A construction contract is an agreement between an employer (the property owner or its authorised agent) and a contractor to construct, repair, modify, renovate or even demolish a structure in an agreed time frame, for an agreed price and to an acceptable standards.

The main agreement is normally signed by both the employer and the contractor. But, where does the subcontractor feature in a legally binding agreement between these two parties? That is often a very important question to ask at an early stage.

A contractor is an organisation (or sometimes a person) hired by the employer to carry out a required work for the completion of a project. Nevertheless, contractors do not always have the expertise or capacity to complete all construction work by themselves. For that reason, subcontractors are a common appointment to complete specified parts of a building project.

The appointment of subcontractors is often a contentious issue due to the far-reaching legal implications this has.

Generally speaking, there are three forms of subcontractor appointments, commonly found in the ways in which parties award contract in the industry; Domestic, this is usually a subcontractor appointed by the main contractor at his/her discretion, Nominated is usually a subcontractor nominated by the employer and that the contractor is obliged to appoint, while the last, Selected is usually a subcontractor selected by the contractor in consultation with the employer in terms of the contract requirements.

The legal relationship/contract follows the appointment and that is why it is important to ensure an understanding.

Accordingly, the manner in which the subcontractor is engaged is therefore quite important. The doctrine of privity of contract is that parties who are not privy to a contract cannot sue or be sued on it.

Therefore the implication can be that an employer is not a party to the subcontract and cannot claim poor quality or delay from a subcontractor. There is privity of contract between the employer and the main contractor, which is where the employer’s recourse lies. Thus, the employer compels the performance of the subcontract through its remedies against the main contractor (main agreement). The main contractor, in turn, claims from the subcontractor in terms of the subcontract.