Back To Back Payment Agreement

A paid provision, although paid in a subcontract, generally means that the contractor is no longer required to pay the subcontractor unless the contractor receives payment from the owner. If the owner does not pay the contractor, the contractor is not required to pay the subcontractor. The payment transaction is considered the greatest risk in the construction process. The payment of the subcontractor depends on the way the employer is paid to the main contractor, and finally on the subcontractor`s main contractor. At the end of the work, a contractor, a subcontractor and suppliers require a payment in a timely manner. General contractors often face requests for delays from subcontractors. In such cases, the subcontractor becomes the innocent victim of non-payment for reasons not due to his work. The principal contractor entered into a subcontractor contract with a subcontractor for a total of AED 60 million. The subcontract contained a “back-to-back” clause in which the principal contractor pays the subcontractor`s payments within (7) to (14) days from the date the employer receives the corresponding payment. As contractors increasingly outsource much of their work to others, the supply chain has become longer and more complex. It is important that all parties ensure that certain rights and obligations exist not only in their own agreements, but also in agreements reached by the parties with other parties.

This ensures that the principal contractor is not responsible for all obligations to the employer, that subcontractors have enforceable rights, and that dates are coordinated throughout the supply chain. In a case that was tried in early 2016, an engineering firm acted as a contractor in a project and assigned a subcontractor a “back to back” clause for certain jobs. The Court held that the purpose of a “back-to-back” clause is generally to prevent the subcontractor from paying the subcontractor for work that has not been approved or paid for by the contracting authority for reasons related to the subcontractor, such as. B than partial or inappropriate work. Despite the existence of a “back to back” clause in the agreement between the parties and even if the supplier has not received payment from the customer, it does not nullify the obligation for the contractor to pay the subcontractor if it is established that the subcontractor did the work properly. In another case, reviewed at the end of April 2016, the client did not pay due to defects in the work. The Court found that, despite the “back-to-back” clause, the principal contractor is required to pay the subcontractor, since the principal contractor was not present. As a general rule, descriptions of back-to-back requirements focus on the relationship between employers, contractors and subcontractors, but they also apply to subcontractors, suppliers, consultants and subcontractors.

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