A recent case explains why termination language or a basis to withhold contract sums is important in your contract. Don’t neglect this language or the negotiation that goes into having this language.
In a recent dispute, GSD Contracting, LLC v. All American Builders & Debris Removal, Inc., 2026 WL 3068422 (Fla. 4th CA 2026), a subcontract included language that said that 10% retainage would be paid 90 days after final completion of the project. The subcontract did NOT include termination for cause language; it only included termination for convenience language. Towards the end of the project, mold was discovered warranting mold remediation. The subcontractor refused to perform until the mold was remediated. The general contractor claimed it was remediated but the subcontractor argued the remediation was insufficient because the contractor did not engage an industrial hygienist. After the subcontractor refused to complete its work, the general contractor terminated the subcontractor for cause. The subcontractor then sued the general contractor for its 10% retainage claiming the general contractor breached the subcontract. The trial court, as affirmed by the appellate court, agreed. The appellate court found that the contract required the general contractor to pay the subcontractor’s retainage 90 days after final completion and the project had long been completed. “Significantly, the subcontract does not contain a termination for cause provision or any pertinent provision permitting [the general contractor] to withhold or retain [the subcontractor’s] retainage following a termination…Nothing in the subcontract provides that [the general contractor] may thereafter withhold the retainage based on an alleged default by [the subcontractor].” GSD Contracting, supra, at *2.
Think about this. Because the subcontractor contained no termination language or basis to withhold retainage / contract sum language, the general contractor had to pay the subcontractor the retainage. The court essentially found that subcontract required the general contractor to pay and then “chase” the subcontractor to recover such money stemming from a subcontractor default. The moral to this issue, whether you agree with the court or not on the outcome, is spending the time on the frontend negotiation of the contract to ensure it has the language to protect interests. Naturally, if you are a subcontractor, excluding such language can be a blessing, as it was here.
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.