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Construction Law/Back Charging Costs onto the Sub Contractor

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Question
We are in a back to back subcontract with an international main contractor in a design build project. The Contract contains clauses that allow main contractor to carry out any part of the work and back charge the cost from the sub contractor in specified cases after serving the appropriate notice.

On request by the Employer, the main contractor instructed the sub contractor to cease the work on four buildings (not started yet) due to an alleged poor quality by sub contractor on the false ceiling of the executed buildings and also due to delays encountered in the project, mainly due to design changes made by Employer. Main contractor also informed the sub contractor that he will procure the four buildings by giving it to other sub contractors and will back charge the costs on the sub contractor.

The main contractor went ahead and appointed the new sub contractors and informed the sub contractor of the new costs, except that these costs are triple the original price, a difference of tens of millions of Qatari Riyal. Sub contractor rejected both the unjustified decision by the main contractor and also the costs.

Are these back charging clauses an open cheque to the main contractor, such that he can appoint any other sub contractor at any price.

Answer
Dear Raed,

Thank you for this question.

This is a difficult situation and much more information is needed than you have been able to provide. The main contractors rights will depend upon whether it has given proper notices. Also if the four buildings are the subject of four different contracts within the sub-contractor then each must be considered separately.

I note that work has not yet started to four buildings. Unless those are part of one contract which is already underway, the main contractor cannot terminate for defective performance; even then I suspect that the reasons would not allow the main contractor to claim back the level of costs that you are indicating.



I hope that this assists you.

Kind regards,
John Dowse

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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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