Subcontracts frequently contain so-called "flow-down" clauses. These provisions state that all the terms, conditions, requirements, etc., of the prime contract are hereby incorporated into the subcontract and made a part thereof. If interpreted literally, the prime contractor assigns responsibility for the entire project to the subcontractor. This, of course, is not the case. It therefore becomes necessary to determine the intended scope of these broadly worded provisions.

In a case reported this week, a prime contractor argued that a broad flow-down clause imposed a claim limitation period from the prime contract on the subcontractor. The sub replied that the clause did not pass through the procedural requirements of the prime contract. The subcontractor prevailed, primarily because the subcontract contained its own claim resolution provisions, which were incompatible with the limitation period in the prime contract.

Other cases reported this week involve correction of a mistaken bid and performance bond coverage for a post-completion warranty. A clerical error in a unit price could be corrected because the intended price was apparent from the overall bid schedule. And, the performance bond guaranteed all contractual obligations, including an express warranty of workmanship.