Any Martian observing the construction industry would find it incredible that a small plastering subcontractor is taking on exactly the same level of risk as the main contractor.
But it may also be taking on a greater risk. Take, for example, the GC Works 1998 government contracts. The subcontractor is required to pass title in its goods and materials to the main contractor before payment has been received. The major risk is that the main contractor could become insolvent before the subcontractor has received payment. This is not a risk that the main contractor carries because government clients do not become insolvent.
What about the position where GC Works is used in the private sector? Again, the risk incurred by the subcontractor is greater than that incurred by the main contractor. The subcontractor runs the risk of insolvency of both the main contractor and the client, since there has to be a pay-if-paid condition in the subcontract. This is legitimised by section 113 of the Construction Act, so that the main contractor is not required to make payment if its payer has become insolvent. So, where is the equality?
I heartily endorse Ann's conclusion that contracts should stand alone and not be dependent on other terms in other contracts.
This would be the result if there was a conscious approach to risk-taking, so that, in Sir Michael Latham's words, contracts have "a choice of allocation of risks … allocated to the party that is able to manage, estimate or accommodate the risk". Ann omits to mention that it is the client that can influence the distribution of risk. This is, of course, much easier to achieve where there are genuine partnering arrangements embracing all the participants in the project.
Rudi Klein is a barrister and chief executive of the Specialist Engineering Contractors Group.