As contractors increasingly assign much of their work to others, the construction production chain has become longer and more complex. It is important that all parties ensure that certain rights and obligations are not only in their own agreements, but also in agreements with other parties. This ensures that the prime contractor is not responsible for all obligations to the employer, that subcontractors have enforceable rights, and that schedules are coordinated throughout the supply chain. A back-to-back agreement is an easy-to-enter form of partnership, which is most often used when working together on a particular project. The parties remain independent, no new legal person is created. A back-to-back contract can relate to many different things, but it is the most used in the construction sector, in this case it means that the main contractor requires its subcontractors to comply with the initial contractual conditions. In this use, the terms of a “back-to-back” contract can also be referred to as “inserted by reference” terms (unlike the newly designed terms). Back-to-back work contracts are quite common, especially for large projects. Important international projects usually require the cooperation of many participants. Each of these participants has a different ability when it comes to contributing to different aspects of the project. In its strictest form, back-to-back refers not only to the replication of contractual rights and obligations at different levels of the contract, but to the requirement that the terms of the contract be included at one level in agreements at lower levels. In response to industry demand, FIDIC is currently preparing a subcontract for the construction of construction and engineering work, designed by the employer and intended to be used for subcontracting to be used with the FIDIC 1999 Red1 and Pink2 books.
In November 2009, FIDIC released a trial version of the subcontract for comment. The trial edition is largely well worded, but some of the dissemination provisions could be slightly revised in the final version that will be published for use this year. The dispute resolution clauses in the test edition attempt to address the three issues mentioned above, but unfortunately they are somewhat deficient and present considerable risks for both the main contractor and the subcontractor. Again, it is to be hoped that these issues will be resolved in the final version. For a more detailed commentary on the FIDIC test subcontract, click here. In a case that was debated in court in early 2016, an engineering firm acted as a contractor in a project and charged a subcontractor with a “back to back” clause for certain works. The court held that the purpose of a “back-to-back” clause was normally to avoid a situation in which the subcontractor had to pay the subcontractor for work that was not approved or paid for by the customer for reasons related to the subcontractor, such as.B. partial or inappropriate work. Despite the existence of a back-to-back clause in the agreement between the parties and even if the contractor has not received payment from the procuring entity, it does not remove the contractor`s obligation to pay the subcontractor if it is established that the subcontractor performed the work correctly. In another case, which was discussed at the end of April 2016, the client did not pay due to defects in the work. The court decided that, despite the back-to-back clause, the main contractor was required to pay the subcontractor because the default came from the main contractor.