Meaning Of Back To Back Agreement
In the case of a back-to-back system, a dispute between the employment master and the employer should have a significant impact on the relationship between the principal contractor and the subcontractor, and vice versa. Commercial intermediaries use a back-to-back document to open a second credit for the benefit of a seller (supplier). In a case that was tried in early 2016, an engineering firm acted as a contractor in a project and assigned a subcontractor a „back to back“ clause for certain jobs. The Court held that the purpose of a „back-to-back“ clause is generally to prevent the subcontractor from paying the subcontractor for work that has not been approved or paid for by the contracting authority for reasons related to the subcontractor, such as. B than partial or inappropriate work. Despite the existence of a „back to back“ clause in the agreement between the parties and even if the supplier has not received payment from the customer, it does not nullify the obligation for the contractor to pay the subcontractor if it is established that the subcontractor did the work properly. In another case, reviewed at the end of April 2016, the client did not pay due to defects in the work. The Court found that, despite the „back-to-back“ clause, the principal contractor is required to pay the subcontractor, since the principal contractor was not present. The Court stated that without any particular commercial use, the natural importance by „for the delivery/installation of …
Work on a back-to-back payment basis…. was simply that Tim Lee would be paid if Super King had received payment from his superior contractor. This was a single payment obligation, namely the obligation to pay upon receipt of payment. There was no indication, either in language or in the actual background, that the single obligation should be divided into parts – one part with respect to the claim and the other part of the timing. Super King`s commitment to pay Tim Lee for the work done would only happen after he (Super King) received payment from Wan Chung, the prime contractor. When designing or reviewing back-to-back contracts, make sure that each contract clause is thoroughly reviewed. Among the elements that could be particularly important: in the construction industry, it is customary for the principal contractor to be able to use the services of a subcontractor to carry out all or part of a specific project for a client. The client generally requires that the client be responsible for the entire work of the project. To protect their liability, the prime contractor will often try to make the subcontractor legally responsible for as much of the project as possible.
Essentially, it is a back-to-back contract that is always standardist when a project requires the collaboration of several different entities to finalize the entire work.