Building Law Encyclopaedia

BUILDING LAW ENCYCLOPAEDIA

David Chappell Michael Cowlin Michael Dunn

A John Wiley & Sons, Ltd., Publication

This edition first published 2009 © 2009 David Chappell, Michael Cowlin, Michael Dunn Wiley-Blackwell is an imprint of John Wiley & Sons, formed by the merger of Wiley’s global Scientific, Technical and Medical business with Blackwell Publishing. Registered office John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom Editorial offices 9600 Garsington Road, Oxford, OX4 2DQ, United Kingdom 2121 State Avenue, Ames, Iowa 50014-8300, USA For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com/wiley-blackwell. The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The publisher is not associated with any product or vendor mentioned in this book. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold on the understanding that the publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional should be sought. Library of Congress Cataloging-in-Publication Data Chappell, David (David M.) Building law encyclopaedia / David Chappell, Michael Cowlin, Michael Dunn. p. cm. Includes bibliographical references. ISBN 978-1-4051-8724-4 (hardback : alk. paper) 1. Building laws–Great Britain. I. Cowlin, Michael. II. Dunn, Michael. III. Title. KD1140.C484 2009 343.41′07869–dc22 2009023691 A catalogue record for this book is available from the British Library. Set in 10 on 11 pt Times NR MT by SNP Best-set Typesetter Ltd., Hong Kong Printed in the United Kingdom 1 2009

PREFACE

We offer this book as a useful tool for anyone who works in or deals with construction contracts in any capacity. Thus it is intended that architects, quantity surveyors, employers, contractors and sub-contractors will find it a useful and practical source of information. We hope as well that lawyers may also find it useful, perhaps as a starting point to research or as information on a standard contract or term that is not familiar. In order to keep the book to a manageable, and affordable, length we have not included direct references to engineering contracts, but hope that professionals who are involved in the engineering industry, particularly engineers, will also find it helpful. We have described the book as a Building Law Encyclopaedia: thus it is intended that it should provide information in reasonable depth on a wide and extensive number of legal terms, principles, phrases and issues that are common in the construction industry. In keeping with an encyclopaedia we have included a broad range of words and phrases (ordered alphabetically by word, not by letter) that we believe will be encountered in all areas of building contracts. They are mostly, although not exclusively, contractual, but we have not, in general, included Latin terms as they are better dealt with in a specialist legal dictionary. We do not suggest that we have covered all the entries that may be possible, or that the entries carry any particular weight. We do hope, however, that the entries will clarify the meanings of terms and – where necessary – provide sufficient information and references for the reader to investigate a term further. We hope that this book will be different from the numerous legal dictionaries that are available, in that it deals specifically with legal definitions and issues as they relate to building, and it provides references to cases and other authorities that will enable the reader to dig deeper. We have included a few tables and illustrations where it appeared to be helpful, but should stress that the book is not a textbook; there are numerous excellent textbooks available, and we have provided a list of such books. In all cases the decision to include or leave out any term has been ours, and inevitably there will be words, phrases or terms that ought to have been included, or otherwise. We would welcome any suggestions for inclusions (or deletions) in a future edition. Where words or terms within a text have their own specific entry we have indicated this by including (qv) after the relevant word or term. We have attempted to include all developments in the law at the time of publication. Our biggest problem was how to deal with the proposed changes to the Housing Grants, Construction and Regeneration Act 1996, which are going to have an impact on the industry and on many of the terms included. We have decided, after much deliberation, that as the legislation has not yet been enacted, it is proper that we should ignore the proposed changes. As far as standard contracts are concerned, we have referred to as many as we can, including some that theoretically are out of date but which are still in common use. Those referred to include the current suite of JCT contracts, SBC, IC, ICD, MW, MWD, as well as ACA, PPC 2000, GC/Works/1 and NEC. However, unfortunately Revision 2 to the JCT contracts was published too late for inclusion. We are of course indebted to all those that have gone before us – the authors of leading textbooks, articles and commentaries. There are also a number of people to iii

Preface whom we owe particular gratitude. We should particularly mention Paul Jensen FRICS FCIArb Barrister, who has kindly written a foreword, and Dr Paul Sayer of Wiley-Blackwell, our publishers and Lionel Browne, who has edited the manuscript. Jane Oldfield and the staff of the RIBA Information Unit have been helpful as ever, and Space Craft Architects have given valuable help. We have also been assisted by numerous colleagues, but of course we assume full responsibility for the text as published. Extracts from standard contracts are reproduced by permission of the Joint Contracts Tribunal Ltd, the Association of Consulting Architects, Trowers & Hamlins and NEC Contracts, the respective copyright holders. The JCT suite of contracts are published by Sweet & Maxwell. The front page of the Companies Act 2006 is reproduced under the terms of Crown Copyright Policy Guidance issued by HMSO. We are grateful to RIBA Publishing for permission to reproduce the certificate and instruction forms that are part of a suite of contract administration forms published by RIBA Publishing and available from ribabookshops.com. Finally, as always, we thank our respective wives, Margaret, Sue and Susan, for their indulgence. The text is correct as far as we are aware as at 30 April 2009. David Chappell, Wakefield Michael Cowlin, Walker Fold Michael Dunn, Addingham

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FOREWORD by Paul Jensen FRICS FCIArb Barrister Registered Chartered Arbitrator; lecturer and examiner at the College of Estate Management; visiting lecturer at Leeds Metropolitan University; sometime director of courses of the Chartered Institute of Arbitrators

This encyclopaedia has not been written by academics. The three authors, to my personal knowledge, have all had many years’ experience at the cutting edge of dispute resolution and determination, and the high quality of this work therefore comes as no surprise to me. It contains a wealth of knowledge of all aspects of construction law, and of the various standard forms of construction contract; but, more than that, it reflects the practical knowledge of its authors. Unlike many legal reference books it is very readable, and it explains the legal words, phrases and principles encountered in the construction industry in a comprehensive manner, and with all the necessary pointers to further reading and law reports. It will be very useful for lawyers, particularly those not specialising in construction law; for claims consultants; and for all those involved in even the slightest way with construction disputes. It will be a ‘must’ for the bookshelves of all construction employers, construction professionals and contracting organisations, large or small. I have had much experience over the years of the competence, industry and integrity of the three authors, and it is with great pleasure that I commend them on their achievement in compiling this work, which I unhesitatingly recommend. June 2009

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ABBREVIATIONS ACA ACA SFA/08 ARB ARCUK BIFM BLR BPF BSI CA-S-07-A CD 81 CDM Regulations CDP CE CE/99 CIB CIC CIC Procedure CIMAR CIS CM/A CM/TC CPR CWa/P&T DB DBSub/A DBSub/C D-Con-07-A DOM/1 and DOM/2 EDI EEA FIDIC GC/Works/1 GMP GWD HBC HGCR

