Subcontracting

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

  • Subcontracting
  • What is subcontracting?
  • When is subcontracting permitted?
  • What is the legal effect of subcontracting?
  • Liability of subcontractor for consequential loss of contractor
  • Liability of subcontractor to customer
  • Liability of contractor for subcontractors
  • Sector specific subcontracting

Subcontracting

This Practice Note examines the following legal and practical matters in relation to entering into a subcontract or when granting permission to subcontract:

  1. What is subcontracting?

  2. When is subcontracting permitted?

  3. What is the legal effect of subcontracting?

  4. Liability of subcontractor for consequential loss of contractor

  5. Liability of subcontractor to customer

What is subcontracting?

Although contractual rights and benefits generally are (subject to express contractual provisions to the contrary) assignable, contractual obligations or burdens are not. However, in certain circumstances contractual obligations or burdens may be ‘vicariously’ performed by way of subcontracting.

Subcontracting is the delegation by one party (the main contractor) of some or all of its obligations under a contract between it and a customer to a third party (the subcontractor) for performance by the subcontractor.

Where subcontracted performance is permitted, there is no transfer of the contractor’s liability under the main contract with its customer to the subcontractor. The contractor remains liable to the customer under the main contract for the non-performance by the subcontractor, even where the customer consents to the vicarious performance.

There is no privity of contract between the customer and the subcontractor. This means there is limited scope for claims by the customer directly against the subcontractor (some exceptions to this are discussed below).

As such, from the main contractor’s perspective, it needs to ensure that it has passed down all the relevant

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