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Construction Law/Subcontractor rights under the contract


Dear Sir,
We are about to enter into a subcontract for road construction with the main subcontractor from Europe. As you are aware subcontracts are all drawn up one-sidedly leaving not enough room for the subcontractor to take actions against the contractor. And the Subcontract we have been offered to sign seems to me as butchered contract from which important clauses for the benefit of the subcontractor are omitted. Thus my attention is what are the main clauses the Subcontractor shall draw its attention, I can say, subcontractor protecting clauses. Are there any FIDIC subcontracts we can utilize or look at? We are little experienced in this area.
thank you

Dear Mr Asilbek,
Even though you may be a subcontractor (or even subcontractor's subcontractor)in a overall project, your contractual relationship with your main contractor is similar to that of a client-contractor relationship. in this case, the main contractor happens to be your client.
There is no subcontractor model in FIDIC. But as you said, there should be additional clauses in a subcontract to protect the mutual interests of main contractor and sub contractor.

Very importantly the following cases to be addressed:
1. Insurance
who will take the insurance? This has a link with your contract price also if you need to take insurance. if you take the insurance, what is the role of main contractor and how the client is compensated?
2. The term 'back to back'
By using this term in subcontracts, the main contractors simply transfer all risks to the subcontractor and the main contractor becomes an agent between the client and subcontractor. Do not accept any such term called back to back
3. payment terms and duration
In a back to back contract, the main contractor need not pay you until client clears the payment to him. His payment may be on hold due to various other reasons (including the performance of other subcontractors). unless it is proved that the payment delay is due to your work, your payment should not be linked or stopped by the main contractor. you need not have the same payment cycle duration. Because the financial capacity of main contractor can be much more than a subcontractor and he can afford to longer time after submitting the bills.
4. Normally the client has a clause in the main contract that if the main contractor is terminated, he should be able to continue the services of subcontractors by directly hiring them or putting them under some other main contractor. Your contract with main contractor should reflect the same theme and should not prevent you from continuing in the project.
5. contract model
Try to use the same contract model (between the client and main contractor) for your contract also (with main contractor). it is easy for operational convenience like measurement, evaluation etc. But it need not the same always.
6. Defects liability period
The main contractor may have a larger spectrum of works which may need longer defects liability periods. you need not agree to the same duration for your part of work.

I have given few major items and the list could be more if you can go through the main contract. Or you may refer to the earlier contracts between your company and major clients for more clarity on local laws that protect the mutual interests of contracting parties.
Hope I have clarified adequately.
---r sivaraman

Construction Law

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