LEGAL ISSUES IN

CONSTRUCTION
MANAGEMENT
GILBERT R. HUFANA
Reality Check
In the construction
management world,
potential legal issues
and pitfalls are part
of day- to-day
operations.
 Common Issues Encountered…
(1) non-compliance with
minimum standards set forth
by law for design and
construction of civil structures
(2) breach of contractual
relations between contractors,
owners, and subcontractor;
and between contractors and
labor.
 POLICE POWER
The state has the duty to
protect the country and its
population from threats to
the public health and safety.

a body of rules of action

or conduct prescribed
by controlling authority
Cooperation from people is
necessary to make the system
more effective and successful.
Building Laws - set out the basic requirements to
be observed in the design and construction of
buildings
• PD 1096: National Building Code of
the Philippines (NBCP) (1) safeguards to
the workers
during
• BP 344: Accessibility Law construction,
(2) to the health &
• PD 1185: Fire Code of the Philippines comfort of the
users
• PD 856: Sanitation Code (3) provide enough
safety to the
• PD 957: Housing and Land Use public in general
Regulatory Board (HLURB)
 PD 1096: National
Building Code of the PH
(NBCP)
a framework of minimum standards and
requirements to regulate and control

design, location, siting,

construction, alteration,
repair, conversion, use,
occupancy, maintenance,
moving, demolition
Buildings & Structures
(public & private)
BP 344: Accessibility Law
provide for minimum
requirements and standards
to make buildings, facilities
and utilities for public use
accessible to disabled persons

The built environment shall

Public and private buildings and
related structures for public use. be designed so that it shall
be accessible to all people.
RA 9514: Fire Code of the PH
ensure public safety, promote
economic development through
the prevention and suppression
of all kinds, of destructive fires

Fire safety in
buildings,
structures &
facilities
PD 856: Sanitation Code of the PH
• Promotion and preservation
of the health of the people
• Raise the health standards of
individuals and communities

Water supply regulation

Waste/sewage disposal
Regulation of establishments
PD 957: THE SUBDIVISION AND
CONDOMINIUM BUYERS' PROTECTIVE LAW
⮚ Providesfor the regulation of the development of
subdivisions and condominiums
⮚ Sets
forth the minimum design standards for
subdivisions and condominiums
establishes secures the maintenance of
requirements of subdivision roads,
decent human drainage, sewerage, water
settlement and to systems, lighting systems,
provide them with and other similar basic
ample opportunities requirements
for improving the
quality of life of the
people
Damages
“Ignorantia Legis
non excusat”
Ignorance of the law is
no defense because the law
itself is definite and knowable
and that we are PRESUMED
to know the law.
 Civil Code of the PH
or RA No. 386
the general law that governs
contractual relations in the
Philippines, which include
A contract is a legally binding construction contracts
agreement that defines and
governs the rights and duties
between or among its parties.

It is the LAW between the parties.

 Contractual Relations in the Construction Industry
Private individuals,
privately-owned
entities, and
Contractor Subcontractor
government
agencies

Employer
or client

Contractor
 Rights & Obligations of Employers/Clients
RIGHTS
To inspect the works or any portion thereof
To require the correction of defects due to
faulty materials, equipment, or workmanship
that may appear within a certain period upon
completion of the works
To stop the works or any portion thereof, if the To provide pertinent information regarding
contractor fails to complete or correct the
same, and to carry out or correct the work by
itself or through other contractors
To obtain title and ownership over all
completed works, and over all materials,
equipment, tools, and supplies for which
payment has been made under the contract
To request variations, in accordance with the
contract
OBLIGATIONS
To pay the contract price
To provide the contractor access to and
possession of the site, to enable the contractor
to perform the construction works
the site that may be needed by the contractor
in connection with the construction works
To obtain relevant government permits and
licenses needed for the project
To obtain and maintain the relevant insurance
coverages required under the contract
Rights of the Contractor
• To receive the contract price
• To be given access to and possession of the site, to
enable the contractor to perform the constructions
works
• To receive pertinent information regarding the site
that may be needed by the contractor in connection
with the construction works
• To receive an extension of time, where applicable, in
accordance with the terms of the contract
Obligations of the Contractor
• To perform and complete the works within the
timelines provided in the contract
• To perform the works using materials, goods, equipment
and methods of constructions of the quality and standards
required under the contract
• To provide and pay for all labor, materials, equipment,
tools, construction equipment, and all machinery,
transportation, and other facilities and services necessary
for the proper execution and completion of the works
• To ensure security and safety at the site
Obligations of the Contractor
• To obtain relevant government permits and
licenses needed for the project
• To warrant that the works conform with the requirements
of the applicable law, the contract and other requirements of
the employer, and are free from hidden defects, imperfections
or faults
• To rectify or remedy any defect or deficiency during the
construction period or within a period of time thereafter
• To comply with all relevant labor laws applying to its
employees
 Subcontractors
• Construction contracts may or may not allow the contractor
to subcontract the whole or a portion of the works, or may
require the contractor to obtain the employer’s consent prior
to such subcontracting.
• If subcontracting is allowed, it is generally the contractor
that remains liable to the employer for all the acts of its
subcontractors, including any negligent, willful or reckless
acts or omissions on the part of any subcontractor.
• It is also the contractor, and not the employer, that is typically
responsible for the proper and timely payment of all
subcontractors.
Construction Contracts content…
• Scope of the works
• program of works;
• terms of reference;
• drawings (including supplementary
details and shop drawings) and
specifications prepared by the architect
and/or other relevant consultants; and
• project schedules and milestones

• Variations
• Design
• Construction
• Site Access
Construction Contracts content…
• Permits
• Completion, takeover & Delivery
• Defects & Defects Liability Period
• Price
• Payment
• Planning
• Delays
• Liability
• Arbitration Clause
 Defects &
Defects
Liability
Period
• The construction contract usually provides for a defects
liability period – usually one year counted from
Substantial or Final Completion.
• In the absence of any contractual stipulation, the defects
liability period under the Civil Code (Article 1723)
applies – 15 years from completion date.
The Contractor is responsible
for defects
• In the event that defects are discovered during the
defects liability period, the employer may require
that the defects be remedied at the sole cost of the
contractor.
• If the contractor fails to remedy the defects, the
employer may (i) remedy the defects or request
another party to do so, and (ii) claim from the
warranty security or retention an amount to defray
the costs for such rectification.
Who is liable for the collapse of the structure?

