International Construction Law Review
BACK-TO-BACK CONTRACTS
LUIGI DI PAOLA
Studio Legale Bonelli Erede Pappalardo, Milan, Italy
PAOLO SPANU
Techint SpA, Milan, Italy
1. Introduction
In the construction industry, a particular form of contract, called “back-to-back”, is commonly used. This term indicates a contract—normally a subcontract—which transfers to the subcontractor, partially or entirely, the obligations undertaken and the rights acquired by the contractor towards the employer on the basis of the so-called “main contract”, so that the subcontractor guarantees the execution of its performance in the same way and under the same conditions to which the contractor is obliged towards the employer.1
First, it is important to note that the use of the “back-to-back” contractual scheme is not exclusive to the construction industry. “Back-to-back” contracts are commonly used in various economic sectors. This article will only analyse some aspects of “back-to-back” contracts in the construction industry.
The subcontract fits well in the “back-to-back” contractual scheme for its nature and function. As put forward by scholars, by means of the subcon-tract the contractor uses another person, the subcontractor, for the total or partial execution of the same works that he took the obligation to execute towards the employer; therefore, the main contract and subcontract are contracts that realise functionally related operations, since they both intend to satisfy the employer.2 It is indeed because of this functional relation between the object of the main contract and the object of the subcontract that the “back-to-back” contractual scheme finds its rationale.
It is clear that the contractor uses the “back-to-back” scheme in order to align totally the obligations undertaken by the subcontractor (even if
1 See Bonelli-Rellini, “Effetti della Clausola If and When: Una rassegna ragionata della giurisprudenza italiana ed internazionale”, Diritto del Commercio Internazionale, 1997, 239 et seq. The same concept is also stated by Ezer as follows: “the subcontractor should be bound to the prime contractor as the prime contractor is bound to the customer”, International Exporting Agreements (New York, 1986), pp. 4–18.
2 See on the matter Bonelli-Rellini, op. cit. n. 1; Musolino, “La categoria del contratto derivato e il subappalto” (2003) 2 Riv Trim Appalti 235 et seq.; Cigliola, “Subappalto”, 1993 Cont impr. 1307 et seq indicating that: “A subcontract does not differ in its essence from a main contract. The main difference existing between a subcontract and the main contract has to be found in the peculiar position of the (sub)contractor and in the link existing with the main contract” and Doubisson, “Quelques aspects juridiques particuliers de la sous-traitance de marchés dans la pratique du commerce international”, Droit et pratique du commerce international, 1983, 492.
The International Construction Law Review [2009
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