Construction projects can be complex undertakings involving many parties. Of course, there is the property owner, but in addition there are usually general contractors and third-party subcontractors involved in these projects. It is important to understand the roles general contractors and subcontractors play in the execution of a construction project in Louisiana, as their classification may have significant legal ramifications.
When a general contractor is working on a complex construction project, he or she may contract with a third party, who will undertake certain tasks associated with the project. For example, a construction company building a strip mall may contract with an electrician to do the wiring in the building. This practice is known as “subcontracting.” When the general contractor hires a third-party subcontractor, the general contractor remains responsible for seeing that the project is completed per the terms of the arrangement the general contractor has with the property owner. This means adhering to the agreed-upon parameters of the project and meeting all deadlines associated with it.
Subcontracting can be useful when certain portions of a project necessitate specialized knowledge that goes beyond the scope of what the general contractor can provide. Subcontracting can help general contractors complete a project in a fiscally responsible manner, and subcontracting can also mitigate any risks associated with the overall project. Moreover, by subcontracting certain duties to others, the general contractor has the time and resources to commit to other, more lucrative dealings. In addition, subcontracting can be cheaper than hiring employees, as certain costs associated with having employees, such as paying for health insurance and full-time wages, need not be provided to a subcontractor.
Subcontracting can be a positive thing, but it is an area of construction law that has the potential to be complex. Moreover, a poorly drafted contract between a general contractor and a subcontractor could lead to issues that ultimately delay the completion of a project. Therefore, parties undergoing these types of business transactions will want to ensure the final agreement is legally sound, and that both the general contractor and subcontractor understand what is expected of them.