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Lecture note construction law (Autosaved)

Construction projects can best be understood in the context of the whole industry.
Technol...View more

 University
Addis Ababa University
 Course
Procurement and Contract Delivery systems (COTM
6202)
 Uploaded by

tsegaye mideksa

 Academic year

2019/2020

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Unit 1

1. THE NATURE OF THE CONSTRUCTION INDUSTRY

Construction projects can best be understood in the context of the whole industry. Technological
complexity ranges from the familiar, well-known materials and trades through to highly complex
facilities involving multiple interacting sub-systems. Regardless of its technological complexity,
any reasonably sized project involves a high level of organizational complexity. This arises
because there are many specialized skills and professions with a useful contribution to the
process. Most who study the industry do so from the point of view of the profession to which
they aspire. Because of this, there are many different descriptions of the construction industry,
drawn from different specialist disciplines. This vagueness is compounded by the fact that
construction involves such a wide range of activity that the industry’s external boundaries are
also unclear. The term ‘construction’ can include the erection, repair and demolition of things as
diverse as houses, offices, shops, dams, bridges, motorways, home extensions, chimneys,
factories and airports; thus, the industry (and issues that affect construction projects) are difficult
to comprehend fully because:

 The relationships between the parts are not always clear.  The boundary of the industry is
unclear.

The fragmentation of construction into a large number of diverse skills is an inevitable

consequence of the economic, technological and sociological environment; there is an
extraordinary diversity of professions, specialists and suppliers. It is important to approach
construction contract problems in an organized, rational way. Although each professional
discipline likes to focus upon its own contribution and the way that it relates to other project
team members, a deeper understanding can be gained by considering how the industry provides a
service to clients and to society at large. Therefore, we begin by separating people into five
groups; builders, designers, regulators, purchasers and users of buildings. Each of these groups is
increasingly sub-divided into specialist interests such that any building project will bring
together a large number of different specialists. The way they combine is specific to each project.
This uniqueness arises from the individual demands of the project coupled with the continuing
evolution of specific roles. This is why it is not sufficient simply to know the contents of
standard contracts. The specific details of each project and the continuing evolution of changing
roles demand that students of construction can understand the importance of contract structure
and the options open to those who choose project strategies.

The construction industry, and the contracts that are used, only make sense in the context of
changing circumstances and in the wider context of how the industry provides a service to its
clients and users. As a first step, each of the five groups is introduced below, with a brief account
of their evolution to put the current patterns into a wider perspective.

I. Builders or Contractors

The dictionary definition of a builder is ‘A person or organization that is responsible for

constructing a building in accordance with the information provided by the architect. ’ similarly,
Jack Rostron’s Dictionary of Property and Construction Law defines contractor as:

‘A building firm who are responsible for constructing a building in accordance with the contract
documents’

Although construction is not a new activity, the most significant developments have taken place
since industrialization. Before the Industrial Revolution construction involved only a handful of
technologies–bricklaying, carpentry, thatching and stonemasonry. Some projects were
sufficiently important to justify the appointment of an architect but few projects employed other
than craft skills.

In the absence of a designer, buildings simply evolved, involving slight modifications as each
new project applied the lessons from experience. Pre-industrial projects were totally organized
by a master mason or an architect. The interactions between the few trades were predictable.
Each craftsman had a detailed knowledge of a particular technology and knew what to expect of
the other trades. Thus, organization and management were simpler than they are today.

The Industrial Revolution led to the emergence of new materials and ways of working. These led
to more adventurous and innovative buildings. For example, the use of steel beams enabled
larger spans to be achieved. In parallel with the developments to the technology of materials, the
transportation network became more sophisticated enabling the rapid spread of new
technologies. Thus, sites became more complex, involving increasing numbers of specialist
trades.

As the technological complexity of any process grows, so the demands for integration and co-
ordination increase. In the case of the construction industry, this demand led to the emergence of
the general contractor (will be explained in-depth in the coming lectures). Before this, clients
would have entered into a series of separate trade contracts with the people who were doing the
work. The general contractor fulfilled a need by employing all the necessary skills, providing all
of the materials, plant and equipment and undertaking to build what the client had had designed.
Thus, in a general contract, the basic premise is that the employer takes the responsibility for
design and the contractor takes the responsibility for fabrication. Although this process is often
referred to as traditional general contracting, it is a tradition that only goes back to the end of the
nineteenth century.

