Unfair Omissions - Penny Wise, Pound Foolish?

There is nothing worse than believing that you have contracted to pay a price for something which you subsequently discover, or are advised, is too high. Contractors are faced with this dilemma on a regular basis. They may look at Sub-Contractor A's rates for a particular item of work and think "I know that I can get that work done cheaper by Sub-Contractor B". An idea then forms. "Why not omit the work from Sub-Contractor A and place an order with the cheaper, Sub-Contractor B?" This sort of thing happens every day up and down the country, often without challenge, but is it allowed?
The short answer is no. It is illegal to do this unless Sub-Contractor A has requested the Contractor to give the work to somebody else because, for example, Sub-Contractor A has a labour or material resources issue or where the Sub-Contract terms expressly allow this action. So let's be crystal clear about this...
 
A Contractor cannot unilaterally take work off one Sub-Contractor and pass this to another Sub-Contractor purely for economic reasons.
 
Under English law, parties are generally free to contract on whatever basis they choose and a party that then finds it has made a bad bargain is stuck with the consequences regardless of how financially painful that might prove to be.
 
So, if this is the case, why do the standard forms of Sub-Contract have provisions for valuing omissions if they are not allowed? The answer to this question is that omissions are allowed and the rules apply to allow a party to cancel work that will not be carried out by anybody. Such rules have to be present because in the absence of such provisions, the omission of the work, for whatever reason, would then amount to a breach of contract. But let's be clear about this....
 
The rules in standard forms of Sub-Contract which relate to the procedure for valuing omissions cannot be used as a "back door" method to switch work from one Sub-Contractor to another for economic benefit.
 
A Contractor who attempts to omit work from Sub-Contractor A in order to pass the same work to Sub-Contractor B for financial gain is committing a fundamental or, in legal-speak, a repudiatory breach of contract which Sub-Contractor A may choose to accept, bringing the Sub-Contract to an end and leaving the Contractor liable to pay damages to Sub-Contractor A arising from the Contractor's wrongful omission.
 
So, if your are a Sub-Contractor, don't put up with a Contractor transferring your work to somebody else unless it suits you and please, please, please don't be tempted to sign a Contract that expressly permits a Contractor to do what common law would prevent!
 
And, if you are a Contractor, resist the urge to swap work from one Sub-Contractor to another in order to save a few quid as to do so will be, as my Granny used to say, penny wise and pound foolish!  
 
Peter Vinden

Peter is an experienced professional in the construction industry with particular expertise in quantity surveying and the commercial management of contracting organisations. 

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