Contractual and Legal Considerations for Implementing Back-to-Back Conditions in Construction Subcontracts
Publication: Journal of Legal Affairs and Dispute Resolution in Engineering and Construction
Volume 16, Issue 2
Abstract
Construction projects are rarely completed without the main contractors’ use of subcontractors. As a result of the inherited contractual and legal interfaces, subcontracting normally poses several challenges for both main contractors and subcontractors. In light of this, the research focused on problems that commonly arise at the subcontract level, particularly those related to the back-to-back framework. According to the relevant literature, the major concerns for scholars and practitioners in subcontracting are (1) contract privity between contracting tiers, (2) conditional payment clauses, (3) assessment of damages, and (4) claim procedures and management. This study conducted a comparative analysis of each of the aforementioned issues between the Egyptian Civil Code (ECC) and the relevant conditions of the first edition of construction subcontract published by the Federation Internationale des ingenieurs-conseils in 2011 published by the Fédération Internationale des Ingénieurs-Conseils (FIDIC). The authors checked the compatibility of the relevant FIDIC subcontract provisions when used within the ECC jurisdiction. The analysis identified some incompatibilities and shortcomings in the ECC and FIDIC subcontract, and the authors recommended modifications and additions to their provisions. Accordingly, the proposed additions in the ECC (1) tackle the ambiguity around the conditional payments in subcontracting, and (2) introduce provisions about the extension of time claims under subcontracts. In addition, multiple changes have been proposed to the FIDIC subcontract clauses for compatibility and better operation of subcontracts within the ECC jurisdiction.
Get full access to this article
View all available purchase options and get full access to this article.
Data Availability Statement
No data, models, or code were generated or used during the study.
References
List of Cases
Airport Pty Ltd v Clarence City Council [2022] HCA 5.
BMD Contractors, Inc. v. FID & Deposit Co. of Maryland.
BS Energo A.S v Bester Generacion UK Ltd [2020] EWHC 223 (TCC).
Case no. 15487 for judicial year no. 77.
Case no.18082 for judicial year no.80 and 2370 for judicial year no. 68.
Comfort Management Pte Ltd v OGSP Engineering Pte Ltd and another [2022] SGHC 77.
Crass v. Scruggs (1897).
Cubic Metre Pty Ltd v C and E Critharis Constructions Pty Ltd [2019] NSWCATAP 130.
Egyptian court of cassation case no.944 for judicial year no. 66 dated 24.05.2015.
Koch v. Construction Technology.
The LEMOINE Company of Alabama, L.L.C. v. HLH Constructors, Inc.
Triple Point Technology Inc v PTT Public Company Limited [2021] UKSC 29.
List of Statutes
Egyptian Civil Code promulgated by law no. 131of year 1948.
Works Cited
AL-Sanhuri, A. 1964. A treatise on civil law [Al-Wassit Fi Sharh’ Al-Kanoun Al-Madany. Beirut, Lebanon: ehya’ alturath alaraaby.
Artan Ilter, D., and G. Bakioglu. 2017. “Modeling the relationship between risk and dispute in subcontractor contracts.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 10 (1): 04517022. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000246.
Assaad, R., A. Elsayegh, G. Ali, M. Abdul Nabi, and I. H. El-adaway. 2020. “Back-to-back relationship under standard subcontract agreements: Comparative study.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 12 (3): 04520020. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000406.
Assaf, S., M. A. Hassanain, A. Abdallah, A. M. Sayed, and A. Alshahrani. 2019. “Significant causes of claims and disputes in construction projects in Saudi Arabia.” Built Environ. Project Asset Manage. 9 (5): 597–615. https://doi.org/10.1108/BEPAM-09-2018-0113.
Ayasrah, M. A. 2015. “Nominated subcontractors and the principle of privity under the UAE and English laws.” Accessed August 1, 2021. http://bspace.buid.ac.ae/handle/1234/928.
Bader, M. F. 2013. “Impact of ‘back to back’ payment clause on the cash flow of subcontractor in the UAE. United Arab of Emirates.” Accessed July 1, 2021. https://bspace.buid.ac.ae/bitstream/handle/1234/507/110031.pdf?sequence=1&isAllowed=y.
