The main contract and subcontract in a construction project are typically interrelated, and in essence, a subcontract is concluded in view and in the light of the main contract. Such interrelation can also be evidenced by explicit references in the subcontract to the main contract. However, despite their close interrelation, the main contract and the subcontract for construction are typically separate. In effect, the several parties, namely the employer, contractor and subcontractor or subcontractors, form a notional contractual chain whereby each party is bound by rights, duties and liabilities with regard to the party that it is linked with.

1. Explain the legal principle that limits direct liability between the Employer and the Subcontractor in the construction industry in Australia ? Elaborate with an example

2. Discuss three risks or liabilities that the Main Contractor gets exposed to if two sets of contracts (employer main contractor and main contractor subcontractor) are not properly aligned?

3. Briefly explain why it is important for an Employer to establish a direct contractual relationship with a subcontractor and further mention how this can be done? Use some examples to support your answer.

QUESTION 2 | Payments | 20 marks

Any person who undertakes or carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services. Whether deliberate or forced, delayed payment up the contractual chain can have dire consequences for anybody further down that chain.

1. Briefly explain five main provisions of payment clauses from at least three different standard forms [5 marks].

2. Explain using example how the value of an Interim Payment Certificate is calculated [10 marks]

3. Explain with examples five common payment related problems in construction projects [5 marks]