Will the client pay me directly if my main contractor goes bust?
Usually not for work already done, because the client has no contract with you, but it may offer you a new contract to finish.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
Your contract is with the main contractor, so the client, often called the employer, owes you nothing for work done under it. If it paid you directly for that work, it could end up paying twice, because the administrator or liquidator can still collect that money from it. The exceptions come from documents you can check. One is a collateral warranty or direct agreement with step-in rights, which let the client take the main contractor's place in your subcontract. Another is a project bank account, where money paid in for your work is held on trust and should still reach you. More often, the client or a replacement main contractor asks you to finish your package. Treat that as a new contract. Price the remaining work fresh, at today's costs, and record the condition of the work before you start. Do not agree to carry the old account's defects or losses into it without pricing them.
Example
Illustrative example. The scenario and figures are invented.
The facts
A groundworks subcontractor on a housing scheme is owed £41,000 when its main contractor goes into liquidation. The employer's project manager calls and asks it to finish the drainage and roads at the old package rates. At those rates, the work left is worth £162,000.
What happens
- The subcontractor explains that the employer does not owe it the £41,000, which is claimed in the liquidation.
- The remaining work is priced fresh at today's costs, and comes to £186,000.
- A joint inspection records the condition of the existing drainage before anything starts, so defects in the old work are not inherited.
- The employer and the subcontractor settle on £179,000 for the new contract, with the inspection record attached.
Finishing the package
| Position | Amount |
|---|---|
| Remaining work at the old rates | £162,000 |
| Remaining work at today's costs | £186,000 |
| New contract agreed | £179,000 |
The outcome
The package is finished under a new contract at £179,000, with a clean start recorded. The £41,000 stays a claim in the liquidation, not a loss carried into the new work.
To have an offer to finish priced as a fresh contract while the old account is claimed in the process, see our Insolvency Claim service.