Liable for (prescribed) subcontractor?

Construction companies cannot do without it, but it is also a source of practical and legal problems: subcontractors. In this article, in a nutshell, the division of liability between the principal, the main contractor and subcontractors.

Normal arrangement

The basic principle is that the contractor performing work for a principal undertakes to create and deliver a so-called work of a material nature outside employment. Any liabilities are simple: the principal can hold the contractor liable directly.

Liability of-and for-subcontractors

If the contractor chooses to have part of the work performed by a third party, the so-called subcontractor, the main contractor remains liable to the client for the entire work. The client can claim against the main contractor directly. The liability of the main contractor is therefore independent of whether the liability has arisen as a result of acts or omissions of the main contractor or subcontractor. The main and subcontractor must settle the mutual liabilities; the principal is not involved in that.

Yet this route does not always make sense. Consider the situation where the main contractor becomes insolvent. Then it is practical to be able to hold the subcontractor directly liable. But no agreement arises between the principal and the subcontractor.

Direct claims against the subcontractor

The principal is not completely empty-handed towards non-performing subcontractors. It is established case law that the subcontractor must, within certain limits, take the interests of the principal into account. If he fails to do so, the subcontractor may be committing an unlawful act, which provides a ground for liability. Nevertheless, this route will be a lot trickier than the regular liability route and thus will not always yield a successful outcome.

Principal liability for the prescribed subcontractor

It is not always the case that the main contractor himself chooses to work with subcontractors, or can pick out these parties himself. It regularly happens that a principal ‘imposes’ a subcontractor, known as prescribed subcontractors.

For a contractor, this situation is not ideal; he usually does not know the prescribed subcontractor, and often these prescribed subcontractors have a close relationship with the client. Yet the contractor does have liability for these parties.

A way out of this situation is offered by declaring the so-called Uniform Administrative Conditions for Construction applicable, in particular Section 6(27) of these UAVs. This states, among other things:

“If the prescribed subcontractor or supplier does not perform, does not perform in time or does not perform properly, and the contractor has done what is reasonably necessary to obtain performance and/or compensation, the principal shall reimburse the contractor for the additional costs incurred by the contractor, insofar as they have not been reimbursed to him by the subcontractor or supplier.”

The UAV thus provides a way out for the performance of prescribed subcontractors to be borne by the principal. This is not a free pass to offload all liability. However, the main contractor must make efforts to induce performance by the prescribed subcontractors. The regulations do not prescribe exactly when this is met, but case law assumes that the contractor need not go so far as to litigate against the subcontractor. If the contractor can prove that it has repeatedly served notice on the subcontractor, for example in e-mails and in the reports of work meetings, then this requirement is usually met.

Any questions?

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