Association of Consultant Architects Form of Building Agreement 1982, Third Edition 1998 (2003 Revision) Association of Consultant Architects Standard Form of Agreement for the Appointment of an Architect 2008 Architects Registration Board Architects Registration Council British Institute of Facilities Management Building Law Reports British Property Federation British Standards Institution RIBA Standard Conditions of Appointment JCT Standard Form of Building Contract with Contractor’s Design 1981 Construction (Design and Management) Regulations 2007 contractor’s designed portion JCT Constructing Excellence Contract RIBA Conditions of Engagement for the Appointment of an Architect 1999 (updated 2004) Construction Industry Board Construction Industry Council Construction Industry Council Model Adjudication Procedure Construction Industry Model Arbitration Rules Construction Industry Scheme JCT Construction Management Agreement JCT Construction Management Trade Contract Civil Procedure Rules Contractor Collateral Warranty for a Purchaser or Tenant JCT Design and Build Contract JCT Design and Build Sub-Contract Agreement JCT Design and Build Sub-Contract Conditions RIBA Domestic Project Agreement Standard Form of Sub-Contract for Domestic Sub-Contractors electronic data interchange European Economic Area Fédération Internationale des Ingénieurs-Conseils General Conditions of Contract for Building and Civil Engineering Major Works guaranteed maximum price Greens Weekly Digest Hudson’s Building and Engineering Contracts Housing Grants, Regeneration and Construction Act 1996 vi

Abbreviations IC ICD ICE ICSub/A ICSub/C ICSub/D/A ICSub/D/C ICSub/NAM ICSub/NAM/C ICW IFC 84 IFC 98 IN/SC JCLI JCT JCT 63 JCT 80 JCT 98 KPI LLP MBC MC 98 MCW/C MF/1 MP MPSub MTC MW MWD NEC NHBC NSC/A NSC/C PC PCC 98 PFI PM PPC qv, qqv

JCT Intermediate Building Contract JCT Intermediate Building Contract with contractor’s design Institution of Civil Engineers Intermediate Sub-contract Agreement Intermediate Sub-contract Conditions Intermediate Sub-contract with Sub-contractor’s Design Agreement Intermediate Sub-contract Agreement with Subcontractor’s Design Conditions Intermediate Named Sub-contract Tender and Agreement Intermediate Named Sub-contract Conditions Institute of Clerks of Works JCT Intermediate Form of Building Contract 1984 JCT Intermediate Form of Building Contract 1998 IFC 84 and 98 Domestic Sub-contract Joint Council for Landscape Industries Joint Contracts Tribunal JCT Standard Form of Building Contract 1963 JCT Standard Form of Building Contract 1980 JCT Standard Form of Building Contract 1998 key performance indicators limited liability partnership Management Building Contract JCT Management Building Contract 1998 JCT Management Works Contract Conditions Model Form of General Conditions of Contract JCT Major Project Construction Contract JCT Major Project Construction Sub-contract Measured Term Contract JCT Minor Works Building Contract JCT Minor Works Building Contract with contractor’s design Engineering and Construction Contract (formerly New Engineering Contract) National House-Building Council JCT Standard Form of Nominated Sub-contract Articles of Agreement JCT Standard Form of Nominated Sub-contract Conditions prime cost JCT Prime Cost Building Contract Private Finance Initiative project manager Association of Consultant Architects Standard Form of Project Partnering Contract (PPC 2000) quod vide, or quae vide – indicates a term that has a definition of its own

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Abbreviations RIAS RIBA RICS RM RSAW RSUA SBC SBCC SBC/Q SBC/AQ SBC/XQ SBCSub/A SBCSub/C SBCSub/D/A SBCSub/D/C S-Con-07-A SCWa/P&T SFA/99 SMM7 SS-DS-07 SS-RS-07 SW/99 TCC UCTA WCD Works Contract/2

Royal Incorporation of Architects in Scotland Royal Institute of British Architects Royal Institution of Chartered Surveyors Repair and Maintenance Contract (Commercial) Royal Society of Architects in Wales Royal Society of Ulster Architects JCT Standard Building Contract Scottish Building Contract Committee JCT Standard Building Contract with Quantities JCT Standard Building Contract with Approximate Quantities JCT Standard Building Contract without Quantities JCT Standard Building Sub-contract Agreement JCT Standard Building Sub-contract Conditions JCT Standard Building Contract Sub-contract with Sub-contractor’s Design Agreement JCT Standard Building Contract Sub-contract with Sub-contractor’s Design Conditions RIBA Standard Agreement for the Appointment of an Architect 2007 Sub-contract or Collateral Warranty for a Purchaser or Tenant RIBA Standard Form of Agreement for the Appointment of an Architect 1999 (updated 2004) Standard Method of Measurement of Building Works 7th Edition RIBA Schedule of Design Services Schedule of Role Specifications RIBA Small Works Agreement Technology and Construction Court Unfair Contract Terms Act 1977 JCT Standard Form of Building Contract with Contractor’s Design 1998 Works Contract Conditions

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A Abandonment of work A phrase used in the arbitration (qv) provisions of GC/ Works/1 (clause 60(2)(a)). Completion (qv), alleged completion or abandonment of the work marks the point at which any reference to arbitration may be made. Abandonment of the Works must entail complete stoppage of all the Works, together with a clear intention not to continue at some future date. It implies removal of all the contractor’s and sub-contractors’ men, plant, equipment etc. from the site, and, depending on the circumstances, it may be construed as an intention to repudiate the contract. See also: GC/Works/Contracts; Repudiation.

Abatement In relation to nuisance (qv), abatement refers to the right of the person who suffers injury or damage by reason of the nuisance to act personally to remove the cause. Care must be taken not to interfere with another party’s rights. Abatement of a nuisance is not looked upon favourably by the courts, unless there is an emergency, because other remedies are available through an application to the courts. Local authorities may serve abatement notices in respect of a statutory nuisance. In the construction industry the word is most commonly used to refer to the process of reducing a price or value: for example, a price is reduced to take account of work not properly executed, or goods supplied not in accordance with a contract, so the contract value or price is not due. It is a common law remedy for breach of warranty in respect of contracts for the sale of goods, and for work and labour. Therefore the value of any abatement (i.e. diminution in value) cannot exceed the contract value or price. Abatement can apply only to reduce the value of work or services, and therefore does not offer a remedy for, say, late completion. The remedy in that situation would be damages for breach of contract. Abatement of price is often confused with a deduction of money or set-off (qv) or counterclaim (qv) against the price. The price or value is due, but sums (e.g. damages) are being deducted for other reasons, e.g. a breach such as late completion. There is a clear difference in law between abatement of price and set-off against a price, and although the end result in money terms may be exactly the same, there are circumstances in which one will be allowable and not the other.1

Abeyance Technically, where a right is not presently vested with anyone, e.g. in the case of an inheritance. In this sense it has no relevance to building contracts. Generally, when something is said to be ‘in abeyance’ what is meant is that it is in a state of being suspended or temporarily put aside.

Abrogate To repeal, cancel or annul. Hence abrogation refers to the annulling or repealing of a law, e.g. by means of legislation.

1

Mellows Archital Ltd v. Bell Projects Ltd (1997) 87 BLR 26.

