Replacement of a subcontractor: the project agreement should address the consequences of the termination and exchange of a subcontractor. As a general rule, the surviving subcontractor may be obliged to enter into a replacement interface agreement on terms substantially identical to those of the existing agreement. Since subcontractors are generally uncomfortable engaging in contracts with unknown companies under these conditions, they will usually seek some kind of protection through subcontracting – for example, an agreement where they are only required to enter into a replacement interface agreement with replacement subcontractors who meet certain minimum financial and technical requirements. Subcontractors will also be cautious if they assume responsibility, if the other subcontractor becomes insolvent, and may try to shift this business risk onto Projectco. Equivalent Project Relief (EPR) is an issue that arises from how Projectco`s commitments and commitments arising from the project agreement are included in the facility management or construction agreement. This will ensure that Projectco`s liability to the subcontractor in question does not exceed projectco`s right to the Authority under the project agreement. In most cases, Projectco must exercise its rights vis-à-vis the Authority and the Authority must accept that Projectco has the right to trigger the subcontractor`s claim against Projectco. Sometimes Project Co is able to attribute such deductions to the subcontractor it believes is best placed to bear the loss. The interface agreement in this case seems to have done just that; It allowed Projet Co to allocate deductions to Construction Co or FM Co “as needed”, and that is what Construction Co was trying to argue. Impossible, the court said, it makes no economic sense.
If a breach of A has caused a loss of Project Co, you may not dismiss that liability to B. Limitation of liability: the interface agreement may limit the liability of the parties in different ways. It is likely that the overall liability of subcontractors to the project does not exceed the liability ceiling in the primary subcontractors. It could also provide, for example, that there is no liability for indirect losses suffered by the subcontractor under the agreement, including loss of profits, business opportunities or good, or that there is no minimum monetary value for claims, in order to avoid light claims being claimed by either party. It is not uncommon for these agreements to cap individual liability, either with respect to a particular party or with respect to certain issues. Projectco and the FM Provider must also agree on what to do with residual liability for defects after the expiry of the Contractor`s latent liability period. . . .