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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.



We are soon to be launching an innovative Contractor Support service aimed at providing advice and support to individuals and companies who may be experiencing challenges or with growth and improvement ambitions.

 

VOLOCO LLP are developing an online portal providing access to a range of procedures, guidance and forms, learning tools, access to remote online and telephone support and face-to-face consultant time with one of our team.

 

If this is something that you feel would benefit you or your business and want to find out more, please get in touch by email or telephone.

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