Here in Ethiopia, All contractors desiring to carry out construction works are required to register
with the Ministry of Works and Urban Development (hereinafter referred to as MoWUD) in
accordance with the Guidelines for the Registration of Construction Professionals and
Contractors (hereinafter referred to as the Guidelines). According to Part 3 of the guidelines, all

Grade 7 - Construction cost of Birr up to 1,000,

Grade 8 - Construction cost of Birr up to 500,

Grade 9 - Construction cost of Birr up to 250,

Grade 10 - Construction cost of Birr up to 100,000 3

II. Designers/ Architect, the Civil Engineer, the Quantity Surveyor

A. Architect

An Architect is a person who designs buildings and is qualified by virtue of the law. Under our
law for registration as professional architects, applicants must hold at least a B degree or the
equivalent in architecture. The applicant must also submit satisfactory evidence of at least four
years of relevant and progressive design and supervision experience acquired after graduation.

The real question these days is whether an architect should lead a project or should be just one of
the consultants managed by a project leader. The view taken on this question depends upon what
architecture is believed to be. The debate can be resolved down to two alternatives; it is either art
or science. An art involves the artist exercising subjective and personal choice with little need to
rationalize or explain the output. This contrasts sharply with the view of architecture as a
science, which involves rational choices based upon objective techniques that can be explained
and justified. Architecture as art cannot be subjected to external management; indeed it can only
occur if the architect is in complete control of the process. Architecture as science can be
subjected to external controls because output can be measured against some predetermined
objective set by the architect. Reality is rarely so simple: real projects involve a complex and
difficult tension between these views and such a debate is rarely exercised at the outset of a
project.

B. The Civil Engineer

The structural design of contemporary buildings, and the design of their mechanical and
electrical installations, has become so sophisticated and complex that it is beyond the technical
knowledge and experience of architects, and is, therefore undertaken by engineers trained and
experienced in this type of work. Construction engineers have a lot of responsibilities. Analyzing
reports is the main part of their job description. They must analyze maps, drawings, blueprints,
aerial photography and other topographical information. It is the construction engineer's job to
make sure that everything is conducted correctly. Accordingly, they have to see the safety of all
the workers undertaking the construction works. In addition to safety, the construction engineer

3 See the other details of the registration process from Guidelines for the Registration of
Construction Professionals and Contractors by the Ministry of Works and Urban Development

has to make sure that the site stays clean and sanitary. Surveying the land while construction is in
progress is also the construction engineer's responsibility. Construction engineers have to make
sure that there are no impediments in the way of the structure's planned location and must move
any that might exist. They also must estimate costs and keep the project under budget.
Construction engineers have to test soils and materials used for adequate strength. Finally,
construction engineers have to provide construction information including repairs and cost
changes to the managers of the construction work.

Tothis end,construction engineers have many activities that they must do every day. Those
activities include drafting, decision making, computer interaction, communication,
documentation, creative thinking, organizing, information collecting, estimating and analyzing.
Construction engineers use drafting to design structures and show it to on others how to build
them. They have to analyze information and make the best decision and solve problems.
Computers are important tools used by construction engineers. They use them to write programs
and solve equations. Communication is used every day to interact with co-workers and
supervisors. Documentation is used to record important information that needs to be passed on to
the management. Most documenting is done electronically. Creative thinking is used to come up
with new ideas and to solve problems. Construction engineers have to be organized to
accomplish goals and prioritize jobs. They have to gather information on the task at hand before
they can start a project. This will help them to ensure that the job is completed correctly. In order
to keep a project under budget, construction engineers have to estimate costs of materials and
workers. Finally, they have to analyze data to find answers to problems that they encounter on
the job site.

