They terminated us out of the blue, with no default notice first
There was no warning and no chance to put anything right, just a letter ending the subcontract and telling us to leave site.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
What's happening?
Most subcontracts only let your main contractor terminate for your default by set steps. First a notice naming the default, then a period to put it right, then a further notice. A letter that ends the subcontract with no default notice first, or on a ground the subcontract does not list, may not follow those steps. Some amended subcontracts also allow the subcontract to be ended without any default, with their own payment rules. The wording decides which you are dealing with.
If the termination was not valid, it may itself be a breach of your subcontract. The claim is then for what you lost: work done and unpaid, and wasted costs such as materials ordered for the rest of the job. It also covers the profit you would have made on the work you were not allowed to finish, less what you saved by not doing it. If the termination was valid, the termination account applies instead. What your main contractor spent finishing your work, the cost to complete, is then set against you.
Whether it was valid is a legal question, and the answer can take time. The figures cannot wait. They come from the same records either way. And the evidence of what was on site starts disappearing the day another firm arrives to finish your work.
The solution
Send the termination letter, the earlier letters and the subcontract to your solicitor at once, on whether the termination was valid. At the same time, record the works as they stood on the day and measure your work line by line. Gather the unpaid balance, the materials ordered for the rest of the job, and the profit in your tender build-up on the work left.
Termination Claim builds the money from those records, whichever way validity is answered. That means your loss if the termination was wrongful, or the account if it was valid, with every line traced to a document. Your solicitor then argues validity with the figures already built. Termination Prevention sets up the notice routine on the subcontracts you are still working under.
Example
Illustrative example. The scenario and figures are invented.
The facts
A drylining subcontractor on a £620,000 package gets a letter on a Friday ending its subcontract. The letter says it is failing to proceed regularly and diligently, meaning progress is too slow. No default notice came before it. It has been paid £310,000, and a further application for £48,000 is unpaid.
What happens
- On the Monday, the letter, the subcontract and the last 3 months' correspondence go to the solicitor. The question is whether the termination followed the subcontract's steps.
- The same morning, the works are photographed floor by floor and the drawings marked up. The board and metal stored on site are listed against their delivery tickets.
- The work done is measured to the termination date and checked against the £310,000 paid, which confirms the £48,000 applied for.
- The supplier's cancellation charge on board ordered for the upper floors is gathered. The profit on the work left is taken from the tender build-up, less the costs saved by not doing it.
The outcome
The solicitor advises that the termination did not follow the subcontract's steps. The claim goes to the main contractor with every part already built and traced to a document.