Guidance for Subcontractors - Yet More Examples of Unfair Subcontract Terms

Note that it is the principles of each of the clauses which is most important - there are many wording/drafting variations out there which follow these 5 themes. More Unfair Terms have been posted on Linkedin already, and more will follow in a later blog.

•    This clause is both unreasonable and impractical. Both of the one-day periods are unreasonable, and are arguably unenforceable as well, however in order to avoid disputes  such tight timescales should never be accepted.

•    The condition precedent obligation to notify Variations in order to be entitled to payment must also be rejected, otherwise there is a risk of the Subcontractor carrying out additional works and not being able to obtain payment. Such pre-conditions in relation to Variations should never be accepted, even with a longer timescale for notification.

•    The valuation of Variations must always be subject to fair valuation rules, usually related to the Subcontract rates and prices, or similar; and should not be at the Contractor’s discretion.

•    This clause goes well beyond reasonable co-ordination with other trades, which is to be expected.

•    The objectionable element of this clause is the ability of the Contractor to change the working arrangements relating to method and access, and to impose new sequence/timing requirements. All of this is likely to result in the Subcontractor suffering uneconomic working and ultimately losses.

•    The imposition of any such additional constraints as to how the Sub-Contract Works are to be performed must always amount to an event for which the Sub-Contractor has the ability to claim additional payment (and time). This could be achieved by changing the words “at its own cost” at the end of the clause to “which shall constitute a Variation”.

•    It is the final part of this clause which makes it objectionable – the Subcontractor is required to stand the extra cost of his works being delayed by up to 4 weeks, at any time. This could also be applied on multiple different occasions.

•    All such imposed suspensions of work must give the Subcontractor full entitlement to recover his additional costs incurred. Therefore clauses such as the above must always be rejected.

•    The final sentence of this clause is outrageous, amounting to an on-demand payment provision, which should never be accepted.

•    The wording of the first line even suggests that if the Subcontractor is delayed by any cause, he will become liable for Main Contract Delay Damages. However the delay may be caused by a matter which is not the Subcontractor’s Risk and for which an extension of time and associated relief from damages can be claimed.

•    The Subcontractor should not accept such provisions, or anything which seeks to extend liability beyond the common law position of damages arising directly from a breach of contract. Even then it is recommended that the Subcontractor always protects itself with an overall limitation of liability provision.

•    Such an obligation to accelerate, as dictated by the Contractor, should never be accepted.

•    Clearly the final sentence of this clause is unreasonable and must never be accepted.

•    Acceleration 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.