The Employer and Subcontractor Essay

Introduction

The basic principle in contract law resonates around the notion that agreements must be legal. The primary idea gravitates around the conviction that the law does not sanction illegal actions. Precisely, contracts are based on aspects that are enforceable by courts. Additionally, if a provision in a contract goes against the laws of the land, then such a contract would be deemed void. Employers and Subcontractors play different roles in construction activities. The roles and the responsibilities of Employers and Subcontractors often vary depending on the statute/s that are used. The change in duties is more significant when the contract designation is altered from being executed by a domestic to a nominated contractor.

As already indicated, the issue under review centers on how roles and responsibilities change between the Employer and subcontractor under the FIDIC rules in comparison with the UAE civil code and the English common law.

FIDIC Red Book

As a balanced contract, FIDIC 1999 present an avenue where justice is obtainable since it bars injustices from taking place. An Engineer or an Employer cannot impose a subcontractor on a contractor. Based on sub-clause 5.2, a Contractor is under no obligation to select a nominated sub-contractor.¹ However, the case only holds if the contractor raises reasonable objections against such a move. If a Contractor is dissatisfied, filing a notice at the soonest possible time detailing the reasons for the objection is necessary. An objection is seen as reasonable if it arises based on several issues. However, if the Employer guarantees to indemnify the Contractor, then the former is allowed to appoint a sub-contractor.

The subcontractors are under an obligation to indemnify Contractors against all forms of negligence that may occur.² In addition, the subcontractor compensates for the misuse of resources by a nominated sub-contractor. Misuse as that attributable to the workers, agents, and any employees of the nominated subcontractor should also be met. Based on the issues reflected above, the subcontractor assumes the responsibility of meeting additional liabilities that emerge.

In practice, a subcontract may not specify several aspects of construction. As an illustration, a nominated subcontractor would undertake the subcontracted work and execute it in a manner that allows the Contractor to carry on work without incurring additional liabilities. Put differently, the nominated subcontractor is expected to allow the Contractor to execute the contract without any glitches.

Regarding indemnification, compensating the contractor extends to all obligations and liabilities that are described in the contract and any consequences that may follow. When a nominated subcontractor fails in certain aspects, the subcontractor incurs losses that are attributable to the mistakes.

Put in more precise terms, when subcontract provisions never provide for indemnity to the Contractor against the subcontractor for failing to fulfill certain obligations, the Contractor is not obliged to work with such Subcontractors. However, when the contract includes such indemnity provisions, the Subcontractors are held responsible for all acts attributable to them. This implies that the subcontractor will be required to meet extra costs as in such contracts, the Contractor is relieved the responsibility to the Employer regarding the subcontracted work.

Based on sub-clause 5.2, the role of an Employer to appoint a subcontractor is limited when the former nominate a contractor.³ This holds since the contractor has no obligation to accept the nominated subcontractor. Since such is possible when the contractor does not raise questions, then the employer has a role of influencing the direction of a project although he/she soldiers the responsibility of added costs. However, the use of a domestic subcontractor limits the responsibility of the Employer. A domestic subcontractor executes the work as demanded by the contractor and this may deny an Employer much influence.

Concisely, when a Contractor employs a nominated Subcontractor, the Contractor assumes the responsibility of the actions of the Subcontractor based on the provisions of sub-clause 4.4. However, such may not hold in instances where Subcontract provisions provide for indemnity to the Contractor. The latter case places demands on the Subcontractor to cater for any additional costs.

Under the FIDIC provisions, sub-clause 59.1, a contractor is obliged to work with nominated sub-contractors. Clause 4.1 provides for the whole aspect of subcontracting. On such evidence, the contractor is responsible for all actions that the subcontractors carry out. In such a case, the nominated sub-contractors are deemed to carry the same responsibilities as domestic subcontractors. Under clause 4.1, a contractor holds the entire responsibility for the actions of subcontractors. However, sub-clause 59.2 offers conditions under which a contractor would seek indemnity.

UAE Civil Code

Under the UAE Civil Code, it is common that a contractor may subcontract parts of the work being done to other contractors or subcontractors. Subcontracting is necessary due to various reasons. As an illustration, certain aspects of work may require specialists or experts in specific fields. If the main contractor cannot offer the required services, then subcontracting from firms that specialize in such would be important. In addition, a Contractor would expect to spread the risk by letting other contractors execute some tasks.

