Professional Documents
Culture Documents
or
Subcontractor
-Who
Wins
Under
Bespoke
Subcontract?
By
Rama
S
Sinnaswamy
BEng,
MBA,
LLM
(Construction
Law
&
Arbitration)
MCIArb,
MCInstCES,
CCP,
MASCE-CEng
Rajesh
Kumar
BE,
MSc
(Construction
Law
and
Practice),
MCIArb,
MRICS,
MCInstCES,
MAIQS,
MIIQS,
CCP,
ICIOB
Risks
in
Subcontract
Some
Onerous
Clauses
a. Extension
of
Time
b. Terms
of
Payment
c. Liquidated
Damages
d. Delay
and
Cost
of
Delays
e. Fluctuation
speciMication
and
approval
delay
Subcontractor
Delay
in
Shop
Drawings
and
Samples
D
elay
in
resources
works
L ack
of
access
F inancial
N
on-adherence
to
the
Schedule
L ack of Proper
Communication
Effects
of
Disputes
Contractors
Obligation
not
to
Disrupt
is
not
implied
Time
Delay
Payment
Delay
Time
Delay
Delays
caused
by
Employer/
authorities
Main
contractor
Subcontractor
Payment
Delay
Delays
caused
by:
Delays in certiMication
Withholding of Payments
Payment
(Bespoke
Sub-clause
15.1
a)
The
Sub-Contractor
shall
not
less
than
7
days
before
the
date
speciMied
in
the
First
Schedule
(the
SpeciMied
Date)
or
otherwise
as
agreed
submit
to
the
Contractor
a
written
statement
of
the
value
of
all
work
properly
done
under
the
Sub-Contract
and
of
all
materials
delivered
to
the
Site
for
incorporation
in
the
Sub-Contract
Works
and
if
allowable
under
the
Main
Contract
the
value
of
off-site
materials
for
incorporation
in
the
Sub-
Contract
works
at
the
date
of
such
statement.
The
statement
shall
be
in
such
forms
and
contain
such
details
as
the
Contractor
may
reasonably
require
and
the
value
of
work
done
shall
be
calculated
in
accordance
with
the
rates
and
prices,
if
any,
speciMied
in
the
Sub-Contract,
or
if
there
are
no
such
rates
and
prices,
then
by
reference
to
the
Price.
Payment
(Bespoke
Sub-clause
15.3
a)
Within
7
days
after
receipt
of
payment
by
the
Contractor
but
subject
as
hereinafter
provided,
there
shall
be
due
to
the
Sub-Contractor
in
respect
of
the
value
of
the
work
and
materials
if
included
in
a
valid
statement
payment
of
a
sum
calculated
in
accordance
with
the
rates
and
prices
speciMied
in
this
Sub-Contract,
or
by
reference
to
the
Price,
as
the
case
may
require,
but
subject
to
a
deduction
of
previous
payments
and
of
retention
monies
at
the
rate(s)
speciMied
in
the
Third
Schedule
hereto
until
such
time
as
the
limit
of
retention
(if
any)
therein
speciMied
has
been
reached.
