodate the sub. Some subs are smaller outfits and cannot outlay the cash for certain items. The GC can then cover the cost without having the sub bill prior to purchase.
#3 the sub hasn’t been hired yet but the material is a long lead item and will need to be ordered prior to the sub being issued a contract. Maybe the GC is reviewing several proposals from a few different sub companies, but needs to place the order now. (NEVER order a custom “long lead” item without having it signed off by the owner)
The purchase of certain materials will increase the GCs risk and exposure. For example, a custom order item (typically non-returnable). If there is a change in plan and the GC has already ordered the item for the sub (custom orders are sometimes long lead), this exposure lands in the GCs lap. (Unless the Owner signed off on the purchase of the custom ordered long lead item)
-Also, warranty issues will fall under the GCs responsibility if deemed a faulty material. There are defect laws to assist with liability, but it’s still a lot of work narrowing down the causes...did the sub damage it, install it incorrectly, or is the material faulty?
Hope this helps
