Nominated Sub-Contractors and Employer’s liability for default...
By VOLOCO LLP, Mar 29 2019 03:37PM
You may believe that if a Nominated Sub-Contractor is in breach of contract, a Contractor would automatically be entitled to loss and expense.
However, although the Employer may have made arrangements with the Sub-Contractor, it would only be in relation to the initial order detailing who was to be the nominated Sub-Contractor, not a direction in relation to the matters which called in the provision for compensation for loss and expense. As the contract between the Contractor and the Sub-Contractor is separate to the main contract, the Employer cannot be responsible for the breach of a contract they are not party to.
There are, however, circumstances in which an Employer can be liable to a Contractor for the default of a Nominated Subcontractor and the Contractor can insist upon an extension of time for that extended period:
1. If the Nominated Sub-Contractor defaults and has its employment under the Sub-Contract determined - although the Contractor is not entitled to an extension of time for either delays caused by the Nominated Sub-Contractor prior to the date of determination, or delays caused by the determination itself, i.e. by the need to appoint a new Sub-Contractor, the Contractor will be entitled to an extension of time if the Employer takes an unreasonable time to nominate a replacement Sub-Contractor.
2.If the delay occurs in the re-nomination process because the Contractor objected to the re-nomination of a replacement Sub-Contractor – if the replacement Sub- Contract (upon which the replacement Sub-Contractor's tender was based) indicates a completion date later than the currently set date for completion, it is prudent to either refuse to accept the nomination of any replacement Sub-Contractor if the Sub-Contract does not provide for completion on the currently set date for completion, or in consideration for not objecting to the re- nomination, to insist on an extension of time. In such a way a Contractor can avoid the effects of taking responsibility for delays caused by the default of a nominated Sub-Contractor whose employment is determined.
But be aware, in the absence of an express provision, even if there is a requirement to nominate a replacement Sub-Contractor, the Employer is only bound to pay for the works as though they had been carried out by the original Sub-Contractor. Therefore if the replacement Sub-Contractor’s rates are higher (which they generally will be) the Contractor has to bear the difference.