Directors, employees and subcontractors become directly accountable
On Feb. 1, 2024, a bill was passed that makes sensitive changes to our liability law. Specifically, from now on it will be easier to directly sue the subcontractors, directors and employees of your contracting party. Today, this is only possible through an intermediate step.
Today, in principle, a contracting party cannot directly sue the performance agent (think, for example, subcontractors, directors and employees) of its co-contractor. In the construction industry, for example, this means concretely that, in principle, a principal cannot directly sue the subcontractor of the general contractor. This is because the principal only has a contractual relationship with the main contractor, so in principle he can only sue the main contractor. In practice, this means that the principal has to sue the general contractor, and the general contractor will in turn sue the subcontractor if he believes that the fault lies there.
The same applies to directors and employees of a company. In principle, they cannot be sued directly by a contracting party of the company itself. If this contracting party suffers damages, he/she will only be able to recover these damages from the company. The company itself can then bring a claim against the damaging director or employee.
This limitation will end next year. Thus, a builder will be able to sue directly the subcontractor of his contractor, and a contracting party will be able to sue directly the director or employee of his co-contractor, at least if that person has committed an error within the performance of the contract with the company, e.g., by flouting a legal provision, or by acting carelessly.
Some examples:
- A principal enters into an agreement with a general contractor. This general contractor uses several subcontractors to carry out the work. The subcontractor responsible for installing the heating and ventilation system makes a mistake and damages the house. In this case, the principal will in principle directly sue this subcontractor be able to appeal, even if he has no direct contractual relationship with it;
- A company places an order with a supplier. Upon delivery of the goods, the employee commits an error, causing the good to be damaged. From now on, the buyer will have this employee in principle be able to address them directly;
- A company performs excavation work for a builder. The crane used in the process turns out not to be sturdy enough, causing it to tip over and damage the site. The principal believes that the director of the company should have known when the contract was concluded that the crane would not be sturdy enough, and can that driver in principle address them directly.
The value of legal customization
Limitations of liability are often included in the main contract between principal and general contractor. Interestingly, the subcontractor can also invoke these agreements against the principal in order to limit its own liability. Thus, the subcontractor can use both limitations from the agreement between the principal and main contractor, and the limitations from its own agreement with the main contractor, in its dispute with the principal.
The same applies to directors and employees. They too can invoke the liability agreements made between client and company or limitations from their own (employment/director) agreement with the company. However, the limits set by labor law and company law for such restrictions must be taken into account.
When does all this apply now?
This change in the law will apply to all claims occurring from its enactment (presumably this will be Jan. 1, 2025), and this regardless of the date the agreements were entered into between your company, your client and persons called upon for performance. So the future law may as well have an impact on all previously concluded agreements.
Thus, a subcontractor who commits an error after Jan. 1, 2025, will be able to be directly sued by the builder, even if all contracts relating to this site were concluded before Jan. 1, 2025. Hence the importance of scrutinizing (or having scrutinized) all pre-existing contracts involving the use of an auxiliary person. Concretely, it is to be expected that from 2025 onwards, the principal (and all other contractual creditors) will be jointly sued much faster, where e.g. both the main contractor and the subcontractor will be directly involved in the dispute.
As of next year, it will be easier to hold executing agents (subcontractors, employees, directors) liable for their personal errors. This does not necessarily mean that the executing agent will also be liable for more than before, as this will depend on the concrete circumstances.
What steps can you already take?
- Review your current agreements and insert sufficient and proper liability limitations depending on what your position is as a customer.
- Have your insurance policies screened and verify that they provide adequate coverage against potential direct claims from creditors.
We can, of course, assist and guide you in this.
We will continue to follow this change in the law closely and will take you through its progress via subsequent news releases.
Do not hesitate to contact us here contact us with questions.
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