Problem: I have a big problem – I am the Managing Director of a specialist contractor and we have just been contra-charged a total of £197,859!
We left the site in late September 2013, but we had told the main contractor well in advance of our intentions. We was expecting a large payment due on 11 October 2013, however we have now been advised of this contra-charge which is apparently for works put right by a third party.
The main contractor has not contacted or informed us to give us the chance to correct the works, and only given us 2 / 3 days’ notice about being contra charged.
Also, we were meant to sign a contract, however the main contractor’s solicitors never provided us with the contract during our time working with them.
Where do we stand as a company?
Mendip, Coalville
Response: Hello Mendip. Regardless whether you signed a contract, you would have entered into a binding agreement simply on the basis of the conduct between you and the main contractor (i.e. you commencing work and the main contractor allowing you access and (presumably), making interim payments). However, the problem is determining what terms are incorporated into your contract (expressed or implied terms or a mixture).
That said, either the Housing Grants, Construction and Regeneration Act 1996 or the Housing Grants, Construction and Regeneration Act 1996 as amended by the Local Democracy, Economic Development and Construction Act 2009 will be implied into your contract with the main contractor. Whichever Act applies, your contract must have an adequate mechanism for payment which means that you will be entitled to regular interim payments plus, if the main contractor wishes to make a deduction from an interim payment, it must issue a timeous notice stating the grounds and setting out the sum to be deducted. If the main contractor fails to issue such a notice on time, it cannot make any deductions (save under the old construction act where it could abate the price).
If the main contractor failed to make payment, you would then be entitled to issue a 7 day notice to suspend performance and if on the eighth day no payment had been made, by issuing a further notice you could suspend operations. However, my big concern is that it appears you have simply left the site without serving the requisite notices or entered into an agreement that can be evidenced (i.e. a signed agreement or a signed instruction from the main contractor).
I therefore suspect that the main contractor will assert that you have abandoned the work which is a repudiatory breach of contract, thus allowing it to accept the wrongful repudiation and bring the contract to an end, complete the work and pursue you for damages. In such circumstances, you are not entitled to be given an opportunity to correct any defects.
Due to the amount that is in contention, I strongly urge that you seek professional advice as quickly as possible.
Good luck.
© Michael P. Gerard MSc, PGDipLaw, PGDipBar, FCIOB, MCIArb, MAE
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.
Author background
Michael is a Barrister, Chartered Builder, Registered Adjudicator & Accredited Expert in quantum and planning matters. He is Managing Director of Michael Gerard & Co www.michael-gerard.co.uk, a company of chartered building consultants and quantity surveyors who provide a specialised service in the areas of construction law, quantum, programming, business recovery and insolvency support to the construction industry. Michael is also a consultant with Silver Shemmings LLP, a London practice of solicitors specialising in construction.