Insolvency During A Construction Project

All businesses require cashflow to operate. The construction industry is a perfect example of that. The entire underpinning of The Builders' Lien Act is to provide some protection for those who provide services and materials on credit in a construction project. Some contractors go further and include "pay when paid" clauses in their contracts. This post will examine what happens when a party in the construction pyramid becomes insolvent.

From the Owner's Perspective: Insolvency of a General Contractor or Subtrade

As an owner, the insolvency of a general contractor ("GC") or subtrade can be an inconvenience. Where, for example, the electrical subtrade becomes insolvent and cannot complete the job, a replacement will need to be found. Inevitably, the cost for the replacement labour will be higher than the initial bid. Whether there is any recourse will depend largely on the terms of the prime contract.