ASSIGNMENT

3. The Contractor shall not assign the Contract or any part thereof1 or any benefit or interest therein or thereunder2 without the written consent of the Employer.3

SUB-LETTING

4. The Contractor shall not sub-let the whole of the Works. Except where otherwise provided by the Contract the Contractor shall not sub-let any part of the Works without the written consent of the Engineer4,5 and such consent if given shall not relieve the Contractor from any liability or obligation under the Contract and he shall be responsible for the acts defaults and neglects of any sub-contractor his agents servants or workmen as fully as if they were the acts defaults or neglects of the Contractor his agents servants or workmen.6 Provided always that the provision of labour on a piece-work basis shall not be deemed to be a sub-letting under this Clause.7,8

1. “THE CONTRACTOR SHALL NOT ASSIGN THE CONTRACT OR ANY PART THEREOF”. This refers to an assignment by the contractor of liability for carrying out the contract so as to have another contractor take over his liability from him, and is the position even in the absence of a specific prohibition of this kind. For obvious reasons one party may not without the consent of the other rid himself of his duties under a contract simply by assigning them to someone else, who may be less able to perform them or pay damages. See as to successors cl. 1, N. 2. For sub-letting see N. 4.

If the contractor is a limited company there may be an assignment in fact although not in law where shares in the company are transferred and the directors are changed. The employer cannot object to this because in law the company is the party to the contract and is a legal entity quite distinct from, and not affected by any change in, shareholders or directors.

If the contractor attempts to assign without the necessary written consent, the employer has a right of forfeiture under cl. 63 (1).

If an assignment is allowed the bond must be altered—p. 321.

2. “THE CONTRACTOR SHALL NOT ASSIGN…ANY BENEFIT OR INTEREST” (IN THE CONTRACT). This requirement is to prevent the contractor assigning his right to contract payments, whether already due or not, which he may want to do as security for borrowing. Where there is no restriction in the contract the contractor is entitled to do so, and it now appears that this clause is legally valid to prevent assignment. r

The pressure on the employer (presuming that this clause is valid) to agree to an assignment is that a contractor may reach the position that he cannot complete without raising a loan on the security of future payments, and if he does not complete forfeiture of the contract may, of course, involve the employer in loss. The dangers are that the contractor may not use the money raised to finance the works, and if the assignment covers the full contract price the assignee, having no interest in the contractor’s reputation, may prevent the usual give-and-take settlement of accounts. A celebrated engineering action was brought and lost, at great cost to both parties, at the insistence of an assignee of the contract payments.

However, if it is possible that this clause will discourage tenderers, the tender form may be altered.

If he receives notice of a valid assignment the employer must pay the person to whom the assignment is made (assignee) direct; if he pays the contractor he may have to pay over again. The assignee, of course, takes no more than the contractor would have been entitled to—for example on forfeiture the contract payments only after deducting the employer’s expenses and damages.