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Fachbeitrag 28.02.2011

Payment of the subcontractor

(03. January 2011)

The financial construction of the building sites, i.e. the post-payment of the entrepreneurs working on the building and the existence of a chain of entrepreneurs may cause some difficulties regarding the payment of the actors in the building site. The post-payment of the contracting fees presumes that the subcontracting party is able to pre-finance its cost so the price of the materials, the salary of the employees…etc. The companies calculate the contracting payment delays in their business project, in order to harmonize their liabilities. In case the subcontractor does not get in due course its payment, it risks the liquidation or judiciary dissolution. The French legislation disposes an act on the subcontracting (act. nr. 75-1334 of 31 December 1975) which aims to protect the subcontractors in case of lack of payment of the main contractor. The arms which were taken by the act in the hand of the subcontractors are the direct action and the main contractor’s personal guarantee in case of private project owner and the direct payment in case of a public project owner. The contracting parties shall not enter into a contract having derogative clauses to the dispositions of the act on the subcontracting, these clauses are invalid. In all cases where a main contractor intends to provide for subcontractors, he shall make accepted the subcontractor and its payment conditions defined by the subcontract by the project owner at the moment of the conclusion of the subcontract. In case the subcontractor and its payment conditions are not accepted by the project owner but the main contractor insists on the subcontractor, the main contractor remains liable towards the subcontractor but he can not refer to the contract counter to the subcontractor. This acceptance is substantial, only the accepted subcontractor can start a direct action against the project owner and only the accepted subcontractor is entitled to the direct payment. The location of the material is not a subcontract, so this type of contract does not benefit from the advantages of direct payment or direct action. 

Private site:

Direct action:

The act empowers the subcontractor to proceed directly against the private project owner in case the main contractor does not comply with its payment obligation towards the subcontractor according to their agreement. The subcontractor can not waive to its right to the direct action, this revocation is not valid. In order to be entitled to start the direct action, the subcontractor shall, in case of delayed payment of the main contractor, put the main contractor in default (la mise en demeure) which means that the subcontractor shall write a final notice letter to the main contractor calling him to pay the due amount. At the same time the subcontractor shall also send a copy of this letter to the project owner. If the main contractor does not fulfil its obligation in the one month after the receipt of the putting in default letter, the subcontractor can claim the contracting amount from the project owner. The subcontractor is entitled to start the direct action even if the cause of the lack of payment of the main contractor is its liquidation. The amount vindicated by the action shall not exceed the amount contained by the subcontract, the amount to which the project owner is effectively entitled and also limited to the amount due to the main contractor on the day of the reception of the putting in default letter.

Guarantee of the main contractor:

The other important security for the protection of the payment of the subcontractor is the personal guarantee of the main contractor provided to every subcontractor. The personal guarantee of the main contractor is a condition of the validity of the subcontract. This invalidity means that the main contractor can not claim damages for the unilateral breach of the contract by the subcontractor, but the subcontractor remains entitled to claim for the payments for the executed works. The main contractor is not obliged to provide such guarantee if he delegates the project owner as debtor to the subcontractor to the extent of the contracting amount between the subcontractor and the main contractor. The condition of this delegation is the acceptance of the subcontractor. As a security of the funds designated to pay the subcontractors, the main contractor is not allowed to assign or engage its claim towards the project owner only to the extent of amounts to which he is entitled due for the work he carried out personally. However the main contractor intends to assign or engage its whole claim towards the project owner, he is obliged to have in advance and in written form a personal guarantee as regards all subcontractors.

Public site:

Direct payment:

In case of a public project owner – the state, the local governments, the public institutes and companies – the subcontractor is paid directly by the project owner. For this purpose the main contractor shall – beyond the acceptance by the project owner – indicate the nature and the amount of all the benefits contained by the subcontracts to the project owner. The direct payment is not applied for subcontracts under 600 Euros. The direct payment shall also be executed by the project owner even if the main contractor is under liquidation. The subcontractor shall not renounce to the direct payment validly. The direct payment is only applicable for the subcontractors who are directly subcontractor of the main contractor, but not for the subcontractors of these subcontractors. Although these sub-subcontractors are also entitled to the personal caution of the main contractor or instead, the delegation of the debtor as defined above.The main contractor shall engage the claim towards the project owner only to the extent of amounts to which he is entitled due for the work carried out personally

Procedure in case of direct payment

The subcontractor shall send the documents justifying its entitlement to the direct payment in recommended letter with reception notice to the main contractor. The main contractor has a period of fifteen days, counted from the receipt of documents, to accept or refuse the payment. The refusal shall be reasoned. After this period, the main contractor is deemed to have accepted the documents justifying the direct payment or parts of these documents which he has not explicitly accepted or refused.

Rated 3,3 out of 5
3,3/5 (1.008)

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