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Streetwise Answers

We are electrical contractors and the majority of our works are as subcontractors to main contractors.
We've had a couple of main contractors go in to administration in recent months and have been left owed tens of thousands of pounds.
Our own subcontractor contracts don't mention anything about withholding monies owed, if the main contractors were to go into administration whilst owing us money.
We are a friendly, rather than contractual company and as such, have paid monies to most of our subcontractors even though we've not been paid. This has obviously had a severe impact on our bank account and cash flow.
We have a couple more outstanding debts - are we within our right go withhold these as we've not been paid?
We're now considering inserting a clause into our contracts whereby we are not obliged to pay sub contractors if the main contractor enters administration and we've not been paid.
My main question is how do we stand legally ? Can we do this? Is this common practice?
Any help or advice would be much appreciated.

Hi Steve

Firstly, good on you for paying your subcontractors when you have not been paid.

In that regard and to answer your first question: in the absence of an express provision in your contract with them which allowed you to do so, you do have an obligation to pay even if you have not been paid. 

So as regards the outstanding debts you mention, (and subject to me seeing the actual contractual arrangement) it is highly likely that you will have an obligation to pay.

Pay when paid clauses were made "ineffective" by the Housing Grants Construction and Regeneration Act 1996 (commonly known as the Construction Act), except in situations were the party responsible for paying had not been paid due to the insolvency of the party paying them.

Most Contractors were quick to pick up on this and include this kind of provision in their contracts. So to answer one of the other parts of your question, yes unfortunately these clauses are quite common.

This has the unfortunate consequence of you needing to either seek to have the clause struck out, or you being careful to check the financial status of the organisation with whom the Main Contractor is contracting.

As regards inserting such a clause into your subcontracts, you need to ensure that any clauses you wish to rely on are well drafted and properly incorporated. That is not something that can be done without seeing the details, but it can be done very economically, by me or by one of our national team of consultants.

Please give me a call on 01773 712116 or email me at

Best regards

Barry J Ashmore

Founder and Managing Director



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