C. The Quantity Surveyor

The quantity surveyor is a person who calculates the quantity of labor and materials that are
required to erect the building and compiles this information in a document known as a bill of
quantities, which is used by tenderers as a basis for estimating the cost of the project and
formulating their tenders. As an agent of the client, the quantity surveyor prepares preliminary
estimates of cost, advises on the value of interim payment certificates, evaluates claims for extras
and determines the proper value of the final account. In recent years the quantity surveyors have
been able to advise a client on a project’s future running and maintenance costs and the income it
may be expected to generate by way of rentals. During the course of the contract, he predicts the
employer's cash flow in respect of monthly payments to the contractor, and continuously informs
the employer about on variations to the contract price caused either by cost fluctuations or
changes to the design, or specification.

D. Regulators or the Government

Buildings and structures affect everyone who comes into contact with them and very few people
believe that the freedom to erect structures should be unfettered. There are many instances where

whenever the work that the contractor is undertaking requires the employer's cooperation. On
another note, the employer is expected to refrain from hindering or wrongfully interfering with
the performance of the contract. 6 On projects involving multiple contractors, the owner has an
implied duty to coordinate the contractors’ work so as to avoid substantial interference between
the contractors thus causing unreasonable delays.

F. Users

Finally we turn to the users of buildings. Although there is an overlap with the preceding
category, users of buildings are a much wider group. All of us pass by buildings, enter buildings
and live in buildings. The products of the construction industry affect everyone; therefore a
decision is needed in each project about the extent to which people outside the immediate project
team should be involved. Therefore, before embarking upon any construction project, it is
advisable to take in to consideration the opinion of the society about the project. For example,
some hydro-electric projects in Ethiopia face opposition by the local population because the
project was not discussed with the people. Because so many people are affected in so many
different ways, it is important to develop approaches that take account of some of these effects.
Therefore, all construction works should find a way for the users of the work to get involved at
an early stage of a project.

6 John Adriaanse, Construction Contract Law, 2nd Edition, Palgrave Macmillan, 2007
(Hereinafter Adriaanse)

Unit 2
 2. THE MAJORE PROCUREMENT METHODS IN THE CONSTRUCTION INDUSTRY

A. General contracting

General contracting involves the separation of construction from design. A main contractor is
employed to build what the designers have specified. Since this form of procurement was
developed it has become very common and is often referred to as traditional.

The basic defining characteristic of general contracting is that the contractor agrees to produce
what has been specified in the documents/designs made by the Architect, on behalf of the
employer. More simply, the owner/employer approaches an Architect and explains what kind of
building he/she wants, and then the Architect designs the building. Once the design is finished
the employer will issue a bid for a contractor to do the work. The result is that the contractor has
no responsibility for design.

At this junction, it is important to see how the tendering process works. The main issue here is
how to determine the price of the construction work. It is difficult to know the price of the work
based on the design of the Architect alone. As a result the profession of quantity surveying was
born. These people specialized in costs, prices and financial control. The contractor was obliged
to build what was documented by the architect, but the process of competitive tendering meant
that bills had to be prepared in such a way that contractors could be chosen based upon the
lowest bid. In order for this process to be effective, and to ensure that all of the contractors were
tendering on the same basis, bills of quantity came to be standardized. Over the years common
practice became codified and recorded into what is now known as the standard method of
measurement.

Accordingly, the contractor’s offer of price is based on the bill of quantities, a document that
itemizes and quantifies, as far as possible, every aspect of the work. The bill forms not only the
pricing document but also, because of its comprehensiveness, an important mechanism for
controlling costs as the project progresses. Therefore, it has a central role in the process and the
quantity surveyor, as the author of the bill, is an important contributor. General contracting, then,
revolves around the relationships between employer, architects, quantity surveyors and builders.

One of the most important documents in general contracts is the bill of quantities. It cannot be
produced if the design is incomplete. It is usually impracticable to prepare a complete design
because of the time needed and because sometimes choices need to be left as late as possible in
the process. If design is only partially completed then general contracting begins to break down
because it is based on the assumption that the contractor prices, and builds, what has been
documented. When the documentation is incomplete, there is a high demand for communications
and information. These demands render the process very difficult to manage. Similarly, when

The first of the essential features of a design and build contract is that the employer approaches a
contractor with a set of requirements defining what the employer wants. The contractor responds
with proposals, which will include production as well as design work. The proposals will also
include the contract price, as well as the manner in which it has been calculated.
Once the employer’s requirements and the contractor’s proposals match, the contract can be
executed and the contractor can implement the work. The contractor will be totally responsible
for undertaking the design work outlined in the contractor’s proposals, for fabricating the
building, and for co-ordinating and integrating the entire process. This includes the appointment
of consultants if the contractor does not have the necessary skills in-house. The employer may
also choose to appoint consultants in order to monitor the various aspects of the work, but this is
not always the case.

