Sector

Subcontracts

BUSINESS OBJECTIVES ACHIEVED

Our expert construction solicitors regularly assist in determining the type of subcontractor agreement that would best benefit you, making sure that your business is adequately protected under the terms of both the main contract and the subcontractor agreement. We can understand your situation and requirements to further assist and support you with various aspects of the subcontractor agreement including but not limited to:

Advice regarding the nature of the subcontractor agreement and its term;
Dispute resolution under either the main contract or the subcontractor agreement;
Protections under the subcontractor agreement, such as indemnities;
Amending or varying the main contract if required;
Drafting subcontractor agreements;
Reflecting the key terms of the main contract in the subcontractor agreement as relevant;
Limitation of liability in the event of default by the subcontractor;
Restrictions on subcontracting;
Negotiating the key terms of the subcontractor agreement; and
Termination terms of the subcontractor agreement.

Throughout a construction project it is often the case where parties subcontract work out to various specialist subcontractors to assist in the works. A subcontractor is a party who agrees to perform part or all of the obligations of the main contractor under a separate contract. A separate contract will need to be entered into between the main contractor and the subcontractor to give it the best opportunity to recover liabilities caused by the subcontractor with the main contractor remaining liable for the performance of the main contract to the employer.

Main contractors usually subcontract obligations because they for example require additional resources, are responsible for making professional appointments, require additional specialist advice or expertise or are required by law to appoint them. A subcontract agreement will be formed to ensure the subcontractor ensures it understands its obligations and must deliver in a timeframe and manner which will enable the main contractor to perform its obligations under the main contract. It is important that the terms of the main contract are reflected in, or 'flowed down' to the subcontractor. This avoids any gaps in the main contractor's obligations under the main contract and the subcontractor's obligations under the subcontract.

Our legal team possesses extensive knowledge and expertise in providing top-notch commercial legal services and support to clients in the construction industry. Contact us now to connect with our solicitors.

Additional Information

What are my rights as the employer?

As a subcontract is a separate agreement to the main contract that does not affect the position of the parties under the main contract. If you are an employer who has a contract in place with the main contractor, regardless of the main contractor subcontracting obligations out, you have a right to sue the main contractor for breach of that agreement. The main contractor here remains liable to you as the employer, should the subcontractor not meet the requirements of the contract for any reason.

Regardless of the contractual position of the parties, a subcontractor could, however, also be liable in tort. An example of this is where the subcontractor is found to owe a duty of care to the customer and is negligent in carrying out the work such that they, for instance, cause physical damage to the customer's property.

In order to ensure you as the employer have directly enforceable rights against any subcontractors, collateral warranties are often sought in order to ensure this. Collateral warranties create a direct contractual link, which would not otherwise exist between the employer and the subcontractor.

How do I know if I can subcontract obligations?

It is not always the case that contractual obligations can be performed by a subcontractor. The question of whether a party to the main contract may subcontract performance of their contractual obligations depends on what the main contract is for and states. Broadly, common law provides that subcontracting is not possible if one of the following applies:

The main contract expressly or implicitly prohibits subcontracting;

The contractual obligations are of a special nature that require personal performance by the original contracting party;

It can be implied from the circumstances that the original contracting party has promised personal performance; or

Statutory or regulatory restrictions.