Construction Law/Advance payment

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Question
Sir,

I am working for a reputed construction company. We have not released advance payment to the subcontractor although he had submitted advance payment guarantee 2 months back. I wanted to know whether the subcontractor will be entitled for time and cost claims in such a case. Also whether the subcontractor can terminate the subcontract in case of non issuance of advance payment. Please note that there is no clause in the subcontract which specifies the timeline for payment of advance or the termination in case of non payment.

Please guide me on this matter

Regards

Answer
Dear Girish,

You do not mention the form of contract, nor the applicable law so the following comments will be generic.

I assume that you are in breach of contract due to your failure to pay the advance payment.  Under common law you are guilty of prevention (or Sharia law, unjust enrichment).  You must reinstate the subcontractor into the position that he would have been prior to your breach. The subcontractor could sue you through the courts, but that would be expensive and long.  What would you do, if the subcontractor suspended work or went slow or terminated the contract due to lack of funds?  Realistically, the subcontractor will be hurting and you have no lever to persuade him to work at a reasonable speed.  I work on the principle that prompt payment ensure good results.  

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Peter M. Elliott

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First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol www.eotprotocol.com before submitting a question.

Experience

Value . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
"We are too poor to buy something cheap"
.Romanian Proverb 2002
A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633)
I said it in Hebrew, I said it in Dutch,
I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
Match your presentation to the reader!
The joy of food lasts but an hour, of sleep but a day, of a woman, but a month, but the joy of a building lasts a lifetime. Syrian proverb.
Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

Organizations
Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

Education/Credentials
B Sc(Hons) in Civil Engineering

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