1

Absolute

Absolute Full, complete and unconditional. Absolute liability (sometimes known as ‘strict liability’ (qv)) is where a liability is carried irrespective of the degree of care taken. No proof of negligence or fault is required. It is sufficient only that a particular incident has occurred. This type of liability may be imposed by statute (qv). See also: Liability.

Absolute assignment The assignment (qv), or transfer, of an entire benefit, e.g. debt (qv) or other legal right, as opposed to merely part of it, and without conditions attached.

Abstract of particulars The phrase used in GC/Works/1 to refer to the supplement that contains important terms and details specific to a contract. It lists modifications or supplements to the printed conditions, e.g. date for completion, the amount of liquidated damages and the length of the maintenance period (qv). Details of the ‘employer’ and the ‘project manager’ (qqv) are listed. Two addenda make provision for setting out dates (or periods after acceptance/ notification of possession) as to when certain information will be available, or directions/instructions concerning sub-contract nominations will be given, to the contractor. If the contractor incurs expense following a failure to meet the specified dates then it may give rise to a disruption and/or prolongation claim (qv) under clause 46. In other forms of contract such important terms and details are set out in sections called, by way of example, an appendix (qv) or contract particulars (qv) or contract data (qv).

Abut Be in physical contact with. There must be actual contact between part of the premises and the road or other feature, which will produce some measurable frontage or common boundary.

ACA Form of Building Agreement The ACA Form of Building Agreement was first published by the Association of Consulting Architects in October 1982. This was followed by a second edition in September 1984 and a third edition (the latest) in 1998 to accommodate Part II of the Housing Grants, Construction and Regeneration Act 1996 (qv). That said, there is no express provision addressing a contractor’s right to suspension under s. 112 of the Act, i.e. following a failure to pay by the employer. The contractor has to rely on s. 112 of the Act. The latest amendment to the third edition is the 2003 revision. A further short amendment has been published making appropriate changes following the introduction of the Construction (Design and Management) Regulations 2007 (qv). This form offers alternatives (e.g. extensions of time (clause 11.5)) across a number of key clauses, permitting flexibility in the contractual arrangements and therefore the distribution of risk between the parties. An employer, in conjunction with the architect, will need to decide which of the alternatives are to apply, prior to inviting tenders. Clause 1 sets out the contractor’s basic obligation. This is to ‘execute and complete the Works in strict accordance with the contract documents’ (i.e. contract drawings (qv), the time schedule (qv), either a schedule of rates 2

ACA Form of Building Agreement and prices, specification or bills of quantities (qqv)). The contractor must also ‘comply with and adhere strictly to’ validly issued architect’s instructions for which the contractor is entitled to payment, unless the matter is covered within the contract sum, or the instruction results from the contractor’s default. Clause 2 addresses the contract documentation, for which there are two alternatives. Alternative 1 requires the architect to issue such further information as is necessary to carry out and complete the Works in accordance with dates shown in the time schedule. Alternative 2 would be chosen when the contractor undertakes to supply some or all of the further information necessary to explain and amplify the contract drawings and/or necessary to execute and complete the Works. This information is submitted to the architect for comment in accordance with the time schedule. Alternative 2 would be used when the contractor takes responsibility for design. The time schedule sets out important stages of the Works, and makes provision for the listing of key dates. Where the contractor has undertaken to provide additional information, drawings, etc. the contractor warrants under clause 3.1 that: — the Works will comply with any performance specification or requirement contained in the contract documents (qv); and — the contractor will use skill, care and diligence in checking any design included in the contract documents; and — any part of the Works to be designed by the contractor will be fit for its required purpose. If the contractor is responsible for designing the Works or a part of the Works, clause 6.6 requires the contractor to take out and maintain professional indemnity insurance. This is in respect of the contractor’s negligence or that of its sub-contractors, suppliers, etc. Under clause 11.1, once possession of the site (or the appropriate part) is given by the employer, the contractor shall immediately begin the Works and proceed ‘regularly and diligently’ (qv). This is to be done in accordance with the time schedule so that the Works are completed ‘fit and ready for TakingOver by the employer’ by the due or extended date. There is provision for general damages as an alternative to liquidated and ascertained damages for delay, i.e. clause 11.3. In both cases the architect must have certified that the Works are in delay (clause 11.2) before a deduction can be made. Extensions of time are addressed under clause 11.5. There are two alternatives. Alternative 1 limits the grounds for an extension to defaults relating to the CDM Regulations and to ‘any act, instruction, default or omission of the Employer, his servants or his agents or of the Architect on his behalf’, whether authorised under the agreement or not. Alternative 2 takes a more prescriptive approach, listing the individual events, e.g. force majeure (qv) and insurance contingencies. Clause 11.7 requires a mandatory review by the architect of the contractor’s entitlement to an extension of time. This is to be undertaken within a reasonable time of the taking-over of the Works. Clause 11.8 gives the architect power to instruct acceleration or to postpone the Works. The architect’s decisions are reviewable by an arbitrator or judge (depending on the option chosen to apply), or by an adjudicator. The time schedule must be revised (clause 11.9) should the contract period be extended, or following the issue of an acceleration or a postponement instruction. 3

ACA Form of Building Agreement The contractor is responsible for its sub-contractors and suppliers (clause 9.9), although the architect’s consent must be obtained prior to sub-letting any portion of the Works (clause 9.2). Provision is made at clauses 9.4 and 9.5 for a sub-contractor to be named either in the contract documents or by way of an architect’s instruction issued against a provisional sum. Under clause 5 the contractor is to ensure the proper management of the Works. The contractor is to appoint a site manager and employ only appropriately skilled and qualified people on the Works. This duty is backed up by the sanction that the architect may require the dismissal from the Works of any incompetent person (clause 8.1(b)). The architect’s authority to issue instructions is set out at clause 8. Certain instructions can be issued at any time up to completion of all the contractor’s obligations, i.e. outstanding work and repairs. The valuation of instructions is addressed at clause 8.2, with the valuation procedure set out at clause 17. This requires the contractor to submit written estimates of the value of the adjustment and both the effect on time and the amount of any loss and/or expense directly attributable to the instruction. There is a procedure for agreeing the contractor’s estimate and, if not, the architect is to value the instruction in accordance with the provisions, i.e. on a fair and reasonable basis using the schedule of rates where appropriate. The claims clause (clause 7) is very broad. It covers any act, omission, default or negligence of the employer or the architect that disrupts the regular progress of the Works, or delays the whole or part of the Works in accordance with the dates in the time schedule. Loss or expense attributable to an architect’s instruction is excluded, given that it is to be addressed under clause 17. There is a procedure for the contractor to submit estimates, and should the contractor fail to do so then there is no entitlement to have the contract sum adjusted prior to the issue of the final certificate (qv). In addition to any act or default of the employer or architect the contractor may also claim for loss and/or expense suffered as a consequence of disruption or delay caused by the CDM coordinator, principal contractor (if not the contractor) and any designer under the CDM Regulations following a failure to comply with their obligations under the regulations. The scheme for certificates and payment requires the contractor to submit interim applications along with supporting documents. These should be submitted on either (i) the last working day of each month up to and including the month in which taking-over occurs and thereafter, as and when further amounts become due either to the contractor or to the employer (clause 16.1A), or (ii) when a stage is complete (clause 16.1B) depending upon whether alternative A or B is chosen. The architect is to issue a certificate within 10 working days of receipt of the contractor’s application. Payment of 95% of the amount stated as due must be made by the employer within a further 10 working days. Failure to pay is a ground for termination, by the contractor, under clause 20.2(a). Final payment is governed by clause 19. The contractor must submit a final account with all documents, vouchers, receipts, etc. within 30 working days following the end of the maintenance period (qv), and the architect must issue the final certificate within 30 working days of the contractor having completed all its contractual obligations under the agreement. No certificate relieves the contractor of any liability under the contract (clause 19.5). 4

