Introduction
We are often asked to draft/review ‘subcontracts’ for clients either:Â
i) where our client is the main contractor appointing a subcontractor; or
ii) where a main contractor is appointing our client as the subcontractor.
Our university clients regularly find themselves in one of the above positions and, indeed, we were recently involved in drafting multiple subcontracts on behalf of one university who, as the main contractor, was the recipient of significant amount of research funding.
Additional matters that may need to be considered over and above a review of a straightforward (if there is such a thing) contract are as follows.
Main Contractor
When acting on behalf of the main contractor, it is important to ensure that the liabilities it has assumed under the main contract are flowed down to the relevant subcontractor. The last thing we want is for the main contractor to find itself exposed to liabilities/obligations over which it has very little or no control because delivery is in the hands of the subcontractor.
Subcontractor
When acting on behalf of the subcontractor, it is often difficult to negotiate the terms of the subcontract due to the terms of the main contract already having been agreed. The main contractor is keen to flow down its liabilities (as pointed out in the above paragraph) and not leave itself exposed.
Nevertheless, it is important to review the main contract before drafting/reviewing the subcontract to ensure that our client is not assuming any more liabilities than those which are settled on the main contractor under the main contract.
Some subcontractor agreements have conditional payment clauses where the main contractor will only pay the subcontractor when it is paid by the client. This can delay payment to the subcontractor so it is important to know if this clause is in their agreement before signing.
Conclusion
Whether you are the main contractor or the subcontractor, it is important to ensure that you are not assuming unnecessary liabilities and that you are maximising the potential benefit under the relevant agreement.
Contact Richard Jenkins on 024 7698 0613 or Richard@clariclegal.co.uk for further advice or assistance.
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This should not be relied upon for legal advice
