This month our experts come to the aid of an employer trying to bypass the contractor to reach the subcontractor, a housing scheme that could be charged extra for bath fittings and a contractor whose contract is silent over late payment
Can we go direct to the subbie?
When employing others to complete outstanding or defective works, can the employer employ the original subcontractor that executed parts of the works, considering that this aspect of the works is very specialised?
This concerns the FIDIC international edition contract. Under clause 39, the engineer has issued notice that a portion of the works is not in accordance with the contract and should the contractor not take steps to remove and re-execute them, others will complete the job at the contractor's expense.
One of the reasons for the works not being completed is that the subcontractor has abandoned the project because of non-payment from the contractor – but it is prepared to execute the works directly for the client.
It may not be entirely wise for an employer to use the contractor’s own subcontractor since if the engineer is instructing the removal and proper re-execution of work that is not in accordance with the contract, but knows that it is in fact the subcontractor that has carried out the work, there is no guarantee that it will be done correctly the second time.
Furthermore, while the payment dispute between the contractor and the subcontractor does not itself concern the employer, the fact that there is such a payment dispute is likely to hinder the subcontractor's ability or concentration on completing the works.
You state that the condemned works are very specialised. If neither the engineer nor the employer can persuade another subcontractor to carry out them out then maybe it is time to employ the amiable settlement provisions of clause 67.2 to see if a temporary agreement can be reached between employer, contractor and subcontractor so as to permit the contractor, through its subcontractor, to re-execute the works. That way, any delays that might be incurred because other subcontractors need to be brought on site could be avoided.
This concerns a JCT98 With Contractors Design contract for upgrading dwellings. The only drawings in the contract are of flats as existing, and these show baths with taps at window end. The contract requires new baths having mixer taps with shower attachments, which cannot be fixed at the window end. The contractor is claiming extra for turning baths around because of longer service runs. We claim that there is no change to the contract conditions, and therefore no extra charge. Who is right?
It is assumed that the employer’s requirements only made reference to new baths having mixer taps with shower attachment. It was for the contractor to provide the taps and shower attachment that would fit the rooms as existing. It is also likely that the employer’s requirements stated that the contractor had, and was deemed to have had, the opportunity of inspecting the site. The contractor would therefore have known of the position of the windows relative to the bath taps and the fact that the upgraded dwellings would have involved the turning around of the bath with the consequently longer service runs.
It is a principle of construction law that, in the absence of an intention to the contrary, a contractor that undertakes to carry out work for a price has an obligation to do any extended and inevitable ancillary works or processes that are needed to produce the described work.
Ultimately, it is for the contractor to show that there has been a change within the contract’s meaning. It does not appear that the contractor is going to be able to do so.
What's the remedy for late payment?
If a contract is silent as to the remedy available for late payment and late certification, can you advise what common law remedy is available with regards to charging interest or leaving the site?
If the contract is silent as to the remedies available for a breach of a payment obligation such as late payment and certification, there are a number of possibilities open to a contractor – but which are much more restricted than would be the case if the Construction Act applied. First, there is no right to suspend work until payment is made – that is a right that the act grants, but is not available at common law. However, if a breach is sufficiently serious – say it is clear that the employer will not make any payments in the future – that is likely to be enough to allow the contractor to "repudiate" the contract and bring all further obligations to an end.
However, there is a remedy available if the contract is silent as to charging interest on late payments of debt. The remedy is governed by the Late Payment of Commercial Debts (Interest) Act 1998, which implies into contracts for goods and services that late payments of debt carries a penal rate of interest. Currently the rate is set at 8% over the official dealing rate of the Bank of England. In contracts that are silent on payment, the day on which the debt arises and accordingly the day on which interest will start to run from is 31 days after the day on which the obligation to which the payment relates is performed, or 31 days after the day on which the employer receives the invoice.