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Legal and Disputes: Terminating A Sub-contract

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We are 75 % through a project in ROI, which was divided in two phases,
We were under pressure to have phase 1 handed over and hastily appointed a subcontract specialist roofer for this public building.
He was very hard to handle from the outset but was an approved contractor for the system specified. For phase one we did have to revised the programme due to delays with piling and design problem with the frame which did hold up the subcontractor, but only on phase 1.
He would not sign our sub contract agreement , (although has it in his possession)  left coming to site to the very last minute and insisted on 100% of the money for the first phase up front.  
We had little choice and were running out of time and had little other option of subcontractors due to labour shortages.
We are now on phase two and this firm has decided that they will return to site one day per week until complete- which has needless to say decimated our programme, held all other trades up, and will undoubtedly lead to LAD with our government client. The contract we have is the public works contract, we are a small family firm and would appreciate any advice given of how best to proceed. The clients design team are well briefed on what has happened and are sympathetic but will still go by the contract.
asked Oct 7 in Legal and Disputes by dsmccrory (270 points)  

1 Answer

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The fact that the subcontractor has not signed the subcontract agreement is immaterial, the act of them coming to site and starting work means they have accepted the contract, in law this is called acceptance by conduct. However it may not be entirely certain what the terms of the contract are, this would depend on statements and representations made by the parties in the lead up to the subcontractor starting work.

Check the terms of the subcontract agreement that you issued specifically around termination to see if you can establish if the lack of performance from the subcontractor gives you the right to terminate. If so follow the contract procedures very carefully to ensure you terminate correctly and avoid a repudiatory breach of contract that would give the subcontractor the right to terminate. Also check what rights you have to recover your losses / costs from the subcontractor as termination may affect this.

There is a risk that this action will lead to the exact terms of the subcontract agreement coming under scrutiny, however I suspect this is the lesser of the two evils, the other one being to put up with the lack of performance.
answered Oct 10 by Neil Earnshaw Panel Member (22,400 points)