In everyday language, “back-to-back” means that each document contains the same conditions and characteristics as the next contract. You can open a registration letter that contains the same items as the previous one. In residential construction, the term could refer to houses built side by side. A client of our company was a subcontractor in a construction project. When the time came for our client to obtain payment, the main contractor argued that, having not received payment from its client, it was not obliged to pay the subcontractor, although there is no agreement between the parties to determine this. Is there a dependency between the principal contractor`s obligation to pay its subcontractors and the receipt of funds by the principal contractor? One of the topics that appeared several times during my sending was the principle of “back-to-back” in the design of subcontracts. The main contractor intensified the litigation before the Court of Cassation and asked it to uphold the judgment of the Court of Appeal because (i) a “back-to-back” clause appears in the subcontracting agreement on the subcontractor`s payments and (ii) the employer does not pay the main contractor the equivalent payment due to the subcontractor. A back-to-back agreement is usually a contract between other members of the same supply chain. In the construction industry, back-to-back contracts are typically used by contractors and their subcontractors or by global supply chains that operate across borders. Back-to-back rules can be included in contracts in a variety of ways: therefore, there are clear advantages for contractors in the implementation of back-to-back agreements.
However, in practice, it can be difficult to conclude reprocessing agreements. Depending on the industry, there may be legislation indicating what can and cannot be included as part of a back-to-back contract, for example. B in the construction industry, the Housing Grants, Construction and Regeneration Act 1996 states that a provision makes payment under a construction contract conditional on payment by a third person, is ineffective (unless that third person, or any other person whose payment is a condition (direct or indirect) for payment by that third person, is insolvent). As contractors increasingly assign much of their work to others, the construction production chain has become longer and more complex. It is important that all parties ensure that certain rights and obligations are not only in their own agreements, but also in agreements with other parties. This ensures that the prime contractor is not responsible for all obligations to the employer, that subcontractors have enforceable rights, and that schedules are coordinated throughout the supply chain. Back-to-back agreements are commercial subcontracts that reflect all or part of the terms of a master contract further up the contractual supply chain. The way back-to-back agreements work is to transfer the same rights and obligations from one party to another, so that the people who perform the work or provide services are responsible and liable for any breach of the transferred obligations, not the “intermediate” level or levels (in complex agreements, there may be more than one subcontractor) in the supply chain. It effectively fills any liability gaps in the contractual chain. Under English law, a back-to-back contract with clauses by reference cannot contain certain types of clauses, from the main contract to the subcontract..
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