GLOSSARY
Building Contract definition
/ˈbɪldɪŋ/ /ˈkɒntrakt/
What does Building Contract mean?
The contract between an employer and a contractor for the carrying out and completion of building works. The building contract may be referred to as the main contract, particularly when sub-contractors are to be engaged.
View the related practice notes about Building Contract
Negotiating a building contract—design issues
Negotiating a building contract—design issues This Practice Note is a negotiation guide, looking at some of the most common issues that arise in relation to design in the drafting and negotiation of building contracts. It looks at provisions that are commonly proposed during the negotiation of a building contract, at the issues that provisions that the employer includes in the draft building contract can cause for the contractor and how the contractor will typically respond to them. It also considers how, in order to be able to agree the building contract, the parties might be able to resolve these design-related issues and, where possible, reach a compromise position that is acceptable to them both. This Practice Note does not focus on a particular form of building contract, the draft contract in which these issues could arise might be a standard form with schedule of amendments or a bespoke form of contract. For ease of reference, this Practice Note uses the expressions ‘Employer’s Requirements’ (ERs) to refer to the document(s) produced by the employer to set out its requirements in relation to the project and ‘Contractor’s Proposals’ (CPs) to refer to the document(s) produced by the contractor setting out its proposals for the delivery of the project set out in the employer’s requirements (usually submitted to the employer as part of its tender). These are the expressions used
Construction horizon scanner—2016 [Archived]
Construction horizon scanner—2016 [Archived] ARCHIVED: This Practice Note has been archived and is not maintained. The data-ln-csis="391375" data-ln-lnis="5J8N-9RS1-F186-J4BY-00000-00">Construction horizon scanner tracks key upcoming developments of interest to construction lawyers. Once a development occurs, it is moved into the archive for the relevant year. This is the archive for events that occurred in 2016 (from March onwards). For a summary of 2016's key events, see our Construction end of year recap—2016. For a comprehensive list of cases handed down in 2016, see the: Construction case tracker—2016 [Archived]. Legislation What happened? When? Find out more Planning: Provisions of the Housing and Planning Act 2016 concerning the Secretary of State’s intervention in local and neighbourhood plan-making (ss 143–147) came into force 1 October 2016 The measures reform the Secretary of State’s powers to intervene in local plan-making, with the aim of ensuring that every local planning authority has a local plan in place. This is of particular importance for boosting housing supply, because local plans are key to housing delivery. See News Analysis: Housing and Planning Act 2016—changes to development plans in force on 1 October. Insurance Act 2015: The IA 2015 came into force 12 August 2016 The IA 2015 introduced a number of fundamental changes which will impact on insureds and insurers involved
Letters of intent—construction
Letters of intent—construction What is a letter of intent? Letters of intent are used in construction and engineering projects to allow the employer to mobilise a contractor before the employer is in a position to enter into the full building contact. The letter may only instruct the contractor to progress design and procurement in relation to the project, or it may authorise works to be commenced on site. Letters of intent vary in their form and complexity. A very simple letter of intent might only confirm a party's present intention to enter into a contract for construction works in the future. In the absence of anything else, such a letter forms nothing more than a non-binding statement of present intention, akin to a comfort letter. However, most forms of letter of intent used for modern construction contracts are much more complex and seek to create contractual relationships between the parties. See Turriff Construction v Regalia Knitting Mills (1971) 9 BLR 20 (not available in Lexis®Library). Modern letters of intent usually set out the employer’s intention to enter into a contract with the contractor for construction works, and will set out the terms on which the contractor is authorised to commence works on site/undertake design work/pre-order materials etc before the main contract is executed. It is common for parties to include a limit on the value of the works
Buyer’s contract negotiation guide—buyer’s initial checklist for contract negotiation
Buyer’s contract negotiation guide—buyer’s initial checklist for contract negotiation This Checklist is intended to help a buyer’s solicitor carry out an initial review of the first draft of a contract for the purchase of commercial property issued by the seller by identifying headline points to check. Sometimes the seller’s solicitor will have drafted the contract without a full appreciation of all the issues that will need to be dealt with and so it is important for the buyer to be alive to anything missing at the outset and flag any likely issues or contract requirements as early as possible (even if only as a placeholder within the contract pending instructions or further information). Identification of seller and buyer The heads of terms may not define the parties accurately: • Companies House—assuming the seller is a company, the buyer’s solicitor should check at Companies House that the correct party and company number is mentioned in the heads of terms and that it matches the details shown in the title documents • if the seller is a foreign company, then the buyer should immediately request an opinion letter for the seller to be issued at both exchange and completion. The seller should expect to provide this at its cost, but may try to argue that the buyer should pay or that they will only provide one for the transfer. However, the
Sub-contracts—stepping down a building contract
