Financial propriety question - main contractor conduct

[Teddy Lop]

Hopefully a simple one, haha. A main contractor manages jobs and collects client payments at completion and starting waypoints and instructs/employs sub contractors to undertake the various work billed on completion of respective "fixes" - is he required to account and seperate monies due forward to others a bit like solicitors etc will have client accounts?

And if he should be unable to pay his subs for several fix stages that are elements he has collected in full on, beacuse these moneys have been diverted towards somewhat unrelated speculative endeavours that have not performed as he envisaged - is this adjacent to fraud or something similar?

[stephenjk]

I would expect you are paying a company and company is subcontracting work and the company has liabilities to these subcontractors. If the money is used for that company in a legitimate fashion even if speculative I think that is legal though possibly not appropriate.

[Dimebars]

Firstly, there is no legal requirement to hold money in a "client account" or similar. All the main contractor is doing is ensuring he is cashflow positive. It wouldn't amount to fraud.

As for the subcontractor payments, it's up to the subbie to ensure that he thinks he will be paid for the work he is doing and managing that risk accordingly. If the main contractor defaults, then he needs to pursue the debt via the legal routes set out in his subcontract.

[blueg33]

Teddy Lop said:

Hopefully a simple one, haha. A main contractor manages jobs and collects client payments at completion and starting waypoints and instructs/employs sub contractors to undertake the various work billed on completion of respective "fixes" - is he required to account and seperate monies due forward to others a bit like solicitors etc will have client accounts?

And if he should be unable to pay his subs for several fix stages that are elements he has collected in full on, beacuse these moneys have been diverted towards somewhat unrelated speculative endeavours that have not performed as he envisaged - is this adjacent to fraud or something similar?

In short - no

Point 2 - the contract will oblige him to pay the sub-contractors, if he doesn't he is in breach of contract. However, the client only has a contractual relationship with the main contractor. Once the main contractor is paid, its up to him how he uses the money unless the contract controls it (rare).

Thats why you always run a financial check on a main contractor and if possible take out some form of insolvency insurance, and have step in rights

[Austin_Metro]

Teddy, are you the employer or the subcontractor?

If I was a subcontractor I would be looking at sections 111 and 112 of the Housing Grants construction and regeneration act 1996 and thinking about my right to suspend. Or threatening it, to get paid.

If I was the employer, I’d be worried I’d end up paying twice, If the main contactor fails and I need to pick up the pieces.

[Scootersp]

Austin_Metro said:

If I was the employer, I’d be worried I’d end up paying twice, If the main contactor fails and I need to pick up the pieces.

'Usually" because of this the person/company at the top will pay the main contractor in the same stages as the main contractor pays the subbies, and physically check progress so the risk is mitigated.

I'd expect that while a % upfront payment to a contractor is common (with a bank bond as security on large contracts), paying a large amount or all is very unusual?

So presumably the end user is satisfied as the work is in fact getting done as required, but lower down the subbies, while not paid and disgruntled, are only communicating this to him and so the end user is blissfully unaware? This is why I'd imagine on the odd occasion you get a subbie going mental with a JCB!