SUSPENSION OF WORK
 Contractors and subcontractors should consider the excellent advantages to be gained by suspending work on a contract.
Consider the situation where the subcontractor is supplying materials and doing the work on a contract and not being paid by the main contractor only to discover, that the main contractor is applying for interim payments and is receiving interim payments including amounts certified as being due to the subcontractor but not paying the amount over to the subcontractor and instead retaining such amounts because of his own cash flow problems.
The subcontractor is unaware of what exactly has been certified as being due to him and feels that he is totally at the mercy of the main contractor.
Most of the time, the subcontractor is at a loss as to what to do. Very often non-payment results in the subcontractor declaring a dispute and wanting to take the matter to arbitration. That is the worst option. Arbitration is an excellent mechanism to solve a dispute where there is a genuine dispute between the parties. Most of the time however there is no genuine dispute and rather, it is the main contractor looking for excuses not to pay his subcontractor. Arbitration is a wonderful tool for creating delay.
The institution of a Court action is certainly not a speedy solution either. A more creative solution simply has to be looked for by the subcontractor.
An excellent tool which can be used is suspension of the work without cancelling the contract.
Provided the subcontractor suspends work properly and correctly in accordance with the terms of the contract then he places the main subcontractor in a major dilemma. On the one hand the main contractor cannot bring another subcontractor onto site because the first subcontract has not been cancelled. On the other hand the main contractor cannot proceed with the contract without the cooperation of the subcontractor. The main contractor therefore has the embarrassment of having to explain to the employer and to the principal agent why the work has been suspended. Of course this is especially embarrassing for the main contractor if the principal agent has certified payments for the subcontract work.
The JBCC nominated subcontract document specifically provides that after giving notice, a subcontractor may suspend the work if the principal agent fails to issue a payment certificate; or the contractor fails to pay the amount certified. There are provisions in the JBCC nominated subcontract document which obliges both the main contractor and the principal agent to notify the subcontractor of the amounts which are certified.
It is important for the contractor or subcontractor to energetically exercise his rights about being informed of what is being certified as an interim payment. If he fails to comply then the contractor / subcontractor may suspend work.
Of course, as I have already said, if it is the main contractor who is holding back the money then, by suspending the work the main contractor is exposed.
Here are some simple steps to observe in order to be sure that he is able to exercise this very valuable tactic of suspending the work without losing the contract:-
1. AT THE TIME OF CONCLUDING THE CONTRACT / SUBCONTRACT
If it is part of the contract / subcontract that the JBCC 2000 Terms and Conditions will apply then at least fill in some of the information on the schedule of the JBCC Contract. The blank places for completion are in Section 42 and at least fill in the name of the employer and the name of the principal agent.
2. MOVING ON TO SITE
Create a presence on site. Appoint a site representative in terms of clause 6 of the JBCC document. Give written notification to all the parties, especially the contractor, the principal agent and the employer of the name of the site representative. Secondly, establish a temporary office, workshops and storage of plant and material, even if the office is tiny. The important thing is to create a presence on site.
3. PAYMENT DIFFICULTIES
When payment difficulties begin seek professional legal assistance to make sure that a paper trail is created. Proper notice must be given of the concerns about the failure to issue payment advice statements. Similarily the principal agent must be bombarded with notices of his duty to notify a subcontractor of amounts included in his payment certificates for the subcontract work.
Once the paper trail has been firmly established then it is safe to move to the next stage and that is to give formal notice of the intention to suspend the work. At that stage it must be brought very pertinently to the attention of the employer and the principal agent that the contractor / subcontractor is not cancelling the contract. It must be clear that the contractor / subcontractor is holding everyone to the terms of the contract / subcontract document and all that is happening is that the work is being suspended.
It must also be made clear that because the work is being suspended and there is no cancellation of the contract, no other contractor / subcontractor may be permitted on site.
4. DURING THE SUSPENSION PERIOD
Keep a site agent on site. Maintain your offices and storage area on site. In other words maintain your presence on site.
Have a competent attorney who understands these matters on standby to take immediate action with an urgent application to court for an interdict the minute you observe that any other contractor has come on to site to take over your contract.
Make sure your Association are fully aware of the suspension of the works so that they are in a position to come down hard on any of its members who go onto site during the suspension period.
Finally do not accept some or other token payment. Make sure that you are paid everything before you lift the suspension.
This article was submitted by:
Attorney Tim Pearce
Pearce, du Toit and Moodie
www.pdtm.co.za |
