Unscrupulous operators increase risk of non-payment
Background
An experienced concrete cutting and coring business subcontracted on a sizeable local water authority construction project.
The head contractor’s business model included persuading many local contractors to enter onerous and inequitable subcontracts.
It preyed on smaller businesses’ misplaced trust and legal naivety, forcing settlements that underpaid and overworked subcontractors so it could submit more competitive tenders and generate significant profits.
The subcontractor failed to do the proper legal reviews, relying on verbal representations that downplayed the written contract’s importance. When the work was complete, $180,000 was still owed. The head contractor offered them just $40,000 in total, claiming they’d not followed the contract’s formal terms and administration requirements.
The anticipated legal cost of overturning the contract was estimated at $220,000 – and given the uncertainty involved, pursuing the matter through the courts was prohibitive
How we helped
With our assistance, the subcontractor recovered $140,000 of the $180,000 owed. It cost them $25,000 to complete these negotiations and reach a formal settlement.
Outcome
Reviewing the contract before signing would have cost the subcontractor just $1,500 and saved them a $65,000 loss. The moral of the story? ‘Buyer beware’ – trust must be earned. Protect yourself from unscrupulous operators and engage professional assistance before contemplating any material transaction.
