Maryland Supplier Agreements: Protect Property Deals

In Maryland real estate development, renovations, and fit-outs, suppliers provide the materials that keep schedules moving. A focused supplier agreement clarifies expectations and reduces surprises—especially around pricing, delivery, lien exposure, and remedies. These contracts also interact with Maryland statutes and case law, including mechanics’ liens, anti-indemnity limits, and judicial treatment of pay-when-paid language.

Why Supplier Agreements Matter in Maryland Property Projects

A well-structured agreement defines scope, price, delivery, quality standards, and remedies. In Maryland, careful drafting also helps manage change-order disputes, protect cash flow, and prevent title issues that complicate closings or refinances. For lien considerations, see Md. Code, Real Property, Title 9 (Mechanics’ Liens).

Core Terms to Include

• Parties and project identification: Legal names, project address, and lender/owner info where relevant.
• Scope and specifications: Reference plans, cut sheets, approved equals; set substitution procedures.
• Pricing and adjustments: Fixed/unit pricing, escalation triggers, tax treatment, and surcharges or freight.
• Delivery and risk of loss: Delivery windows, FOB terms, title transfer, risk of loss, site access.
• Inspection and acceptance: Inspection rights, rejection standards, cure timelines, remedies for nonconforming materials.
• Change orders: Written change process and pricing methodology.
• Payment timing and documentation: Billing cycles, retainage, pay apps, and lien waiver forms aligned with actual funds received; any pay-when-paid language should account for Maryland law and case guidance (see DEC Elecs., Inc. v. Raptor IS, LLC, 246 Md. App. 209 (2020)).
• Warranties: Manufacturer and supplier warranties, start dates, assignment to owner, and service logistics.
• Insurance and indemnity: Certificates, additional insured endorsements where applicable, and indemnity tailored to Maryland’s anti-indemnity statute (Md. Code, Real Property §10-501).
• Termination and suspension: For cause/for convenience, demobilization costs, restocking fees.
• Dispute resolution: Maryland governing law, venue, and mediation/arbitration consistent with project documents.
• Compliance: Licensure (if applicable), safety standards, and required debarment/OFAC checks.

Mechanics’ Liens: Managing Title Risk

Unpaid suppliers on Maryland projects may assert mechanics’ liens that cloud title and delay closings. Owners, developers, and prime contractors can reduce risk by requiring timely lien waivers, maintaining accurate delivery and invoice records, and coordinating waiver forms. Suppliers should preserve statutory rights by tracking first delivery dates and ensuring materials are furnished to the project. Because procedures and deadlines are technical and time-sensitive, align contract administration with Title 9.

Pay-When-Paid, Lien Waivers, and Prompt Payment

Clauses that make a supplier’s payment entirely contingent on owner payment face limits under Maryland law. Courts often treat pay-when-paid language as affecting timing rather than permanently shifting nonpayment risk, and parties should avoid indefinite or absolute conditions on payment. See DEC Elecs., Inc. v. Raptor IS, LLC, 246 Md. App. 209 (2020). On public projects, coordinate your agreement with applicable prompt payment and any bond claim procedures.

Anti-Indemnity and Risk Allocation

Maryland restricts construction contract clauses requiring one party to indemnify another for that other party’s sole negligence. Draft indemnity to cover your own work, employees, and lower-tier subs, and pair it with commercially reasonable insurance requirements. Coordinate additional insured and primary/noncontributory language with your broker to avoid coverage gaps. See Md. Code, Real Property §10-501.

Material Escalation and Supply Chain Disruption

Price volatility can derail budgets. Use escalation clauses tied to objective indices or supplier quotes, define substitution rights for unavailable items, and allocate freight surcharges. Require prompt written notice, backup documentation, and set caps or opt-out rights if costs exceed thresholds.

Quality, Warranties, and Long-Lead Items

Require compliance with plans and applicable codes. For long-lead items, set submittal and mockup milestones. Align warranty periods with project completion and ensure warranties are assignable to the owner or successor. State remedies for defective or nonconforming materials, including expedited replacement and appropriate backcharges.

Documentation That Protects Closings

Title insurers and lenders often require a clean lien picture. Build into your agreement: conditional lien waivers with each progress payment, unconditional waivers upon cleared funds, affidavits of payment to lower tiers, delivery tickets tied to installed work, and sworn statements as requested by lenders or title companies. Keep purchase orders, invoices, and site logs consistent to avoid closing delays.

Coordination With Prime Contracts and Subcontracts

Flow down relevant prime contract requirements (submittal schedules, delivery windows, warranty standards, and dispute procedures). If the supplier agreement is standalone, incorporate key owner requirements by reference and add an order-of-precedence clause so conflicts are resolved predictably.

Practical Checklist Before You Sign

• Verify the supplier’s legal name and good standing.
• Confirm insurance limits and endorsements match the contract.
• Align delivery terms with site readiness and storage conditions.
• Attach specifications, approved manufacturers, and substitution procedures.
• Set invoice format, required backup, and lien waiver forms.
• Define escalation, surcharges, and freight responsibilities.
• Confirm warranty start dates and assignment language.
• Ensure indemnity and additional insured provisions comply with Maryland law.
• Add Maryland governing law and venue.
• Map lien notice, waiver, and documentation steps to your schedule.

When to Involve Counsel

Engage Maryland construction counsel for high-value or long-lead orders, updates to standard terms, or disputes over liens, payment, or warranties. Counsel can harmonize your supplier agreement with upstream contracts, title and lending requirements, and Maryland’s mechanics’ lien and anti-indemnity rules.

FAQ

Do suppliers in Maryland need to send a preliminary notice to preserve lien rights?

Maryland does not require a universal preliminary notice, but strict deadlines and content rules apply to lien petitions. Confirm project type and deadlines before first delivery.

Are pay-if-paid clauses enforceable in Maryland?

Clauses that make payment entirely contingent on owner payment face enforceability limits. Courts often construe them as timing mechanisms unless unequivocally shifting risk and consistent with law.

Can owners require unconditional lien waivers before payment clears?

Best practice is to use conditional waivers with progress payments and unconditional waivers only after funds clear, to reflect actual consideration and reduce dispute risk.

Which law should govern a Maryland project supplier agreement?

Use Maryland governing law and venue for predictability and alignment with mechanics’ lien and construction statutes.

Questions about a Maryland supplier agreement? Contact our team to discuss your project.

Sources

• Md. Code, Real Property, Title 9 (Mechanics’ Liens)
• Md. Code, Real Property §10-501 (indemnity provisions in construction contracts)
• DEC Elecs., Inc. v. Raptor IS, LLC, 246 Md. App. 209 (2020)

Disclaimer: This article is for general informational purposes only, is not legal advice, and does not create an attorney–client relationship. Laws change and vary by circumstance; consult Maryland counsel about your specific situation.