Subcontracting in the Light of the Civil Transactions Law and the Egyptian Civil Code

The civil codes — the Egyptian Civil Code and the Civil Transactions Law among them — permit a contractor to entrust the works he has undertaken to carry out, in whole or in part, to another contractor. This is what is known as a subcontract: a contract by which a contractor asked to carry out work entrusts that work, wholly or in part, to another contractor. The contract has the character of a contract for works only as against the employer; as regards the person he deals with — the subcontractor — he is himself the employer.

Article 661 of the Egyptian Civil Code provides that "a contractor may entrust the carrying out of the work, wholly or in part, to a subcontractor, where no term of the contract prevents him and the nature of the work does not presuppose reliance on his personal competence. In that case, however, he remains responsible for the subcontractor as against the employer."

That text was drawn from Article 364(2) of the Swiss Code of Obligations. The Civil Transactions Law complies with the same rule: Article 473 provides that "1. A contractor may assign the carrying out of the work, wholly or in part, to a subcontractor, unless the statutory provisions, the agreement or the nature of the work require otherwise, or unless the person of the contractor is material. 2. The contractor's liability toward the employer subsists."

Neither the Egyptian Civil Code nor the Civil Transactions Law governs the assignment of a contract for works, and the general rules therefore apply to it. Provisions on subcontracting were, however, laid down, given its considerable practical importance. The main contractor may entrust the work to a subcontractor for its execution in whole or in part, unless the reservations the law lays down apply.

The conditions on which subcontracting is permitted

The Egyptian Civil Code provides:

1. That no term of the contract prevents the contractor from doing so.

Whether the term is express or implied. Where such a term exists, the contractor must comply with it, or be exposed to the sanction the general rules impose. Where there is no prohibiting term, the contractor may entrust the performance of his obligation to another contractor as a subcontractor, and that subcontract is valid and effective as against the employer. Subcontracting commonly occurs in large works, where the tasks are many and various.

The possible existence of a prohibiting term in the contract between employer and contractor does not, however, limit the contractor's drawing on others in performing his obligation — whether skilled or unskilled — so long as they are not subcontractors and are employed by him under contracts of employment rather than contracts for works.

1. That the nature of the work does not presuppose reliance on the contractor's personal competence

As where the nature of the engagement rests on the contractor's personal competence — a painter, a physician or an engineer — none of whom may entrust the work to another, even where the contract contains no express prohibition on subcontracting.

The Civil Transactions Law permits subcontracting unless:

1. The statutory provisions, the agreement or the nature of the work require otherwise;
2. Or the person of the contractor is material.

The nature of the relationships between the parties to a subcontract

One: the main contractor and the subcontractor

The relation between them is that of employer and contractor, governed by the subcontract. The main contractor is bound, first, to enable the subcontractor to complete the work, by supplying him with the plant and tools the work requires where he has undertaken to do so, and by supplying the specifications and drawings where the work calls for them. Should the main contractor fail in this, the subcontractor may have recourse against him seeking specific performance, and may also seek rescission of the subcontract, with compensation in either case where there is ground for it.

The main contractor is bound, second, to take delivery of the work on its completion. Should he refuse after formal notice, he is treated as having taken delivery, unless the subcontractor has departed from the specifications set out in the subcontract or from the rules of the trade. Finally, the main contractor is bound to pay the subcontractor's remuneration; where the remuneration is not fixed by agreement, recourse must be had to the value of the work.

The subcontractor's obligations are confined to completing the work in the manner agreed and on the terms set out in the subcontract. Where the contract lacks such terms, recourse must be had to the custom governing the rules of the trade. Where he needs tools and plant, he is bound to bring them at his own expense unless the main contractor has undertaken to supply them. Where the subcontractor has undertaken to supply the materials needed to complete the work, he warrants their quality and their latent defects, unless he was aware of those defects. Where the main contractor supplies those materials, the subcontractor must preserve them.

Two: the main contractor and the employer

This relation is governed by the main contract. The employer has no relation to the subcontract, although the subcontractor may have recourse against the employer for his remuneration, as set out in the third head below.

The employer is bound toward the main contractor to enable him to complete the work; he is bound to take delivery of the work and to accept it from the main contractor, not from the subcontractor; and he pays the remuneration to the main contractor, unless the subcontractor has recourse against him for it.

The main contractor remains bound toward the employer to complete the work at the time agreed and to deliver it on the terms set out in the contract between them.

Three: the relationship between the employer and the subcontractor

In principle there is none, the relation being confined to the main contractor and the employer, with no direct relation between subcontractor and employer. An indirect relation arises between them, however, founded on the relation each has with the main contractor: each may resort to the oblique action, brought in the name of his debtor the main contractor, to claim the rights that contractor holds against the other. By this means the employer may require the subcontractor to complete the work, to deliver it, and to warrant it. The subcontractor likewise may require the employer to enable him to carry out the work, to take delivery of it and to accept it, exercising the right of his debtor the main contractor. The subcontractor may in addition claim payment of his remuneration from the employer.

Article 662 of the Egyptian Civil Code provides that "subcontractors and the workmen employed on the contractor's account in carrying out the work have the right to claim directly from the employer, up to the amount he owes the main contractor at the time the action is brought. The workmen of subcontractors have the like right against both the main contractor and the employer."

The Civil Transactions Law lays down a different rule. Article 474 provides that "a subcontractor may not claim from the employer for himself anything of what is due to the contractor unless the contractor has assigned it to him against the employer". The law thus fixes the compass of the relationship between subcontractor and employer as extending to what the main contractor is owed by the employer, and only upon the main contractor's assignment of it to him — unlike the Egyptian Civil Code, which does not make the subcontractor's right depend on the main contractor's authorisation.