Reduce your risk in the contractual jungle: FREE Issue Items ©

contractIt’s very common these days for customers to free issue some materials or plant that you would ordinarily supply under your contract. It’s sometimes necessary because of long delivery periods, when a contractor isn’t appointed, sometimes the customers motive is to save paying contractors overhead and profit on items. This can raise a myriad of contractual risk.

What if damage occurs while its being installed, or after, who’s responsible for costs and programme implications?Who’s responsible for off loading, storage, moving into position? What happens if the goods arrive late, who pays for standing/waiting time who’s responsible for co-ordination?Attending to defects during and after the contract completion

You position on the above will vary dependent on whether you are the Main Contractor, Sub-Contractor or Sub/Sub-Contractor.

The ECA suggested the following clauses be inserted;

(1)        Unfixed materials, equipment and goods on site
All unfixed materials, equipment and goods on site provided by the Main Contractor and intended for incorporation into the works by the Sub-Contractor shall be at the Main Contractor risk as regards any loss or damage howsoever caused.

(2)        Defects in materials, equipment and goods provided by the Main Contractor to a Sub-Contractor.
The Sub-Contractor will not be liable for rectifying or replacing defective materials, equipment or goods provided by the Main Contractor and incorporated into the Works by the Sub-Contractor.

During the course of the Works, any such rectifying or replacing will be ordered by the Main Contractor and the Sub-Contractor paid in accordance with the conditions in the Sub-Contract for valuing and paying for variations.

During the Defects Liability Period any such rectifying or replacing will be the subject of a separate agreement between the Main Contractor and the Sub-Contractor should the parties agree to entering into such an agreement.

Should the quantities of materials, equipment or goods provided by the Main Contractor be disproportionate to the requirements of the Works, the Sub-Contractor will not be responsible nor will he have responsibility for calculating quantities or bear the cost of waste.

Geraldine Fleming of Knowles Limited – the dispute resolution experts says.

As is the case with many contractual issues, the initial hurdles to overcome are: Is there a contract in place? and whose terms and conditions apply?

Ideally all contracts will include a clause similar to the ECA’s clause quoted above, however we suggest that the clause is enhanced to cover the other issues raised for example:

The Main Contractor is responsible for all unloading and distribution of goods within X metres of their final installed position.The Main Contactor is responsible for any consequential costs if the goods arrive either too early or too late when compared to the agreed programme.  Such costs include but are not limited to storage, standing time, preliminary costs, disruption and other delays caused to other Sub-Contractors in the project as a whole.The Main Contactor is responsible for ordering the correct amount of goods and making an appropriate allowance for wastage.  The Sub-Contractor is not responsible for the consequences for any over or under ordering.

The above clauses need to be considered on each and every occasion where free issue materials are involved to ensure that the Sub-Contractor is adequately protected if disputes arise.  Amendments may be required to suit your specific circumstances.  Obviously the same issues will arise up the line if it’s the client who’s buying the goods on behalf of the Main Contractor.

This is the next in a series of articles where we look at some ways you can reduce your risk in the contractual jungle. The articles are brought to you as collaboration between UK Estimating Support Ltd and Knowles Ltd.