Contract savvy
but it could relate to stock items not prematurely ordered where
the supplier insists on and is entitled to a cancellation amount (say
a bulk order for copper piping at a reduced price for bulk). NSSA
clause 31.6 limits the ability to place orders for goods prematurely
and without justification and provides a very good reason why
subcontractors should ensure that the placing of such orders
should be covered by notice to the employer and contractor and
their agreement thereto even where it is necessary as part of a
price fixing agreement. The subcontractor has a common law
obligation to mitigate damage and may have to communicate
with the contractor and employer on preference for a termination
fee rather than specific performance because, in the event of a
termination fee on a bulk order such as the example above, the
contractor would be the party having to pay the damages for the
termination [NSSA clause 38.5.6] whilst the employer may have
to pay an increased cost for the balance of the goods if the initial
order is terminated and then reclaim them as part of the costs of
completing the works.
The employer cannot forcibly or against the subcontractors
will take over an order issued by the subcontractor – it would
have to be by mutual agreement and interest. If the employer
deals directly with the supplier and arranges for a termination
of the subcontractor’s order and direct sale to the employer
(inducement) there could be a case for wrongful interference
by the employer 9 or wrongful termination by the supplier but
inevitably such actions are more often than not avoided due
to practical and financial reasons and a subcontractor would
normally make use of its dispute resolution provisions to recover
any funds due to it as part of its contractual entitlement.
It is submitted that the value of materials and goods included
in a paid interim certificate may be excluded from this provision 10
although this is extremely arguable if the subcontractor has not
been paid by the contractor (see Concor Holdings (Pty) Ltd v
Potgieter (219/03), [2004] ZASCA (28 May 2004); Administrator
General South West Africa v Trust Bank of Africa Ltd 1982 (1) SA
635 (SWA) judgments).
If uncontested by the subcontractor by the exercise of liens
and reservation of ownership, the employer may lay claim to the
materials and leave it to the subcontractor to prove a claim for
materials and goods certified but not paid to the subcontractor,
whatever the reason for such non-payment, but care would need
to be exercised to not dispossess the subcontractor improperly
and face a spoliation order. This is a double-edged sword because
the employer would also be entitled to assert a claim against
9 See Neethling–Potgieter-Visser Law of Delict, 6 th Edtn, LexisNexis Durban 2010 pp. 306-307 and particularly p. 307 where the inducement causes a lawful termination of the
contract.
10 Materials and goods included in a payment certificate become the property of the employer in terms of NSSA clause 31.6
62
RACA Journal I February 2020
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