Sub-contracts—stepping down a building contract This Practice Note looks at the process of producing a construction sub-contract, often referred to as ‘stepping down’ a building contract. It looks at key considerations in the process of producing a ‘step down’ (also sometimes called a ‘flow down’), including some potential pitfalls to avoid and some particular issues that need to be considered/addressed. The majority of the industry standard form building contracts publish accompanying sub-contracts, however, where the employer and contractor have entered into a bespoke building contract, a form of sub-contract must be prepared from scratch to align with the building contract. When the building contract is stepped down, the contractor’s rights and obligations under the building contract are passed on to the sub-contractor so that the contractor’s obligations under the building contract become—to the extent relevant and with appropriate adjustment—the sub-contractor’s obligations under the sub-contract. This enables the contractor to fulfil its obligations at building contract level through the performance of the sub-contractor under the sub-contract. For more about sub-contracts in general, see Practice Note: Sub-contracting in construction projects. General points to consider in creating a step-down Types of clauses to be included in the sub-contract In general terms, three types of clauses will need to be included in the sub-contract: • clauses that are in the building contract and that are passed down in their entirety (usually boilerplate clauses eg
Public liability in construction—analysis of common law provisions
Public liability in construction—analysis of common law provisions All the standard forms of building contract make specific provision for the liabilities which are at the contractor or employer's risk and which party is to insure those risks. See, for example, Practice Notes: JCT contracts—insurance, NEC contracts—insurance, FIDIC contracts (pre-2017 editions)—insurance and FIDIC contracts 2017—insurance. However, if the building contract is oral, or if the written terms are silent, then the common-law provisions will prevail. What are the contractor's potential liabilities? The contractor's liabilities are: • liability in tort to third parties for injury, death or damage to property caused by the contractor's negligence (see Practice Note: Negligence in construction), and • liability to the employer in respect of damage to the works caused by the contractor’s own negligence or for breach of contract (see: Contract law for construction lawyers—overview) The contractor is not liable to the employer if the works are damaged by any cause other than the contractor’s own negligence or breach of contract. For example, damage caused by fire, flood, theft, etc or damage that was an inevitable result of carrying out the work, would not be at the contractor’s risk. The contractor's liability for damage to property was limited following the decisions in D and F Estates and Murphy v Brentwood. The contractor may purport to limit
Agreements for lease with development obligations—practical completion
Agreements for lease with development obligations—practical completion Under an agreement for lease which contains development obligations, the tenant’s obligation to take the occupational lease only arises once the developer’s works have been completed and are fit to be taken over by the tenant. This will occur when the works are certified as being ‘practically complete’. This expression is borrowed from the standard forms of building contract which refer to the supervisor of that contract (often referred to as the 'architect' or 'employer’s agent') issuing a statement or certificate of practical completion when practical (or sometimes substantial) completion of the works is achieved. It should be noted that ‘practical completion’ under the building contract may have the same meaning as ‘practical completion’ for the purposes of the agreement for lease, but this is not always the case. Moreover, there may be additional requirements in relation to what constitutes ‘practical completion’ under the agreement for lease. When does practical completion occur? There is no standard industry definition of ‘practical completion’, although some construction contracts do include a bespoke definition in order to create more certainty or to suit the particular project. Consequently, you should ensure that the agreement for lease contains its own definition. Definitions often incorporate the terms: • ‘complete and defect free’, or • ‘capable of beneficial use and occupation’ The latter is the more usual because the former would appear to
Payment in consultant appointments
Payment in consultant appointments Consultant appointments and the HGCRA 1996 ‘Construction contracts’ as defined in the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996) are subject to the provisions of Part II of the HGCRA 1996 (subject to some exceptions). See Practice Note: Introduction to the HGCRA 1996. HGCRA 1996, s 104(1) provides that construction contracts include agreements for: • the carrying out of construction operations • arranging for the carrying out of construction operations by others, whether under sub-contract or otherwise • providing labour, or the labour of others, for the carrying out of construction operations HGCRA 1996, s 104(2) clarifies that this includes agreements to carry out architectural, design, or surveying work, to provide advice on building, engineering, interior or exterior decoration or on the laying-out of landscape in relation to construction operations. Consultant appointments can therefore be caught by the definition of a ‘construction contract’ where the appointment relates to ‘construction operations’ as defined in the HGCRA 1996. Under section 105, ‘construction operations’ is widely defined and includes works that you would expect in construction and engineering projects, including construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land, as well as installing systems such as heating, lighting etc, and also painting and decorating. There are some exceptions to the application of the HGCRA 1996, but these
Building liability orders