Default
of
Subcontractor
(FIDIC
Sub
Clause
18.1)
If:
(a) the
subcontractor
is
deemed
by
law
unable
to
pay
his
debts
as
they
fall
due,
or
enters
into
voluntary
or
involuntary
bankruptcy,
liquida9on
or
dissolu9on,
(b) the
subcontractor
has
repudiated
the
Subcontract,
(c) the
subcontractor,
without
reasonable
excuse,
has
failed
to
commence
or
proceed
with
the
Subcontract
Works..,
(d) the
subcontractor
refuses
or
neglects
to
remove
defective
materials
or
remedy
defective
work
after
being
instructed
so
to
do
by
the
Contractor..,
(e) the
Subcontractor,
despite
previous
warning
from
the
Contractor,
in
writing
,
is
otherwise
persistently
or
Mlagrantly
neglecting
to
comply
with
any
of
his
obligations
under
the
Subcontract,
(f) the
Subcontractor
has
contravened
Sub-Clause
2.5(Sub-Subcontracting),
or
(g) the
Contractor
is
required
by
the
Engineer
to
remove
the
Subcontractor
from
the
Main
Works
after
due
notice
in
writing
from
the
Engineer
to
the
Contractor
in
accordance
with
the
Main
Contract,
Default
of
Subcontractor
(FIDIC
Sub
Clause
18.1)
Contd
then
in
any
such
event
,
and
without
prejudice
to
any
rights
or
remedies,
the
Contractor
may
by
a
notice
to
the
Subcontractor
forthwith
terminate
the
Subcontractors
employment
under
the
Subcontract
and
thereupon
the
Contractor
may
take
possession
of
all
materials,
Subcontractors
Equipment
and
other
things
whatsoever
brought
on
to
the
Site
by
the
Subcontractor
and
may
by
himself
or
any
other
contractor
use
them
for
the
purpose
of
executing
and
completing
the
Subcontract
Works
and
remedying
any
defects
therein
and
may,
if
he
thinks
Mit,
sell
all
or
any
of
them
and
apply
the
proceeds
in
or
towards
the
satisfaction
of
monies
otherwise
due
to
him
from
the
Subcontractor.
Sub
Clause18.3
Contractors
Powers
The
Contractor
may
in
lieu
of
giving
a
notice
of
termination
under
this
Clause
take
part
only
of
the
Subcontract
Works
out
of
the
hands
of
the
Subcontractor
and
may
by
himself
or
any
other
contractor
execute
and
complete
such
part
of
the
Subcontract
Works
and
remedy
any
defects
therein
and
in
such
event
the
Contractor
may
recover
his
cost
of
so
doing
from
the
Subcontractor,
or
deduct
such
costs
from
monies
otherwise
becoming
due
to
the
Subcontractor.
Sub-contractors
Default
(Bespoke
Sub
Clause
17.1)
If
the
Sub-Contractor:
(a)
fails
to
proceed
with
the
Sub-Contract
Works
with
due
diligence
aAer
being
required
in
wri9ng
so
to
do
by
the
Contractor;
or
(b)
fails
to
execute
the
Sub-Contract
Works
or
to
perform
his
other
obliga9ons
in
accordance
with
the
Sub-Contract
aAer
being
required
in
wri9ng
so
to
do
by
the
Contractor;
or
(c)
refuses
or
neglects
to
remove
defec9ve
materials
or
make
good
defec9ve
work
aAer
being
directed
in
wri9ng
so
to
do
by
the
Contractor;
or
(d)
commits
an
act
of
bankruptcy
or
enters
a
deed
of
arrangement
with
his
creditors
or,
being
a
company
goes
into
liquida9on,
(other
than
a
voluntary
liquida9on
for
the
purposes
of
reconstruc9on),
or
has
a
receiver
appointed
of
all
or
part
of
its
undertaking.
then
in
any
such
event
and
without
prejudice
to
any
other
rights
or
remedies,
the
Contractor
may
by
wriFen
no9ce
to
the
Sub-Contractor
forthwith
determine
the
Sub-Contractor's
employment
under
this
Sub-Contract
and
thereupon
the
Contractor
may
take
possession
of
all
materials,
Construc9onal
Plant
and
other
things
.,
Sub-contractors
Default
(Bespoke
Sub
Clause
17.3)
Part
The
Contractor
may
in
lieu
of
giving
a
notice
of
determination
under
this
clause
take
part
only
of
the
Sub-Contract
Works
out
of
the
hands
of
the
Sub-
Contractor
and
may
be
himself,
his
servants
or
agents
execute,
complete
and
maintain
such
part
and
in
such
event
the
Contractor
may
recover
his
reasonable
costs
of
so
doing
from
the
Sub-Contractor,
or
deduct
such
costs
from
monies
otherwise
becoming
due
to
the
Sub-Contractor.
Upon
TERMINATION
.