ACA Standard Form of Agreement for the Appointment of an Architect There is an optional provision for disputes to be settled by a named conciliator (clause 25A). There are also provisions covering adjudication (qv), and either arbitration (qv) or litigation (qv). An optional provision exists making an adjudicator’s decision final and binding on the parties unless the dispute is referred to either arbitration or litigation within 20 working days, or such other period as the parties may insert. See also: BPF System; PPC 2000.

ACA Standard Form of Agreement for the Appointment of an Architect (ACA SFA/08) This form of appointment is published by the Association of Consultant Architects. It is said to be a development of the SFA series of appointments originally produced in 1992 and based on the SFA/92 version but with amendments and updates. All such standard form contracts are liable to fall foul of the Unfair Terms in Consumer Contracts Regulations 1999 (qv) where the contract is with a consumer. It is the architect’s responsibility to read through the form carefully with a consumer and explain all the implications of each part. The form, which is contained within one document, consists of: — Memorandum of agreement — Attestation — Schedule 1: Project, site and attachments — Schedule 2: Services to be performed by the Architect — Schedule 3: Fees and Expenses — Schedule 4: Other Appointments — Schedule 5: Collateral Warranties and Third Party Rights — Model letter to a commercial client — Model letter to a consumer client — Conditions of agreement Among the important features of the form for the architect are the following: — The client agrees to hold other consultants and the contractor, not the architect, responsible for their work. — The client must provide necessary information, and the architect is entitled to rely on it. — If the architect is involved in extra work beyond the architect’s control, additional fees on a time basis are payable. — The client’s rights to set off amounts against fees due to the architect are excluded. — Where a withholding notice is not given, the amount due is the amount on the architect’s account. — If the architect is obliged to take legal action to recover amounts due, the client is to indemnify the architect against all costs reasonably incurred. — Interest on late payment is to be in accordance with the Late Payment of Commercial Debts (Interest) Act 1998 with interest otherwise at 8% over Bank of England Base Rate. — The architect has the right to suspend the copyright licence in the event the client fails to pay. — The architect does not warrant that the project will be completed in accordance with the timetable or the budget. — There are exclusion clauses for asbestos and toxic mould. 5

ACA Standard Form of Contract for Project Partnering — —

There is a net contribution clause (qv). Both architect and client have the right to determine performance of the services on reasonable notice. The ACA also publishes Appointment of a Consultant Architect for Small Works (ACA98 revised 2004). See also: Conditions of Engagement (RIBA); Standard Agreement for the Appointment of an Architect (S-Con-07-A); Standard Form of Agreement for the Appointment of an Architect (SFA/99).

ACA Standard Form of Contract for Project Partnering See PPC 2000. Acceleration of work The increasing of resources either to complete works early or to reduce delays encountered. The use of the word ‘acceleration’ raises a number of issues, which have been highlighted as follows: ‘Acceleration’ tends to be bandied about as if it were a term of art with a precise technical meaning, but I have found nothing to persuade me that that is the case. The root concept behind the metaphor is no doubt that of increasing speed and therefore, in the context of a construction contract, of finishing earlier. On that basis ‘accelerative measures’ are steps taken, it is assumed at increased expense, with the view of achieving that end. If the other party is to be charged with that expense, however, that description gives no reason, so far, for such a charge. At least two further questions are relevant to such an issue. The first, implicit in the description itself is ‘earlier than what?’ The second asks by whose decision the relevant steps were taken.2

Generally, a contract administrator, or an employer for that matter, has no power to instruct the contractor to accelerate the Works. The contractor’s obligation is to complete the Works within the time specified or, where no particular contract period is specified, within a reasonable time (qv). The contractor cannot be compelled to complete earlier than the agreed date unless there is an express contract term authorising the architect, or contract administrator, to require acceleration. Generally, if an employer wishes the Works to be completed earlier (or more usually to be completed on time despite unavoidable delays), a further agreement must be negotiated and will generally involve extra payment. However, ACA clause 11.8 does empower the architect to issue an instruction to bring forward dates shown on the time schedule (qv) for the taking-over of any part of the Works. This power may not be exercised unreasonably, and an appropriate adjustment must be made to the contract sum (qv). This is in contrast to a number of standard forms that include an administrative provision allowing an agreement to accelerate to be concluded between the parties, e.g. NEC clause 36, MP clause 19 and GC/Works/1 clause 38. Under GC/Works/1 clause 38, if the employer wishes to have the Works (or a section) completed before the date(s) for completion, the employer can direct the contractor to submit priced proposals for achieving the accelerated date, together with any consequential amendments to the programme, or to submit an explanation of why the contractor cannot achieve an accelerated completion. The employer’s direction should specify the period within which this must

2

Ascon Contracting v. Alfred McAlpine Construction Isle of Man (1999) 16 Const LJ 316 at 331 per Judge Hicks.

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Acceleration of work be done. If the employer accepts the contractor’s proposals, the contractor is to be notified in writing to that effect, setting out: — the accelerated completion date; — the amendments to the programme; — the revised contract sum; — a revised stage payment chart; and — any other agreed relevant amendment. This notification is the formal acceleration instruction. The contractor may, of its own volition, submit a proposal to the employer for early completion of the Works or a section of the Works. If the contractor does so and the proposal is accepted, a formal acceleration instruction would then be issued. It is worth noting that it is the employer and not the project manager who deals with the matter of acceleration. Clause 36.1 in NEC is brief and again authorises the project manager to instruct the submission of a quotation to accelerate, which is not the same as an instruction to accelerate. The project manager states the changes to the key dates (qv) upon which the quotation is to be based. The contractor submits a quotation, or states reasons for not doing so. MP clause 19 is similar in approach, but goes further by expressly stating that, save as to clauses 19 and 25 (which allow the contractor to propose an early completion date), the employer may not instruct acceleration. Clause 6.6 of PPC is very straightforward and provides that the client’s representative may instruct acceleration (and postponement or re-sequencing) of any date in the project timetable. Any such instruction is treated as a change. These are to be contrasted with the provision within the MBC at clause 3.16 and Schedule 6. The procedure is elaborate. The architect/contract administrator issues an instruction seeking an acceleration quotation only if the employer so requires. The procedure governing the provision and acceptance of any quotation is set out at Schedule 6. The gist of Schedule 6 is as follows. — Paragraph 1: If the employer requires (i) a completion date for the project or a section earlier than the applicable date, or (ii) a reduction in the period of any entitlement the contractor has to an extension of time, or (iii) to otherwise alter the sequence or timing of the Works, then the architect/contract administrator is to issue an instruction seeking a quotation from the management contractor. Details of the employer’s requirements are to accompany the instruction, e.g. revised earlier completion date or the required sequencing. — Paragraph 2: The management contractor, or through it a works contractor, may make a reasonable objection. Subject to the grounds for the objection, the instruction may either be withdrawn or be modified so as to remove the objection. — Paragraph 3: Subject to no objection being extant the contractor is to submit a quotation or notification to the architect as soon as is reasonably practicable. In the quotation the management contractor is to state, in respect of each works contractor affected: (i) a lump sum amount for meeting the requirements of the parameters set out in the instruction, or if it is not possible to produce a lump sum then a statement that the amount would be ascertained in accordance with the works contract conditions; (ii) the earliest date that could be agreed and fixed as the 7

