What happens to my money when my subcontract is terminated?
Usually nothing more is paid until someone else has finished the work, and then an account decides who owes whom.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
Under the standard JCT subcontracts, after a termination for your default, your main contractor finishes the work. It then works out what the whole subcontract would have cost on your terms. It sets that against what it has paid you, what it spent finishing the work, and any loss the termination caused it. The difference is paid whichever way it falls. If you terminate for your main contractor's default, the account runs the other way and can include your own loss. Sums that fell due before the termination may be treated differently, depending on the wording. Amended and bespoke subcontracts change the details, so check your termination clauses for the account they require. Retention, materials on and off site and unpaid applications all have to be placed within that account. The records of what was on site on the termination day carry much of its weight, so make them straight away.
Example
Illustrative example. The scenario and figures are invented.
The facts
A subcontractor is terminated with a third of its package left. It hears nothing for 5 months, then receives the main contractor's account demanding payment.
What happens
- The account is checked against the structure the subcontract's termination clauses require.
- The subcontract sum is adjusted for the instructed variations the account leaves out.
- The cost to complete is answered line by line against the original scope.
The outcome
The subcontractor answers the account in the structure the subcontract requires, with its own figures, before any balance is agreed.
Building the account the termination provisions require, and pursuing the balance, is our Termination Claim service.