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Flow Down Of Terms Agreement

9 diciembre, 2020

Subcontractors must closely comply with the provisions of their subcontracting that relate to the terms of the main order. These provisions are commonly referred to as «downward flows» clauses. Most subs are naturally familiar with these provisions. They try to outsource the conditions of a main order «down «. Caution should be exercised in the development of flow clauses and, although there is a temptation to treat them as a short cut, it is a trap for the unwary. The inclusion of the reference provision requires clear wording, particularly where the clause to be resumed includes an exclusion or limitation of liability. A poorly worded flow-down clause, instead of creating a «backtrack» agreement, may result in uncertainty as to the terms of the subcontracting and the extent to which the terms of the main contract are included. Such uncertainty can be an obstacle for parties resolving contractual issues that may arise and, in the worst case, may even lead to satellite disputes over contractual terms. The most disadvantaged party in this scenario is the main contractor. When the subcontractor`s work is delivered in accordance with the subcontractor, but does not fully meet the requirements of the main contract, it is the contractor who is responsible for the discrepancy by the employer. This responsibility cannot be passed on to the subcontractor, who has of course complied with his own obligations.

It is therefore clearly in the best interests of the prime contractor to find a way to fill any gaps between the subcontractor`s obligations and its own well-developed flow rules to achieve this. There are many ways to design a flow clause, but the objective is always the same – to ensure that the subcontractor`s obligations to the principal contractor are consistent with the owner`s obligations to the employer. The development of effective flow clauses – potential mine falls The most appropriate approach depends on the circumstances, the nature of the project and the share of the work to be allocated.