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Collateral warranties
The subcontractor may face an unreasonably open-ended obligation to enter into collateral warranties at any time with the employer. Such warranties can be "in such form as the main contractor shall prescribe". Evidently, this is the case no matter how onerous the drafting.

An uninsurable "fitness for purpose" obligation is imposed on the subcontractor in respect of any design work it carries out. This contrasts with the more normal "reasonable skill and care" imposed in the standard forms of contract. Later there is an obligation for the subcontractor to obtain professional indemnity insurance in respect of its design liabilities. These two obligations are mutually exclusive.

All "risk in all goods and materials" will remain with the subcontractor until practical completion. However, "all goods materials and temporary works shall become the property of the contractor as and when the goods, materials and temporary works or any part thereof are first identified, inspected or appropriated by the contractor for the subcontract works and in any event upon delivery to the site". Under this provision, the subcontractor will lose ownership, will not have been paid, but must bear risk attached to materials.

Payment
The payment mechanism more or less follows the requirements of the Construction Act, but payment will be slow. Applications are submitted by the 25th of each month, and payment will become due "on the 15th, of the second month following the date of the application for payment". The final date for payment will be a further 14 days after the due date.

The subcontractor could have to wait 89 days from start on site to receipt of the first payment. This compares adversely with the 47 days in industry standard forms of subcontract. Payments are evidently subject to a pay-when-certified device, and a pay-if-paid device is also included, based on a loophole in the Construction Act.

There is an encompassing set-off provision based on the subjective "opinion of the contractor" about any loss which the contractor has allegedly suffered, or "will suffer". The scope of such set-off includes: "breach of this or any contract between the contractor and the subcontractor or any tortuous act". The amount to be set off will be based on the contractor's "bona fide estimate", which is "binding and conclusive" until final determination.

Retention
Clause 33 says retention will be deducted at a "minimum of 5%", even if the main contract retention is at a lower level such as 3%. All of the subcontract retention will be released at the same time, six weeks after the subcontractor's application, which will be made no sooner than the earlier of: two years after the end of the main contract defect liability period; or the date when the contractor receives the final release of retention. So it's either pay-when-paid or a prolonged wait! The contractor is given a wide right to "summarily determine the subcontractor's employment" in part or in whole, with severe financial consequences.

A seriously flawed adjudication procedure allows that both the party referring a dispute to adjudication and the other party can seek an "order" from the adjudicator. A curious double-negative provision states that "the adjudicator's decision shall be binding on neither party save in so far as" it relates to granting or refusing the parties' proposed orders.

The scope of the orders which the adjudicator can make in his/her decision is very limited with regard to payment or money. The only type of order permitted is one that requires "one party to pay money to the stakeholder on trust to be paid to the other party only after the conclusion of all arbitration or litigation under this subcontract and then only to the extent that the Adjudicator's decision is not overturned or amended". Thus there can be no direct decisions about immediate payment and, for example, the adjudicator cannot order the contractor to pay any disputed or outstanding amount directly to the subcontractor. The intended benefit of adjudication in protecting cash flow on valuation or payment disputes is thwarted.

Suspension of performance
Clause 42 makes a legally ineffective attempt to contract out of the statutory provisions in the Act, giving the subcontractor the right to suspend performance of its obligations in the event of payment default by Barnfield Construction. "The contractor and the subcontractor agree that the provisions of section 112 of the Housing Grants, Construction and Regeneration Act 1996 are hereby excluded."

Barnfield Construction replies
John Huxtable describes our contract conditions as unbalanced. The facts do not support that contention. Each year Barnfield Construction places orders with over 200 subcontractors, a number of whom we have worked with for our entire 25-year history.

The subcontract terms and conditions were introduced in June 1999 after extensive consultation with our subcontractors. They were developed because of practical difficulties using unadulterated standard forms of subcontract. Since their introduction, we have had no claims or disputes. We invite dialogue and where appropriate make changes by amendment.

Our subcontractors have embraced the terms and conditions, which have been described as clear and unambiguous. They have welcomed the green and amber payment notices that we use with clause 30 (application for monthly payment) for the benefit of subcontractor cash flow. Barnfield is not claims orientated. We enjoy a close working relationship with subcontractors, employers and end users.