Updated: Jan 16
A great article published by JD Supra offers a good lesson to prime contractors. In summary, it is an overview of a case out of Virginia where a subcontractor was struggling to perform and the prime contractor stepped in and began dealing directly with the subcontractor’s lower-tier subs. The subcontractor sued the prime contractor for tortious interference with its business relationships. You can read the article here.
It highlights an important point for primes and subs that may be involved in a dispute over delay or non-performance. Prime contractors can face stiff penalties if one of these conditions occurs, which can prompt a prime to direct lower-tier subcontractors if in an effort at mitigation. However, doing so can subject the prime to claims by the subcontractor that the prime “going around” the subcontractor to the lower-tier subs was tortious interference with the subcontractor’s business relationships and caused it to lose profits.
In an effort to mitigate claims like these and to further ensure the work is completed if the subcontractor fails to perform, a prime contractor should consider including clauses that expressly allow it to intervene without liability or to hire another entity to perform the work and charge those costs to the subcontractor.