Q&A - Am I liable to pay sub-contractors when contractor has gone bust?

Q:  I have engaged a contractor to do extension work on my home and he has since gone bust. Am I liable to pay his sub-contractors in respect of the work they have done?

A:  Generally the contractual relationship would be between the contractor and the sub-contractor, which means you would not have any liability towards the sub-contractor.

There are however exceptions to the rule. Firstly, if you have directly ordered the sub-contractor to do specific work you must pay them for it Secondly it is possible for you and the sub-contractor to have a ‘collateral' contract that makes you liable to pay them. This would apply if you have made a direct promise to the sub-contactor that they will be paid in any event. Finally, it may be possible that the main contractor was an agent (i.e. a middle-man) between you and the sub-contractor. If this is so, you would be liable to the sub-contractor as his employer. In all cases it is up to the sub-contractor to prove your liability.

All of this demonstrates why it is preferable to ensure that you deal directly only with the main contractor when having building works done and that you keep communications with any sub-contractors to a minimum. In order to avoid liability in such matters it is crucial to maintain the distinct relationships between all of the parties involved. This is best done by ensuring that any orders and payments you make are to the contractor and this in turn is to be dealt with by the contractor dealing with the sub-contractor. In the event of liquidation, it will then be for the sub-contractor to make a claim as a creditor of the contractor for payment of monies owed, rather than seeking to establish a relationship between you both.