The contractual relationships in design and build offer some advantages over other methods of
construction procurement. The most important advantage is that the contractor is responsible for
everything. This ‘single-point’ responsibility is very attractive to clients, particularly those who
may not be interested in trying to distinguish the difference between a design fault and a
workmanship fault. This single point responsibility also means that the contractor is not relying
on other firms (e. architects) for the execution of design or for the supply of information. By
removing these blocks to effective communication, experience has shown that programmes and
budgets are more likely to be adhered to, and the speed of building is likely to be quicker.

One reported disadvantage of design and build is where there is a conflict between aesthetic
quality and ease of fabrication; the requirements for fabrication will dominate.

C. Management contracting

The characteristics of a management contract are that the client engages the management
contractor to participate in the project at an early stage, contribute construction expertise to the
design and manage the construction. Because of these requirements, it is normal for the
management contractor to be an experienced builder or construction company, but this is not a
pre-requisite. The management contractor is not employed for the purposes of undertaking any of
the works, but solely for managing the process. In effect, management contracting is a
procurement method consisting of 100% sub-contracting. Every item of building work is sub-
contracted to works contractors.

2.2 CONTRACT PRICE

The contract price is dealt with in different ways by different contracts. The type of procurement
methods we mention above i. General Contracting or Design and build, usually does not matter
on how the parties in a construction contract determine the price of the work. If the two parties
used bills of quantity and then usually the contractor based these bills of quantity to bid for the
contract, therefore the final price of the work will be the bid price. Consequently, if any

quantities are altered because of variations in the client’s requirements, then the contract sum
will be altered. These types of contracts are called lump sum or stipulated sum contracts.

On the other hand, parties to a contract may agree to establish the price of the project after the
completion of the project. This may occurs even though there may be bills of quantity, which the
contractor priced; their purpose was purely for the tendering process. Let’s elaborate this with an
example. Say for instance Mr wants to build a two storage building. He hires an Architect and a
quantity surveyor. Then the surveyor, based on the design of the Architect and the current market
price for materials prepares a bills of quantity. Afterwards, the employer Mr issued a public
tender for contractors to do the work. Consequently, many contractors came forward and
submitted a bid based on the bills of quantity developed by the employer. Accordingly,ABC
Building Contractors Plc. submitted the lowest bid price and won the bid. At this junction, ABC
Plc. has two options, one to accept the work as a lump sum contract and continue with the work
or provide that the price of the building will be re-measured after the work is completed and the
bid price it submitted is just for the tendering process. The second contract pricing is called ‘re-
measurement’ contracting.

I. Lump Sum Contracts

In this type of contract, the supplier (contractor) agrees to provide specified services for a
specific price. The receiver (employer) agrees to pay the price upon the completion of the work,
or according to a negotiated payment schedule. Lump sum contracts require complete plans and
specifications setting forth detailed directions to enable the contractor carry them out. In
developing a lump sum bid, the builder estimates the costs of labor and materials and adds to it a
standard amount for overhead and the desired amount of profit.

Most builders estimate profit and overhead to total about 12-16 percent of the project cost. This
amount may be increased based on the builder's assessment of risks. If the actual costs of labor
and materials are higher than the builder's estimate, the profit is be reduced. If the actual costs
are lower, the builder gets more profit. Either way, the cost to the owner is the same. In practice,
however, costs that exceed the estimates may lead to disputes over the scope of work or attempts
to substitute less expensive materials for those specified.

II. Re-Measurement Contracts

Re-measurement contracts, in contrast to the lump sum contracts, are contracts in which the price
to be paid for the whole work is to be ascertained by measurement in detail of the various parts
of the work and the valuation thereof by reference to a schedule of prices included in the
contract.

