Revoking the Exercised Termination of the Construction Contract: Implications and Lessons Learned

Abstract

The decision to terminate the main construction contract by a project owner is a serious task that is normally approached with a great deal of caution and made almost invariably after seeking the appropriate legal advice. However, it is not a rare case that affected contractors find themselves in a position of attempting to have the exercised contract termination amicably revoked and the resumption of work on site reinstated. Whether such attempts eventually fail or succeed, major ramifications are likely to surface in administrating the propagation of the impacts of both main contract termination and its subsequent revocation on the subcontracts of the lower-tier project participants, i.e., subcontractors. This paper tackles this exact case, which involves the actions taken by the general contractor toward the subcontracts’ works, first upon the termination of the main contract becoming effective and then upon having this owner’s exercised termination successfully revoked. The methodology involved a number of steps. First, an analysis of the legal perspective on how the termination of the construction contract becomes effectively in place is carried out, using (1) a case law review of numerous industry-reported cases involving contract termination, and (2) a review of standard forms contracts. Second, an investigation of the viability and requirements for the possible annulment of contract termination, as stipulated under civil and common laws, is performed. Last, the details of a recent multinational contractor–subcontractor dispute are thoroughly studied, and lessons learned concerning the prevailed irreparable harm are deduced. The outcomes of the work shall be of value to project owners when deciding to revoke their exercised termination and to general contractors when deciding on the effective actions toward the subcontracts’ works when such a revoking action becomes effective.