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Law Blog: Keep calm and carry on

In his new regular law blog, John Sheils partner at Shadbolt & Co, says don't panic

Here on my desk I have a red mug and written on it in white are the words " KEEP CALM AND CARRY ON."

Apparently this phrase is taken from a poster produced by the government just before the WWII. The mug was given to me by my brother-in-law (he's officially "cool" - earring, plays the guitar, builds his own furniture, that sort of thing).

"Those words sing don't they?" the brother-in-law said to me as he gave me the mug. And it's true, "keep calm and carry on" could be the motto for our unsettled economic times.

Another phrase that sings in these uncertain times is "pay when paid."
However, as every schoolboy knows, pay when paid clauses were out-lawed in 1998 by virtue of the Housing Grants Construction and Regeneration Act.

However, an exception was made in respect of so called upstream insolvency - that is where a third-party payer, such as the employer, becomes insolvent. For example, a contractor may include a pay when paid provision in a sub-contract which will then operate in circumstances where the employer becomes insolvent.

The courts have already set out limitations as to when such a clause can operate. For example, the contractor cannot benefit from the clause where the reason why he has not been paid is as a result of his own breach. Also, the contractor is duty bound to use his best endeavors to pursue the money from the employer.

The idea of retaining this particular exception to the banning of pay when paid clauses was so that main contractors and sub contractors could share in the risk of an employer's insolvency.

Although, when I say the exception sings, I fear it may sing a requiem for some hard pressed subbies.

I suppose the only option in such circumstances is to keep calm and carry on.