Building liability orders The Building Safety Bill received Royal Assent on 28 April 2022, becoming the Building Safety Act 2022 (BSA 2022). The BSA 2022 intends to bring forward extensive reforms of the regulatory regimes and standards for building and fire safety and construction products through a variety of secondary legislation. The BSA 2022 also expanded the legal protections available to parties affected by building safety defects. It extended the limitation periods applicable to certain defect claims, and created new rights exercisable in relation to inadequate building works and construction products. The measures introduced by the BSA 2022 included provision for the High Court to make ‘building liability orders’ (BLOs). BLOs may be granted against companies associated with a party that is liable in respect of a building safety risk, with the effect that the associated company will be become jointly, or jointly and severally, liable with that original company. This Practice Notes provides guidance and commentary on the sections of BSA 2022 that deal with BLOs, and looks at when BLOs may be sought and granted. For more information on the BSA 2022 generally, see Practice Note: Building Safety Act 2022—key provisions and issues and for information specifically on the other rights that parties may have in respect of building safety defects, including under other provisions of the BSA 2022, see Practice Notes: • Fire safety defect
Landlord and tenant—insurances
Landlord and tenant—insurances A tenant may be given rights under an agreement for lease to enter a property prior to completion in order to carry out fit out works. This is important for the tenant so that they can commence trading as soon as possible after moving into the property. When fit out works are to be completed in an existing building by a tenant, the tenant as employer under the building contract ordinarily selects Insurance Option C of the Joint Contracts Tribunal (JCT) Design and Build Contract or Standard Building Contract 2011 or 2016 editions ('Option C'). Also see Practice Note:Refurbishment and fit out—insurances. Required insurance Option C provides that up until practical completion of the fit out works: • the tenant, as employer, must take out and maintain composite all risk insurance in joint names with the contractor to cover the new works (see Practice Notes: Contractors’ All Risks (CAR) Insurance and Joint names insurance—construction contracts), and • the tenant, as employer, must take out and maintain composite insurance in respect of the existing structures, and their contents, in joint names with the contractor The tenant will be able to procure all risks insurance in respect of the new works in the joints names of the tenant, his contractor and any sub-contractors. However, the tenant will not be able to procure stand alone insurance in relation to the
View the related precedents about Building Contract
Schedule of services—Structural Engineer (traditional procurement)
Schedule of services—Structural Engineer (traditional procurement) Schedule of services—structural engineer (traditional procurement) The Consultant shall: General responsibilities (Stages 0–7) • [act as Lead Consultant in relation to the Project, which shall include: • advising in relation to the scopes of services for other members of the Design Team • advising on the need for other specialist consultants that may be required to complete the Project (and their scopes of services) • directing other consultants forming the Design Team • co-ordinating and integrating the design of the Project as a whole • arranging and chairing regular design meetings to facilitate the conduct of the Project and ensure that minutes are taken and circulated afterwards • facilitating communication between the Client and the Design Team] • [perform services as Principal Designer for the purposes of the Construction (Design and Management) Regulations 2015 to ensure best practice at all times in respect of safety in design OR interact and liaise as required with the Principal Designer and ensure best practice at all times in respect of safety in design] • receive the Client’s instructions and information relating to the Project • [liaise and co-operate with the Lead Consultant] • liaise and co-operate with other members of the Design Team • develop design within the cost parameters of the Project • prepare and/or review drawings and specifications as may be required • provide, agree and review with the Client on a regular basis a deliverables
Consequences of termination clauses (construction contract)
Termination (consequences) Consequences of termination of a consultant’s appointment 1 Subject to the other provisions of this Agreement and without prejudice to any right of action then accrued to either party on termination the Consultant will be entitled to fees for all Services properly performed and completed at the date of termination of this Agreement. 2 [Upon termination the Employer
Legal due diligence questionnaire—private M&A—share purchase
Legal diligence'>due diligence questionnaire—private M&A—share purchase Dated [insert date] Introduction This legal due diligence questionnaire relates to the proposed purchase by [insert buyer name] (the Buyer) of the entire issued share capital of [insert name of target company] Limited incorporated in England and Wales under number [insert company number] (the Company) from [insert seller name] (the Seller) (the Proposed Acquisition). This questionnaire is designed to enable the Buyer, the Buyer's solicitors and other professional advisers involved in the Proposed Acquisition to obtain the information which the Buyer requires to assist in its valuation of the Company. Please answer every question fully. Please provide your answers in italics underneath each question and provide copies of all relevant documentation, ensuring that all answers and documents are clearly marked by reference to the appropriate paragraph of this questionnaire. We reserve the right to raise further enquiries in respect of both your responses to this questionnaire and generally. Definitions Business • means the business of [insert description of the business] and all other activities including those ancillary or incidental to or in connection with such business as carried on by the [Company OR Group] CA 2006 • means the Companies Act 2006; Contractor • means any individual working in a Group Company’s business who is not an Employee or Worker; Data Protection Laws • means as applicable and binding on the Company: (a) Directive 95/46/EC; (b) the Data Protection Act 1998; (c) Directive
