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Construction Law/Does Notice of demobilization to subcontractor tantamount to notice of Contract termination?

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Question
Mr. Peralta,

Subcontractor committed a breach of contract. Client issued a notice of demobilization instead of a notice of termination of the subcontract to the subcontractor. During the meeting for the final settlement, Subcontractor claims that no notice of termination has been made therefore the latter is still entitled to payment for the idle time up to the present time. Now, contractor claims that the notice for demobilization already tantamount to notice of contract termination due to the subcontractor's breach. Does Notice of demobilization to subcontractor tantamount to notice of Contract termination? Construction Setting: KSA
Thank you."

Answer
Dear Bryan,


You did not mention the form of contract you are using. My comments will be general in nature.

Is there an existing Termination of Subcontract mechanism in the subcontract?

Notice of Demobilization is not the same as Notice of Termination. However, this depends on what is written in the notice of demobilization. An argument can be raise as to what was the reason and intention for the issuance of Notice of Demobilization to the Subcontractor. If the tenor of the issued Notice of Demobilization suggests termination then it may be considered as a termination notice.

If there's an existing termination mechanism defined in the Contract then that should be followed by the Parties involved in the subcontract. To practice the rights of terminating a subcontract, Parties should be guided by those conditions and mechanism.

Hope the above helps.

Regards,

Jonathan L. Peralta

Construction Law

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Jonathan L. Peralta

Expertise

Questions relating to construction claims, Extension of Time, Variations, Interim Payment and delay analysis under FIDIC Form of Contracts.

Experience

Experience in the following sectors: buildings, residential, infrastructure, civil and marine works. Have worked for different international contractors in Myanmar, Vietnam and the Philippines.

Organizations
AACEI, U.S.A., Dispute Resolution Board Foundation,U.S.A., ASCE, U.S.A., PICE,Philippines

Education/Credentials
Bachelor of Science in Civil Engineering, Registered Civil Engineer in the Philippines

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