I've been sent a default notice
The main contractor says we are in default and has given us a few days to put it right, or it will terminate.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
What's happening?
A default notice is usually the first formal step towards termination. Under most subcontracts, it must name the default, a breach the subcontract lists, and give you a set period to end it. If the default carries on past that period, your main contractor can terminate by a further notice. The period is short, often days rather than weeks. It usually runs from when the notice arrives, not from when someone in the office reads it.
The defaults named are ordinary events on a hard job: progress said to be too slow, defective work not removed when directed, a gang taken off site. Some notices are well founded; others are pressure. Either way, silence is the worst answer. It leaves your main contractor's version of the facts as the only one on file, and the clock keeps running.
The solution
Fix the dates first: when the notice arrived, how long your subcontract gives you to end the default, and when a termination notice could follow. Gather the records that answer it: resources on site, access given, directions received and what you did about them. Reply in writing within the period, with the facts and what you are doing, and attach the records. Send the notice to your solicitor the same day on whether it is valid.
Termination Prevention deals with a notice that is already running first. Then it sets up the routine that gets the next notice from site to your office on the day it arrives, with a written reply inside the period.
Example
Illustrative example. The scenario and figures are invented.
The facts
A mechanical subcontractor on a £1,400,000 package receives a notice on a Tuesday. It says the subcontractor is failing to proceed regularly and diligently on levels three and four, meaning progress there is too slow. The main contractor may terminate if the default continues for 10 days. The notice went to the site cabin, and the commercial manager sees it on the Thursday.
What happens
- The cabin's post log fixes receipt as the Tuesday, so the 10 days end on the Friday of the following week.
- The labour returns show 12 operatives on site, against 11 in the tender resource plan. The diaries record that levels three and four were not released to the subcontractor until the previous Monday.
- The written reply goes the next day, the Friday, with the records attached. It sets out the resources, the release dates from the main contractor's own emails, and the plan for the two floors.
- The solicitor is asked the same day whether the notice is valid under the subcontract's wording.
- From the next week, anything addressed to the company that arrives on site is scanned to the commercial manager the same day.
The outcome
No termination notice follows. The two floors are finished, and the file now holds the subcontractor's account of the facts beside the main contractor's.