What Are “Back Charges” in Construction?

LA back charge is basically an offset for unexpected costs. To boil it down to the basics, let’s take a look at general contract law. Contracts provide the opportunity to recover damages when one party fails to perform. Damages are provided in order to “place the injured party in the position they would have been had the contract been properly performed by all parties.” This same principle applies to back charges.

If, as the GC, you need to pay more to repair, replace, or clean up the work of a sub or vendor, that cost can now be shouldered by the party that should have completed it in the first place. Before going any further, keep in mind that back charges are not statutory (i.e. provided by law). Rather, they’re contractual rights. This means they are governed by the terms set forth in a contract (if they’re even included in the contract in the first place). Many subcontracts provide for some sort of back charges, but many don’t. If a contract doesn’t provide for back charges (which are also commonly called “a right to set off“), then it might not be a good idea to withhold them!

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Keys to Success with Back Charges

Back charges can be tricky if you’re not careful. The two main things to keep in mind are communication and documentation. (Honestly, most construction disputes could be resolved by the combination of communication and documentation — but that’s a blog post for another day!)

Communication

Best practice is to have any back charge notice requirements explicitly stated. Make sure that the subcontract provides you with reasonable notice provisions. Meaning, if and when you incur back charges, be sure you are notified of the charges and provided with an ample amount of time to correct, repair, or clean up any issues caused by your team’s work.