Contracts & ExecutionQuestion 69 of 1632

A subcontractor fails to complete their scope of work on a project. The prime contractor's primary recourse is:

a.Report the sub to CSLB and wait for the Registrar to order completion
b.Complete the scope with another sub and bill the excess to that sub
c.Stop all work and treat the prime contract as terminated by the owner
d.Ask the owner for a change order covering the replacement sub's higher price

Explanation

When a subcontractor defaults, the prime's contract remedy is to terminate that subcontract, have the scope finished by others, and recover the difference from the defaulting sub — or from its performance bond, if one was furnished. (a) CSLB discipline can suspend or revoke the sub's license, but the Registrar has no power to order the work completed or to make the prime whole; that is a court's or an arbitrator's job. (d) A change order moves the cost onto the owner, who neither caused the default nor agreed to pay twice for the same scope. (c) Walking off is worse than useless: abandoning a project without legal excuse is itself cause for discipline under B&P §7107, so the prime would trade a collection claim for a license problem.

Law Reference: Bus. & Prof. Code §7107 (abandonment); §7108.5 (payments to subcontractors)

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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)
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