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Set-off and contras

In many cases, says Barry, the veiled threat of adjudication is enough to cause a bullying contractor to ‘back off’. So, stand up for your rights – don’t just accept what the contractor says.

AS many of you’ll know I’m currently the current author of the 4th edition of ‘The Streetwise Subbie’, available at all good book stalls, or at a discount from our website.

In the Third Edition Jack said:
Some builders have a policy of recouping their losses by setting off money from their subbies. Out of the blue comes a letter from the builder blaming our unfortunate subbie for the project delays and informing him that the costs of liquidated damages and the builder’s own prelims costs will be deducted or ‘set off’ from the next payment due
Sadly, that situation has become ever more prevalent, and it seems the only way some contractors can return a profit is to beat it out of their subcontractors. Of course, not all contractors operate in this way, but let’s just say there’s not a week goes by when we’re not advising our exclusively subcontractor clients about such unfair treatment.

A good time to tackle these problems is during the ‘tender to order process’ when you have the opportunity to review and negotiate the sub-contract conditions.

Many set-off clauses (ie as found on the contractor’s own onerous forms) are a ‘license to print money’. Most major contractors have clauses entitling them to deduct set-off for future estimated costs that may or may not actually happen.

Other fertile opportunities for contras may be based on alleged damage to other trades, additional attendance provided by the contractor, failure to clear rubbish etc. Many also claim the right to deduct money in respect of other sub-contracts.

If you’re prepared to sign up on terms like that, you’re asking for trouble, and will probably get it.

The Construction Act requires that prior written notice must be given by any party who intends to withhold money from payments otherwise due. The dreaded Pay Less Notice.

The most common standard forms JCT SBCSub/C and DBSub/C at Clause 4.10.5, require the contractor to serve any such notice not later than five days before the ‘final date’ for the next interim payment.

The first thing most contractors do is reduce that period to one day. And, while that notice requires the contractor to specify ‘the basis on which that sum has been calculated’ it regrettably doesn’t require much effort to meet that ‘test’.

There’s no particular form that a Pay Less Notice should be in, except that it must be in writing, intentional, unambiguous and clear that it’s a Pay Less Notice. It must include a statement of the sum due and how that sum is calculated, including the exact calculation.

There’s no set level of evidence required to back up the calculation, there just needs to be some kind of basis showing what it’s made up of. It would of course be sensible to provide evidence in respect of any reductions, if the reasons are inadequate, false, or unreasonable, such will fall foul in adjudication.

During the job itself, make sure you operate good ‘housekeeping’ (ie prompt removal of your trade waste from working areas and care of your plant and equipment). Ensure you respond quickly to the contractor’s complaints regarding site cleaning or damage. If you’re responsible, then attend to the matter forthwith. Take photographs of completed areas and keep records to protect yourself. If possible, try to get the contractor’s signature for handovers of such areas.

Above all, you must deal promptly with any delay to your works and submit delay notices in writing at the time and request an extension of time if necessary.

Many contractors wait until the end of the job before producing their claims against you, supported by a bundle of ancient day-work sheets going back several months. This is a common negotiating tactic aimed simply and crudely at reducing your account. Don’t stand for it, it’s probably a ’try on’. Act immediately and if necessary, escalate the matter, and if the sum of money is big enough, take professional advice.

Despite the length of time the Construction Act has been around, there are still some contractors who are oblivious to its requirements, whether belligerently or ignorantly. So, if a contractor deducts contras without notice take professional advice, all you need to do is pick up the phone and call us on 01773 712116.

In many cases our involvement and the veiled threat of adjudication is enough to cause a bullying contractor to ‘back off’. So please, stand up for your rights – don’t just accept what the contractor says.
01773 712116

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