Short form of consultant’s appointment
Short form of consultant’s appointment This Agreement is made on the [insert date] day of [insert month and year] Parties 1 [Insert Employer name] (Company Registration No. [insert number] whose registered office is at [insert office]) (the 'Employer' which term shall include all permitted assignees or other transferees under this Agreement); and 2 [Insert Consultant name] (Company Registration No. [insert number] whose registered office is at [insert office]) (the 'Consultant') Whereas (A) The Employer has entered into or proposes to enter into a contract with [insert name of contractor] of [insert contractor's address] for the [design and] construction of a [insert brief description of the project] (the ‘Project’) at [insert location of site] (the 'Building Contract'). (B) The Employer wishes to appoint the Consultant to perform the services set out in Schedule 1 (the 'Services') in accordance with the Agreement It is hereby agreed as follows 1 Definitions and Interpretation 1.1 In this Agreement the following expressions shall have the following meanings: [Beneficiaries • any and all [Funders] [Purchasers] [Tenants] ] Copyright Documents • data and/or documents (whether hard copy or stored on electronic media) including surveys, investigations, studies, reports, plans, drawings, specifications, models, calculations, schedules of work, programmes, method statements, budgets and cost plans Fee • £[insert fee] exclusive of VAT [Funder • means a party (acting for itself and, where it leads for a syndicate of persons, as agent and trustee for them) who agrees to provide
Nuisance clause (building contract)
Nuisance [Short form 1 The Contractor shall take all practicable steps to prevent any trespass, public or private nuisance or other interference with the rights of any adjoining or neighbouring landowners, tenants or occupiers or any statutory undertakers arising out of the carrying out of the Works or any obligation pursuant to clause [2.35 or insert clause regarding making good defects] and shall assist the Employer in defending any proceedings which may be instituted in relation there
Third party agreements clauses (construction contracts)
Third party agreements Consultant 1 The Consultant warrants and undertakes to the Employer that no act, omission or default of the Consultant in relation to the Services shall constitute, cause or contribute to a breach by the Employer of the Employer's obligations under the Building Contract, any other agreement with any Interested Party, Funder or any other agreement connected with the Project to which the Employer is party and which the Employer has provided copies (or relevant extracts) to the
Schedule of Amendments to JCT Minor Works Building Contract with contractor’s design 2011 [Archived]
Schedule of Amendments to JCT Minor Works Building Contract with contractor’s design 2011 [Archived] Schedule of amendments to the jct minor works building contract with contractor’s design 2011 (as modified by amendment 1: cdm regulations 2015) ARCHIVED: This Precedent has been archived and is not maintained. The Contract comprises the Minor Works Building Contract with contractor’s design 2011 published by the JCT (as modified by Amendment 1: CDM Regulations 2015) subject to the following amendments: Articles of agreement ARTICLES Article 7 Article 7 ArbitrationDelete article 7 and insert ‘All references to arbitration in this Contract are deleted.’ Article 9 After Article 8 insert new Article 9 as follows: Article 9 [ To be added on the face of the contract ] Schedule of Amendments The Employer and the Contractor agree that the modifications in the Schedule of Amendments attached hereto (as initialled by the parties) are incorporated into this Contract and the provisions of the Articles of Agreement, the Contract Particulars, the Conditions and the Schedules annexed to the Conditions shall have effect as modified by the Schedule of Amendments which together comprise the ‘Contract’. Article 10 Insert a new Article: Article 10 Collateral Warranties Within 14 days of the Employer’s request, the Contractor shall deliver to the Employer executed deeds of collateral warranty from the Contractor in favour of any Funder, Purchaser and Tenant
Report on construction documentation
Report on construction documentation [insert name of property] Executive summary [insert a general summary of the construction documents/highlight any key areas of concern] Building contract and related documents Save where otherwise indicated below, the Building Contract, consultant’s appointments and collateral warranties are generally in line with what we would expect to see on the market, in particular containing the following: 1) a requirement to carry out the Works/provide the Services using a standard of reasonable skill and care to be expected of a qualified professional or contractor experienced in working on projects similar to the Works; 2) an obligation not to specify or use harmful or deleterious materials when carrying out the Works; 3) an obligation to provide an irrevocable and royalty-free copyright licence for use of any and all documents and materials produced by the Contractor/Consultants during the course of the Works, with such licence also being capable of being assigned or transferred to third parties without restriction; 4) a requirement to maintain professional indemnity insurance to cover its liabilities under the Building Contract/Appointments (as appropriate) at a level specified in the Building Contract/Appointment; 5) an ability to assign the benefit of the Building Contract/Appointment/collateral warranty to third parties on a minimum of two occasions without the Contractor or Consultant’s consent, with assignments to group companies and parties providing finance for the works excluded from this number; 6) a requirement to provide collateral warranties
Consultant form of collateral warranty to employer (post novation)—Consultant Friendly
