My subcontract has been terminated and they want me to pay to finish it
We've been put off site, our last application hasn't been paid, and now there's a bill for someone else to complete our work.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
What's happening?
Termination changes how the money works. Under most subcontracts, once your main contractor terminates for your default, nothing more is due to you until someone else has finished the work. Then an account is drawn up. It sets what the whole package would have cost under your subcontract against what your main contractor has paid you and spent finishing it. The balance goes whichever way it falls.
Your main contractor brings in another firm, the completion contractor, to finish your work. What that costs, the cost to complete, is where these accounts grow. The price can include betterment, meaning a better specification than your subcontract asked for, plus work outside your package and extras your main contractor wanted anyway. Your own work, meanwhile, is often valued by your main contractor's surveyor after you left, with nobody measuring on the day.
Whether the termination was valid is a question for your solicitor, and it matters: if it was not, the account may look very different. But the figures on both sides have to be built either way. If nobody answers your main contractor's figures, they are the only ones on the table. And the evidence of what you left on site starts disappearing the day the completion contractor arrives.
The solution
Record the works as they stood on the termination day. Then measure and evidence your work line by line, including materials on and off site and every instructed variation, and check it against every payment. Build the account in the structure your subcontract's termination clauses require.
Termination Claim tests your main contractor's cost to complete against your original scope. It takes out betterment, work outside your package and costs that belong elsewhere, each shown separately. It then submits the account in your name and negotiates on the numbers. Termination Prevention sets up the notice and records routine that stops a default case building on your next job.
Example
Illustrative example. The scenario and figures are invented.
The facts
A cladding subcontractor's £900,000 subcontract is terminated with two elevations left to do. It has been paid £520,000. The main contractor issues its account 5 months later: a cost to complete of £470,000, a loss of £40,000 and a demand for £130,000.
What happens
- The works as they stood on the termination day are pieced together from the last measured application, dated photographs and the delivery records. The completion contractor's own first-week photographs confirm the two elevations were untouched.
- The subcontract sum is adjusted for £32,000 of instructed variations that the main contractor's account leaves out.
- The £470,000 cost to complete is read against the original scope. £45,000 of it is an upgraded bracket system the subcontract never specified, and £38,000 is fire stopping from another package.
- Of the £40,000 claimed as loss, £15,000 is backed by invoices and the rest is unexplained.
- The account goes back in the subcontractor's name, answering the main contractor's figures line by line. Whether the termination was valid is left with the solicitor.
The account on each side's figures
| Item | Main contractor | Tested |
|---|---|---|
| Subcontract sum as adjusted | £900,000 | £932,000 |
| Cost to complete | £470,000 | £387,000 |
| Loss claimed | £40,000 | £15,000 |
| Paid to the subcontractor | £520,000 | £520,000 |
| Balance | £130,000 to the main contractor | £10,000 to the subcontractor |
The outcome
The account settles with nothing paid either way, against the £130,000 demanded. The Handover Pack at the close records that the default case was built on two progress emails nobody answered.