Acceleration of work completion date for the project or relevant section; and (iii) any other material terms. — Paragraph 4: Upon receipt of the notification from the management contractor, if the employer agrees to the amount(s) stated by the management contractor and the stated completion date, then the architect is to issue a confirmation instruction. This instruction confirms the details and terms of the acceleration, and fixes the completion date. Architects sometimes believe that provisions such as SBC clause 2.28.6.2 and IC clause 2.19.4.1 give them the power to instruct acceleration measures. This is because the clauses state that the contractor must ‘do all that may reasonably be required’ to the satisfaction of the architect to proceed with the Works. A clause like this is often erroneously referred to by the architect and contractor alike as the ‘acceleration clause’. That is not its true purpose, or even part of its function. It does not empower the instruction of acceleration. It is there to ensure that the contractor proceeds with the Works diligently, taking notice of the architect’s wishes, and it may involve reprogramming the Works, but not to an extent that involves the use of significant additional resources. Should the architect issue an instruction to accelerate and the contractor obeys, it is questionable as to whether the contractor has an entitlement to payment. Much will depend upon the authority, whether ostensible or implied, of the architect to give the instruction as agent for the employer. It is possible that the contractor may be entitled to payment of a reasonable sum on the basis of an implied contract or quantum meruit (qv). If the employer authorised the instruction, the contractor is more likely to be successful with such a claim. A contractor may try to base a claim for loss and/or expense (qv) on ‘acceleration’, sometimes referred to as ‘constructive acceleration’. The claim usually proceeds on the basis that the contractor asserts an entitlement to an extension of time but the contract administrator or employer refuses to extend the contract period and exhorts the contractor to finish on the completion date. The contractor faced with this situation accelerates the work in order to avoid having to pay liquidated damages (qv). Standard form contracts do not expressly deal with this situation. The claim is essentially one for the failure of the contract administrator to properly carry out their duty to extend the contract period. The contractor’s problem with this argument is one of causation (qv). The contractor’s remedy for the contract administrator’s failure would seem to be by means of adjudication or arbitration (or litigation if applicable). In practice, the contractor may not wish to risk incurring large sums in liquidated damages that might not later be recovered. The case of Motherwell Bridge Construction Limited v. Micafil3 is often cited as authority in support of a constructive acceleration claim. The case involved a sub-contract on a project where the main contract was under a modified form of FIDIC. Judge Toulmin did allow Motherwell to recover its acceleration costs, but the precise reasoning behind the decision is not clear. Motherwell had sought extensions of time that were refused by Micafil, who did require Motherwell to complete by the subcontract date. It would appear that there may well have been an express or implicit agreement that Motherwell would be reimbursed its acceleration costs to meet the sub-contract completion date following a number of exchanges between the parties. 3

Motherwell Bridge Construction Limited v. Micafil Vakuumtecchnik (2002) 81 Con LR 44.

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Acceptance See also: Agency; Management contract; Postponement; Practical completion; Regularly and diligently.

Acceptance The act of agreeing to an offer (qv) that constitutes a binding contract. Acceptance may be made in writing, orally or by conduct. Acceptance by conduct would occur if the offeree acted in such a way as to observe the terms of the offer and showed an intention to be bound by it, e.g. by commencement of works on site.4 Acceptance must be unqualified or there is no contract. A qualified acceptance may amount to a counter-offer (qv). Thus, if contractor A offered to build a house for employer B for the sum of £20,000, and B accepted subject to a reduction in price for the omission of the garage, B is said to have made a counter-offer. The original offer is terminated, and B cannot later decide to accept it unless A reintroduces that offer. The general rule is that an acceptance must be communicated to the offeror. If an offeror states a particular means of acceptance, then the offer cannot usually be accepted in another way. Therefore, where written acceptance is stipulated, an oral acceptance will not usually suffice. It may be possible to accept an offer by an alternative method, but this would depend upon the construction (qv) of the offer, and what other way is used to communicate acceptance. The question would be: did actual acceptance accomplish the objective as well as the stipulated method of communication? To avoid this kind of dispute, it is usually advisable to accept an offer strictly in accordance with any stipulations set out. If an offer is accepted by post, the acceptance takes effect upon posting of the acceptance, and not upon its receipt by the offeror.5 This is an artificial exception to the general rule. It applies even if the offeror has posted a withdrawal of the offer, which has not been received by the offeree. The postal rule would give way to an express provision attached to the offer that acceptance must be received. The postal rule does not apply to modern so-called ‘instantaneous’ forms of communication, such as telephone or telex. In these situations, as communication is instantaneous, the contract is concluded when acceptance is received, provided that the communication is clear. The position is not yet clear as regards emails, given that actual communication is not necessarily immediate. Though not necessarily the same, service of a notice under a contract by fax has been held to be actual service in writing, provided it has been received.6 Further service of an arbitration notice by email that was received was held to be good service.7 A binding contract will normally come into existence as soon as a tender is received and a letter of acceptance is sent.8. In such instances it is invariably the case that the tender refers to a specific form of contract, and unless there are matters that are still to be agreed or (unusually) there is an express stipulation that execution of formal documents is required, it is probable that there will be a binding contract between the parties on terms of the standard form specified.9 4 A Davies & Co (Shopfitters) Ltd v. William Old Ltd (1969) 67 LGR 395 and AE Yates Trenchless Solutions Limited v. Black and Veatch Limited [2008] EWHC 3183. 5 Henthorn v. Fraser [1892] 2 Ch 27. 6 Construction Partnership UK Ltd v. Leek Developments Ltd [2006] EWHC B8 (TCC). 7 Bernuth Lines Ltd v. High Seas Shipping Limited (2006) 1 Lloyd’s Rep 537. 8 Kilby & Gayford Ltd v. Selincourt Ltd (1973) 3 BLR 106. 9 G Percy Trentham Ltd v. Archital Luxfer Ltd [1993] 1 Lloyds Rep 25 at 29–30 per Steyn LJ.

9

Accepted programme This is often the cause of disputes when architects refuse to issue certificates until the formal documents are executed. If that were indeed the situation, the architect would be unable to issue instructions or exercise any power under the contract, and the contractor would be entitled to leave the site. It has been held that a handshake in itself did not give rise to a binding contract, given that insufficiencies existed on key terms.10 Acceptance is fundamental to the formation of a contract, but remains one of the common areas of dispute or difference between the parties. See also: Letters of intent; Subject to contract.

