Compliance with the “back-to-back” principle is particularly difficult if a contract evolves dynamically on at least one side, i.e. if service contracts or other contractual conditions are still in limbo or are being negotiated. Here you may need to make the appropriate adjustments on the other side of the contractual relationship, if necessary or desired by the other party. There is no one-size-fits-all solution to the various possible pitfalls associated with consecutive contracts. Regardless of the approach chosen to draft consecutive contracts, the decision should never be based on the intention to shorten what should necessarily be a rigorous drafting process. Both prime contractors and subcontractors will have every interest in ensuring that the subcontract is properly drafted. In addition, for a number of subcontracts, the main contractor must ensure that its main contractual obligations are properly shared between the different subcontractors and are not untnowingly omitted. GCVpresencementsTerms of dispatchconditions of purchaseConditions of purchaseCompany contracts managementSuring contract contracts concluded by which a prime contractor transfers his obligations and responsibilities to the employer to his subcontractors is becoming an increasingly common feature of construction projects. While they can be a practical way to transfer risks and obligations throughout the chain of responsibility, inadequate wording can lead to particularly complex and difficult disputes. A common feature of consecutive contracts is the provision that payment to the subcontractor is subject to receipt of payment by the prime contractor under the main contract. However, such “payment at the time of payment” clauses are not enforceable in construction contracts under the laws of certain jurisdictions, including England and Wales and Singapore. Sometimes a “certified payment” clause is considered an appropriate compromise, if not also prohibited in the relevant jurisdictions, as will soon be the case in England and Wales.
Although such clauses are not prohibited by applicable law, they are often rejected by subcontractors who expect to be paid once their obligations under the subcontract are due, regardless of the position higher up the chain. So there are clear benefits for entrepreneurs to implement consecutive agreements. In practice, however, it can be difficult to conclude revaluation agreements. Especially when “large” suppliers have to act as subcontractors, the desire for “back-to-back” often remains unfulfilled. Because the “big ones” are often not willing to negotiate contracts with “small” general contractors individually. This does not necessarily mean that cooperation cannot work. However, you should compare the terms of the contract on both sides and check what risks this entails for you and whether they are acceptable to you accordingly. Ultimately, in these cases, it`s also about weighing business opportunities wisely against legal risks.
In a consecutive plan, a dispute between the prime contractor and the employer is likely to have a material impact on the relationship between the prime contractor and the subcontractor, and vice versa. In this bulletin, we discuss the main reasons why consecutive contracts can be particularly contentious and the main drafting issues that need to be considered and addressed in order to minimize the risk of litigation. .