Just as the FIDIC provisions, the UAE Civil Code allows Contractors to sub-contract partially the work being undertaken. The main difference lies in the fact that under the UAE Civil Code, the Contractor has the power to subcontract wholly the work. However, this may not hold if the initial contracting terms do not provide for subcontracting or restrict the extent to which subcontracting should be done. By way of illustration, the initial contract between a Contractor and the Employer may place demands that the latter should solely do the work. Under the UAE Civil Code, sub-contractors have no rights against the Employer. ⁴

The Contractor and the Subcontractor deal with all matters that pertain to subcontracting. Put simply, the rights and liabilities that emerge due to subcontracting remain an issue between a contractor and the subcontractor. It is important however to note that in the UAE, Employers often request specialist sub-contractors. This establishes a direct link between the subcontractor and the Employer in regards to the quality of the subcontracted work. Despite such a possibility, the subcontractor does not have any direct rights against an Employer.

Assessing the provisions of the FIDIC rules against the UAE Civil Code, a contractor is required to obtain the consent of an Engineer before getting approval to sub-let or sub-contract any part of work.⁵ Further, a Contractor remains responsible for any defaults that arise based on the role of all subcontractors. Under the FIDIC rules, subcontracting is limited to parts of the work. Failure to honor the provisions of the subcontracting restrictions has serious ramifications since the Employer reserves the right to stop the contract.⁶ Based on these observations, the UAE Civil Code differs from the FIDIC rules, as the subcontractors are relieved of any form of liability while executing assigned duties.

English Common (UK) law

In construction contracts, the subcontractor is under an obligation to defend and indemnify a contractor. Such provisions are found in the Oregon statute (ORS 30.140). The provisions of the statute demand that a subcontractor cannot defend or indemnify a Contractor in cases of a loss that is attributable to the actions of the Contractor.⁷ When a nominated subcontractor replaces a domestic subcontractor, the roles slightly differ.

Under common law, a contractor has the right to demand indemnity against subcontractors when defects emerge. However, to get compensation, the contractor in question must prove that between the two parties, the latter was at fault. The requirement implies that although the contractor is liable to the subcontractor, the former must prove that his/her liability is only secondary while that of the latter is primary. In this regard, a contractor would for instance argue that the subcontractor is the one that did the work. Hence, subcontractors have a role to play in settling additional costs although this is limited to a certain extent as it depends on the Contractor proving misuse or misconduct on the part of the former.

Under the English Common Law, a contractor seeks the services of a domestic subcontractor to execute given tasks. However, under given contracts, an architect or a supervising officer has the right to approve or disprove those picked for subcontracting. Although the contractor has a right to use nominated contractors for individual gain, the former must provide supporting facilities to the latter. The appointment of nominated subcontractors facilitates the establishment of a direct association between the Employer and the subcontractor.

As the above point illustrates, designating a nominated subcontractor paves way for a direct engagement. Based on this realization, the subcontractor has a responsibility to execute all duties outlined in the contract provisions. Hence, the subcontractor has the responsibility of offering services as demanded by the Contractor. However, any liability that emerges due to misconduct on the part of the subcontractor places an additional responsibility on the latter to meet additional costs.

Under English law, an employer is under an obligation to re-nominate when a nominated subcontractor defaults. Given such circumstances, the Employer is entitled to specify another subcontractor as a replacement.

Conclusion

Occasionally controversy encircles contract execution. Nonetheless, legal provisions play a crucial role in solving such issues. Even if the rules do not vary extensively, differences are visible. As illustrated, under common law, the roles and responsibilities of a subcontractor and an Employer do not change based on alteration of designation from domestic to nominated subcontractor. However, under UAE law, the subcontractors have no responsibility to bear any additional costs. Under the English common law, the subcontractor is required to offer requested services and meet any additional costs that emerge in case of breach of the agreement.

Bibliography

International Federation of Consulting Engineers, Conditions of Contract For Works of Civil Engineering Construction, International Federation of Consulting Engineers, New York, pp. 10-20.

McKendrick, E, Contract Law – Text, Cases and Materials, Oxford University Press, London, pp. 171.

Terterov, M, Doing Business with the United Arab Emirates, GMB Publishing Ltd, London, 2006, pp. 100-10.

Whelan, J, The Civil Code of the United Arab Emirates: The Law of Transactions of the State of the United Arab Emirates, Kluwer Academic Publishers Group, London, pp. 334-400.

Footnotes

1. International Federation of Consulting Engineers, Conditions of Contract For Works of Civil Engineering Construction, International Federation of Consulting Engineers, New York, pp. 10-20.
2. Ibid.
3. Ibid.
4. J Whelan. The Civil Code of the United Arab Emirates, The Law of Transactions of the State of the United Arab Emirates, Kluwer Academic Publishers Group, London, pp. 334-400.
5. M Terterov. Doing Business with the United Arab Emirates, GMB Publishing Ltd, London, 2006, p. 100-10.
6. Ibid.
7. E McKendrick, Contract Law – Text, Cases and Materials, Oxford University Press, London, 171.