Contract savvy
The conclusion from the above differing wording indicates that
the following situation therefore results:
a. Whatever has been certified for the n/s works through
the principal building agreement prior to termination
and has been paid by the employer to the contractor,
remains so and the subcontractor is required to recover
such amounts from the contractor (subject of course
to the right to request direct payment by reference
to liens and reservations of ownership as discussed
hereunder).
b. After termination, payment for uncertified n/s work
completed prior to termination (together with materials and
goods per clause 38.5.5) is no longer certified through the
principal contractor but is made directly by the employer in
terms of the subcontract.
c. The final account of the contractor must include the total
value of the n/s works and materials and goods which
includes sums paid directly to the subcontractor after
termination. Such a final account must be processed
in terms of clause 34.0 and any direct payments to n/s
subcontractors reflected in the recovery statement (PBA
clause 33.2.6).
d.
None of these provisions suggest that the provisions of
clause 38.5.1 (the works must cease) are removed and that
the subcontractor is required to continue with the n/s works.
With regards to (a) the employer is possibly entitled to elect to
make direct payments to subcontractors [PBA 21.6 and 35.1.2]
and to recover such direct payments from the contractor as
expense or loss [PBA 35.2, 33.2.8]. The n/s agreement in turn
also provides for an election by the employer to make direct
payment to the subcontractor upon receipt of a request from the
subcontractor on 2 grounds. These are:
1. Clause 35.1.1 - A failure to provide an n/s payment guarantee
in terms of clause 3.1.1 or 3.1.2 (right to a payment guarantee
for the outstanding balance of the subcontract value where
the contractor has defaulted on a payment in terms of
clauses 31.9.2, 31.15, 34.10.2 and 34.14 12 ).
2. Clause 35.1.2 - A failure to make payment of an amount paid
to the contractor for the subcontractor.
This election that is available to the employer 13 is not a right
that is available to the subcontractor but one available to the
employer to protect its own interests. These interests could
be anything such as delays to the execution of the n/s works,
12 Clauses 34.10.2 and 34.14 deal with the final payment.
13 See PBA clause 20.6 and 21.6.
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RACA Journal I February 2020
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