This type of contract is usually entered into when the extent and scope of the work to be done is
not known at the time of entering into the contract. Therefore, in this type of contract, it is
usually immaterial whether any particular piece of work that the contractor is required to do is

Unit 3

1. The Law Governing the Construction Industry in Ethiopia 7

While contract law is of greatest importance both private and public contract law, construction
law includes tort law (personal injury and business torts), the law of agency (an aspect of
contract law), mechanics' lien law and other laws that protect subcontractors and suppliers,
workers' compensation law (workplace injuries), administrative law (workplace safety and award
of public contracts), copyright law, and, to a lesser degree, patent law, to name the most
important.

Basically, the construction industry is treated in two different domains: The Civil Construction
Laws , and the Government Construction Laws. The division is simply based on the type
employer or owner. The former laws apply where a private individual or company usually
referred to as ‘employer’ (otherwise known as ‘owner’ or ‘client’) enters into a construction
contract with a contractor. And the latter involves a government department which intends to
have construction works carried out on behalf of the government for public interest. Thus,
depending on whether the construction contract involves a private civil/business-to-business
engagement or a government-to-business, separate set of rights and obligations apply in the
construction industry.

I. Government Construction Contracts:

The objective of this section is to try to understand weather ‘government construction contracts’
are treated differently under Ethiopian law than ‘civil construction contracts’. As far as ‘civil
construction contracts’ are concerned, we know that they are governed by the ‘general contracts’
provisions of the Civil Code together with the special provisions under the Title Code relating to
‘Contract of work and labour’ (Art. 2610-2631) and "Contracts relating to Immovable!!" (Art.
3019-3040). However, for ‘government construction contracts’ one burning question remain
‘whether government construction contracts are administrative contracts?’

It is to be noted private contracts are the expression of the free will of the two contracting parties
who stand on an equal footing. In public law, however, the private individual is opposed by the
state, the representative of the public interest. Put simply, the core-essence or central tenet of the
administrative contracts law has been that public interests prevail over private interests. As a

7  ዛፌኮ ኃ/የተ/የግሌ ማህበር እና ብሓራዊ መሏንዱሶች ስራ ተቋራጭ ዴርጅት ግንቦት 15/2003 የሰበር
ችልት የሰ/መ/ቁ 47526 ቅጽ 11 ገጽ 281  ተስፊዬ አበበ ሥራ ተቋራጭ እና ማዕረጉ ወርቁ ሥራ ተቋራጭ;
ጥር 24/የሰ/መ/ቁ 56252 ቅጽ 12 ገጽ 53  ወ/ሮ ዮርዲኖስ ሃጏስ እና ወ/ሮ ሀይማኖት ተፇራ:የካቲት 21/2003:
/የሰ/መ/ቁ 58258 ቅጽ 12 ገጽ 79  አቶ ተዴሊ ማሞ ጌታቸው እና እነ አቶ ፌስሏ ሱመር /ሁሇት ሰዎች/
ሚያዝያ 21/2003; /የሰ/መ/ቁ 55359 ቅጽ 12 ገጽ 101  አሌ ናይሌ ቢዝነስ ግሩፔ ኃ/የተ/የግሌ ማህበር እና
የኢትዮጵያ መንገድች ባሇስሌጣን: ሰኔ 28/2003; /የሰ/መ/ቁ 61110 ቅጽ 12 ገጽ 124  አቶ ካሣሁን አያላው
እና የምስራቅ ጎጃም ጎዛምን ወረዲ ጤና ጽ/ቤት; ጥር 1/2005; /የሰ/መ/ቁ 71972 ቅጽ 13

result, the government department is placed to be in a special legal position and is granted
special rights or privileges in order to fulfill its public functions. Accordingly, the government
department is entitled to such privileges as to increase, diminish or put an end to the obligations
of the contracting party regardless of the terms of the contract.

