The following Construction practice note produced in partnership with CMS provides comprehensive and up to date legal information covering:
most importantly, a contractor needs to keep alert to the employer's financial status
the contractor should take heed of ongoing rumours about the employer's financial position (either in the press or by word of mouth)
look out for official announcements to shareholders/the stock market (for example, profit warnings)
note any surprising or uncommercial omissions from the project made by the employer
keep aware of the employer's non-payment or late payment of other parties on this project, or on other projects being carried out by the employer
clearly, if the employer suspends work on the scheme without any adequate explanation or without commercial rationale, this may be a sign that the employer is unwilling to finance further work
confirm suspicions by carrying out a Dun & Bradstreet search/report, which should disclose, for example, any unsatisfied court judgments against the employer
If the employer is insolvent, see Checklist: Contractor steps to take if employer becomes insolvent—checklist.
There are various ways in which a contractor can protect itself in advance against the risk of an employer becoming insolvent during the course of a project. Other than the specific items going towards the security package which a contractor might wish to see put in place (see below)
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