Who’s liable for a sub-contractor’s mistake?

If you bring in outside help to complete work for one of your customers and something goes wrong, who will be in the firing line? And what steps can you take to protect yourself?

A helping hand

If you’ve landed a contract but don’t have the resources or expertise to complete the work yourself, it’s common practice to use a sub-contractor to help out. But will you and your company be liable for their mistakes if things don’t go as planned?

Contractual problems

If you don’t supply the goods or services you’re being paid for in accordance with the terms and conditions of sale, you’ll be on the hook to sort out the problem, financial or otherwise, even if it was a sub-contractor which caused it.

Trap. Not having a sale contract doesn’t mean you escape. Even if there’s no written or oral agreement, there’s an implied obligation to ensure that the job is completed to a reasonable standard.

Passing the buck

If your customer makes a claim against you because of, say, faulty workmanship, but this was down to the sub-contractor you used, you can, in turn, make a claim against them.

Tip. Have a formal contract with your sub-contractor that mirrors the terms of the contract you have with your customer. This can make it easier for you to go after the sub-contractor responsible if your customer makes a claim against you.

Non-contractual problems

If the sub-contractor has caused a problem not directly linked to the contract, for example their van damages your customer’s property, the good news is that they are liable. But there are two exceptions to this rule, and if either apply your customer can make a claim against you as well as against the sub-contractor.

• Vicarious liability. If you’ve “borrowed” your sub-contractor’s workers to do the work.

• Extra-hazardous activities. If the work involved is unusually dangerous.

The second exception is self-explanatory, but the first was recently redefined following an appeal court case.

Exceptions

In the case of Biffa Waste Services (B) v Maschinenfabrik (M), M had been asked by B to construct some heavy machinery, and had in turn engaged specialist sub-contractors to help. However, one of the sub-contractors caused a fire at B’s premises. B sued both M and the sub-contractors. In the original judgment M was found liable because it was caught by the exceptions above. But M appealed and won. The judge decided that the sub-contractors should be solely liable, but why?

Supervision is not control

The judge said that “supervision” of sub-contractors was not “control”. M did not control them and so couldn’t be liable for their mistakes.

Tip. When hiring a sub-contractor state in the contract that you’ll only supervise work. Control over how the work is carried out is up to them.

Trap. Even though you may not control the sub-contractor’s work, you and your co-directors still have an obligation under the Health and Safety at Work etc. Act 1974 to provide a safe working environment for everyone working for you, whether or not they are employees.

A customer can expect compensation if you fail to live up to the terms of your contract, even if it’s a sub-contractor’s fault. But if the problem isn’t directly related to the contract, they will be solely liable, providing you weren’t in control of their workers. State in your contract you’ll only supervise them, not control how they do the job.