Consultant form of collateral warranty to employer (post novation)—Consultant Friendly Date [insert date] 20[insert year] Parties 1 [insert name of Consultant] (Company Number [insert company number]), whose registered office is at [insert address] (the ‘Consultant’); 2 [insert name of Employer] (Company Number [insert company number]), whose registered office is at [insert address] (the ‘Beneficiary’, which expression shall include successors in title and any permitted assigns); and 3 [insert name of Contractor] (Company Number [insert company number]), whose registered office is at [insert address] (the ‘Contractor’). Recitals (A) The Beneficiary appointed the Consultant under an appointment dated [insert date] (the ‘Appointment’) to perform [insert details of the services] services (the ‘Services’) in connection with [insert description of the project] (the ‘Project’). (B) The Beneficiary engaged the Contractor under a contract dated [insert date] (the ‘Building Contract’) to carry out design and construction works in connection with the Project. (C) The Beneficiary has novated the Appointment to the Contractor by way of a deed of novation dated [insert date] and the Consultant has agreed to execute this collateral warranty in favour of the Beneficiary. Now in consideration of the payment of £1 (receipt of which is hereby acknowledged by the Consultant) This deed witnesses as follows: 1 Consultant's warranties and undertakings 1.1 The Consultant warrants and undertakes to the Beneficiary it has: 1.1.1 exercised and shall continue to exercise in the performance of
Consultant’s appointment—long form design
Consultant’s appointment—long form design Contents This Agreement is made on [date] Parties 1 [Insert name of Employer] (Company Registration No. [insert number]) whose registered office is at [insert address of Employer] (the ‘Employer’, which term shall include all permitted assignees or other transferees under this Agreement); and 2 [Insert name of Consultant] (Company Registration No. [insert number]) whose registered office is at [insert address of Consultant] (the ‘Consultant’). background WHEREAS (A) The Employer has entered into or proposes to enter into a contract with [insert name of Contractor] of [insert address of Contractor] (the ‘Contractor’) for the design and construction of [insert brief description of the project] at [insert location of site] (the ‘Building Contract’). (B) The Employer wishes to appoint the Consultant to perform for the Employer the services as described in Schedule 2 to this Agreement (the ‘Services’) under the terms and conditions of this Agreement. [The Employer intends to novate the appointment of the Consultant to the Contractor in accordance with clause 24.] Now it is hereby agreed as follows 1 Definitions and interpretation 1.1 In this Agreement the following expressions shall have the following meanings unless the context requires otherwise: Additional Fee • means the additional fees (if any) payable by the Employer to the Consultant pursuant to clause 15 for performing any Additional Services which the Employer may instruct the Consultant to perform pursuant to clause 15. Additional
View the related q&as about Building Contract
What is the Joint Fire Code referred to in JCT contracts and when does it apply?
What is the Joint Fire Code referred to in JCT contracts and when does it apply? The publication known as the ‘Joint Fire Code’ provides guidance on fire prevention on construction sites. It applies to all parties involved in the supply chain, including those responsible for construction on site, as well as those who specify and design. The full title of the Joint Fire Code is ‘Fire Prevention on Construction Sites: The Joint Code of Practice on the Protection from Fire of Construction Sites and Buildings Undergoing Renovation’. It is produced by the insurance and construction industries together and compliance with the code is normally required by insurers for larger construction projects. The objective of the Joint Fire Code is to prevent fires on construction sites. It can be purchased in hard copy form from the Fire Prevention Association, RIBA and others. The Joint Fire Code was first published in 1992 and the most recent edition (the 9th edition) was published in 2015. It was first published following two fires which caused a combined loss of more than £150m and which led to the insurance industry questioning whether it was economically viable to continue to insure construction projects. Since its publication, it has helped to improve standards of fire safety on construction sites. The Joint Fire Code sets out precautions and safe working practices that should be adopted
Do you have a straight forward contract for building works between a contractor and home owner?
Do you have a straight forward contract for building works between a contractor and home owner? We do not have a precedent contract in Lexis®PSL Construction that would suit these purposes. We suggest that an appropriate form of contract to use in these circumstances would be either: • JCT
Is a contractor entitled to an extension of time if construction works are delayed due to the impact of coronavirus (COVID-19)?
Is a contractor entitled to an extension of time if construction works are delayed due to the impact of coronavirus (COVID-19)? The answer depends entirely on the contract between the parties. Standard form contracts provide for the granting of extensions of time and these usually include a provision for force majeure which would include the effects of coronavirus (COVID-19). The JCT standard forms of building contract contain an extension of time provision which defines the contractor’s entitlement to an extension of time by reference to ‘relevant events’. The definition of relevant events includes ‘force majeure’. The JCT standard forms do not contain a definition of force majeure, therefore, it is necessary to consider the common law position as it pertains to frustration. In Davis Contractors v Fareham UDC, the House of Lords gave what is now regarded as the classic definition of the doctrine when it said that frustration: ‘…occurs wherever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do.’ A force majeure clause will be construed in each case with a close attention to the words which precede or follow it,
How are head office overheads and loss of profit assessed as part of a contractor's claim for loss and expense?
