First of all, for any construction work in UK, the following provisions shall apply;
A building construction project needs the following:
- building contractor
- quantity surveyors for measurement and valuation of work-in-progress and for cost planning.
- If contract involves specialised new technologies, the services of structural engineer will be needed.
- Project management contractor will be responsible for the overall control of the process.
In any building construction contracts, the following UK laws will have its impact.
The appearance of the building will be controlled by planning law whereas safety of the completed building is controlled by building control legislation , safety of the process of any building in UK is controlled by health and safety legislation act.
All building construction work needs prior approval from authorities under” Town and Country planning Act 1990 “and “Planning and Compulsory Purchase Act 2004.” “The Building Act 1984” specifies functional requirements of the regulations which have to be observed by the building contractor. For organisation and management of any construction contract, the provisions of “ “The Health and Safety at Work 1974” and the Construction” and “Design and Management Regulations 2007” and the “Occupier’s Liability Act of 1984” will be applicable.
Contract
It is essential when any construction of any building is envisaged, it is better to have every participator in the contract like builder, designer, project management contractor through a written contract. This will create obligations on purchaser with a provider of services or with a supplier. Contract may be a professional building contract, a professional appointment letter or a sub-contract. In a building contract, service providers will be professionals like architect, project management contractor, surveyor etc and as such, the fundamental commercial character of the process cannot be ignored. It is to be remembered that contracts are records of business transactions and in case of any dispute, the courts will scrutinise them with the same regulations that will be applicable to other commercial contracts. (Murdoch & Hughes 2007:.4)
Construction Contracts
It is the memorandum of agreement that actually forms the contract. It is to be noted that conditions are secondary terms which add detailed terms to the agreement. Thus, the memorandum can be executed either as a simple contract or as a deed. The memorandum of agreement shall contain details like law that applies to contract, time-limits if any, covenants regarding limit of liability, the quantum of professional indemnity insurance, the names of the arbitrators or adjudicators etc. Signing the contract either by way of as a deed or as a simple contract is essential. (Beatson 1997:21).
For instance, in an architect appointment contract, schedule 1 will elaborates the client’s requirement as to the requirement of the project. Schedule 2 explains with details of services that an architect will perform. Schedule 3 recognises fees and expenses and schedule 4 illustrates the details of other appointments made by the client’s for the project. (Lyon 1994:273). In the case of construction contract, the professional service agreement is designed as a shell contract.
It is essential to use the JCT design build form (JCT DB 05) in designing the construction contract. A JCT form of contract first requires that there must be a legal requirement for detailed contract provisions. Client has to state his requirements and convey them to the contractor. The contractor embarks on not only to complete the design but also the execution of the work. The client should appoint his agent (project management contract) to administer conditions. (Barnes 2006:2).
It is important to both the parties should agree each of the optimal terms in a construction contract. It is better to exercise an explicit negotiation and agreement of particular terms in stead of using boiler plate contracts.
Unsigned contract
However, due to negligence or with ulterior motives, if a contract is unsigned, still it is enforceable with the circumstantial evidence. In case of building contracts , if they are not signed by any parties or either one of the party , they may be deemed to be concluded by means of faxes ,telephone calls , negotiation meetings and even handshakes over breakfast even when nothing whatsoever is handwritten. ( Mather1999:11).
Legal Opinion
One of the clauses in the construction contract obliges the client to go for legal advice whenever it is necessary in conjuncture with any dispute between the client and the other parties connected to the project. Likewise, in your case, had you engaged a legal consultant, he would detected that contract has been unsigned and would have advised you to get the signature from the contractor so as to make him legally binding. (Slawson1996:10).
Asbestos issue
As regards to asbestoses issue, the client would have solved the issue had he arranged public consultation processes that would have put full stop to the boycotts and protest by the public. This would have helped the client to educate them about the safety measures initiated by the project management contractor.
As regards to the budgeted expenditure exceeding the budgets, the client should have taken the feed back from the earlier projects which might had shed light on probable problem areas.
