When it comes to construction contracts, the devil is in the detail.
The wording of a contract is crucial to understanding its contents and implications. If you are struggling to get to grips with some of the detail in a new contract one of the best things you can do is to discuss the contract with an experienced building and construction solicitor.
Whyte Fraser & Co Solicitors
Subcontractors
Many subcontractors attempt to protect themselves and force payment of an invoice by the main contractor by walking off site without any written notice or warning. However, such action can be counter-productive and constitute a breach of contract.
That breach of contract may trigger the main contractors’ contractual entitlement to withhold payment, to terminate the sub-contractor’s appointment or to bring remedial contractors on to the site to carry out the works. The main contractor may then be entitled under the contract to issue a damages claim against the sub-contractor for delay, cost and expense.
Subcontractors can be surprised to learn - with a bump - the actual terms of a written subcontract that they agreed to when it comes to Schedules for Payment and the steps required to be taken to ensure timely payment. Many subcontractors incorrectly believe that contracts state that interim payments will automatically be paid (i) within say 28 days of request for payment and (ii) if they make that request verbally, by invoice or text message. Text messages are rarely a contractual way of seeking payment. Many contracts actually state that payment will not be made until 60 days or more after a properly formulated formal Claim for Payment or Application for Payment is made.
As a result, subcontractors can find themselves out of pocket for some time depending on the terms they may have unwittingly signed up to.
It can take years of confidence building, self-education and experience for subcontractors to ensure that they are not taken advantage of when entering into and progressing contracts, particularly while many large contractors have legal and QS departments focused on protecting their beneficial contractual arrangements.
Unfortunately, the average subcontractor often does not have similar professional support at their disposal, so they need to quickly learn to analyse and inspect tender documents before pricing; appropriately qualify quotations; employ someone with experience to draft their own favourable terms and conditions; correctly and timeously submit tender documentation and supporting paperwork in advance of the deadline; confidently ensure that any pre-contract negotiation meeting addresses all the points relevant to them and sub-contractors must carefully read site meeting minutes to ensure they accurately reflect what was discussed and agreed.
Subcontractors should ensure that any subcontract order is beneficial to them; one that protects their interests and ensures they are entitled to payment as close to 28 days from claim or application for payment as possible. Where a client or employer requests a warranty, for example where a subcontractor has contractual design responsibility, a sub-contractor should take the opportunity to consider the extent of the warranty and whether it reasonably covers the performance required within the contract or whether the proposed warranty goes too far.
As subcontract terms and conditions contain rules those must be followed by both/all parties, it is important not to agree to anything verbally without having it immediately followed up in writing.
Payment applications must be fully compliant with the terms of the contract entered into, which may include the requirement to follow a particular timetable and contain particular terms in line with the contract.
Sub-contractors should feel confident in addressing site, construction or contractual issues as they arise. They also require understanding of the process of practical completion and making good defects, the effect of signing off, the final account process and an understanding that retention release is not automatic and needs to be applied for.
Sub-contractors also require understanding of the extent of their liability for latent defects, so it is important that sub-contractors keep records of what has actually happened on-site, so they are not expected to take responsibility for matters that were no fault of their own and may well have happened prior to or after them being on site.
Construction Contracts
Essential Insights on Construction Subcontracts
Explore key topics in construction subcontracts, from protecting your rights to ensuring timely payments, understanding contract terms, and navigating self-help remedies.
