Subcontractor’s Delay Claim Is Barred by “No Damage for Delay” Clause Incorporated Into Subcontract by “Flow-Down” Clause
Kegler Brown Construction Newsletter May 1, 1998
General contractors have frequently utilized subcontract "flow-down" clauses to attempt to incorporate by reference all of the provisions in their prime contract with the owner upon the subcontractors on that project. In this way, general contractors attempt to limit their liability and risk by making the subcontractor's obligations consistent with the general's obligations to the owner.
A case from Georgia's Supreme Court has held that a subcontract "flow-down" clause (which stated that the general contractor had the same rights as against the subcontractor that the owner had against the general contractor) allowed the contractor to defeat a subcontractor's delay claim with a "no damage for delay" provision in the prime contract. L & B Construction v. Regan Enterprises, 267 Ga. 809 (1997).
This case emphasizes the value of "flow-down" clauses to general contractors who are interested in making subcontractors assume their risk to owners, and stresses the need for subcontractors to review and understand the obligations in the prime contract if they elect to sign subcontracts containing "flow-down" provisions.