Subcontractor Limitations

I am not sure of contract the you are using but I think it is the section of the ownership of the plant that will apply. See below section below a typical clause from Fedic.

I would suggest read your contract and ask the owner why he is not paying you as per your contract

In short it means that you can only hand the item over to the owner if it belongs to you. (This mean you must pay for it before the owner pays you depended on your payment terms if payment is with transfer of ownership etc).

As for getting the subcontractor not to talk to the owner make sure that their is something like that in your agreement with the subcontractor. If not instruct your subcontractor that he can only talk to you.

32.1
The Contractor warrants that the Plant, upon delivery, will have been fully paid for and will be fully owned by the Contractor and that the Contractor is entitled to pass ownership in the Plant to the Employer.

The Employer shall be entitled, before making any payment to the Contractor, to require the Contractor to provide a certificate signed by the Contractor and the Contractor’s supplier/Sub Contractor confirming that ownership in any such Plant has passed to the Contractor.

I hope this assist you. Also remember these clauses was created to protect the Client. What do you think will happen if you’s subcontractor goes bankrupt the owner will have a piece of equipment Paid for belonging to the banks which he then have to return or pay for a second time.

I hope this assist

HI Shahzad,
I fully sympathise where domestic subcontractors go behind the back of the Main Contractor and complain about alleged failures to, or squeeze payments from, the Employer/Client. This achieves very little other than increased aggravation on the Contractor.

When this happens, the first thing to realise is that this is politics at play, and no amount of complaining to the Subcontractor after the event, will guarantee that it will not be repeated. In such a political environment – where the Subcontractor may be related to the Client in some way, or where the (local) Subcontractor is of the same nationality of the Client and where the Contractor is a foreign contractor – the best thing to do is to ensure that the Subcontract documents specifically prohibit the Subcontractor from meeting with any agent of the Client, and to also state that if such a meeting does takes place, then the Subcontractor is liable to have his Subcontract terminated.

In your situation, where there seems to be no specific requirement in the Subcontract that prevents such a meeting (though there is probably an implied restriction), you may consider raising a claim against the Client if he has paid an inappropriate amount to the Subcontractor. If the Client has over-paid the Subcontractor, then you should raise a claim for the amount of overpayment (plus interest!) to be recovered from the Client. The Client has, in my view, unquestionably interfered in the administration of the Contractor’s project, and in deducting monies due to the Contractor in respect of a Subcontractor, the Client is in breach of Contract.

In addition, you need to inform the Subcontractor that he is in breach of his Subcontract terms (at least by inference!), and that he has no authority or right to enter into discussions with the Client in respect of the Contractor’s rights or obligations.

At the end of the day, depending upon the power struggle within the project’s matrix of parties, you will just have to cope with the situation and manage your way around it, or you can get the Subcontractor to toe the line and forbid him to meet with the Client. However, you need to take the Client to task for his breach and get him to ensure that it will not be repeated.

Hope this helps,

Stuart

www.rosmartin.com

Hi Stuart I think the owner has the right to make sure that the "Equipment" belongs to the contractor before hepay’s for it.

Just imagine a Owner purchasing something & Paying without the item belonging to the contractor.

Example
You walk into the Car Dealer & Purchase a Brand New Porsche & you pay for it.

The next Morning the Car distrubuter goes bankrupt Assuming the car Dealer has not pay for the vehicle yet.

Does this mean you keep the car. No the "court" will take the car away from you because it is still a asset of the Car Distrubutor. (But when you paid the money and have asked for proof of ownership you know the car does not belong to a third party)

And you are left without a car and trying to get the money from the Car Dealer.

So you can only sell something if it belongs to you. And the purchaser (You can make sure it belongs to him)


Cheers

Hi Jaco,

I think that we may be discussing this at cross-purposes. I fully agree with you that the Owner should be comfortable with the fact that he gets what he pays for, although I would expect him to be insured against such matters as the Contractor going bust!

My reading of Shahzad’s problem is more to do with the administration of an errant Subcontractor who goes against the spirit, if not the precise wording, of his Subcontract. The problem is not related to the transfer of ownership, which, depending upon the Contract terms, can take place as soon as the materials enter the site, or as soon as they are incorporated into the Works, or once the project has reached Provisional Acceptance.

The whole principle of the contracting industry is based upon the fact that the Contractor first carries out the work, then gets paid. If payment is withheld, it can be for a whole host of reasons, from faulty performance to incomplete work. Shahzad hasn’t amplified on the details behind his situation, so we can only address it at face value. In addition, Shahzad may be referring to a labour-only subcontractor, in which case the capital cost of equipment or materials is not involved. My earlier post reflects my own experience in dealing with this situation, but I am sure that there are many more answers to his difficulty.

Incidentally, my local Porsche dealer is less than 2 kilometres from my house and is well known here in my village; with him, I wouldn’t be stupid enough to pay for all of the car until I actually had the key in my hand!! ;-)

Cheers,

Stuart

www.rosmartin.com