How are head office overheads and loss of profit assessed as part of a contractor's claim for loss and expense? What is a claim for loss and expense? Under a construction contract, a contractor will usually be entitled to claim loss and expense where it suffers delay or disruption to the progress of the works, due either to matters within the employer's control or to breaches of contract by the employer. Claims for loss and expense are commonly brought under various different headings (see Practice Notes: Loss and expense and Loss and expense claims—practical tips), two of which will usually be a contractor's claim for overheads (also known as prolongation costs) and for loss of profit. On what basis can a claim be brought? Contractors often believe that an entitlement to claim overheads and loss of profit (as well as other heads of loss and expense) automatically follows from an entitlement to an extension of time. This is not usually the case and each claim must be addressed separately, in accordance with the particular terms of the contract. Depending on the particular form of contract, a claim for overheads and loss of profit could arise: • under a particular term of that contract (eg the JCT Standard Building Contract With Quantities 2011, clause 4.24), and/or • for breach of that contract ie a claim for damages
Under the JCT and NEC contracts, is the contractor entitled to an extension of time if construction works are delayed due to the impact of coronavirus (COVID-19)?
Under the JCT and NEC contracts, is the contractor entitled to an extension of time if construction works are delayed due to the impact of coronavirus (COVID-19)? A contractor may be entitled to an extension of time due to coronavirus where, for example: • labour supply is affected • material supplies are delayed by supply chain issues affected by overseas governments exercising statutory powers • the site is closed partially or wholly or restrictions are placed • government exercise of statutory powers The terms of the contract will determine the routes available to a contractor. This Q&A looks at the provisions in the two forms most commonly used in the United Kingdom—the JCT contracts and NEC contracts. JCT contracts Under the JCT Standard Building Contract 2011/2016 there are three possible avenues for a contractor to make a claim for an extension of time: Force majeure ‘Force majeure’ is not defined in the standard JCT contract (it is advisable to check any schedule of amendments for a definition) but does constitute a ‘Relevant Event’. So long as the contractor has followed the correct contract procedures and given notice of the Relevant Event, the contractor may be entitled to an extension of time. As there is no definition of force majeure in the JCT standard contract, case law should be consulted for an appropriate reference point. The case law is limited but in a 1920s case Lebeaupin
What happens to the contractor’s right to possession of the site when it terminates a JCT contract because of default by the employer under clause 8.9?
What happens to the contractor’s right to possession of the site when it terminates a JCT contract because of default by the employer under clause 8.9? This Q&A considers a scenario where there are no provisions in the schedule of amendments to the contract which have amended the termination provisions (it is not uncommon to see amendments which clarify arrangements for possession of the site upon termination and/or set out additional termination related conditions to those found in the standard terms). One of the primary obligations of the employer is to give possession of the site to the contractor (or such access to it as is required to enable the works to be carried out). The extent and timing of the possession or access to be given will depend upon the express terms of the particular contract. See Commentary: Emden’s Construction Law: [5.16] Access to site. Under many JCT forms of contract, such as the JCT Standard Building Contract 2011/2016 (SBC), possession of the site is granted to the contractor pursuant to clause 2.4. As this is a primary contractual obligation, it only continues while the contract is on foot. This is because termination occurs prospectively, meaning that the parties are discharged from further performance of primary obligations under the contract, although their
Are you aware of any case law on what is required or constitutes compliance for the purposes of clause 2.27.1 of JCT Standard Building Contract 2011?
Are you aware of any case law on what is required or constitutes compliance for the purposes of clause 2.27.1 of JCT Standard Building Contract 2011? Clause 2.27.1 of the JCT Standard Building Contract 2011 (SBC) provides: 'If and whenever it becomes reasonably apparent that the progress of the Works or any Section is being or is likely to be delayed the Contractor shall forthwith give notice to the Architect/Contract Administrator of the material circumstances, including the cause or causes of the delay, and shall identify in the notice any event which in his opinion is a Relevant Event...' Lexis®PSL practical point: identical clauses are contained in the Standard Building Contract 2016 (cl 2.27.1) and the JCT Design and Build Contract 2011/2016 (cl 2.24.1), albeit that the reference to ‘Architect/Contract Administrator’ is replaced with the ‘Employer’ in the design and build contracts. There are two main issues to be considered when determining whether compliance with a notification provision such as clause 2.27.1 of the SBC has been achieved: • what is the scope of the requirement to give notice ‘forthwith’ and is the contractor required to comply with this condition? • what is the extent of the notification/detail of the ‘material circumstances’ that must be given? Timing of notice It is a question of construction whether a provision amounts to a ‘condition precedent’ and therefore strict compliance with the requirements in
Where, under a building contract, an employer has taken out insurance in joint names, does that give the contractor protection from a subrogated claim being brought against them by the insurer in the name of one of the other insured parties?
