Professional Documents
Culture Documents
Definition of Terms
Procurement
• Subject to contract" is used when the parties do not intend any legal
consequences to flow from the communications. It is often used during
contract negotiations, such as when negotiating heads of terms, to ensure
no legally binding contract is created inadvertently.
• It seems clear that the term ‘Subject to Contract’, in terms of the sale of
land, traditionally meant that, in the absence of a formal contract, no
binding agreement arises. The use of this wording in construction projects,
however, does not ensure the same degree of certainty. From the legal
cases referred to, it is not clear that whether a letter which is headed
‘Subject to Contract’ does or does not constitute a binding contract
depends upon the wording in the letter.
Due diligence
Due diligence is referred to in a construction contract, placing an
obligation on the contractor to complete the works with care and the
'requisite effort'. A similar term may refer to 'ordinary care', that is, the
care that a reasonable person would take to avoid harm to other
persons or property.
• https://www.designingbuildings.co.uk/wiki/Due_diligence_when_sel
ecting_contractors_or_subcontractors
• https://www.designingbuildings.co.uk/wiki/Due_diligence
Programme
https://www.out-law.com/topics/projects/projects-procurement-and-
contracts/programmes-of-works-and-construction-contracts/
Delays and Delay Analysis
https://www.lexisnexis.com/uk/lexispsl/construction/synopsis/93690:9
6249/Issues-in-construction-contracts/Delay-and-
disruption?wa_origin=gnb
Loss and Expense/Additional Cost
• Loss and expense is a wider term that refers to matters which are the responsibility of the client that materially affect the progress
of the works. This includes matters that disrupt, rather than delay the progress of the works, but still entitle the contractor to make
a claim for additional costs incurred.
• Construction contracts will generally provide for the contractor to claim direct loss and/or expense as a result of the progress of
the works being materially affected by relevant matters for which the client is responsible, such as:
• Failure to give the contractor possession of the site.
• Failure to give the contractor access to and from the site.
• Delays in receiving instructions.
• Opening up works or testing works that then prove to have been carried out in accordance with the contract.
• Discrepancies in the contract documents.
• Disruption caused by works being carried out by the client.
• Failure by the client to supply goods or materials.
• Instructions relating to variations and expenditure of provisional sums.
• Inaccurate forecasting of works described by approximate quantities.
• Issues relating to CDM.
• Claims may comprise costs resulting from disruption to the works or from
delays to the works (prolongation).
• The contractor must give written notice of a claim as soon as it becomes
reasonably apparent that the regular progress of the works is being
materially affected. This need not necessarily result in a delay to the
completion date, and so claims for loss and expense and claims for
extensions of time do not necessarily always run together.
• Claims are restricted to 'direct' loss and expense and so 'consequential
losses' (such as lost production) are generally excluded. Direct losses are
those that 'flow naturally' from the breach of contract.
Extension of Time
• Extension of time EOT in construction contracts. Construction
contracts generally allow the construction period to be extended
where there is a delay that is not the contractor's fault. This is
described as an extension of time (EOT).
• When it becomes reasonably apparent that there is, or that there is
likely to be, a delay that could merit an extension of time, the
contractor gives written notice to the contract administrator
identifying the relevant event that has caused the delay.
• If the contract administrator accepts that the delay was caused by a
relevant event, then they may grant an extension of time and the
completion date is adjusted.
Time at large
https://www.designingbuildings.co.uk/wiki/Time_at_large
Q. What is meant by ‘time at large’? How does it affect the employer’s
entitlement to levy liquidated damages for late completion?
Time is at large when a contract is entered into with no period of time fixed
for completion. Where this occurs, the contractor’s obligation is to complete
work within a reasonable time. There may also be circumstances which arise,
rendering a completion period fixed by the contract as no longer operable,
again rendering time at large. An example is where a delay is caused by the
employer and the terms of the contract make no provision for extending the
completion date due to delays by the employer. A failure on the part of the
architect, contract administrator or engineer to administer the extension of
time clause as required by the contract, or interference on the part of the
employer in the extension of time process, to the detriment of the
contractor, would also render time at large. Where time becomes at large,
the contractor’s obligation is to complete the work within a reasonable time.
Fit for purpose
• The problem may stem from the wording in the Supply of Goods and
Services Act which provides that where an employer either expressly
or by implication makes known to a contractor any particular purpose
for which the building is to be built, there will be an implied term the
building will be reasonably fit for that ...
• http://www.buckles-
law.co.uk/site/library/new_construction_news_section/fit_for_purpo
se.html
• https://www.designingbuildings.co.uk/wiki/Fitness_for_purpose_in_c
onstruction
Variations and/or additional work
• A variation (sometimes referred to as a variation instruction, variation order or change order) is an alteration
to the scope of works in a construction contract in the form of an addition, substitution or omission from the
original scope of works.
• Almost all construction projects vary from the original design, scope and definition. Whether small or large,
construction projects will inevitably depart from the original tender design, specifications and drawings
prepared by the design team.
• This can be because of technological advancement, statutory changes or enforcement, change in conditions,
geological anomalies, non-availability of specified materials, or simply because of the continued
development of the design after the contract has been awarded. In large civil engineering projects variations
can be very significant, whereas on small building contracts they may be relatively minor.
