Managing Risks in Construction Subcontracting

In large-scale real estate and infrastructure projects, subcontracting is a standard practice used to delegate specialized tasks. However, under the Ethiopian Civil Code, the relationship between the employer (client), the main contractor, and the subcontractor involves complex layers of liability.

Legal Considerations for Developers:

Privity of Contract: Generally, there is no direct contractual link between the employer and the subcontractor. The main contractor remains primarily responsible for the quality and delivery of the entire project.

Direct Action Rights: In certain circumstances, subcontractors may have the right to claim unpaid fees directly from the employer if the main contractor defaults, provided the employer still owes funds to the main contractor.

Joint Venture Risks: When contractors enter into joint ventures, the "Joint and Several Liability" principle often applies, meaning each partner is fully responsible for the project's obligations, emphasizing the need for rigorous internal agreements.

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