Fairchild v. Glenhaven Funeral Services Ltd 1 case elucidates that even when medical science is not capable of proving or finding some factual matters, the claimant may still succeed in establishing causation. The case pertained to three appeals made by individuals who had contracted mesothelioma.
This disease is caused if a person inhales asbestoses fibres at their work place. It will take many years for the disease to develop and in such cases, it would very difficult for the claimant to establish when and where he contracted the disease. In tort case, for claiming damage, claimant should clearly establish that a specific defendant was responsible for causing damage which is the customary principles of causation. In this case, claimants had worked with the various employers and it was very difficult to establish from which work place they had contracted such disease. (Harpwood 2003:158).
In such circumstances, it is enough to establish that each of the employers had significantly enhanced the risk of injury. As the result, the employee was given the right to recover from all the employers, though it was not clear which specific employment had been the real cause of the disease.
In the under mentioned cases, contradictory results were reached by the courts and these cases demonstrate the wrong sustained by the claimant which can be stimulated by the rule of causation. The above principle was laid down in Wilsher v. Essex and Hoston v. East Berkshire HA. Further damage which a different means can be inflicted on a defendant and this was established in Fairchild v.Glenhaven Funeral Services Ltd and in Bonnington Castings v. Wardlaw. (Hodge 2004:245)
Escalation in Project Cost
As regards to escalation of project cost from £15m to £ 19m, design team gave false promise that cost savings could be achieved during the detail design process but they had not fulfilled the promise. Contractual risks are that the contract apportions these between the parties to the contract, whether written or not. In case, even if the contract is silent on a specific risk, that risk will still to be borne by one party or other. The construction contract may attempt to transfer a risk by making one party to the contract financially liable should any contingency occur. Thus, in construction contract, the risk is transformed into financial equivalents so that they can be transferred or otherwise dealt with. It is better the construction contract should have clearly specify what would happen if there is an escalation in costs and who has to bear such costs.
Right to Light
The design in a construction contract should consist the following:
Design of the building should facilitate to detain passive solar heat, minimisation in the external area to stop loss of heat, external surfaces have to be insulated heavily. The proposed building development should not significantly forbid the quantum of light reaching the neighbouring properties or should not conflict with standard S.3.1.
A right to light can be enforced or exist only in favour of defined apertures in buildings. This right cannot be claimed on the light falling on unbuilt or vacant land. Any building with windows over two decades old is prone to benefit from the rights of light over adjacent land. A right of light is a negative easement as it compels the servient owner to restrain from constructing buildings on his land which forbids the light received by the principal tenement. A right to light is annexed to land and it is an incident of ownership of an interest in the land to which the right to lights exists. Further, a right to light essentially remains as a judge framed law.
Professional service agreement
These are contracts and they are subject to rules of contract law. This covers duties of the parties, the details of the service to be carried out by the parties and quantum of payment to be made to them. These are not a contract themselves and these terms within them relate to the duties of the parties and the details of the service to be carried out. (Holleyman 2000:52).
The role of architect in a construction project
There was communication gap between client and architect as the project contractor failed to communicate the architect’s view to the client. This issue would have come to the attention of the client had he surveyed the customers and employees of the construction project at frequent intervals. An architect acts on behalf of the client and he has to feed back to the client on the progress in the development of the project. In investors in Industry Ltd v. South Bedfordshire DC2 , the Court of Appeal held that architect has an overall duty to check for compliance.
The main functions of an architect includes to design the building , counsel on the identification and appointment of other consultants , to administer the design , identify and appoint the contractor , sub-contractors and to represent client’s interest. It is advised to use the standard architect’s service agreement published through standard form of SFA/99 by Royal Institute of British Architects 2004 is highly recommended. (RIBA).
Implementation of CDM
As the result of European Union Directive which specifies the minimum criteria of health and safety at temporary or mobile construction site, the regulations namely Construction (Design and Management) Regulations (CDM) was introduced in March 1995 and recent updation was held in 2007.