• Variations may include:
• Alterations to the design.
• Alterations to quantities.
• Alterations to quality.
• Alterations to working conditions.
• Alterations to the sequence of work.
Breach of contract
• Where there has not been a clear mistake in a contract, things become
more complex. A very literal reading might give one particular meaning to a
clause, but another party might say that this meaning was obviously not
the one which both sides had meant to achieve during negotiations or
when they signed the contract. A court's first point of reference will be the
Golden Rule: words should be interpreted in line with everyday usage and
given their natural and ordinary meaning. This should apply unless it
results in an absurdity or inconsistency with the rest of the contract. In this
case, the grammar and ordinary sense of the words can be modified as far
as is needed to resolve the absurdity or make business common sense of
the contract if it is clear what the parties must have meant, but no further.
Errors
• It is a Clear cut mistake !!
• In contract law, a mistake is an erroneous belief, at contracting, that
certain facts are true. It can be argued as a defense, and if raised
successfully can lead to the agreement in question being found void
ab initio or voidable, or alternatively an equitable remedy may be
provided by the courts. Common law has identified three different
types of mistake in contract: the 'unilateral mistake', the 'mutual
mistake' and the 'common mistake'. The distinction between the
'common mistake' and the 'mutual mistake' is important.
Misrepresentation
• If the work is being carried out under a JCT contract then this will
specify how the project is to be insured.
• The most common form of tort law is that of negligence. For liability
in negligence to be founded, four key ingredients must be present:
• • duty of care
• • breach of that duty
• • damage (which is caused by the breach)
• • foreseeability of such damage
Liquidated/Delay Damages
• Contracts generally include a provision for the contractor to pay
liquidated damages (or liquidated and ascertained damages,
sometimes referred to as LAD's) to the client in the event that the
contract is breached. In building contracts, liquidated damages
usually relate to the contractor failing to achieve practical completion
(ie completing the works so they can handover the site to the client)
by the completion date set out in the contract.
• Liquidated damages are not penalties, they are pre-determined
damages set at the time that a contract is entered into, based on a
calculation of the actual loss the client is likely to incur if the
contractor fails to meet the completion date. They might include, rent
on temporary accommodation, removal costs, extra running costs and
so on. They are generally set as a fixed daily or weekly sum. There
may be a more complicated formulae where the works are phased, or
where there will be partial possession. It is important that the
method of calculation is formally documented.
• If the contract prevents the client claiming liquidated damages, or if
actual losses are significantly different to those that were estimated
at the time the contract was entered into, then the client may pursue
a claim for unliquidated (i.e. actual) damages through the courts. This
would require them to prove that an actual loss had been incurred
and that loss was not too 'remote'.
• As liquidated damages are not a penalty, they must have been based
on a genuine calculation of damages when they were set.
Certificates and payment
• Warranties
• Warranties are minor terms of a contract which are not central to the
existence of the contract. If a warranty is breached the innocent party
may claim damages but can not end the contract:
Dispute and resolution
ADR
• Alternative dispute resolution (ADR) refers to a range of techniques for resolving disputes
without seeking redress from the courts.
• Choosing ADR can help avoid lengthy and expensive litigation. It is flexible and cost effective and
can bring a speedy conclusion to a problem.
• Techniques include:
• Adjudication involves the appointment of an independent adjudicator who considers the
evidence and makes a decision which is binding to all parties. It is widely used within the
construction industry.
• Arbitration involves the parties agreeing to refer the dispute to a third party (the arbitrator) and
agree to be bound by the arbitrator’s decision.
• Mediation involves the appointment of an independent third party (the mediator) whose role is
to help all parties to a dispute to come to an agreement. It is a voluntary process and all parties
have to agree for mediation to go ahead. Mediation is not binding.
• Negotiation is the process of getting parties together with a view to reconcile differences and
establish areas of agreement, settlement or compromise.
Adjudication
• The Party Wall etc Act 1996 provides a framework for preventing and
resolving disputes in relation to party walls, boundary walls and
excavations near neighbouring buildings. A building owner proposing
to start work covered by the Act must give adjoining owners notice of
their intentions in the way set down in the Act.18 Jun 2013
• A Party Wall Agreement (technically called an “award”) is the
document produced by the two party wall surveyors (or the “agreed
surveyor”) acting for the respective owners.
• It will usually consist of three parts:
•
• The award itself i.e. a set of guidelines governing how the proposed
works should progress
• A “schedule of condition” of the adjoining property, often supported
by a set of photographs
• Drawing(s) showing the details of the proposed works
• The award will normally be based upon a draft document, the most popular of which is produced
by the RICS, which is then amended according to the details of the specific work. It should clearly
state details of the two properties, their owners and their owners' addresses. It should also
contain full details of the two surveyors (or agreed surveyor) and the “Third Surveyor” (if an
“agreed surveyor” is used there will be no Third Surveyor).
• Other items covered include:
• Brief details of the proposed works
• Working hours; normally 8am to 5.30pm weekdays only of residential work
• Assurances regarding the contractor’s public liability insurance
• Indemnities by the building owner in favour of the adjoining owner
• Access arrangement for the surveyors