Like it or Lump it?
- Published: Thursday, 25 November 2010 08:17
Many contractors are faced with changes of projects; typically this can be 15% of the contract value or even more !
Your customer has placed an order with your firm which included reference to your quotation comprising your lump sum figure and your schedule of rates (as they requested). The customer then decides they no longer want lightning protection, for key strategic programme reasons they placed the order direct, with YOUR sub-contractor, well they would have been if all had gone to plan.
They now come to the simple matter of deduction, and they are proposing to simply deduct the full amount you had included in your quotation. You rather unfortunately made a mistake when pricing the lightning protection and being offered two prices one in copper and one in aluminium, being pushed for time and erring on the side of caution you used the higher copper price, in hindsight aluminium would have done the job, leaving you with a nice tasty profit. It hardly seems fair that this lucrative element of the job is being taken away from you does it? The fact of the matter is that your lump sum and schedule of rates all seem to work against you, and in favour of allowing the customer to make this seemingly unfair deduction.
Geraldine Fleming of Knowles says
As there is a contract between the parties, this is a clear breach of contract situation. Subcontractors and main contractors need to realise that the subcontractor is both obliged and entitled to complete the contractual scope of work, and by deleting the lightning protection work from the subcontractor's scope, and giving it to another subcontractor, this is a breach of contract by the main contractor. Such a breach would entitle the subcontractor to claim loss of profit - and the subcontractor needs to ensure that he produces the evidence to the main contractor to show what his loss of profit actually is. The subcontractor should write to the main contractor, pointing out the main contractor's breach, detailing what it would have cost him to do the work including labour and materials and providing a copy of the aluminium price and comparing it to the contract rate. The subcontractor then should be paid this loss of profit. Watch out for main contractor's including clauses in their terms and conditions that allow them to deduct work, and expressly state that a subcontractor would not be entitled to claim loss of profit.
For further reading - have a look at the cases of Amec Building Limited v Cadmus Investments Co Limited (1996) and Abbey Developments Ltd v PP Brickwork Limited (2003).
electrical industry contractor contract law news,lighting digest,lightingdigest.co.uk