Flow-Down Provisions: “Subject To” Language, Standing Alone, May Not Be Enough

When drafted with specific “assumption of duties” language, a flow-down provision has the effect of incorporating obligations owed by the general contractor to the owner into the subcontract. The result is that the subcontractor assumes the same obligations to the general contractor as the general contractor owes to the owner. When drafted ambiguously, however, flow-down clauses may present interpretation challenges for courts faced with determining whether a subcontractor is bound by provisions in the prime contract.

If a general contractor-subcontractor dispute arises where the subcontract has a different dispute resolution provision than that of the prime contract, which clause governs? For example, the prime contract requires disputes to be litigated in state court, but the subcontract requires arbitration of disputes. Whether a court will enforce the dispute resolution clause in the prime contract as valid and binding on the subcontractor may depend on the existence and specific language of a “flow-down” provision.

According to some Florida courts, language in the subcontract stating that it is “subject to” the prime contract is likely insufficient to bind a subcontractor to the rights, remedies and/or responsibilities in the prime contract. Such provision lacks any express language that the subcontractor has assumed the duties owed under the prime contract.

In St. Augustine Pools, Inc. v. James M. Barker Inc.,[1] a provision in the subcontract stated that the agreement was “subject to” the general contract. The Fifth DCA rejected the argument that the “subject to” language was sufficient to incorporate and bind the subcontract parties to the dispute resolution provision in the general contract. Reasoning that the “subject to” language typically “indicates a condition to one party’s duty of performance and not a promise by the other,” the court held that the purpose of the “subject to” language was simply to make the subcontractor aware of the duties and requirements in the general contract. The language did not, however, bind the subcontractor to the duties or requirements assumed by the parties to the general contract.

Similarly, in Affinity Internet, Inc. v. Consol. Credit Counseling Serv., Inc.,[2] the Fourth DCA held that the defendant was not bound by a dispute resolution provision in a collateral source document because “[t]he doctrine of incorporation ‘requires that there must be some expression in the incorporating document . . . of an intention to be bound by the collateral document.” Courts outside of Florida have similarly held that, in order to bind a subcontractor to obligations in the prime contract, a clear flow-down provision with assumption of duties language is required.[3]

In summary, Florida case law exists which indicates that a subcontractor is not bound by obligations in a prime contract absent a flow-down provision with specific language that the subcontractor assumes towards the general contractor all of the general contractor’s obligations and responsibilities owed to the owner under the prime contract. Rather, if the parties’ intent is for a subcontractor to assume identical obligations as those assumed in the prime contract, one option may be for the parties to use the American Institute of Architects (AIA) Form’s recommended “flow down” provision language and to make sure “flow-down” provisions include express language that the subcontractor is “assuming” the prime contract’s duties and obligations.

[1] 687 So. 2d 957, 958 (Fla. 5th DCA 1997).

[2] 920 So. 2d 1286, 1288 (Fla. 4th DCA 2006).

[3] See, e.g., MPACT Constr. Grp., LLC v. Superior Concrete Constructors, Inc. 802 N.E. 901 (Ind. 2004) (reasoning that in order to bind subcontractor to duties in prime contract, parties must include a clear flow down provision providing that subcontractor assumes all of the contractor’s obligations in prime contract).

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