Penalty
or
Liquidated
damages
Call
on
Bond
Performance
Security
(FIDIC
Sub
Clause
2.2)
If
the
Subcontract
requires
the
Subcontractor
to
obtain
security
for
his
proper
performance
of
the
Subcontract,
he
shall
obtain
and
provide
to
the
Contractor
such
security
in
the
sum
stated
in
the
Appendix
to
Subcontractor's
Offer.
Such
security
shall
be
in
the
form
annexed
to
the
Conditions
of
Subcontract
or
in
such
form
as
may
be
agreed
between
the
Contractor
and
the
Subcontractor.
The
institution
providing
such
security
shall
be
subject
to
the
approval
of
the
Contractor.
The
cost
of
complying
with
the
requirements
of
this
Clause
shall
be
borne
by
the
Subcontractor,
unless
the
Subcontract
otherwise
provides.
Performance
Bond
(Bespoke
Clause
20)
The
Sub-Contractor
shall
obtain
when
required,
a
bond
or
guarantee
of
a
bank
registered
in
the
U.A.E.
acceptable
to
the
Employer
to
be
bound
with
the
Sub-Contractor
to
the
Contractor
in
a
sum
equal
to
10
percent
of
the
Sub-Contract
value
for
the
due
performance
of
the
Sub-Contract
under
the
terms
of
the
Performance
Bond.
The
said
bank
and
the
terms
of
the
said
Performance
Bond
to
be
so
entered
shall
be
at
the
expense
in
all
respects
of
the
Sub-Contractor.
Such
bond
or
guarantee
shall
be
valid
until
the
issue
of
Defects
Liability
CertiMicate.
Disputes
between
a
Contractor
and
a
Subcontractor
UAE
Case
-
DebrieWing:
i. Main
contractor
failed
to
make
payments
ii. Subcontractor
reduced
resources
iii. Subcontractor
was
removed
from
the
site
for
their
alleged
delay
iv. Imposed
penalty
v. Performance
Bond
was
encashed
Court
Appointed
a
Single
Arbitrator
Both
parties
presented
their
arguements
with
evidences
Contractors
Wrongful
Acts
Overwhelmed
the
set
backs
Contractor
and
other
Subcontractors
were
also
parties
to
the
delay,
besides
mainly,
-------
Non-payment:
Dues
-
Progress
payment
20%
Termination
took
place
and
penalty
imposed
Performance
bond
encashed
while,
1. Progress
Payment
CertiMicate
revealed
consistency
in
progress
completed
up
to
99%
2. partial
possession
happened
(28/67
Floors)
3. Substantially
completed
Payment
CertiWicates
InWluenced
Arbitrators
Decision,
How?
Taking
over
CertiWicates
InWluenced
Arbitrators
Decision,
How?
Effects
of
Taking
o
ver
CertiWicates
Record
shows
partial
progressive
occupation
for
internal
ofMice
partitioning
works
without
TOC
Back
dated
TOCs
Inconsistencies
in
other
Subcontractors
TOCs
Award
Main
Contractors
actions
were
proven
as
wrong
Subcontractor
entitled
for
the
work
done
Due
amounts
paid
less
deduction
Retention
Paid
Performance
bond
money
returned
Lessons
Learned
Contracting
parties
shall
honor
their
commitments/
fulWill
the
obligations
under
UAE/
Qatar
Civil
Codes,
besides,
Main
Contractor
Foresee
implications
of
actions,
letter
or
document
such
as
Payment
CertiMicate/
Taking
over
CertiMicate
Avoid
termination
Sub
Contractor
Avoid
delay
or
suspension
Consultant
Effects
of
Payment
CertiMicates
Effects
of
back-dated
TOCs
Who
wins?
Contractors
actions
might
be
right
under
Bespoke,
but
was
he
the
winner?
Subcontractor
reduced
resources;
Minally,
was
only
compensated
for
his
dues
under
the
Subcontract,
after
a
lengthy
process
of
Arbitration/
Litigation.
So,
was
he
the
winner?
Thank
You
Q&A