Accepted programme A defined term (clause 11.2(1)) within NEC referring to the programme identified in the contract data (qv) or the latest programme accepted by the project manager. Submission, acceptance, revision and requirements of a programme are dealt with in clauses 31 and 32. The programme under this contract is a key management tool for the project manager. See also: Engineering and construction contract (NEC); Programme.

Accepted risks The term is used in GC/Works/1 clauses 1 (1), 19 (loss or damage) and 36 (extension of time) to describe the risks that may affect the Works but which do not rest with the contractor. Presumably the risks are termed ‘accepted’ to indicate that they are accepted by the employer. In any event, that is the effect. Clause 1 (1) defines ‘accepted risks’: as pressure waves caused by the speed of aircraft or other aerial devices; ionising radiations or contamination by radioactivity from any nuclear fuel or from nuclear waste from the combustion of nuclear fuel, radioactive, toxic, explosive or other hazardous properties of any explosive nuclear assembly including any nuclear component and war, invasion, act of foreign enemies (whether or not war has been declared), civil war, rebellion, insurrection or military or usurped power. Under clause 19 the contractor must make good or compensate the employer for any loss or damage that arises out of, or is connected with, the execution of the Works. If a claim is made or proceedings are brought against the employer in respect of loss or damage, the contractor must reimburse the employer any costs or expense reasonably incurred. However, the employer must reimburse the contractor’s reasonable costs or expenses to the extent that the loss or damage is caused by the employer or its agent’s default, an ‘accepted risk’, unforeseeable ground conditions, or other circumstances outside the contractor or sub-contractor’s control. The contractor is entitled to an extension of time under clause 36(2)(d) for any delay caused by the occurrence of an ‘accepted risk’.

Access to neighbouring land Difficulties can arise when it becomes necessary for a building owner to enter upon adjoining land (i.e. neighbour’s land) in order to carry out work to the building owner’s property, e.g. maintenance or repair works. A person could be held to ransom by a neighbour where the work was essential to deal with weather ingress or structural problems. The Access to Neighbouring Land Act 1992, which applies to England and Wales, was introduced to address such situations. It deals with ‘basic preservation works’. 10

McNicholas Construction (Holdings) Ltd v. Endemol UK plc [2003] EWHC 2472 (Ch).

10

Access to Works The term is broad and includes, but is not necessarily restricted to, such things as maintenance of or repair to a building, clearance of or repair to a drain or cable, treatment or cutting back of any growing thing, and the filling in or clearance of a ditch. If neighbours are unable to reach agreement then an application can be made to the court (i.e. County Court), which must be satisfied that the work is reasonably necessary for preservation, and that it cannot be carried out without substantial difficulty unless entry onto the adjoining land is possible. The court cannot make an order if the adjoining owner would suffer interference with the use or enjoyment of the land, or suffer hardship. The court may include whatever terms and conditions it deems appropriate to protect the adjoining owner’s property or privacy. These terms could include the payment of money to the adjoining owner by the person desiring to carry out the work. There is a court fee for making such an application.

Access to Works The contractor has an implied right of access to the site or Works insofar as the access is controlled by the employer, otherwise it would be impossible for the contractor to carry out the Works. Access means the right to approach or reach, and is distinct from possession of the site. A failure to give access to and from the site (i.e. ingress or egress) under the predecessors to SBC gave the contractor express grounds for an extension of time and/or loss and expense. There were several provisos attached: — the access must be across adjoining or connected land, buildings, way or passage; — such land, etc. must be in the possession and control of the employer; — the means of access must have been stated in the contract, e.g. on the drawings or in the bills of quantities (qv); and — the contractor must have given such notice, if any, that may be required. There is no similar wording within SBC. It would seem that a similar failure by the employer would fall under the ‘sweep-up’ events within the comparable extension of time (clause 2.19.6) and loss and/or expense (clause 4.24.5) provisions, i.e. ‘any impediment, prevention or default, whether by act or omission, by the Employer, …’. It is not a breach of contract where access is impeded by third parties over whom the employer has no control, e.g. pickets.11 Similarly, no extension can be awarded or money claim allowed if the employer fails to obtain permission for the contractor to cross a third party’s property, although that might well amount to a breach of contract by the employer (or fall within the SBC ‘sweepup’ provisions) if the employer has expressly or implicitly undertaken to obtain such permission. ACA makes no specific provision for an extension of time or additional monies on the ground that the employer has failed to provide access. A failure to provide agreed access would give rise to such claims on the ground of the employer’s default under clause 11.5 (extension of time – both alternatives) and clause 7 (employer’s liability). Under GC/Works/1 the employer’s failure to give agreed access would give rise to an extension of time under clause 36(2)(b) but not, it would seem, a 11

LRE Engineering Services Ltd v. Otto Simon Carves Ltd (1981) 24 BLR 127.

11

Accident prolongation or disruption claim under clause 46. However, delay in the contractor being given possession of the site would give rise to a prolongation or disruption claim under clause 46(l)(b), thereby drawing a distinction between access and possession. Clause 26 (site admittance) is not relevant, as it merely refers to the power of the project manager to refuse admission to such persons as the project manager shall think fit. Where an architect and/or a quantity surveyor is appointed under the contract, there will be an implied term that they have the right of access to the site. SBC states the position expressly, i.e. clause 3.1. See also: Possession.

Accident In its ordinary sense it denotes an unlooked-for mishap or an untoward event neither designed nor expected.12 Its actual meaning in a contract or elsewhere is a question of interpretation.13 In general, accident is no defence to an action in tort (qv), and in some cases the happening of an accident may itself give rise to a prima facie case of liability. This is known as res ipsa loquitur (‘the thing speaks for itself ’), which was explained in Scott v. London & St Catherine’s Docks Co: Where the thing is shown to be under the management of the defendant or his servants, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence in the absence of explanation by the defendants, that the accident arose from want of care.14

For example, objects do not usually fall from scaffolding unless there is negligence, so if a visitor to site is injured by a bucket falling from scaffolding, the maxim will apply. See also: Inevitable accident.

Accommodation works Work such as bridges, fences, gates, etc. which are carried out and maintained by statutory undertakers (qv), e.g. the Department of the Environment, Department of Transport, Network Rail, for the accommodation or convenience of the owners or occupiers of adjoining land. For example, there is a statutory obligation on Network Rail (as successor to the former railway companies) to fence off land used for the railway from adjoining land.

