During my decades reviewing construction contracts, often the worst ones are subcontracts. These are the three ways in which they are abused.
Dumping on your subcontractor
Main contractors (through their contract terms) are guilty of some of these sins:
- making their subcontractors sign up to all sorts of nasties that they would themselves refuse to accept from their own clients … they clause dump,
- wanting to manage the project without managing any of the risks of that project … they risk dump,
- being too lazy to extract what is relevant and bury critical and useful subcontract information under a huge pile of legal sticks, many of which are irrelevant to the subcontract works. Most subcontracts try to include all the main contract documents, any umbrella or framework agreements, stakeholder agreements and a host of ancillary agreements … they paper dump.
For example, I worked with a company who treated all conditions precedent to payment as a huge red flag… and yet had at least five different conditions precedent for a subcontractor to navigate and comply with if it wanted to get paid.
I reviewed a subcontract which we were told ‘reflected the provisions in the main contract’. As they’d provided me with a copy of that main contract, I could cvonfidently reply that few of the nasties were as a result of a ‘flow-down’ and, even worse, many of the protections the main contractor had negotiated for itself were missing for the subcontractor!
Unfair risk allocation is a the perennial hot potato and even the UK Government Construction Playbook 2020 recognised its negative impact on the sector and collaboration.
What should you do?
As a main contractor, do better.
As a subcontractor, learn to walk away. Reject any subcontract which is marked as non-negotiable. Review and negotiate all subcontracts to ensure you are safeguarding your business. Don’t bet your business on someone else’s project!
This post is taken from the Chapter 4 to How to Write Simple and Effective Subcontract Agreements in Just 500 Words, available from Amazon in paperback and kindle.