Where, under a building contract, an employer has taken out insurance in joint names, does that give the contractor protection from a subrogated claim being brought against them by the insurer in the name of one of the other insured parties? Subrogation It may first be useful to recap how subrogation works. In the event of a successful claim being made under an insurance policy, insurers can typically exercise rights of subrogation to seek to recover the amounts paid out under the policy from those liable for causing the loss/damage which led to the claim. Rights of subrogation enable the insurer to step into the shoes of the insured to bring an action in the insured’s name against the offending party or parties. One important exception to this position applies where joint names insurance is procured. See Practice Note: Subrogation in insurance and reinsurance. Joint names insurance under building contracts Building contracts commonly require either the employer or contractor to procure insurance of the works (and, in some cases, other structures) in the joint names of those parties. Such contracts also often require that additional parties, such as sub-contractors and funders, be recognised as insured under the policy. Although building contracts typically refer to ‘joint names’ insurance, what is actually required is ‘composite insurance’ (rather than ‘joint insurance’) as the interests of the parties in the property
Do the Joint Contracts Tribunal and NEC contracts give Contractors the right to extensions of time in respect of delays caused by the ongoing materials shortage?
Do the Joint Contracts Tribunal and NEC contracts give Contractors the right to extensions of time in respect of delays caused by the ongoing materials shortage? In recent months, the global demand for construction products has exceeded supply, causing a shortage of materials that has put pressure on the UK construction sector. The materials affected include timber, steel, cement, paints, and electrical components. Several factors have contributed to this imbalance of supply and demand, including the coronavirus (COVID-19) pandemic, and the effects of Brexit. Under most forms of construction contract (including those in the Joint Contracts Tribunal (JCT) and NEC suites), the Contractor is responsible for providing the goods and materials needed to complete the works. Many Contractors will therefore wish to confirm whether they are entitled to: • additional time to complete, to allow for delays caused by material shortages (eg where materials are unavailable or subject to unusually long lead or delivery times), and/or • recover their delay-related costs In this answer, we have considered the position under the JCT Standard Building Contract (SBC) 2016 and NEC 4 Engineering and Construction Contract (ECC), focusing on the provisions that we consider most relevant. The JCT SBC The Contractor’s right to extensions of time and recovery of delay-related loss depends on the occurrence of Relevant Events (REs) and Relevant Matters (RMs). The events/risks that comprise the REs and RMs are listed at
How does the Construction Industry Scheme apply to contract administration, and what duties are owed by the contract administrator to the employer in respect of the scheme under JCT?
How does the Construction Industry Scheme apply to contract administration, and what duties are owed by the contract administrator to the employer in respect of the scheme under JCT? We have assumed in this Q&A that the employer under the JCT Standard Building Contract 2011 and 2016 (SBC) is a ‘contractor’ for the purposes of the Construction Industry Scheme (CIS). This should be specified in the Contract Particulars against the reference to the Fourth Recital and clause 4.6 of the SBC 2016 (clause 4.7 in the 2011 edition). However, even if the parties fail to state this, or if the employer’s status changes such that it comes within the definition of a contractor under CIS only after the contract has been signed, the parties will still be subject to the obligations of CIS. For guidance on when an employer is classed as a ‘contractor’, see Practice Note: The construction industry scheme—when does it apply?—Contractors. Obligations under the CIS The obligations imposed by the CIS on contractors (including an employer that falls within this definition under the CIS) are considered in Practice Note: Construction industry scheme—contractors' obligations, and include: • Registering as a contractor with HMRC • Verifying employment status of sub-contractors • Verifying payment status of sub-contractors • Deducting tax from contract payments • Paying tax withheld to
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Major extension of adjudication rights (Abbey v Simply)
Construction analysis: In an important judgment, the Court of Appeal has confirmed that statutory adjudication rights can extend to contracts other than those through which the construction works and services are paid for and performed. The Court of Appeal’s decision provides rare guidance on how section 104(1) of the Housing Grants, Regeneration and Construction Act 1996 (HGCRA 1996) is to be interpreted and the extent to which statutory adjudication applies. This is the first time the Court of Appeal has considered the issue of what is a ‘construction contract’ for adjudication purposes. Written by Barry Hembling (bhembling@wfw.com) of Watson, Farley & Williams LLP, who acted for the successful appellant in this case.
Claim for remedial works costs under a collateral warranty not too remote (Orchard Plaza Management Company Limited v Balfour Beatty Regional Construction Limited)
Construction analysis: The Technology and Construction Court (TCC) granted summary judgment to strike out parts of the defendant’s case claiming that the loss suffered by the assignee of a collateral warranty who paid for remedial works were not the natural consequence of breaches of warranty of the nature relied upon by the claimant and thus were too remote.
