5 Unfair Sub-Contract Terms for Subcontractors to be
wary of and What to Do About Them
1. TIME-BAR PROVISIONS FOR NOTIFICATION OF DELAYS
Example of Unfair Sub-Contract Wording:
“the Sub-Contractor shall immediately on becoming aware of any delay or
likely delay and as a condition precedent to the Sub-Contractor’s
entitlement to any extension of time, notify the Contractor within 7 days of
the circumstances and period of delay encountered or likely to be
encountered, and shall update the Contractor with full details on a weekly
basis thereafter. The Sub-Contractor shall not be entitled to an extension of
time for any delay event, if it fails to comply with this Clause”
7 days is never enough - project staff take holidays and are busy people.
Always either:
•
Insist on at least 7 weeks for such Notices (as per the NEC3 clause 61.3
period).
•
Delete the condition precedent elements of the wording altogether, or
•
Employ a full time QS and include additional Prelims to cover the cost of
meeting the notification requirements and thereby avoid becoming timebarred.
2. INDEMNITIES AND LIABILITY FOR DEFAULT
Example of Unfair Sub-Contract Wording:
“The Sub-Contractor shall be liable for and shall indemnify the Contractor
against every liability whatsoever which the Contractor may incur to any
person or third party and against all direct, indirect, and consequential
liability, expense, loss, claim, demands or proceedings made against the
Contractor by reason of any default of the Sub-Contractor”.
•
The words “Indemnity” or “Indemnify” should always ring alarm bells.
These are an attempt to broaden your liability beyond that which is set in
common law.
•
Never accept any provision which makes you liable for indirect or
consequential costs/losses.
•
Never accept liability for future liabilities, which relate to future cost not yet
incurred and is open to abuse.
•
Bear in mind that even without an Indemnity provision, your liability at
Common Law is usually unlimited. Therefore it is always wise to insert a
Limitation of Liability provision, at the lowest value possible – this should
usually be a % of the Sub-Contract Sum.
3. DISCLAIMER CLAUSES RELATING TO SURVEY REPORTS
RELATING TO THE SITE
Example of Unfair Sub-Contract Wording:
“The Contractor may provide the Subcontractor with relevant data, surveys,
reports, and other information relating to the site and to the Subcontract
Works. The Subcontractor shall be wholly responsible for interpreting all
such data, surveys, reports, information and the like, and shall be fully
responsible for verifying the accuracy, adequacy, sufficiency or
completeness of the same.
No claim for any inadequacy or error in any such documentation will be
made by the Subcontractor and no additional payment or time entitlement
shall arise. The Subcontractor shall be deemed to have fully satisfied himself
as to the correctness and sufficiency of the Subcontract Price”.
•
These type of provisions seek to pass responsibility for existing conditions
on the site to the Subcontractor, even if the information in the surveys,
reports etc. are inaccurate or incomplete.
•
They are particularly high-risk clauses in relation to ground conditions,
other physical conditions, and existing buildings. Liability for
contamination, asbestos, below ground obstructions, unsuitable existing
surfaces, and adverse ground conditions can all become the
Subcontractor’s liability under such provisions.
•
This type of disclaimer clause should always be rejected – at worst the
Subcontractor must be able to rely on the survey/report information
provided, when calculating his tender prices. Any deviation or error must
give rise to an entitlement to claim additional payment and/or time.
4. ACCELERATION OBLIGATIONS
Example of Unfair Sub-Contract Wording:
“The Sub-Contractor shall forthwith comply with any instruction received
from the
Contractor to accelerate the Sub-Contract Works or any part or
parts of the Sub-Contract Works, provided that such instruction is in writing
and is expressly stated in the instruction to be an instruction to accelerate”.
•
Such an express obligation to accelerate (as dictated by the Contractor)
should never be accepted. It may not be feasible to accelerate and the
Subcontractor’s additional costs would be at risk.
•
This type of acceleration provision would include an obligation to complete
earlier than the Subcontract Date for Completion – which should never be
accepted.
•
Such provisions should only be accepted where they are subject to the
Subcontractor’s agreement (at the time) to the acceleration request, AND
to prior agreement of the additional sums to be paid to the Subcontractor
for the acceleration measures.
•
Evaluation of acceleration should include the additional cost of:
- overtime and weekend working;
- lost production due to resultant inefficiency (too many men),
- lost production due to extended shifts, night shifts etc;
- learning curve/induction time for new labour;
- additional subsistence payments;
- higher rates payable to additional labour brought in;
- additional supervision/prelims;
- additional plant costs - mobilisation and under-utilisation.
5. DISRUPTED WORKING DISCLAIMERS
Example of Unfair Sub-Contract Wording:
“The Sub-Contractor shall not have exclusive or uninterrupted access to
any part of the site and the Contractor does not guarantee continuity of
working or access. The Sub-Contractor is not entitled to any additional
payment or to any extension of time as a consequence of any delay or
disruption to the Sub-Contract Works resulting from the Sub-Contractor's
failure to make allowance for same”.
ALWAYS REJECT SUCH PROVISIONS, THEY ARE DESIGNED TO CAUSE YOU LOSSES:
•
The Subcontractor must be entitled to assume in his tender that the
Contractor will provide unhindered access to enable him to carry out his
works efficiently and without disruption or interruptions. It is impossible to
make allowance for disruption which may or may not occur, and is
undefined – only expressly defined programme/access constraints can be
priced for.
•
If the Contractor stops the Subcontractor from working or denies/restricts
access to the work fronts as planned, then the Subcontractor must retain a
right to claim recovery of the additional inefficient working costs incurred.
•
Any changes imposed to the agreed contract programme and agreed
access arrangements are unforeseeable and the Subcontractor’s rights of
claim must be retained.
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initial consultation:
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