Bou Ayyash, N. Z. 2019. “Compatible contractual mechanisms for administrating subcontractor’s claims and disputes.” Doctoral dissertation, Dept. of Civil and Environmental Engineering of the Maroun Semaan, Faculty of Engineering and Architecture, American Univ. of Beirut.
Cheung, S. O., and K. H. Y. Pang. 2012. “Anatomy of construction disputes.” J. Constr. Eng. Manage. 139 (1): 15–23. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000532.
El-Sayegh, S. 2020. “Construction disputes in the UAE: Causes and resolution methods.” MDPI: Build. J. 27 (3): 7. https://doi.org/10.1191/0143624406bse160.
FASA (Foundation of the American Subcontractors Association). 2020. “Contingent payment clauses in the 50 States 2020.” Accessed July 1, 2022. https://www.keglerbrown.com/content/uploads/2019/10/Contingent-Payment-Clauses-in-the-50-States-2020.pdf.
Fawzy, S. A., I. H. El-Adaway, L. Perreau-Saussine, M. S. Abdel Wahab, and T. H. Hamed. 2018a. “Claims for extension of time and additional payment under common law FIDIC: Civil law analysis.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 10 (4): 06518002. https://doi.org/10.1061/(asce)la.1943-4170.0000276.
Fawzy, S. A., I. H. El-Adaway, L. Perreau-Saussine, M. S. Abdel Wahab, and T. H. Hamed. 2018b. “Civil law context for understanding employer’s payment obligations under Common Law Fidic.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 11 (1): 06518006. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000285.
FIDIC (International Federation for Consulting Engineers). 2011. Conditions of subcontract for construction. 1st ed. Geneva: FIDIC.
Giancaspro, M. 2023. “Lowering the privity bar: Explaining the effect of Hobart International Airport Pty Ltd v Clarence City Council [2022] HCA 5.” Accessed May 1, 2023. https://www.fenwickelliott.com/sites/default/files/nick_gould__subcontracts_paper_for_university_of_vienna.indd_.pdf.
Gould, N. 2011. “Subcontracts.” Fenwick elliot. Accessed October 1, 2020. https://www.fenwickelliott.com/file/695/download?token=gbnxAMEE.
Greenwood, D., K. Hogg, and S. Kan. 2005. “Subcontractors’ liability for project delay.” J. Financ. Manage. Prop. Constr. 10 (2): 107–114. https://doi.org/10.1108/13664380580001068.
Grose, M. 2016. Construction law in the United Arab Emirates and the Gulf, 46. New York: Wiley.
Haloush, H. A. 2020. “Subcontracting in construction and privity of contract: Defining the nexus.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 13 (1): 04520041. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000445.
Hansen, S., S. F. Rostiyanti, and Purnomo. 2017. “Conditional payments in the Indonesian construction industry.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 9 (3): 06517001. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000226.
Ibbs, W., L. D. Nguyen, and L. Simonian. 2010. “Concurrent delays and apportionment of damages.” J. Constr. Eng. Manage. 137 (2): 119–126. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000259.
Kandil, O., N. A. Yehia, and T. H. Hamed. 2020. “Consequences of quantities increase under some civil codes and FIDIC red book.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 12 (1). https://doi.org/10.1061/(asce)la.1943-4170.0000344.
Khalef, R., I. H. El-adaway, R. Assaad, and N. Kieta. 2020. “Contract risk management: A comparative study of risk allocation in exculpatory clauses and their legal treatment.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 13 (1): 04520036. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000430.
Khattab, M. S. 2018. “Privity of contract in the context Of UAE and English laws.” Accessed October 1, 2021. https://www.academia.edu/38277229/PRIVITY_OF_CONTRACT_pdf.
Kshaf, D. A., M. A. Mohamed, and K. M. El-Dash. 2022. “The major problems between main contractors and subcontractors in construction projects in Egypt.” Ain Shams Eng. J. 13 (6): 101813. https://doi.org/10.1016/j.asej.2022.101813.
