Overview

In the current uncertain times it is common to hear rumours of financial difficulties at contractors and sub-contractors which are bound to cause concern for employers on construction works. However, there are a number of steps you should take to protect your position before terminating a building contract on the grounds of insolvency.

These include:

• Check what constitutes "insolvency" under the building contract and what the specified consequences on termination are.
• Keep your own detailed records, and check the contractor's record-keeping and project reporting. It may be helpful if the contractor is contractually required to comply with a recognised quality assurance standard such as ISO 9000.
• Pay attention to where goods are located, particularly the title to off-site goods.
• Check agreements with third parties. For example, are all collateral warranties in place and do you need the consent of third parties before terminating the building contract?

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