Construction weekly highlights—16 June 2022
This week's edition of Construction weekly highlights includes an article about the impact of the Building Safety Act 2022 on manufacturers and suppliers, information about two new consultations opened by the Department for Levelling Up, Housing and Communities (DLUHC) on the proposed Higher Risk Buildings (Descriptions and Supplementary Provisions) Regulations, and on the best ways to protect social housing residents from the dangers of poor electrical safety, commentary from industry bodies on what, if anything, has changed since the Grenfell Tower disaster that took place five years ago on 14 June 2017, the Architects Registration Board’s announcement (ARB) that it has reached an important milestone in the process that will help UK registered architects seek registration in the US, and vice versa, and a new report from the Construction Industry Training Board (CITB) highlighting the substantial recruitment and training challenges facing the construction industry.
Correct approach to damages for professional negligence unsuitable for summary judgment (Standard Life v Gleeds)
Construction analysis: The Technology and Construction Court (TCC) refused to grant summary judgment against, or strike out, parts of a claimant’s case relating to the assessment of recoverable loss in a claim based on an allegedly negligent cost estimate. The TCC considered that this matter was highly fact sensitive and should not be decided without further pleadings and evidence.
Hong Kong court decides that the ‘Extended Fiona Trust Principle’ can be displaced by clear language (H v G)
Arbitration analysis: The Fiona Trust principle is that parties, as rational businesspeople, should be assumed to have intended any dispute arising out of their relationship to be decided by the same tribunal (Fiona Trust v Privalov). The principle is relied upon most commonly where a party wishes to have a single arbitral tribunal determine multiple disputes arising out of one contract. The ‘Extended Fiona Trust Principle’ is where the Fiona Trust principle is applied to a scenario where multiple disputes arise under multiple related agreements between the same parties (per Mr Justice Bryan in Terre Neuve Sarl & others v Yewdale Ltd & others, a decision of the English Commercial Court). In H v G, Mr Justice Chan in the Hong Kong Court of First Instance held that the Extended Fiona Trust Principle had been displaced by clear language, which showed the parties wished disputes arising out of Contract A and Contract B to be resolved separately. It is the latest in a string of cases in the Hong Kong courts in which parties have tried (and mostly failed) to apply the Extended Fiona Trust Principle. Written by Ben Bury, Partner, and Stephanie Yu, senior associate, at HFW.
Building Safety Act 2022—key impacts for the construction industry
Construction analysis: Katherine Metcalfe, partner, and Julian Brooksbank, senior associate, both at Pinsent Masons consider the key impacts of the new Building Safety Act 2022 which is scheduled to be fully operational by October 2023.
Fail to plan...plan to fail—the USAF case provides an important insight into the issues surrounding protective claim forms and abuse of process (USAF Nominee No 18 Ltd v Watkin Jones & Son Ltd)
Construction analysis: This is a case that concerned the key question as to whether at the time of the issue of the claim form (the ‘Claim Form’), the claimant (‘USAF’) was in a position properly to identify the essence of the claim. If the answer to that question was no, the only remedy would be for the Claim Form to be struck out as, at the time of issue, USAF could have had no intention to pursue the proceedings, since it had no known basis to do so. No doubt to the relief of USAF, Mr Justice Eyre held that USAF was in a position to properly identify the essence of its claim and did intend to pursue the claim. USAF was therefore able to continue with its claim. The case provides important insight for legal practitioners and potential claimants and defendants into the relevant considerations when bringing a claim or being the recipient of claim and/or a request for a standstill agreement on the eve of the expiration of the limitation period. Written by Sam Beer, senior associate at Hill Dickinson LLP.
Contractor was not co-insured under a project insurance policy (RFU v Conway Ltd)
Construction analysis: The Technology and Construction Court construed the terms of a construction contract to establish that a contractor was not co-insured under an employer’s all-risks project insurance policy. This meant that the employer could seek recovery of its insured losses from the contractor, and a fellow contractor and co-defendant could seek a contribution.
Construction weekly highlights—24 February 2022
This week's edition of Construction weekly highlights includes a Court of Appeal (CA) case in which the CA considered the meaning of ‘total cost’ in a contract for interior design services (Alebrahim v BM Design London Ltd), a case in which the Technology and Construction Court (TCC) found that the defendant building contractor was liable to the claimant homeowners for damages for defective works and losses consequent on termination (Struthers v Davies), the publication of a report by the International Chamber of Commerce (ICC) on the use of technology in international arbitration, an update on the progress of the Building Safety Bill, and the publication by the New Engineering Contract (NEC) of a practice note on its secondary option (X22), ‘Early Contractor Involvement’.
Homeowners succeed in defects claim against contractor (Struthers v Davies)
Construction analysis: The Technology and Construction Court (TCC) found that the defendant building contractor was in repudiatory breach of contract, and awarded the claimant homeowners damages for defective works and losses consequent on termination. The court rejected the defendant’s arguments that the claimants’ attempt to terminate the contract was unlawful, and that certain remedial works carried out by the claimants had been unnecessary.
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