Consecutive agreements, whereby a prime contractor attempts to pass on its obligations and responsibilities to the employer to its subcontractors, are becoming an increasingly common feature of construction projects. While they can be a practical way to transfer risks and obligations through the chain of responsibility, inadequate wording can lead to particularly complex and difficult disputes. In this way, the chain of custody works in a subcontracting relationship: if the subcontractor`s work does not fulfill its obligations assigned in the main contract, the customer can sue the main contractor for breach of the main contract, and the main contractor can sue the subcontractor for breach of the subcontract: the term ”back-to-back” agreement is used to refer to a specific type of subcontract. This term is used when all the terms used in the main contract are incorporated by reference into the consecutive subcontract. They are normally used when the subcontractor`s rights and obligations to the prime contractor correspond to those of the main contract. Creating a consecutive agreement could be as simple as changing the names of the parties to the main contract and including a ”back-to-back” clause, thus transferring all tasks from the main contract to the subcontractor. However, as we will see in the next section, this can lead to problems. As for the subcontractor`s claim on the unpaid payment, it is important to respect the case law of the Court of Cassation. The Court of Cassation has already ruled that if a prime contractor has agreed to pay the payments due to the subcontractor after receiving the equivalent payment from the employer, the receipt of this equivalent payment by the main contractor is a condition for the subcontractor to be able to demand its payment.
However, the subcontractor`s request for its unpaid payment was premature due to (i) the existence of the subcontract clause in the subcontract and (ii) the non-receipt of the supervisor who received the corresponding payment from the employer. Prime contractors should obtain the client`s consent to hire subcontractors before attempting to draft consecutive contracts. As part of the contract itself, prime contractors should transfer responsibility for their portion of the work to the contractor. It depends on the context. Since the answer usually requires careful analysis, it is advisable to seek professional advice. The solution we usually find is a hybrid – a consecutive contract that also covers areas of the contract where simple back-to-back rights and obligations do not work. In many construction projects, the contractor enters into an agreement with a contractor for all the work and the contractor then enters into subcontracting agreements for certain parts of the work. The subcontractor`s agreements often include a consecutive clause.
The meaning of a back-to-back clause is that the agreement between the prime contractor and the subcontractor is subject to the agreement between the original customer and the prime contractor and generally the original customer is the only one to confirm the work, and payment and payment from the prime contractor to the subcontractor depends on the receipt of payment by the prime contractor. Stand-alone contracts contain all the terms of the original contract that are relevant to the subcontract. Such a contract can eliminate cumbersome cross-references, inaccuracies and inconsistencies. However, drafting a stand-alone contract can be even more time-consuming than drafting a consecutive contract, as each party must review the agreements and decide which terms to include in the subcontract and which terms to change. If you have any questions about subcontracting or contract law in general, please contact Neil Williamson. In a court case in early 2016, an engineering firm acted as a contractor on a project and hired a subcontractor to perform certain work with a ”back to back” clause. The court ruled that the purpose of a ”back-to-back” clause is generally to avoid a situation where the contractor must pay the subcontractor for work that has not been approved or paid for by the customer for reasons related to the subcontractor. B as partial or inappropriate work. Despite the presence of a ”back-to-back” clause in the agreement between the parties, and even if the contractor has not received payment from the client, it does not waive the contractor`s obligation to pay the subcontractor if it is determined that the subcontractor performed the work correctly.
In another case, which was discussed at the end of April 2016, the customer did not pay due to defects in the work. The Court found that, despite the referral clause, the prime contractor is required to pay the subcontractor because the failure was caused by the prime contractor. A back-to-back contract can refer to many different things, but it is most commonly used in construction.3 min read It is important to remember that data protection obligations are transmitted through the subcontracting chain. The subcontractor is a subcontractor and all subcontracting agreements are prohibited unless the customer has given his prior written consent. The main contractor should look at the data processing and subcontracting provisions in the main contract to see what it says about the subcontracting. The main contractor must conclude a subcontract with it which imposes on the subcontractor the same data protection obligations as the contracting entity. As with other assigned obligations, the main contractor is fully responsible for the performance of the data protection obligations of the subcontractors. A client of our company acted as a subcontractor in a construction project. When it was time for our client to receive payment, the prime contractor argued that because it had not received payment from its client, it was not obliged to pay the subcontractor, although there was no agreement between the parties that stipulated it.
Is there a dependency between the prime contractor`s obligation to pay its subcontractors and the receipt of funds from it? To incorporate the terms of the main contract into consecutive contracts (subcontractors), copy the applicable terms into the new contracts. Be sure to exclude any conditions that do not apply, such as . B the total cost of the contract or other clauses which concern only the main contractor. This method of creating consecutive contracts may seem simple and effective, but it can sometimes be more difficult than drafting a stand-alone contract. The first approach is often seen by entrepreneurs as the simplest and therefore most cost-effective way to pass on responsibilities. However, without special attention, such an approach can often lead to difficulties. Particular attention should be paid when drawing up the consequential provisions. For example, a general provision that all references in the main contract to the ”employer” and the ”prime contractor” in the subcontract are to be understood as references to the ”prime contractor” and the ”subcontractor” respectively may not be appropriate for an obligation and could result in the invalidity of an essential provision of the contract or be subject to an interpretation that was never intended. In addition, with long and detailed contractual specifications (often in the form of employer requirements), it can be very complex and even contentious to separate the relevant obligations for each individual subcontract. The biggest concern of suppliers is that they inadvertently take the risk for inappropriate matters given the size and scope of their respective subcontracts.
A consecutive agreement is an easy-to-enter form of partnership that is most often used when working together on a particular project. The parties remain independent, no new legal entity is created. Subcontracting can be observed in a number of sectors, including construction, transportation, manufacturing and information technology. A subcontract always refers to another contract – often referred to as a ”main contract” or ”main contract”. Two parties will have entered into the main contract, and then one of these parties may wish to subcontract some of their obligations. The scope of these subcontracting obligations may be as broad as the parties wish (subject to the subcontracting provisions in the main contract). .