For the lawyers with the Common Law experience, the difference may not resonate at all. Many
lawyers from the continental legal system, on the other hand, must have been long pondering at
such concepts as Acts of Government ( theorie de Fait du Prince ), theorie de l’imprevision , the
non-applicability of the doctrine of exceptio non adimpleticontractus , the doctrine of causa (
cause: absence of cause or cause illicite ), supervision, clause exorbitante du droitcommun , etc.
These are concepts alien to ordinary civil contracts. The concepts had been introduced to the
Ethiopian legal system by Professor Rene David as he drafted the Civil Code of Ethiopia. It is
saddening to learn, however, that whilst the French contrats administrative has been
continuously refined and developed under the case law of the French Conseild’Etat , the
Ethiopian Administrative Contracts Law has been perhaps the most marginalized and stagnant
area of law.

Under French law, contracts can be governed by administrative contracts or private law
contracts. An administrative contract is characterized by the provision of a public service or a
contract which gives the administration exceptional powers not found under private law
contracts. The latter powers are called “clauses exorbitantes du droitcommun” meaning
contractual provisions not found in the ordinary law of contracts. An example would be per-
mitting an administration a unilateral right of cancellation. The term public service is expounded
by case law but includes such activities as the provision of gas to a city. The unique feature of
the administrative contract is to give protection to the public interest.

Under the doctrine of “fait du prince” an act of the administration may affect the rights of the
other party under a contract. This cannot be objected to by the other party but may entitle it to
monetary compensation. The theory of “imprevision” (un-foreseeability) imposes (on the
administration) the duty to pay compensation to a contractor who encounters unforeseen
supervening circumstances under a government contract which would otherwise make it
excessively onerous for him to continue. The private person contracting with the administration
my not derive benefit from performing his part but may be entitled to compensation for his/her
loss.

It is noteworthy; therefore, that administrative contracts law is regulated separately from the civil
contracts in Ethiopia. It is against this backdrop that the divide between civil and administrative
contracts in the Civil Law countries must be looked into. This is so important in light of the fact
that government departments can also conclude civil contracts.

Unit 4
Disputes in Construction Works
In trying to understand why disputes occur on construction works, the key clearly lies with the
fact that people are interacting in some way. Although many disputes are based upon arguments
about technical or legal points, disagreement escalates when people become intransigent 8. It is
important to be clear about the basic concepts. In particular, conflict should be distinguished
from dispute. These words are often interchanged in common parlance but for our purposes
conflict occurs when objectives are incompatible. This is to be expected in construction. In fact,
one of the reasons for appointing a team of professionals to contribute advice to a client is to
engage in this kind of conflict. Each specialist will bring a particular agenda and skill to the
problems at hand. The ensuing conflict of objectives is a central part of the project development
process and should be expected. On the other hand, disputes arise when a conflict becomes an
altercation; perhaps when one or both of the parties becomes intransigent (from a behavioral
point of view), but definitely when the argument revolves around rights and is justiciable.

Construction disputes frequently appear to be problems of money. The modern requirements for
reduced construction time, stricter financial control and ever-increasing complexity in contracts
have resulted in a greater proportion of conflicts. These conflicts include problems caused by
inefficient management (by either parties), inadequacies in briefing, failure of programming, late
issue of drawings, design errors, over-zealous supervision, poor communications, etc.

The following are identified as causes of disagreements from literature survey:

A. Misunderstandings usually occur because of poor communication.

B. Values differ between people, professionals and skills,

C. People often have unrealistic expectations. The client wants speedy completion and a quality
building at a low price. The contractor may want more time, a more reasonable quality and
maximum price.

D. Emotions play a role, the ability to handle stress causes conflict. A person’s self- esteem (or
lack of it) can cause also conflict. Factors under this heading include languages, dynamics,
geography, childhood experiences, upbringing and religion.

E. Education levels, both structured and unstructured learning can have an influence on conflict.

F. Many things are different between projects. There are different teams, different funders and
designers.

8 Intransigent means refusing to be persuaded, especially refusing to change opinions that are
strongly believed in

G. Not all people are equally skilled to visualize two-dimensional drawings in a three-
dimensional way.

H. Changes to plans, deadlines, payment dates, and so on, can cause conflict.

I. It does not matter whom or what one must blame for a delay. It could be the weather, a
subcontractor, the bank or whoever. The mere fact that there is a delay could cause conflict.

