The insolvency of Carillion has highlighted the dangers of insolvency arising in construction projects. Are there any things a contractor or sub-contractor can do if a counter party or entity elsewhere in the contract chain becomes insolvent? We have experience in this area and can help.
As to what can be done will depend on the type and nature of the project, the contract terms and other relevant facts but based on our experience here are 5 points to consider immediately:
- Retention of title claims – it may be possible to recover goods or materials where title has not yet passed. The claims can be complex but they can be effective leading to a recovery of goods or to a settlement releasing money to an unpaid contractor/sub-contractor. The key is to move fast and take early advice.
- Serve any appropriate notices under the relevant contract and in respect of any sub-contracts. Unless the contract provides for it, insolvency will not necessarily give rise to a right to terminate.
- If guarantees, bonds or credit insurance are in place, make sure that you comply with any notice requirements to preserve rights.
- Pay when paid clauses will be enforceable if there is insolvency upstream in the chain.
- Professionals such as architects may have IP rights that can be deployed to provide leverage in negotiations in ongoing projects.
It is important that early advice is taken to establish what rights and remedies might be available in any given case. Delays in acting could be fatal to a claim.