Contract documents

September 28, 2022

The majority of prime construction contracts include “flow-down” provisions, and the AIA Contract Documents are no exception. Flow-down provisions, in essence, require the contractor “to structure its subcontracts in such a way that the contractor’s obligations under the prime agreement are ‘flowed down’ to subcontractors.”[1] This provision is important because all project participants – not just prime contractors – are obliged to adhere to the requirements in various documents provided by the owner, such as drawings and specifications, even though not all project participants have a contract with the owner. It is through flow down provisions that these obligations bind all parties throughout the contractual chain.

The A201- 2017 General Conditions of the Contract for Construction contains the flow-down provision in Section 5.3:

§ 5.3 Subcontractual Relations By appropriate written agreement, the Contractor shall require each Subcontractor, to the extent of the Work to be performed by the Subcontractor, to be bound to the Contractor by terms of the Contract Documents, and to assume toward the Contractor all the obligations and responsibilities, including the responsibility for safety of the Subcontractor’s Work that the Contractor, by these Contract Documents, assumes toward the Owner and Architect. Each subcontract agreement shall preserve and protect the rights of the Owner and Architect under the Contract Documents with respect to the Work to be performed by the Subcontractor so that subcontracting thereof will not prejudice such rights, and shall allow to the Subcontractor, unless specifically provided otherwise in the subcontract agreement, the benefit of all rights, remedies, and redress against the Contractor that the Contractor, by the Contract Documents, has against the Owner. Where appropriate, the Contractor shall require each Subcontractor to enter into similar agreements with Sub-subcontractors. The Contractor shall make available to each proposed Subcontractor, prior to the execution of the subcontract agreement, copies of the Contract Documents to which the Subcontractor will be bound, and, upon written request of the Subcontractor, identify to the Subcontractor terms and conditions of the proposed subcontract agreement that may be at variance with the Contract Documents. Subcontractors will similarly make copies of applicable portions of such documents available to their respective proposed Sub-subcontractors.

Flow-down provisions don’t stop at the subcontractor, though. For example, the A401-2017 Standard Form of Agreement Between Contractor and Subcontractor contains the following flow-down provision in Article 2:

Article 2 Mutual Rights and Responsibilities The Contractor and Subcontractor shall be mutually bound by the terms of this Agreement and, to the extent that the provisions of AIA Document A201–2017 apply to this Agreement pursuant to Section 1.3 and provisions of the Prime Contract apply to the Work of the Subcontractor, the Contractor shall assume toward the Subcontractor all obligations and responsibilities that the Owner, under such documents, assumes toward the Contractor, and the Subcontractor shall assume toward the Contractor all obligations and responsibilities that the Contractor, under such documents, assumes toward the Owner and the Architect. The Contractor shall have the benefit of all rights, remedies, and redress against the Subcontractor that the Owner, under such documents, has against the Contractor, and the Subcontractor shall have the benefit of all rights, remedies, and redress against the Contractor that the Contractor, under such documents, has against the Owner, insofar as applicable to this Subcontract. Where a provision of such documents is inconsistent with a provision of this Agreement, this Agreement shall govern.

When evaluating whether a flow-down provision is appropriate for your contract or subcontract, parties need to consider a multitude of issues. Some of the more common considerations related to flow-down provisions include:

1.     Dispute Resolution. Is it not uncommon for a prime contractor to agree to arbitration as its dispute resolution method. However, some jurisdictions require heightened standards for parties agreeing to arbitration, thereby waiving their litigation rights. As a result, “flowing-down” the dispute resolution selection may require careful consideration and potentially specific language or actions by the contractor and subcontractor to make it enforceable.

2.     Notice of Claims. The AIA’s A201 General Conditions require the contractor to give notice of claims to the owner within 21 days. If a claim originates from a subcontractor, a prime contractor may be obligated to “pass through” the subcontractor’s claim to the owner. In this case, an identical timeline of 21 days that has been “flowed down” may present an issue for the prime contractor if the subcontractor waits until the end of that timeframe to submit its claim; in this case, the contractor may be delayed until after the 21-day window to pass through the subcontractor’s claim to the owner. If parties anticipate pass through claims on their project, they may want to consider how the flow down provision will affect such claims.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.  

[1] § 5:137. § 5.3—Subcontractual relations—Obligation to “flow down” responsibilities to subcontractors (legal), 2 Bruner & O’Connor Construction Law.