Accord and satisfaction ‘The purchase of a release from an obligation whether arising under contract or tort by means of any valuable consideration, not being the actual performance of the obligation itself. The accord is the agreement by which the obligation is discharged. The satisfaction is the consideration which makes the agreement operative.’15 Accord and satisfaction bars any right of action on the matters covered by the agreement. If a contractor agrees to accept part payment and to release the employer from payment of the balance, this will be valid if the agreement is 12

Fenton v. Thorley [1903] AC 443. J & J Makin Ltd v. London & North Eastern Railway Co [1943] 1 All ER 645. 14 (1865) 3 H & C 596 per Erle CJ at 601. 15 British Russian Gazette & Trade Outlook Ltd v. Associated Newspapers Ltd [1933] 2 KB 616 at 643. 13

12

Act of God supported by fresh consideration (qv), or if the agreement is executed as a deed. There must be true accord, under which the creditor voluntarily agrees to accept a lesser sum in satisfaction.16 The essential point is that the creditor must voluntarily accept something different from that to which the creditor is entitled.17 Although not legally necessary, it is prudent to arrange for the agreement to be recorded formally in a letter or other document: e.g. if a legal action is being compromised, a suitable form of words might be ‘I accept the sum of £x in full and final settlement of all or any claims … and I will forthwith instruct my solicitors to serve notice of discontinuance.’ Ultimately, whether there has been an effective agreement is a question of fact.

Accrued rights and remedies of either party A phrase used in JCT 98 clause 28.4 and IFC clause 7.11 but not repeated in section 7 of either SBC or IC. The reference related to the rights and duties of the parties following the contractor’s determination of employment under the contract. It does not refer merely to cases where the remedy is a claim for breach of contract but also other rights and remedies, e.g. the architect’s right to issue an instruction requiring rectification of defective work.18 Since under the contract the employer acquires a right to have defective work remedied at the time it was carried out, this is an ‘accrued right’ for the purposes of the clause. See also: Rights and remedies.

Acknowledgement of service A response by the defendant to the service of a claim form (qv). The response will state whether the defendant intends to dispute the claim. Full details of the legal requirements are to be found in the Civil Procedure Rules.

Acquiescence Agreement. It is possible for a party to acquiesce to something by simply standing by and watching it happen.19 In such circumstances the party may be precluded from objecting at a later date. The principle may have application to architects, engineers, clerks of works and others who observe work being carried out on site. See also: Estoppel.

Act of God A sudden and inevitable occurrence caused by natural forces; independent of human intervention. The test is whether or not human foresight and prudence could reasonably recognise its possibility and so guard against it.20 Lightning, earthquake (at least in the United Kingdom) and extraordinary weather conditions fall within the concept. Normally an act of God does not in itself excuse contractual performance, although it may do so on the interpretation of a particular contract. Some insurance policies and contracts for the carriage of goods provide that there is no liability for losses caused by act of God. There appear to be no reported cases involving act of God in

16

D & C Builders Ltd v. Rees [1966] 2 All ER 837. Pinnels Case (1602) 5 Co Rep 117a. 18 Lintest Builders Ltd v. Roberts (1980) 10 BLR 120. 19 ER Ives Investment Ltd v. High [1967] 1 All ER 504. 20 Greenock Corporation v. Caledonian Railway Co [1917] AC 556. 17

13

Act of Parliament the context of the construction industry, although some contractors may refer to it as an excuse for non-performance or a ground for terminating the contract. What they usually mean is the similar but wider concept of force majeure (qv). See also: Frustration; Vis major.

Act of Parliament A statute (qv). Primary legislation as distinct from statutory instruments and regulations, which are secondary legislation. A statute is the formal expression of the will of Parliament, and sets out the law in written form, e.g. the Housing Grants, Construction and Regeneration Act 1996. Proposed legislation is introduced in the form of a Bill, which must pass through all the requisite stages in both houses of Parliament and then receive the Royal Assent. The majority of modern Acts of Parliament are public statutes of general application. Local Acts are private statutes of local application. An Act of Parliament is divided into several parts: — The short title by which the Act is known. — The long title, which sets out the purpose of the Act in general terms. — The enacting formula, which runs ‘Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and the consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:’ — The numbered sections, which contain the substance of the Act. Each is divided into sub-sections, paragraphs and sub-paragraphs as appropriate. — The marginal notes to each section. — Various schedules, which contain matters of detail, repeals, etc. The modern practice is to state the broad general principles within the Act, leaving matters of detail to be covered in secondary legislation made by a minister in the form of a statutory instrument (qv). The practice is often criticised, because it is said that the Executive is taking over the powers that are vested in the Legislature, which alone should make the law. Figure 1 shows the first page of an Act of Parliament.

Action Civil legal proceeding by one party against another. The purpose of an action may be to gain a remedy or enforce a right. Actions may be in persona (against an individual – the defendant) or in rem (against an item of property). Criminal proceedings are termed ‘prosecutions’. See also: Defendant; Plaintiff; Pleadings; Statement of case.

Activity schedule The term is used in the NEC main option A ‘Priced contract with activity schedule’ and main option C ‘Target contract with activity schedule’. The activity schedule in each option is to be identified in the contract data (qv) part two and prepared by the contractor. The activity schedule is subject to change, at least under main option A (clause 54.2), but it is not clear how the lump sum prices for each activity are recalculated. Although not defined, it seems that the activity schedule is identical to the schedules of activities within the BPF System (qv) and the activity schedule in SBC and IC. Under SBC and IC it would seem that the activity schedule is also to be prepared by the contractor. See also: Priced activity schedule. 14

Actual cost

Figure 1

First page of an Act of Parliament (reproduced by permission of HMSO).

Actual cost This is a term used in the CE (qv) form of contract under the target cost option. It refers to the costs incurred by the supplier (e.g. the contractor) in carrying out the services, and which can be recovered by the supplier from the purchaser (e.g. the employer). The costs are to be ascertained on an open book basis, but net of all discounts, rebates and taxes, and excluding the supplier’s margin and excluded costs. 15

Ad hoc The supplier is to keep detailed records in a fully auditable manner and make them available to the purchaser when reasonably required for verification purposes.

Ad hoc For this specific or special purpose. Used to refer to an appointment for a particular purpose, and usually in contrast to an appointment ex officio (by virtue of office).

Ad idem Literally ‘at the same point’, but also ‘agreed’ or ‘of the same mind’. Negotiating parties are said to be ad idem when they have reached agreement on all the terms of contract.

Addendum bills A term used to describe further bills of quantities (qv) produced to modify the bills originally prepared. For example: — To make a reduction on the lowest tender figure if it exceeds the employer’s budget. In this case they may be termed ‘bills of reductions’. — When standard unit types are designed and a common bill of quantities prepared, an addendum bill is often necessary for use on individual contracts to quantify minor variations from the standard, e.g. to accommodate such items as steps and staggers in terraces in otherwise identical house units. Addendum bills of the first type are not always popular. They can be confusing unless both the original bills and addendum bills are fully cross-referenced. For example, the original bills may include an item for pointing in a particular type of mastic. The addendum bills may show that the mastic has been omitted and different superior mastic added back. The addendum bills are, of course, referenced to the original, but the original is often not referenced back to the addendum, because it was prepared prior to the addendum bills. It is possible, therefore, that a contractor may overlook the change unless both documents are thoroughly checked. Some alterations will be clear from the drawings, which should reflect the situation shown in the original bills as amended by the addendum bills. Unfortunately, an item such as mastic will often simply be termed ‘mastic’ on the drawing, without any indication of the type. Should the contractor make such a mistake, then it would be required to correct the mistake at its own cost. When faced with addendum bills, contractors should take care to go through their working copy of the original bills, noting in the margin where the addendum bills take effect. If possible, addendum bills should be avoided unless they are very short. Their advantages of cheapness and speed may be negated if they lead to significant errors.

