He’s Given My Work to Another Contractor – I Want My Lost Profit!
All too often we get involved in projects where clients, as always, are looking to save a few pennies and omit work from a Contractors Contract to then place an order for the exact same work with another cheaper alternative Contractor. But if this happens what rights do you have?
First things first; this blog is written on the basis that the Contract you have entered into actually includes an express provision allowing your client to omit the work and have it carried out by others. If it does not, then this is a totally different story, but that is for another day. But let’s be clear, most forms of contract allow your client to simply omit work from your work scope, but does it then further state he can get the work carried out by another third party Contractor? That’s what we are talking about here – two totally different things.
Also, one more point, we are assuming that the work in question was in fact profitable for you i.e. there must be some loss. This may sound obvious, but as we all know when tenders are being finalized, pencils get sharpened and occasionally it has been known that the work cannot be carried out for the sums bid. If this is the case, then take my advice and agree the omission as quickly as possible!
Assuming your client has the express contractual right to omit the work and have a cheaper (and okay inferior!) Contractor complete the work instead of you, what rights do you have?
As always check the exact wording of the Contract. Do the terms of the Contract specifically state that profit is recoverable or indeed that profit is not recoverable? If so, then simply apply the provisions of the agreed contractual clause. But if, as happens in a lot of standard forms the Contract is silent, what is the position then?
Well it’s good news. It has been held by the courts that the “generally accepted position in the industry” is that you will be entitled to claim for loss of profit. It then falls to you to evidence and quantify your actual loss. This may not be as straightforward as it seems.
What are you entitled to claim – the amount of profit included within your bid for the omitted items or the expected profit that you could have earned undertaking the work? Would you have made more money completing the work than stated in the Contract? Could you have completed the work for a lesser cost either by skillful project management or astute procurement?
In essence, what you have is a damages for breach of contract claim, and as always the purpose is to put you in the same position as if the breach had not occurred. So, if that’s the case and assuming you can prove it, it makes sense that you may well be entitled to the actual profit that you have lost, if you would have completed the work i.e. not the bid profit.
In any event, I am sure your client will argue that you would have made no profit on the work anyway, and he has saved you money!