Skip to content

Risky Business

Question

We are planning a top end residential development and are keen to use a particular European contractor for certain finishes. However, this contractor refuses to work as a sub-contractor and is insisting on being directly employed. We don't want to go down a construction management procurement route and are considering relying on clause 2.7 of the JCT Standard Building Contract as regards the finishes work. Are there any particular risks associated with this approach?


Answer

Clause 2.7 of the JCT Contract requires the main contractor, subject to certain safeguards, to allow third party contractors on site to carry out work which does not form part of the main contract works. The clause 2.7 procedure is tried and tested, but it is not without risk.

It is almost always in an employer's best interests to enter into a single main contract which covers the entirety of the works to be carried out: the main contractor takes full responsibility for the entirety of the works, and is responsible for dealing with and resolving any issues or disputes which may arise with or between any sub-contractors. So, if a sub-contractor damages work carried out by the main contractor or any other sub-contractor, or causes delay to any other parties, the responsibility for dealing with this normally rests with the main contractor.

If clause 2.7 is used, the main contractor has no responsibility for, and no control over, the third party. The employer has to enter into a direct contract with that party and, for the purposes of the JCT main contract, that third party is an "Employer's Person". This means that the employer is responsible to the main contractor for the acts and omissions of the third party (and vice versa). So, if the third party damages the main contractor's work, or delays the main contractor, this is at the employer's risk. The main contractor will have a claim against the employer, and the employer will, in turn, have to claim against the third party.

This arrangement therefore exposes the employer to the risk of involvement in issues and disputes arising between the main contractor and the third party.

There are often practical problems on site, involving clashing access requirements, programme clashes, and difficulties over the co-ordination of work and the integration of the third party's product into the overall works. All of these potentially expose the employer to possible claims by the main contractor or the third party.

The increased risk of the clause 2.7 approach can be reduced (but never totally removed) in a number of ways:

  • Ensuring that the arrangements are back to back, so that the employer has the ability to pass one party's claim on to the other;
  • The two contracts should have a common contract administrator, to facilitate co-ordination between the two contracts and to avoid the risk of conflicting instructions; and
  • A detailed project protocol, covering issues such as liaison and co-ordination, co-operation between all parties, access to the site, and programming should be put in place and should apply to the designers, the contract administrator, and other consultants as well as to the main contractor and the third party contractor.

This article first appeared in Professional Housebuilder on 1 June 2016.

How to find us:
London Bankside

Bankside Office

240 Blackfriars Road
London
SE1 8NW
DX 53 Chancery Lane

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

London Mayfair

Mayfair Office

6 Grosvenor Street
London
W1K 4PZ

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Oxford

Oxford office

6 Worcester Street
Oxford
OX1 2BX

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Bankside Office

240 Blackfriars Road
London
SE1 8NW
DX 53 Chancery Lane

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Get directions

Contact us