NEC ECC: What if a defect by subcontractor 1 causes a defect to Subcontractor 2 - who pays?

NEC3 and NEC4 Contracts General
1

Here is a scenario with lets say everyone working under option A contracts.

Subcontractor 1(S1) has to install equipment X which they have done.

Subcontractor 2 (S2) has to install their kit after S1 and their specification states it has to be more than 300mm from kit installed by S1. They have installed equipment Y 350mm from kit X.

One month later turns out equipment X is wrong equipment and has to be replaced. S1 is given an instruction to correct this defect which will be at their cost. They reinstall correct equipment which is now bigger than original. Installed equipment X is now only 150mm from equipment Y, the 350mm requirement is in S2 Scope not S1 Scope. S1 has corrected their defect at their cost. However, equipment Y is now non-compliant and Contractor will have to give an instruction to S2 to move equipment Y by at least 150mm. This will be a compensation event to S2 that they will recover from the Contractor.

How can the Contractor recover that though against S1?? I am not sure they can, and if it was REALLY expensive to move it would that be fair on S1, even though I get it is not really fair on the main Contractor either?

2

Your analysis is correct. Contractors often include Z clauses in their subcontracts to introduce the right for them to be able to recover additional costs / losses in the way you describe.

Fairness doesn’t come into contracts, not even NEC ones! Contracting parties are free to sign up to whatever contracts they like provided it isn’t illegal.

The question we should really be asking is why wasn’t the Contractor supervising what S1 was doing to ensure they didn’t install the wrong equipment in the first place?