CDM specifies better planning, design and administration of a construction project so that health and safety standards are maintained and to minimise the accident and fatality rates. CDM is also helps to contain high incidence of occupational health disorders. Under CDM regulations, the following positions have key role for the observance of health and safety issues and they are client or employer, the designer or architect, the building contractor and the planning supervisor.
A client has a criminal liability to make sure that a CDM co-coordinator is employed early in the contract process and to make sure that without a Health and Safety plan is in place, no construction work commences.
Under CDM regulations, a construction contract will be considered as a “notifiable project” and has to be notified to HSE (Health and Safety Executive) if it lasts more than 30 days and involved more than 500 persons day. For instance, in UK, about 500,000 project notifications are received by HSE on annual basis and this help HSE to schedule their inspection priorities.
Under CDM regulations, a planning supervisor has to be appointed no sooner the intended purchase had been agreed. (Perry 2002:.31)
When CDM regulations are applicable to developers?
If a project is to be accomplished for a domestic client and if an agreement is entered between client and the developer where
- The land is owned by the client
- Where construction will be carried out in the said land
- After the construction , the land will include premises
Then said individual arranging for the construction work will be regarded as developer under the CDM regulations and CDM regulations thereafter will be applicable to the developer and not to the domestic client, as the developer step into the shoes of “client.” (Perry 2002:.32)
It is to be noted that a project need not notified if it has the Local Authority as the enforcing authority for health and safety law or the project involves individual who are not at ‘work’.
An employer has the power to terminate the construction contract if the contractor fails to observe with contractual duties regarding CDM regulations.
If there is a failure to comply with the CDM regulations, then the developer can be convicted or indicted under the health and safety legislation. Magistrate court has the power to levy fine up to £ 5000 and Crown courts can levy unlimited fine amount and also to award custodial sentences. (Perry 2002:.33)
JCT Contract
This refers to Joint Contracts Tribunal contract form which clearly explains the essential contents of various clauses of the standard form of building contracts. For instance, JCT contracts of the 2005 suite enclose a section namely “contract particulars” where the parties to the contract should mention about the project specific data.
JCT new suite of construction contract was released in 2005. It has many new features. (Chappell 2007:2).
Injuries to Third Parties
In one case, HSE initiated a prosecution against the principal contractor for having failed to have a required Construction Phase Health and Safety Plan in operation where two accidents were reported. H& S plan also failed to recognise the perils and risks of the ground works and not included Risk Assessments and suitable Method Statements.
It was held by the Crown Court that due to rigorousness of the accidents, the Principal Contractor was fined £20,000 plus £ 300 costs. The ground works Contractor was imposed with a fine of £ 20000 and a cost of £3000 under Construction (Health, Safety and Welfare) Regulations 1996.
Any contravention of CDM law will fall under criminal law. Under CDM, an individual can file a suit against another individual for damages due to their act of negligence or failing in their common law duty of care.
Likewise, if a client permits or allows work to start on a site without an adequate Construction Phase Health and Safety Plan and an accident occurs, the persons injured will have the privilege to initiate legal proceedings in the Civil Court. (Perry, 2002, p.35) Hence, you may ask the building contractor to settle the claim of the injured person and claim the same from the insurance company through out of court settlement.
It is to be noted that majority of boiler-plate contracts insist some types of insurance to be covered without fail like indemnity against third party claim against injury. Any injury or damage to third parties are concerned, these are explained in the clauses of 6.1 and 6.2 of JCT contract thereby contractor agrees to indemnify the employer against some types of liabilities originating in the course or out of carrying out the works. Under clause 6.1, the liability the employers incurs for any death or injury of any individual. However, such injury is caused due to negligence of employer, contractors will not he held responsible.
In Dutton v Bognor Regis UDC, the Court of Appeal held that the contractor was liable to pay damages for any injury caused during course of contract. This decision was confirmed by House of Lords in Anns v Merton LBC. Main legal principles laid down by the above decisions were as follows:
An architect or a building contractor owes a duty of care to the subsequent owners. The duty of care may result in liability for injury or damage to any individual or property. (Murdoch and Hughes 2003:320).