J. Parties often inadequately define quality. High quality may mean different things to a plasterer
and to the project director or project manager. One must use objective standards to define
materials and workmanship. One must precisely describe what one requires. A client may
specify a much higher standard than what he really wants while wanting a lower price.

K. A sub-contractor may misunderstand the actual requirements and may quote a lower price
than other contractors may, then when he realizes his mistake, conflict results.
Hereunder are detail explanations of some of the areas that generate frequent disputes in
construction works...

I. One-Sided Contracts:

Owner-drafted contracts frequently reflect the mentality that conflict can be avoided by
protecting the owner from all possible claims. Such contracts contain exculpatory language,
waivers and limitations intended to bar virtually all claims by the contractor. The idea is to
protect the owner from all foreseeable and unforeseeable risks by shifting responsibility for those
risks to someone else. One-sided contracts, however, may generate as many claims as they
prevent.

When commencing construction, contractors justifiably expect that all necessary permits are in
place; they will have access to the work; they will receive timely engineering and owner-
supplied information; shop drawings will be promptly reviewed; and unexpected conditions or
changes will be fairly compensated. Where these expectations are not met, contractors often lose
money on a project, prompting claims no matter what the contract provides. In a worst case
scenario, severe losses may force a contractor out of business, resulting in a failure to complete
the work and the attendant delays, disruptions and inevitable costs to the project. Construction
conflicts are more likely to be avoided through a fair allocation of project risks, not only in trying
to safeguard the client in formulating the one-sided contract document. The guiding principles
are that risks should be allocated as follows: First, risks should be allocated to the party who has
direct control over the portion of the process that creates the risk. Second, where no party has
direct control, risk should be allocated to the party who is best able to protect against an

contractual dispute, it follows that the contracting parties must have a very clear understanding
of what they are undertaking.

V. Business relations

A further point affecting the origin of disputes is the preservation of good business relations.
There are often circumstances where the parties to the contract are from the same business
environment and will probably be contracting with each other again in the future. In these
circumstances they are likely to understand both the rules and each other’s needs and
requirements. For the sake of future business they will seek effective and quick resolution of
points of disagreement.

On the other hand, there are circumstances where one party is deliberately obstructive and seeks
to exploit every possible opportunity to its limit. This can happen where the parties are not likely
to work together in the future.

In this regard, practice has shown that in government construction contracts, contractors are
usually very keen to preserve a good relationship with such a client, as opposed to private
construction contracts.
In the building industry, as opposed to civil engineering, most work is done in the private sector,
and the number of disputes is much larger as a consequence.

VI. Technical matters

Disagreements often arise over technical questions. The technology involved in construction is
idiosyncratic, difficult to understand and subject to change. The use of different and/ or
unfamiliar techniques is often the cause of arguments and disagreements.

For example, the nature of the site is often a source of contention. While the site itself is clearly
visible at ground level, it can hold many surprises once excavation starts. It is not enough merely
to look at a site in order to ascertain the site conditions. The part where the building is going to
sit is actually several metres below the part that is visible. Adequate site investigation is a
constant source of problems in the industry. Whose responsibility is it? In order to answer that
question, one must look at the clauses in the contract. Do they represent what is intended? It is
depressing to realize how many clients are shocked to discover the extent of their liability for site
conditions once problems arise.

VII. Legal matters

Some disputes are technically simple, and turn on what is the law on a specific point. The law is
not infinite! There are many day-to-day occurrences that not covered by the law or have not
previously been decided upon by the courts. The resolution of a dispute may hinge upon the
ascertainment of the law in a previously undefined area. Also, even where there are laws or

precedents, they may be inappropriate in the particular case. No two cases are identical, so there
are often tremendous difficulties to overcome in interpreting and applying the law.