Lee, J., Y. Ham, and J.-S. Yi. 2021. “Construction disputes and associated contractual knowledge discovery using unstructured text-heavy data: Legal cases in the United Kingdom.” Sustainability 13 (16): 9403. https://doi.org/10.3390/su13169403.
Masadeh, A. 2014. “Vicarious Performance and Privity in Construction under the law of United Arab Emirates.” Int. Constr. Law Rev. 31 (1): 108.
McGuinness, J. 2007. “Payment.” In The law and management of building subcontracts. Hoboken, NJ: Blackwell.
Mokhtar, E. 2020. “A vision on future development of building and construction industry in Egypt.” J. Egypt. Soc. Engineers 59 (1): 1–7.
MPED (Ministry of Planning and Economic Development). 2023. “Public investments.” Accessed January 1, 2023. https://mped.gov.eg/Investment.
Munaaim. 2010. “Security of payment regimes in the United Kingdom, New South Wales (Australia), New Zealand and Singapore: A comparative analysis. Centre of Construction Law and Dispute Resolution, The Old Watch House, Strand Campus, King’s College London, Strand, London, United Kingdom.” Accessed September 1, 2010. https://www.irbnet.de/daten/iconda/CIB19017.pdf.
Pudner, S. K. 2013. “The differences between “pay if paid” and “pay when paid” clauses in construction contracts.” Accessed January 15, 2013. https://www.lexology.com/library/detail.aspx?g=b5bf4d47-b69b-4a48-b9d7-8a27d4c5d8bc.
RICS (Royal Institute of Chartered Quantity Surveyors). 2021. “Subcontracting guidance note.” Accessed January 1, 2021. https://www.rics.org/profession-standards/rics-standards-and-guidance/sector-standards/construction-standards/black-book/subcontracting-1st-edition.
Rostiyanti, S. F., S. Hansen, and T. N. Ponda. 2020. “Cause and effect of conditional payments provision to subcontractors.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 12 (1): 04519045. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000352.
Shafik, N., S. Qodsi, E. Serag, and M. Helmi. 2016. “Application of FIDIC contracts under the Egyptian civil code.” J. Leg. Aff. Dispute Resolut. Eng. Constr. 8 (3): 04516004. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000193.
Shanab, M. L. 1977. Commentary on sources of obligation. Cairo, Egypt: Dar El Nahda El Arabiya.
Tan, Y., B. Xue, and Y. T. Cheung. 2017. “Relationships between main contractors and subcontractors and their impacts on main contractor competitiveness: An empirical study in Hong Kong.” J. Constr. Eng. Manage. 143 (7): 05017007. https://doi.org/10.1061/(ASCE)CO.1943-7862.0001311.
Thomas, M. 2021. “Apportioning subcontractors’ liability for project delays: A consensus approach.” Accessed January 1, 2023. https://bspace.buid.ac.ae/items/5267f444-88bb-4647-ba21-2d649babe289.
Yehia, N. A. 2020. AlMogaz fi mas’olyet al mohandes wal moqawel fi ‘okood al ensha’. Cairo, Egypt: Dar El Nahda El Arabya.
Yik, F. W., et al. 2006. “Problems with specialist subcontracting in the construction industry.” Build. Serv. Eng. Res. Technol. 27 (3): 183–193. https://doi.org/10.1191/0143624406bse160oa.
Zack, J. G., and T. F. Peters. 2011. “Proving and pricing subcontractor delay claims.” Accessed March 1, 2022. https://www.cmaanet.org/sites/default/files/2018-04/Proving%20%26%20Pricing%20Subcontractor%20Delay%20Claims.pdf.
Zons, J. 2010. “The minefield of back-to-back.” Accessed October 1, 2021. https://lawonline.ir/articles/99/186843/Construction-Law-International.
Information & Authors
Information
Published In
Journal of Legal Affairs and Dispute Resolution in Engineering and Construction
Volume 16 • Issue 2 • May 2024
Copyright
© 2023 American Society of Civil Engineers.
History
Received: Apr 15, 2023
Accepted: Oct 6, 2023
Published online: Dec 23, 2023
Published in print: May 1, 2024
Discussion open until: May 23, 2024
ASCE Technical Topics:
Authors
Metrics & Citations
Metrics
Citations
Download citation
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.