Opinion ID: 596464
Heading Depth: 2
Heading Rank: 2

Heading: Test to Distinguish Subcontractor and Materialman

Text: 14 In distinguishing a subcontractor from a materialman, courts apply a balancing test with certain factors tending to weigh in favor of a subcontractor relationship, particularly where the company assumed a significant and definable part of the construction project, and other factors tending to weigh in favor of a materialman relationship. 15 Generally, courts have found the following factors weigh in favor of a subcontractor relationship: (1) the product supplied is custom fabricated 1 ; (2) the product supplied is a complex integrated system 2 ; (3) a close financial interrelationship exists between the companies 3 ; (4) a continuing relationship exists with the prime contractor as evidenced by the requirement of shop drawing approval by prime contractor 4 or the requirement that the supplier's representative be on the job site 5 ; (5) the supplier is required to perform on site 6 ; (6) there is a contract for labor in addition to materials 7 ; (7) the term subcontractor is used in the agreement 8 ; (8) the materials supplied do not come from existing inventory 9 ; (9) the supplier's contract constitutes a substantial portion of the prime contract 10 ; (10) the supplier is required to furnish all the material of a particular type 11 ; (11) the supplier is required to post performance bond 12 ; (12) there is a backcharge for cost of correcting supplier's mistakes 13 ; and (13) there is system of progressive or proportionate fee payment 14 . 16 Generally, cases have found the following factors tend to weigh in favor of a materialman relationship: (1) a purchase order form is used by the parties 15 ; (2) the materials come from preexisting inventory 16 ; (3) the item supplied is relatively simple in nature 17 ; (4) the contract is a small percentage of the total construction cost 18 ; and (5) sales tax is included in the contract price. 19