Lecture Notes on Construction Law: Bereket Fetene, Adama Science and Technology
University, Law Department
I. Builders or Contractors
The dictionary definition of a builder is ‘A person or organization that is responsible for
constructing a building in accordance with the information provided by the architect.’ similarly,
Jack Rostron’s Dictionary of Property and Construction Law defines contractor as:
‘A building firm who are responsible for constructing a building in accordance with the contract
documents’
Although construction is not a new activity, the most significant developments have taken place
since industrialization. Before the Industrial Revolution construction involved only a handful of
technologies–bricklaying, carpentry, thatching and stonemasonry. Some projects were
sufficiently important to justify the appointment of an architect but few projects employed other
than craft skills.
In the absence of a designer, buildings simply evolved, involving slight modifications as each
new project applied the lessons from experience. Pre-industrial projects were totally organized
by a master mason or an architect. The interactions between the few trades were predictable.
Each craftsman had a detailed knowledge of a particular technology and knew what to expect of
the other trades. Thus, organization and management were simpler than they are today.
The Industrial Revolution led to the emergence of new materials and ways of working. These led
to more adventurous and innovative buildings. For example, the use of steel beams enabled
larger spans to be achieved. In parallel with the developments to the technology of materials, the
transportation network became more sophisticated enabling the rapid spread of new
technologies. Thus, sites became more complex, involving increasing numbers of specialist
trades.
As the technological complexity of any process grows, so the demands for integration and co-
ordination increase. In the case of the construction industry, this demand led to the emergence of
the general contractor (will be explained in-depth in the coming lectures). Before this, clients
would have entered into a series of separate trade contracts with the people who were doing the
work. The general contractor fulfilled a need by employing all the necessary skills, providing all
of the materials, plant and equipment and undertaking to build what the client had had designed.
Thus, in a general contract, the basic premise is that the employer takes the responsibility for
design and the contractor takes the responsibility for fabrication. Although this process is often
referred to as traditional general contracting, it is a tradition that only goes back to the end of the
nineteenth century.
Here in Ethiopia, All contractors desiring to carry out construction works are required to register
with the Ministry of Works and Urban Development (hereinafter referred to as MoWUD) in
accordance with the Guidelines for the Registration of Construction Professionals and
Contractors (hereinafter referred to as the Guidelines). According to Part 3 of the guidelines, all
Lecture Notes on Construction Law: Bereket Fetene, Adama Science and Technology
University, Law Department
So we ask the basic question ‘are public works contracts (also referred to as government
construction contracts or public works of civil engineering construction) parts of administrative
contracts?’
According to Art.3244 (1) of the Civil Code:
A contract of public works is a contract whereby a person, the contractor, binds himself in
favor of an administrative authority to construct, maintain, or repair a public work in
consideration of a price.
The Civil Code of Ethiopia of 1960 introduced into the Ethiopian legal system the concept of
administrative contracts law. The injection of the administrative contracts provisions into the
legal system empowered government departments to choose between two types of contracts: a
private law contract or a public law contract (administrative contract). Thus, contracts that are
concluded by Government Departments are not necessarily administrative contracts. According
to Art.3132 of the Civil Code:
A contract shall be deemed to be an administrative contract where:
a) It is expressly qualified as such by the law or by the parties, or
b) It is connected with an activity of the public services and implies a permanent
participation of the party contracting with the administrative authorities in the
execution of such service, or
c) It contains one or more provisions, which could only have been inspired by urgent
considerations of general interest extraneous to relations between private individuals.
Whether or not a contract that is concluded by a government department is an administrative
contract is to be determined in light of the criteria set under Art.3132 of the Civil Code. The law
categorizes some contracts as administrative contracts, ipso jure, as per Art.3132 (a). These are:
i) Government concession contracts: Arts.3207- 3243,
ii) Public construction contracts (Public works contracts): Arts.3244- 3296, and,
iii) Government supplies contracts (Public supply contracts): Arts.3297- 3306.
Therefore, in the absence of a ‘qualifying clause’ by the parties, construction contracts for public
works would all the same remain to be an administrative contract.
Lecture Notes on Construction Law: Bereket Fetene, Adama Science and Technology
University, Law Department
23. over time payments for the resident engineer or supervisor on site, when the contractor
executes works out of normal working hours,
24. Corruption,
25. Inadequate work experience and qualification of consultant’s site engineer/supervisor,
26. Lack of self-confidence of consultant’s residence engineer in approving some works or
parts thereof on the site,

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