They keep quoting clauses at me I didn't know I'd signed
Every letter from the main contractor quotes a clause, and we have to dig out the subcontract to find what it means for us.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
What's happening?
Main contractors run their subcontracts by the clauses. A deduction comes under one, an instruction to speed up under another, and a notice that you are in default under a third. Each letter names a clause and assumes you know what it says. If you do not, every reply starts from behind. Some letters also start a clock you did not know was running.
The clauses in those letters are usually the same few: deductions and set-off, retention, delay damages, default and termination. Each has its own periods and conditions. Your main contractor may have to give notice in time before it can deduct at all. A default notice may give you a fixed number of days to put things right before your main contractor can terminate.
Finding each clause as each letter arrives means answering in a hurry. Miss a letter that started a clock, and you can lose money, or the subcontract itself.
The solution
Set out what the subcontract commits you to, clause by clause, in the terms your team will meet. List each right to deduct and the notice it needs, and when your retention comes back. Add the delay damages, and each default and termination step with its period. Then check the letters you have already had against it, and answer any that started a clock.
Post-Signing Contract Review does this for you. We set out in plain words the dates, notices, time bars, deductions, retention, delay damages and termination terms you have signed up to. We flag the terms that may not work as written, and hand your team a cheatsheet and a diary.
Example
Illustrative example. The scenario and figures are invented.
The facts
A drylining subcontractor is on a £530,000 subcontract. In one month it receives a £14,500 deduction for cleaning and a letter saying it is in default for slow progress. It also gets a reminder of the retention being held.
What happens
- The subcontractor sets out the subcontract clause by clause. It finds six rights to deduct, and a default clause giving 10 days to put things right before termination. Retention is 5 per cent, half released when the main contract works are complete and half 12 months later.
- It checks the cleaning deduction against its clause. The clause requires a notice with the amount and its basis before the final date for payment. None was given, so the subcontractor challenges the deduction in writing.
- It finds that the default letter started the 10 day period 6 days earlier. It replies the same day with a plan to recover progress.
- It gives the site and commercial teams a cheatsheet of the six rights to deduct, the default steps and the retention dates.
What the clauses meant in figures
| Item | Figure |
|---|---|
| Subcontract sum | £530,000 |
| Deduction challenged | £14,500 |
| Days left of the default period when found | 4 |
| Retention held at 5 per cent | £26,500 |
The outcome
The subcontractor answers the default letter inside its period, and no termination follows. The £14,500 is added back in the next payment. The team now reads each new letter against the cheatsheet before it replies.