Recently we have seen a number of cases where the building contractor has simply not got on with the job. Some work is ongoing but is only a trickle.
Usually, this is because the contractor is experiencing financial difficulty. It is not in administration or liquidation, but it is struggling.
For a local authority employing such a contractor this is extremely frustrating; deadlines are missed with very little, if any, explanation as to why or if and when things will be "back on track".
If the contractor had been placed in administration or liquidation the position can be relatively straightforward. The building contract will often contain a provision that entitles the local authority to terminate the contract by notice upon the insolvency of the contractor, leaving the local authority able to employ an alternative contractor to complete the works.
It is not quite so simple if the contractor does not get on with the job. Under the JCT Standard Form of Building Contract 2005 in order to terminate the building contract in such a situation, it is necessary to serve two notices. In the first notice the local authority must set out at least one of five specified defaults. The two that are most likely to apply are:
- The contractor without reasonable cause wholly or substantially suspends the carrying out of the Works.
- The contractor fails to proceed regularly and diligently with the performance of his obligations under the Contract.
The notice should contain information as to the basis on which the default is alleged.
Only if the contractor continues the default for 14 days after receiving the notice can the local authority serve a second notice terminating the contract. That second notice must be served within 21 days after the end of the 14 day period. Legal advice should be sought before serving either notice.