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What does the phrase ,,Invoice directly to you, right!’’ mean?
It often occurs in the negotiations of contracts for services (e.g construction or renovation contracts) that a major contractor makes a price offer which includes work to be performed by another entrepreneur or company. The service description accompanying such price offer states that certain work will be performed by someone else. (Often, the name of the company has been mentioned too.) It would be logical to assume that the other entrepreneur is a subcontractor and the main contractor is responsible for the subcontractor’s work. However, the situation becomes ambiguous if the price offer is followed by a contract and even the contract does not clearly define the legal role of the other entrepreneur. Usually, the co-operation between the contractor and the customer goes well for a while and in the interest of speed of business, etc., the contractor informs the customer that the other entrepreneur will invoice the customer directly for the smaller part of work: ,,Invoice directly to you, right!” Why not, if the contractual rights and obligations are clear! But in practice it often turns out otherwise.
A common mistake is that the contract for services refers to the price offer made and it has not been specified anywhere if the contractor is also responsible for the smaller part of work which is done by the other entrepreneur. In other words, what is the legal role of the one doing the smaller part of work, to whom the customer has now paid directly? Is he a subcontractor, or is he another contractor with whom the customer has entered into another contractual relationship? Maybe he has joined the service contract and entered into the contractual relationship as a new obligor alongside the current contractor, and both are jointly and severally liable? In a situation where the will of the parties is not clearly specified, dozens of such legal questions may arise. Later, if disagreements between the parties come up because of the quality of work or complying with the deadlines, inevitably, there will be disagreements about the liability as well. Especially, if the smaller part of work is a prerequisite for the following work and it has been done poorly. In this case, there will be long disputes whether the contractor, who is the contractual partner of the customer, is responsible for all work or whether the customer should submit the claims deriving from the poor quality of work directly to the one who performed the problematic smaller part of work. Legally, the correct answer would be that it depends on the will of the parties and which earlier agreements the arguing party can prove. In practice, it usually means a long and complex legal dispute, from which first of all lawyers benefit financially.
In order to avoid such disputes, it should be specified in the price offer itself whether the contractor considers himself as the main contractor, who is also responsible for the smaller part of work (to be carried out by subcontractor). If it is not specified in the price offer, the potential customer receiving such ambiguous price offer should immediately answer whether it is acceptable for him/her that there will be two contracts for services, or is the prerequisite for accepting the price offer the condition that the one making the price offer agrees to be the main contractor and, hence, responsible for all the works to be done. Also, one must use the opportunity to clearly define in the contract for services for which obligations the contractor is or is not responsible. Generally, it is in the customer’s interest to have one main contractor so that all contractual rights and obligations are exercised between the two parties. That is, the main contractor is fully responsible for the subcontractor’s work. On the other hand, it is in the contractors’ interest to define the contractual relationships in such a way that each contractor is solely and directly responsible only for his/her own work and the customer exercises its rights and fulfils its obligations in direct contact with each of them. For the customer, such execution of contracts is complex and resource intensive.
How the parties agree depends on their will. In order to avoid later disputes, it is advisable to keep in mind three rules: 1) in negotiations or upon concluding or performing the contract, do not assume, ask for clarifications in order to agree specifically; 2) all agreements concerning the performance of work (including so-called operational or current agreements) should be agreed at least via e-mail; 3) regular supervision of the performance of work contributes to the quality of the result.
Ilmar- Erik Aavakivi / LEADELL Pilv Law Office
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