Cold Link Africa January / February 2020 | Page 39

CONTRIBUTORS
INCORPORATING COLD CHAIN
than specific performance because, in this provision 2 although this is extremely
the event of a termination fee on a bulk arguable if the subcontractor has not
order such as the example above, the been paid by the contractor (see Concor
contractor would be the party having Holdings (Pty) Ltd v Potgieter (219/03),
to pay the damages for the termination [2004] ZASCA (28 May 2004); Administrator
[NSSA clause 38.5.6] whilst the employer General South West Africa v Trust Bank
may have to pay an increased cost for the of Africa Ltd 1982 (1) SA 635 (SWA)
balance of the goods if the initial order is judgments).
of the costs of completing the works.
The employer cannot forcibly or against
If uncontested by the subcontractor
by the exercise of liens and reservation
of ownership, the employer may lay
the subcontractors will take over an order claim to the materials and leave it to
issued by the subcontractor – it would the subcontractor to prove a claim for
have to be by mutual agreement and materials and goods certified but not paid
interest. If the employer deals directly with to the subcontractor, whatever the reason
the supplier and arranges for a termination for such non-payment, but care would
of the subcontractor’s order and direct need to be exercised to not dispossess
sale to the employer (inducement) there the subcontractor improperly and face
could be a case for wrongful interference a spoliation order. This is a double-edged
by the employer or wrongful termination sword because the employer would also
by the supplier but inevitably such actions be entitled to assert a claim against the
are more often than not avoided due alleged lien the subcontractor is trying
to practical and financial reasons and to enforce if the subcontractor is acting
a subcontractor would normally make unlawfully.
1
use of its dispute resolution provisions to
At worst, this clause is important in
recover any funds due to it as part of its protecting the subcontractor from an
contractual entitlement. insolvent contractor by providing an
It is submitted that the value of
enforceable obligation by the employer
materials and goods included in a paid to take delivery of and pay for uncertified
interim certificate may be excluded from materials (as distinct from making direct
1. See Neethling–Potgieter-Visser Law of Delict, 6th Edtn, LexisNexis Durban 2010 pp. 306-307 and particularly
p. 307 where the inducement causes a lawful termination of the contract.
2. Materials and goods included in a payment certificate become the property of the employer in terms of
NSSA clause 31.6
COLD LINK AFRICA •
January/February 2020
terminated and then reclaim them as part
Contract negotiations are a slippery slope as most sub-contractors don’t have the funds to
consult and lawyer fees are pricy.
payment for materials certified and paid must ensure that the list, the value and
to the contractor but not paid by the the direct payment are disclosed to the
contractor to the subcontractor). At best, contractor and reflected in the final account
it probably provides an opportunity for the issued to the contractor in terms of clause
employer to treat the payment for unpaid 38.5.4. The question of payment is further
materials as part of its costs of completing dealt with in the discussion of the provisions
the works. of NSSA clause 38.5.7 at bullet 7 hereunder.
Practically there may be problems
in identifying what materials and Clause 38.5.6
goods have been paid or included in ‘The contractor shall be liable to the
a certificate. This is normally dealt with subcontractor for damages resulting from
by the use of the cumulative payment such termination’.
process used in construction payments.
The principal agent and the subcontractor
This provision may appear at first glance
to be the statement of the obvious but
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