+44 (0)1625 626200 info@decipher-group.com

The question

I am a project manager of a construction project under an NEC4 contract. I am dealing with a major problem caused by a key subcontractor. They have failed to meet their obligations, leading to significant delays.

Despite our attempts to address the issue directly, the subcontractor has not responded positively. Even threatening termination has not motivated them. Termination seems like the only option left. Our primary concern is the impact on stakeholders and the increased costs of retendering. What can I do?

The answer

Managing subcontractors is a complex and challenging task. The decision to terminate a subcontractor’s contract should be made with great care. Firstly, you will need to consider the contractual provisions. Also, think of the likely impacts on the business’s financial and reputational standing. The case of Struthers and another v Davies highlights the critical importance of adhering to contractual protocols before considering termination.

Clause 16.1 of the NEC4 contract states you must inform the subcontractor of any concerns and allow adequate time to propose a resolution. If the subcontractor’s response is inadequate, you may issue an early warning to make them aware of the possible outcome of their non-performance.

The court in Henia Investments Inc v Beck Interiors Ltd held that the contractor had the right to terminate the subcontractor’s contract after providing adequate notice of non-performance. The subcontractor’s inability to present a credible programme or plan to address non-performance was deemed a repudiatory breach of the contract.

This article was written by Stuart Bosley who is a managing director at DeSimone. Click here to read Stuart’s full response. Should you need help with any of the issues raised in this article, don’t hesitate to get in contact with us today.