Default Termination For Subcontractors Part 1
In the construction industry, most properly drafted construction subcontracts identify the contractor’s right to terminate the subcontract upon the default of the subcontractor. In most cases, the specific events and circumstances that constitute as a default are itemized in the subcontract. As Florida construction lawyers, we know there are many reasons that can result in a subcontractor defaulting on a project. To view the second half of this article, please visit Part 2.
A subcontract might include that the subcontractor will be held responsible for any defaults if:
- They fail to perform the work in a timely manner
- They fail to to perform work in a safe and skillful manner
- They fail to supply competent supervision
- They fail to provide the correct number of skilled workmen
- They fail to supply the proper materials and equipment
- The fail to correct defective work in a timely manner
- They fail to compensate their sub-subcontractors or suppliers
- They fail to stay on track with the project schedule
Opportunity to Correct the Default
Most properly drafted subcontracts will provide the subcontractor with the opportunity to correct the default before the contractor is able to exercise their right to terminate the subcontract. Default termination is not an option that is invoked lightly, as it’s the construction industry equivalent of capital punishment. Additionally, it’s recommended that alternatives to termination be considered in advance, as well as be mentioned in the subcontract. Termination is an extreme act and should not be the contractor’s sole option when dealing with their subcontractor’s default.
Failure to Correct the Default
Though it’s suggested that contractors give subcontractors an opportunity to correct a default, as Florida construction attorneys, we know that a subcontractor may refuse or fail to correct the default within their specified time frame. If that is the case, there are a few steps contractors can take to protect themselves:
- Supplementing the subcontractor’s workforce
- Hiring a second subcontractor to take over part of the work
- Make direct payments to the subcontractor’s material suppliers, sub-subcontractors, and laborers
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.