In D& F Estates Ltd v Church Commissioner for England, it was held by House of Lords that a building contractor liability in tort is restricted to defects which cause either injury to individuals. Further, under the “Building Act, 1984,” an action for damaged can be initiated in respect of personal injury sustained.
Quantum of fees payable to Project Manager
The contract of the project manager would have specified his quantum of fees. In case of any dispute, client should first try to settle the issue directly with project manager or else he can opt for arbitration since project management contract will be having arbitration clause. However, in case of any dispute over the fees payable to project manager, either of the party, under the law of restitution may approach the court to determine the fees payable on a “quantum of merit “or on actuary basis. It is to be noted that there is no restriction how big a claim should be brought under this basis. (Tettenborn 2002:21).
My Suggestion for Procurement Contract for second Phase
Procurement contract assists for the systematic procurement of supplies and work for a project. Normally , it contains conditions that demand the engineer or architect to create bidding processes for supply of material , equipment, machinery and supplies, to make a inquisitive analysis of various bids , to monitor the delivery schedule dates , to oversee the transportations materials to project site and to supervise with financial operations like reviewing cash flow , funds requirements , book-keeping etc. In turnkey construction contracts, procurement can be possible only after the financial closure for the project is made. (Hoffman 2008:170).
I strongly advise that separate contract have to be entered into with building contractor, quantity surveyors for measurement and valuation of work-in-progress and for cost planning, contract with structural engineer and project management contractor who will be responsible for the overall control of the process. Under procurement management system, the client assumes contractual part and the project management contract assumes the role managing the different trade contract and make sure that they work together efficiently and smoothly. (Ashenfelter 1997:S16).
List of References
Ashenfelter, Orley. (1997) ‘Contract Form and Procurement Costs: The Impact of Compulsory Multiple Contractor Laws in Construction.’Rand Journal of Economics 28, no. 0 S5-S16.
Barnes, Peter. (2006). The JCT 05 Standard Building Sub-Contract.London: Blackwell Publishing.
Beatson, Jack E. and Daniel E. Friedmann, eds. (1997) Good Faith and Fault in Contract Law. Oxford: Clarendon Press.
Bosch, Gerhard and Peter Philips, eds. (2002) Building Chaos: An International Comparison of Deregulation in the Construction Industry. London: Routledge.
Chappell, David. (2007). The JCT Design and Build Contract 2005. London: Blackwell.
Collins, Hugh. (1999) Regulating Contracts. Oxford: Oxford University Press.
Cosgrave, Aidan. (2002). Neighbours from hell. Web.
Harpwood, Vivienne. (2003). Modern Tort Law. London: Routledge.
Hodge, Sue. (2004) Tort Law. Antigonish: William Publishing.
Hoffman, Scott L. (2008). The Law and Business of International Project Finance. Cambridge: Cambridge University Press.
Holleyman, Robert. (2000) ‘Updating Contract Law for the Digital Age.’ USA Today (Society for the Advancement of Education), (3) 52.
Lyon, M. Beth. (1994) ‘The Role of the Consulting Engineer in Developing Country Construction under the FIDIC Form Contract.’ Law and Policy in International Business 26, (1) 273-294.
Mather, Henry. (1999) Contract Law and Morality. Westport, CT: Greenwood Press.
Murdoch, John & Hughes, Will. (2007) Construction Contracts: Law and Management. London: Routledge.
Perry, Pat. (2002) CDM Questions and Answers: A practical Approach. London: Thomas Telford.
Slawson, W. David. (1996) Binding Promises: The Late 20th Century Reformation of Contract Law. Princeton, NJ: Princeton University Press.
Tang, S. L., Irtishad U. Ahmad, Syed M. Ahmed, and Ming Lu. (2004) Quantitative Techniques for Decision Making in Construction. Hong Kong: Hong Kong University Press.
Tettenborn, A.M. (2002). The Law of Restitution in England and Ireland. London: Cavendish Publishing.
Footnotes
- [2002] UKHL 22.
- DC (1986) 1 AII ER 787.