Sub-contracts—stepping down a building contract
Sub-contracts—stepping down a building contract

The following Construction practice note provides comprehensive and up to date legal information covering:

  • Sub-contracts—stepping down a building contract
  • General points to consider in creating a step-down
  • Types of clauses to be included in the sub-contract
  • Avoid gaps in liability
  • Change party references as appropriate
  • Terminology
  • Consider each provision individually
  • Consider the options in relation to each risk
  • Key considerations for the contractor
  • Stepping down time periods
  • More...

Sub-contracts—stepping down a building contract

This Practice Note looks at the process of producing a construction sub-contract, often referred to as ‘stepping down’ a building contract. It looks at key considerations in the process of producing a ‘step down’ (also sometimes called a ‘flow down’), including some potential pitfalls to avoid and some particular issues that need to be considered/addressed.

The majority of the industry standard form building contracts publish accompanying sub-contracts, however, where the employer and contractor have entered into a bespoke building contract, a form of sub-contract must be prepared from scratch to align with the building contract.

When the building contract is stepped down, the contractor’s rights and obligations under the building contract are passed on to the sub-contractor so that the contractor’s obligations under the building contract become—to the extent relevant and with appropriate adjustment—the sub-contractor’s obligations under the sub-contract. This enables the contractor to fulfil its obligations at building contract level through the performance of the sub-contractor under the sub-contract.

For more about sub-contracts in general, see Practice Note: Sub-contracting in construction projects.

General points to consider in creating a step-down

Types of clauses to be included in the sub-contract

In general terms, three types of clauses will need to be included in the sub-contract:

  1. clauses that are in the building contract and that are passed down in their entirety (usually boilerplate clauses eg compliance with

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