Back To Back Agreement Construction

The principal contractors should obtain the consent of the client to hire subcontractors before attempting to enter into back-to-back contracts. Under the contract itself, the principal contractors should cede responsibility for their share of the work to the contractor. The principal contractor does not want to be solely responsible for all elements of the project. This will ensure that they pass on their commitments and commitments to the promoter through their subcontractors. This allows the prime contractor to limit its exposure to potentially risky bonds. To do this, they use back-to-back contracts with their subcontractors. While the back-to-back principle is relatively direct and in itself undisputed, in practice problems often arise because of the way different contracts are documented. Poorly developed contracts can be difficult to interpret and inevitably lead to tedious and costly quarrels. Autonomous contracts contain all the terms of the original contract that are relevant to subcontracting. Such a contract can eliminate cross-references, inaccuracies and inconsistencies that are tedious.

However, drafting a stand-alone contract can be even more tedious than developing a return contract, as each party must review the agreements and decide what conditions will be included in the subcontracting and what conditions need to be changed. In general, there are important provisions of a principal contract that a party wishes to include in a return agreement, including data and delivery items (including reports), termination times and obligations related to the provision of goods or services or the dates of application of claims arising from the main contract. A client of our company acted as a subcontractor in a construction project. When the time came for our client to obtain payment, the principal contractor argued that, because he had not received payment from his client, he was not obliged to pay the subcontractor, although there was no agreement between the parties to determine it. Is there an dependence between the obligation of the principal contractor to pay his subcontractors and the obtaining of funds by him? This type of thorough and systematic process should be accepted as an integral part of negotiating a return contract, regardless of the approach. There was no agreement between the contractor and the subcontractor at the end of June 2016, but the Court found that, in practice, the parties acted as if there was a return clause and that the original not only approved all payments, but acted directly in front of the subcontractor to authorize the work.

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