Civil Engineering Reference
In-Depth Information
11.7 Privity of contract
11.7.1 General
Ordinarily there is no direct contractual relationship between the employer and the
sub-contractor, and the individual contracts which make up the contractual chain
between sub-contractor and employer are (subject to collateral warranties and to the
circumstances described in Section 11.7.2) enforceable only by the parties to such
contracts. This principle is known as privity of contract.
The law would, however, in certain circumstances, permit an employer to sue a
supplier direct, should the supplier have given certain assurances or warranties as to,
for example, the fitness for purpose of the supplier's product, notwithstanding the fact
that the contract for the sale of the product was with the contractor appointed by the
employer, see
Shanklin Pier Ltd
v.
Detel Products Ltd
(1951) and
British Workman's
and General Assurance Co
.v.
Wilkinson
(1900).
Another exception is where appropriate rights are assigned by a main contractor
to a sub-contractor, see
Constant
v.
Kincaid & Co
. (1902). Assignation is considered
in Chapter 12. In the absence of a direct contractual relationship, or an assignation
of rights, neither employer nor sub-contractor can sue the other under contract.
A practical example of this is that, in the absence of the former direct agreement,
NSC/W/Scot, an employer and nominated sub-contractor would not be able to
enforce any rights against the other, for example, direct payments (see above).
It should be noted that (if so provided for in the Contract Particulars) clause
2.26 of the SBCSub/C/Scot (with similar provisions in DBSub/C/Scot and SBC-
Sub/D/C/Scot) specifically requires any sub-contractor to give a collateral warranty
in favour of the Employer, purchaser, tenants and/or funder within 14 days from
receipt of a notice from the Contractor. The SBCC has published the following forms
of sub-contractor collateral warranty for use with its sub-contract forms:
•
Sub-Contractor/Funder collateral warranty (SCWA/F/ Scot 2005 (October 2007
revision));
•
Sub-Contractor/Purchaser and Tenant collateral warranty (SCWA/P&T/Scot 2005
(October 2007 revision));
•
Sub-Contractor/Employer collateral warranty (SCWA/E/Scot 2005 (October 2007
revision)).
Clause 7E of the SBC and the SBC/DB imposes an obligation on the Contractor to
procure for the Employer collateral warranties from a Sub-Contractor to purchasers,
tenants and/or funders in the relevant forms described above, subject to amendments
proposed by the relevant Sub-Contractor and approved by the Contractor and
Employer (such approval not to be unreasonably withheld or delayed), if so provided
for in the Contract Particulars. It is not uncommon, however, for employers to
insist on bespoke forms of collateral warranties rather than those published by the
SBCC, by making appropriate amendments to clause 7E and annexing such bespoke
forms. In that event, consequential amendments must of course also be made to the
sub-contracts.
