Joint Check Agreement Form—Do You Need It?
If you don’t have vast experience with writing legal documents, you may be confused as to what a joint check agreement is and how to use it.
A joint check agreement is mainly used in the construction business and when dealing with construction contracts. While using a joint check agreement has numerous benefits, it also comes with some risks you need to watch out for.
This article will help you understand what joint check deals mean and whether you need a joint check agreement form.
What Is a Joint Check Agreement?
A joint check agreement is a contract between three or more parties that either allows or obligates one party to issue payments to the other parties in the form of joint checks.
For example, if two parties need to fulfill specific requirements to satisfy a primary contractor, the primary contractor may pay:
- The parties separately
- The subcontractor, after which the subcontractor is expected to pay the lowest tier party
- Both parties in one go by issuing joint checks
The use of joint check agreements minimizes the risk of the supplier being tricked by the construction company and not getting paid for the materials they provided.
More Useful Info About Joint Check Agreements
The parties that agree on the terms and conditions of a joint check agreement are the:
- General contractor as the party that makes initial payments. This is usually a developer or a property owner
- Subcontractor that provides services to the general contractor, i.e., a building construction company
- Lowest tiered party, which is usually the building supplier
Keep in mind that there are two types of joint check agreements:
- Obligatory—by which the general contractor must issue joint checks to the subcontractor and the supplier
- Permissive—that only permits the general contractor to pay the parties through joint checks
Advantages and Disadvantages of Joint Check Agreements
As is the case with plenty of agreements, a joint check agreement has benefits and downsides. Check out the table below to see what’s great about using a joint check agreement and what you need to watch out for:
|Joint Check Agreements|
What Is a Joint Check Agreement Rule Suppliers Need To Know About?
If you are a supplier, you need to watch out for one major rule regarding joint check agreements.
When you sign and deposit a check you get, you certify that you have been paid all the amount due at the time the check was issued.
In the case of a general contractor putting the wrong amount on the check, you waive your right to get your actual pay if you deposit the check.
Joint Check Agreement Form—How To Write Your Joint Check Agreement
Since there isn’t a statute that defines what a joint check agreement must look like, there isn’t a standard joint check agreement form you have to use.
This is good news since it allows you to write your own joint check agreement and include the terms and conditions you are comfortable with.
Here’s the information you should include in your joint check agreement form:
- Parties—full legal names of all the parties involved in the agreement
- Project—name of the project and the address of the construction site
- Joint checks statement—a statement that stipulates whether the general contractor is obliged or only permitted to issue joint checks to the parties
- Payment—the date when the payments are made and the maximum payment amount
- Date—the time and date when the agreement will go into effect
- Signatures—signatures of all three parties at the end of the agreement
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