🤝 Joint Check Agreements
A joint check agreement protects you when you're worried about not getting paid. This guide explains how they work and when to use them.
Key Principle
A joint check is only as good as the agreement behind it. Get it in writing before the work starts.
What Is a Joint Check?
A joint check is a payment made payable to two parties—typically:
- A subcontractor AND their supplier, or
- A sub-subcontractor AND the prime subcontractor
Both parties must endorse the check to cash it, ensuring funds reach the intended recipient.
Example
Situation: You're a GC worried that your drywall sub won't pay their material supplier.
Solution: You issue checks payable to:
"ABC Drywall AND XYZ Building Supply"
Both must sign, so the supplier is guaranteed to receive their portion.
When to Use Joint Checks
As a GC or Prime Contractor
Request joint checks when:
- Subcontractor has cash flow concerns
- You've received preliminary notices from sub's suppliers
- Subcontractor has history of payment issues
- Large material orders are involved
- You want extra protection against liens
As a Subcontractor
Request joint checks when:
- GC or owner has payment concerns
- You're new to working with this customer
- Project is large relative to your cash flow
- You want assurance of payment
As a Supplier or Sub-tier
Request joint checks when:
- You have concerns about sub's ability to pay
- You've had payment issues before
- The order is large
- You want security beyond lien rights
Joint Check Agreement Elements
Essential Terms
A proper joint check agreement should include:
-
Parties identified
- Who is issuing checks
- Who checks are payable to
- Project identification
-
Scope
- What payments are covered
- Which invoices or materials
- Dollar limits (if any)
-
Payment process
- How invoices are submitted
- Who approves amounts
- Payment timing
-
Endorsement handling
- Where checks are sent
- How endorsement happens
- Distribution of funds
-
Lien waiver requirements
- Conditional waivers at payment
- Unconditional waivers after clearing
- Form requirements
Sample Agreement Language
JOINT CHECK AGREEMENT
Project: [Project Name and Address]
Date: [Date]
[GC Name] ("Contractor") agrees to issue checks payable
jointly to [Subcontractor Name] ("Subcontractor") and
[Supplier Name] ("Supplier") for materials supplied to
the above project.
1. Contractor shall issue joint checks for materials
supplied by Supplier to Subcontractor for the Project.
2. Subcontractor shall submit Supplier invoices with each
pay application.
3. Joint checks shall be mailed to Supplier at:
[Address]
4. Supplier shall endorse checks and forward to
Subcontractor after deducting amounts owed.
5. Both parties shall provide appropriate lien waivers
with each payment.
6. This agreement covers materials only and does not
exceed $[Amount].
7. This agreement does not create any obligation by
Contractor to Supplier beyond issuing joint checks
as described herein.
AGREED:
____________________ ____________________ ____________________
Contractor Subcontractor Supplier
How Joint Checks Work
Payment Flow
- Supplier invoices subcontractor for materials
- Sub includes supplier invoice in pay app to GC
- GC issues joint check payable to both
- Check sent to supplier (typically)
- Supplier endorses and deposits, pays sub balance
- Both provide lien waivers to GC
Endorsement Options
Option 1: Supplier handles
- Check sent to supplier
- Supplier endorses, deposits
- Supplier pays sub their portion
- Common when supplier has leverage
Option 2: Sub handles
- Check sent to sub
- Both parties meet to endorse
- Sub deposits, pays supplier
- Common when sub wants control
Option 3: At GC's office
- Both parties come to GC
- Endorse check together
- Immediate distribution
- Most controlled approach
Benefits and Limitations
Benefits
For GC:
- Reduces lien exposure
- Ensures funds reach suppliers
- Creates paper trail
- Encourages sub to pay bills
For Supplier:
- Guaranteed payment path
- Reduces collection risk
- Maintains lien rights
- Better than unsecured receivable
For Subcontractor:
- May enable larger orders
- Builds trust with GC
- Shows financial responsibility
Limitations
Joint checks do NOT:
- Guarantee full payment
- Replace lien rights
- Create direct obligation from GC to supplier
- Ensure sub applies funds correctly
Risks remain:
- Check could bounce
- Amounts could be disputed
- Sub could negotiate lower amounts
- Bank endorsement issues
Common Issues
"Sub won't sign over the check"
Causes:
- Dispute with supplier
- Cash flow problems
- Wants to use funds elsewhere
Solutions:
- Include dispute resolution in agreement
- GC holds check until resolved
- Conditional waiver required before endorsement
"Amounts don't match"
Causes:
- Partial shipments
- Returns or credits
- Disputed items
Solutions:
- Require matching invoices
- Allow partial joint checks
- Document discrepancies
"Bank won't accept endorsement"
Causes:
- Name mismatch
- Missing DBA
- Illegible signature
Solutions:
- Use exact legal names
- Include all DBAs
- Clear signature requirements
- Use bank's mobile deposit
Best Practices
For the Party Requesting
- Get it in writing before work starts
- Specify exact scope of what's covered
- Include lien waiver requirements
- Know your lien rights aren't waived
- Track all joint checks issued
For the Party Issuing
- Don't over-commit - joint checks add burden
- Keep copies of all agreements
- Verify invoices before issuing
- Require proper waivers with each check
- Don't pay more than what's owed to sub
For Everyone
- Use proper names - legal entity names
- Document everything - copies of checks, endorsements
- Communicate clearly - who sends what where
- Track payments - match checks to invoices
Joint Checks vs. Other Protections
| Protection | Complexity | Effectiveness | Cost |
|---|---|---|---|
| Joint Check | Low | Medium | None |
| Payment Bond | Medium | High | 1-3% |
| Letter of Credit | High | High | 1-2% |
| Personal Guarantee | Low | Varies | None |
| Lien Rights | Medium | High | Legal fees |