Studying the form

Determination
The main contractor is given a wide, arbitrary and highly onerous right to "summarily determine" the subcontract on a variety of grounds, including failure to proceed in a way that satisfies Tolent's opinion or failure to comply with any implied terms. Who is to say what terms have been implied? There is a complete absence of any reciprocal right for the subcontractor to determine the subcontract, even in the event of major default by Tolent.

Payment
Payments will not become due until 50 days after the end of the month in which the application was submitted, and the final date for payment will be a further 10 days after the due date.

So having waited up to a month to submit an application, the subcontractor will have to wait a further 60 days before payment arrives. Thus the period from start on site to arrival of first payment could be up to 91 days (31-day first month + 50 days + 10 days). This contrasts adversely with the maximum of 48 days (31-day first month + 17 days) under proper standard forms of subcontract such as Domestic Sub Contract DOM/1.

A payment notice will be sent by Tolent to the subcontractor within five days after the due date, as required by the Housing Grants, Construction and Regeneration Act. However, there is a mysterious provision to the effect that "the subcontractor agrees that a payment notice prepared and given in accordance with this clause will constitute notice required by section 110 (2) Housing Grants, Construction and Regeneration Act 1996".

In my view, either the notice complies with the plain language of the Act, or it doesn't. What is Tolent worried about that has caused it to go to the trouble of including this provision? A wide pay-if-paid provision is included, taking advantage of, but seemingly going significantly further than, the loophole in the Act permitting such devices to operate in the event of upstream insolvency. Here it is not just the insolvency of the "principal contractor under the principal contract" that allows Tolent to withhold payment to the subcontractor, but also the insolvency of "any third party responsible for discharging payment to Tolent (whether directly or indirectly)". This seems to include potentially anyone that owes money to Tolent, whether or not the money is destined to be passed on to the subcontractor.

Set-off
Tolent gives itself a remarkably wide and potentially unreasonable right to make set-off deductions from payments to the subcontractor. Deductions may be made from payments due under this "or any other contract", and the amount to be deducted has a similarly wide scope and can include not just amounts owed on this contract but on "any other contract agreement or arrangement whether independent of or connected to the subcontract".

The drafters go further and purport to give Tolent the astonishing right to make deductions (of amounts evidently owed on this or other contracts) from amounts due to the subcontractor "pursuant to any adjudicator's award". In the words of John McEnroe: they cannot be serious! This would render any adjudicator's award unsafe and easy to circumvent, with the main contractor merely needing to make a set-off claim in order to nullify or diminish (at least for the time being) the adjudicator's award.

Lip service is paid to the requirements of the Act. It requires advance notice of any set-off deduction, with the period of notice required to be agreed in the contract. Here Tolent opts for the minimal requirement: notice to be given just "one day before the final date for payment".

Suspension
The Construction Act requires the subcontractor to give at least seven days' notice of its intention to suspend performance following payment default by the main contractor, with Parliament clearly intending that it is for the subcontractor to decide how much notice to give, as long as it is at least seven days. However, here Tolent seeks to impose a requirement for the subcontractor to give "at least 30 (thirty) days' written notice of its intention to suspend performance".

This cynical provision severely limits the potential effectiveness of the remedy of suspension, and provides leeway for a further 30-day delay in payment by the payment defaulter. Devices such as this, that seek to disable the remedy against payment default, inevitably raise the suspicion that the main contractor wishes to be free to default in payment. They send worrying signals.

Dispute
The adjudication provision incorporates the CIC model adjudication procedure, but with some potentially unreasonable aberrations, including an amendment to the effect that the party referring a dispute to adjudication must bear not only the full fees and costs of the adjudicator but also all costs and expenses incurred by the other party. "The party serving notice to adjudicate shall bear all of the costs and expenses incurred by both parties in relation to the adjudication including but not limited to all legal and experts' fees." This unreasonable provision will in most cases place a prohibitive entry barrier to adjudication and in effect disables the statutory remedy of adjudication.

General comment
The Tolent subcontract documents include a series of unreasonable and potentially onerous provisions, to the detriment of the subcontractor, and seem to be aimed in part at minimising key provisions of the Construction Act. In particular there seems to be a concerted effort made in the drafting to minimise or avoid the contractual and statutory consequences of late payment. This gives a sadly negative signal to tenderers and is hardly conducive to trust and co-operation. Why is Tolent unable to use genuine standard forms of subcontract, unamended?

Tolent's reply
We consider ourselves to be recognised as one of the UK's leading providers in the construction industry. We have an outstanding reputation for the quality of the product that we deliver and the responsible and effective way in which we deliver it. Crucial to this is our relationship with all parts of the supply chain, and in particular with those ultimately responsible for carrying out much of the work, our sub-contractors.

As part of our business development, we have therefore sought successfully to develop sustainable and close relationships with a considerable number of sub-contractors. We recognise that relationships which deliver benefits for our sub-contractors as well as ourselves motivate all to achieve the common goal, namely a happy client. Some describe it as partnering; we call it common sense.

An integral part of this relationship must be clearly defined roles and responsibilities, and in particular the appropriate allocation of risk to those best able to manage it. The contract is the starting point for this. Whilst we are not complacent, we like to think that our bespoke contract clearly and relatively succinctly sets out those roles and responsibilities. Our contract does this in a way that we hope is less ambiguous than many of the standard forms.

As with any proactive organisation, we continually review our relationships and business operations. Our subcontract is no different. Where we perceive the incidence of risk to have shifted or changed in any way, we take this into account through consultation and discussion with our sub-contractors. This may and often does lead to an amendment of the bespoke form. Indeed, the option of using a standard form under appropriate circumstances is not precluded.

As to the final question posed by Mr Huxtable, a glance through any series of construction law reports will highlight the number of disputes that arise between parties who misunderstand the terms and conditions of the standard forms, which are often lengthy and unclear. We believe that our bespoke contract provides an unambiguous basis upon which the parties can undertake their responsibilities.

The acid test must be whether our sub-contractors are happy to undertake business with us on the terms considered and whether they, in consequence, enjoy a rewarding and professionally satisfying relationship. In our experience, they are and do, and very few disputes arise as a consequence.