DESIGNER
by reason of a defect in those
plans and specifications
CONTRACTOR
on account of defects in the
construction or the use of
materials of inferior quality
furnished by the contractor
 Breach of
the aggrieved/injured
party may choose
between 2 remedies

1. action for specific performance

Article 1191 of of the obligation with damages
the PH Civil
Code 2. action for rescission of the
obligation also with damages
Dispute Resolution
Disputes arising out of construction
contracts that have no arbitration
clauses are resolved through ordinary
court litigation.

“as long as the parties agree to submit their

dispute to voluntary arbitration, regardless
of what forum they may choose, their
agreement will fall within the jurisdiction
of the CIAC” (NIA v Court of Appeals, 1999)
Laws on Regulating the Construction
Industry
• Presidential Decree No 1746 – Construction Industry
Authority of the Philippines
• Republic Act No. 4566 (Contractor’s License Law)
• Executive Order No. 1008 (Construction Industry
Arbitration Law)
• Republic Act No. 9184 (Government Procurement Act)
Construction Industry Authority of the PH
http://construction.gov.ph/
promote, accelerate and regulate the growth
and development of the construction industry

PCAB PDCB CIAC

POCB POCB
Republic Act No 4566 (Contractor's
License Law)
• Created the Philippine Contractors
Accreditation Board (PCAB)
• requires contractors to obtain a license from
PCAB and also sets out the procedure and
requirements for the issuance of such license
no contractor (including sub-contractor
to ensure, for the safety
and specialty contractor) shall engage in
of the public, that only the business of contracting without first
qualified and reliable having secured a PCAB license to conduct
contractors are allowed to business
undertake construction in
the country
Construction Industry Arbitration
Commission (CIAC)
• created by E.O. No. 1008
• tasked to provide the industry with the necessary
alternative dispute resolution facilities for the speedy and
equitable settlement of claims and disputes arising from,
or connected with, construction contracts in the Philippines

Arbitration - is a way of settling dispute(s)

between parties who agree to submit the
same for resolution by their nominated judges
or arbitrators. A decision or an award
rendered by arbitrator/s in CIAC arbitration
proceedings is enforceable by a writ of
execution.
Labor Code of the PH
• The law governing employment practices
and labor relations in the Philippines.
• sets the rules for hiring and firing of private
employees; the conditions of work
including maximum work hours and overtime;
employee benefits such as holiday pay, thirteenth-
month pay and retirement pay; and the guidelines
in the organization and membership in labor
unions as well as in collective bargaining.
Conditions of Work
• Wage – a minimum set forth for a specific type of work
• 13th Month Pay
• Hours of Work – 8 hours/day
• Overtime Pay - beyond the regular 8 hour working
period
• Night Shift Differential Pay – work b/w 10pm and 6am
(additional 10%)
• Rest Days – 1 day for every 6 days worked
• Holiday Pay
• Leave (Service Incentive Leave) – 5 days per year
Other Mandatory Benefits
• Social security benefits
• PhilHealth benefits
• PAG-IBIG
Regular v Probationary
• Regular Employee
• an employee performs activities that are usually necessary or
desirable in the usual business or trade of the employer
• Probationary Employee
• Article 281 of the Labor Code states that probationary
employment should not go over six months unless it is under
an apprenticeship agreement stipulating a longer period.
• An employee who continues to work after the probationary
period will be considered a regular employee.
Types of Employment
• Term or Fixed Employment - for a definite period of time and the
employment contract must be terminated after such period expires
• Project Employment - an employee is hired for a specific project or
undertaking and the employment duration is specified by the scope of work
and/or length of the project
• A project employee may acquire the status of a regular employee when
they are continuously rehired after the completion of the project or when
the tasks they perform are vital, necessary, and indispensable to the usual
business or trade of the employer.
• Seasonal Employment - when the work to be performed is only for a certain
time or season of the year and the employment is only for that duration.
• Casual Employment - an employee performs work that is not usually
necessary or primarily related to the employer’s business or trade.
Security of Tenure
• The employer shall not terminate the services of an
employee except for a just cause or when
authorized (Art. 279, Labor Code of the PH)
• Just causes are based on acts attributable to an
employee's own wrongful actions or negligence.
• Authorized causes refer to lawful grounds for
termination which do not arise from fault or
negligence of the employee.
Illegal Dismissal
• termination of employment or separation from
employment without complying with due process
of law
• It may result in reinstatement, full back wages,
moral damages, exemplary damages, nominal
damages, and attorney's fees.
National Labor Relations Commission
(NLRC)
• a quasi-judicial agency attached to the
Department of Labor and Employment (DOLE)

mandated to adjudicate labor

and management disputes
involving both local and
overseas workers through
compulsory arbitration and
alternative modes of dispute
resolution
Dispute Resolution is COSTLY.

Avoid it at all costs!

“Always do right.
This will gratify
some people and
astonish the rest.”
Mark Twain