A hidden risk – assignment of subcontracts on termination

November 17th 2020

Occasionally main contracts are terminated due to the main contractor’s default. For when this occurs, many construction contracts include a mechanism to deal with the termination process. A common provision in such mechanisms is the contractor is required to “assign any subcontracts” to the Employer. Legally this means assigning the benefit (i.e. the subcontractor’s obligation to properly perform the subcontract works) of the subcontract.

On the face of it, this assignment provision appears fairly innocuous. As the main contract has been terminated the Employer benefits from a direct relationship with the subcontractor. The contractor in turn has no further use for the subcontractor. So why not assign?

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