Problem: Main contractor refusing to make payment
My company had a contract with a main contractor, which I terminated myself because the main contractor did not pay the company on time. Since termination, the main contractor continues to refuse to make any payment.
Prior to termination, the main contractor made a delivery of goods to my company’s yard, and I would like to sell those supplies to off-set the monies not paid. Can I do this?
Response: How was the contract terminated?
My first concern would be how you went about terminating your company’s employment under the contract / brought the contract to an end. Because termination is such a major step, it is paramount that you have terminated correctly otherwise the company has wrongly repudiated the contract, the result of which will place the company at serious risk of being pursued for damages for breach of contract.
I have not seen what terms and conditions you have signed up to, but it is unusual for a contract to include a term that allows the sub-contractor to terminate simply because a payment is late. There will be either a written term of the sub-contract that allows the company to suspend performance of its obligations should payment not be received by the date set under the contract or alternatively, such a term will be implied by virtue of the Housing Grants, Construction and Regeneration Act 1996 (as amended by the Local Democracy, Economic Development and Construction Act 2009), but the company only has aright to suspend work, not to terminate.
Even if the company had a right under the contract to terminate if payment was not received, it does not have a right to sell or use the goods that are stored in its yard – clearly, these goods do not belong to the company. You may have lien over the goods, but that would be the extent of any claim.
I would strongly recommend that you seek the services of a suitably experienced solicitor, whose first task will be to look at your company’s contract with the main contractor, and then the issue of termination, in order to see if the company is in repudiatory breach of contract.
© Michael Gerard 2018
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.