Wednesday, December 4, 2013

Default Terminations: A Death Penalty?

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In this linked article distributed by Advise & Consult, Inc., Smith, Currie & Hancock's Gene Heady discusses default-termination clauses in subcontracts and their impact on the parties.  

In particular, the article provides some ideas as to what should constitute an "event of default" for the subcontractor, including failing to pursue its work diligently, failing to prosecute the work in a workmanlike and skillful manner, failing to pay sub-subcontractors and suppliers, or failing to correct defective work, among others. One very important point that may be ignored by some general contractors is the requirement to follow the contractual provisions allowing subcontractors to cure their defaults.

The article is a good summary of what types of clauses should be incorporated into subcontracts to protect both the subcontractor and the contractor.  More saliently for us as a dispute-resolution group, it helps to remind us of possible defenses to a termination for default claim.

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