Nominated subcontractors: what is the risk

Nominated subcontractors continue to be a cause for dispute where there is delay or defective work by that subcontractor.

However, if the nominated subcontractor is forced on the contractor, the contractor may have a defence against any claim for delay or defective work alleged by the subcontractor.

The Dubai Court of Cassation held that:

“When a subcontractor is nominated by the employer or its consultants (without a right for the contractor to refuse), the employer shall be liable for any delay in the performance of the subcontracted part and the main contractor shall not be liable for any delay fines if they can prove that the delay is caused by such subcontractor and the main contractor played no part in the delay.”

Employers should consider the potential consequences a nomination without a right to refuse can have and weigh up whether the risk of such a nomination is worth it.

Contractors should always check the nominated subcontractor clause and ensure that they have a reasonable right to object to the nomination. If there are any doubts about the subcontractors’ capabilities, the contractor should submit a notice of dispute.

For contractors, it is recommended that you protect yourself and possibly cause a disruption in your relationship with the employer than to assume the risk of the subcontractor’s non-performance.

Should you require assistance to ensure the nominated subcontractor clause is fair and protects your interests, or for contract reviews generally relating to Construction and Projects, please contact the authors.

Written by Scott Lambert, Partner and Christopher Gibson, Associate

Tagged in: Subcontractors, Construction and Infrastructure