Terminating a contractor’s employment under a building contract may sound like a simple thing to do and, all too often, parties assume that it is. This is a dangerous assumption to make, because virtually every building contract contains detailed termination provisions which must be complied with in order to validly terminate the contractor’s employment. If these provisions are not complied with then the contractor’s employment will not have been validly terminated, and the consequences of this can be very costly.
So, the most important thing that you can do when considering termination is to look very carefully at the relevant provisions in your building contract. Many building contracts are standard terms (such as the JCT Standard Building Contract, 2011 Edition or the JCT Design and Build Contract, 2011 Edition), and they often include schedules of amendments to these standard terms. You need to check both of these documents, since the standard provisions may have been amended.
Each contract will contain different termination provisions, but generally speaking you need to check the following:
- What are the grounds of termination?
It is very tempting to try and terminate on grounds that you think should apply. Don’t. The contract will provide specific grounds upon which you can terminate, and you need to be able to show that one or more of these grounds has been satisfied.
- What is the procedure for termination?
If you are terminating due to contractor default, you will probably have to serve two notices, the first being a notice of default and the second being a notice of termination. If, however, you are terminating due to contractor insolvency, you will probably only have to serve a notice of termination. The contract will provide for timescales that must be complied with in respect of these notices, and you must check your building contract to see what they are.
- How to serve the relevant notices.
It is tempting to send your notices by email, but this will probably not be good enough, as many contracts stipulate that notices must be delivered by hand or sent by recorded, signed for or special delivery post. Ignore this at your peril because if you don’t serve the notice in the specified way then it won’t be valid and neither will the termination.
So, if your inclination is to try and terminate the contractor’s employment without looking at the contract, resist it. Take a quick half hour to dig it out and check its terms could save you a tremendous amount of time, hassle and money.
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