Should I sign my subcontract as a deed?
Only once you have priced the risk, because signing as a deed gives your main contractor 12 years to claim against you, not 6.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
Under section 5 of the Limitation Act 1980, a claim under an ordinary contract must be brought within 6 years of the breach. Section 8 allows 12 years for a contract signed as a deed. For defective work, the clock usually starts when the work is finished. The same period applies to your own claims for payment. But the risk that grows is a defects claim arriving long after you have left site. Main contractors ask for a deed because their own contract with the client is often a deed. They want the same time to pass claims down to you. Before you sign, ask for a simple contract instead. If that is refused, ask for a clause that ends your liability for defects sooner. Check that your insurance will cover a claim made in the later years. If the deed stays, keep your records for 12 years and price the extra risk. A deed must also be signed in the right way, so ask your solicitor how.
Example
Illustrative example. The scenario and figures are invented.
The facts
A groundworks subcontractor is asked to sign a £650,000 subcontract on a school as a deed. The main contractor's own contract with the client is a deed.
What happens
- The subcontractor asks for a simple contract. The main contractor refuses, because it wants the same 12 years it has with the client.
- Its broker confirms that its insurance covers a claim made in the later years, for as long as the policy is renewed.
- It prices the extra risk, and sets the job's records to be kept for 12 years after its work is finished.
- Its solicitor confirms how the deed must be signed, and two directors sign it.
The outcome
The subcontractor signs knowing a defects claim can come for 12 years, with the risk in its price and the records kept to answer it.
To have the deed, and every other term that moves risk onto you, rated and priced before you sign, see our Pre-Signing Contract Review service.
Sources
- Limitation Act 1980, s 5 (Time limit for actions founded on simple contract). legislation.gov.uk.
- Limitation Act 1980, s 8 (Time limit for actions on a specialty). legislation.gov.uk.