Terminating a Subcontractor for Nonconforming Work

By AIA Contract Documents

June 8, 2023

This article highlights provisions found in AIA Contract Document A401-2017 Contractor/Subcontractor Contract for Construction related to the termination of a subcontractor for nonconforming work.

Section 7.2.1 of A401-2017 – Termination for Cause and Deadlines for Correction

Section 7.2.1 Termination for Cause allows a contractor to send notice to a subcontractor that repeatedly fails or neglects to perform work in accordance with the contract. After receipt of the notice, the subcontractor has ten days to commence and continue the correction of the default or neglect. If the subcontractor fails to diligently proceed with the corrective action, the contractor may terminate the subcontract and finish the subcontractor’s work in the manner that the contractor deems appropriate. To the extent the unpaid balance of the subcontractor’s work is less than the amount it takes the contractor to complete the unfinished work, the subcontractor is responsible for the difference. For convenience, Section 7.2.1 of A401-2017 is copied below.

  • 7.2.1 Termination for Cause

If the Subcontractor repeatedly fails or neglects to carry out the Work in accordance with the Subcontract Documents or otherwise to perform in accordance with this Subcontract and fails within a ten-day period after receipt of notice to commence and continue correction of such default or neglect with diligence and promptness, the Contractor may, by notice to the Subcontractor and without prejudice to any other remedy the Contractor may have, terminate the Subcontract and finish the Subcontractor’s Work by whatever method the Contractor may deem expedient. If the unpaid balance of the Subcontract Sum exceeds the expense of finishing the Subcontractor’s Work and other damages incurred by the Contractor and not expressly waived, such excess shall be paid to the Subcontractor. If such expense and damages exceed the unpaid balance of the Subcontract Sum, the Subcontractor shall pay the difference to the Contractor.

There are a few things to keep in mind while working through this provision of your subcontract, which are as follows:

  1. Review all documents associated with your subcontract to ensure there are not any additional steps or remedies found in other documents that would modify the subcontract language; and
  2. The ten-day timeline for corrective action begins upon the subcontractor’s receipt of notice.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.