Addition See: Extra work. Additional variation percentage A fixed percentage addition to the valuation of additional work to allow for the cost of any disruption caused by an instruction requiring a variation. This is a somewhat unusual method of dealing with cost-based claims, and no standard form contract makes provision for it. The percentage would be specified by the contractor in its tender. It is not to be confused with the standard provision in, for example, SBC clause 5.6.3.3, which 16

Adjudication requires any valuation of a variation to include an allowance for any addition to or reduction of preliminary items. See also: Brown clause; Liquidated prolongation costs.

Adjacent Lying near to but not necessarily adjoining.21 It is to be contrasted with ‘adjoining’, which suggests a degree of contiguity.

Adjoining (property) To be contiguous with. Few building sites stand in isolation, and so the rights of owners of adjoining property must always be considered. There is no general right of access over or onto adjoining property, even for the purpose of carrying out essential repairs. Care must therefore be taken to ensure that the Works are set out so that no trespass (qv) to neighbouring property occurs. Maintenance can be a problem, and thought should be given to future repairs. The Access to Neighbouring Land Act 1992 was intended to address such problems. See also: Access to neighbouring land; Party Wall Act 1996; Support, right of.

Adjudication In English common law it refers to the decision of a court. In Scots law it is concerned with the attachment of land, usually in relation to a debt. In the particular context of building contracts it means to decide an issue judicially. Certain standard contracts and sub-contract forms had limited provisions for adjudication for some time, e.g. ACA 2, GC/Works/1 third edition and NSC/C. Following the introduction of the Housing Grants, Construction and Regeneration Act 1996 (qv), otherwise known as the ‘Construction Act’, on 1 May 1998 and the equivalent Construction Contracts (Northern Ireland) Order 1997 (qv) on 1 June 1999, every construction contract must contain express provision permitting either party to refer any dispute under the contract to adjudication, thus complying with s. 108 of the Act (or article 7 of the Northern Ireland Order). A construction contract is defined within the Act. The requirements of s. 108 (article 7 of the Northern Ireland Order) are that each construction contract must provide: — that either party may give notice, at any time, of an intention to refer a dispute or difference to adjudication (this has been held to include the period following termination);22 — a timetable, of seven days from the above notice, for both the appointment of the adjudicator and having the dispute referred to the adjudicator; — for a timetable of 28 days, or such longer period as the parties may agree, from the date of the referral for the adjudicator to reach a decision; — for extending the 28-day period by up to 14 days if the adjudicator and referring party so agree; — that the adjudicator is to act impartially, which does not necessarily require the adjudicator to be independent; and

21

Wellington Corporation v. Lower Hutt Corporation [1904] AC 773. A & D Maintenance and Construction Ltd v. Pagehurst Construction Services Ltd (1999) 16 Const LJ 199. 22

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Adjudication —

for the adjudicator to take the initiative in finding out the facts and the law. The construction contract must also provide: — that the adjudicator’s decision is binding upon the parties until either the dispute is decided by arbitration or legal proceedings (as applicable under the contract) or the parties agree that it is final. The courts have shown themselves ready to enforce an adjudicator’s decision,23 provided that the adjudicator had the jurisdiction24 to decide the dispute, even when it can be demonstrated that the decision is wrong in either or both fact and law;25 and — that neither the adjudicator nor the adjudicator’s employees or agents are liable for anything done or omitted when acting as, or for the, adjudicator unless the act or omission was done in bad faith. If a contract does not comply with the Construction Act, the adjudication procedures in the Scheme for Construction Contracts (England and Wales) Regulations 1998 apply, or the Scheme for Construction Contracts (Scotland) Regulations 1998, or the Scheme for Construction Contracts in Northern Ireland Regulations (Northern Ireland) 1998 as appropriate. Under the Scheme the adjudicator may take the initiative in ascertaining the facts, e.g. visit the site, request the supply of documents, or ask questions of the parties. When reaching a decision, the adjudicator may open up and review certificates and decisions, provided they were not final and conclusive. The standard form construction contracts include adjudication provisions that comply with the Act, e.g. SBC, IC, ICD and DB clause 9.2 and MW clause 7.2, and subject to minor amendments these forms adopt the procedure set out in the Scheme. There are procedures other than the Scheme that comply with the Act and can easily be incorporated by the draftsmen into contracts. The Construction Industry Council (CIC) procedure and the Technology and Construction Court Solicitor’s Association (TeCSA) rules are among the better known. In practice, difficulties can arise, as a referring party may have considerable time to put together the referral document while the respondent can have a much shorter period within which to reply, e.g. 7 or 14 days. This is sometimes referred to as an ‘ambush’. Timescales (e.g. 7 or 28 days) include every day (i.e. Saturdays and Sundays) except bank holidays. Other difficulties can arise when a party refers a complex matter to an adjudicator along with voluminous supporting evidence. Such a complex dispute may well be better dealt with in arbitration or litigation. However, under the Construction Act a party has the right to have the dispute adjudicated. Only one dispute may be referred to adjudication, although the dispute may be drawn widely – such as the sum due to the contractor in an interim certificate, or even a final account, which may

23

The two grounds on which the courts will not enforce an adjudicator’s decision are a lack of jurisdiction and a breach of the rules of natural justice. 24 In Capital Structures plc v. Time & Tide Construction Ltd [2006] EWHC 591 (TCC) it was held that the possibility of economic duress influencing the formation of the underlying contract was grounds for the non-enforcement of an adjudicator’s decision, because if found to be correct the adjudicator would lack jurisdiction. 25 Bouygues (UK) Limited v. Dahl-Jensen (UK) Limited (2000) 73 Con LR 135 (CA); William Verry Limited v. North West London Communal Mikvah [2004] 1300 EWHC 1300 (TCC).

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Administrative receiver include decisions on measured work, variations and loss and/or expense. Once a matter has been decided by an adjudicator the same dispute cannot be referred to another adjudicator in a further adjudication. The second adjudicator would be bound by the first adjudicator’s decision.26 This prevents a party having a second ‘bite of the cherry’, and it is clear that this extends to disputes that are substantially the same as had previously been referred.27 The principle behind adjudication is that it should be a speedy method of resolving disputes, producing decisions that have a temporary binding effect, and that the process should be inexpensive. The Construction Act is silent on inter-party costs. However, adjudicators can usually decide on how their fees and expenses are to be apportioned between the parties, although usually a losing party pays. Otherwise each side pays its own costs. Adjudicators have the power to decide on the matter of the parties’ costs only if the parties expressly or by implication give the adjudicator the power.28 See also: Day; Dispute; Scheme for Construction Contracts.

Adjudicator The person appointed to act as a judge in a court or tribunal, and give a decision. Under the Construction Act s. 108(e) the adjudicator must act impartially (qv). In reaching a decision the adjudicator must not exceed the jurisdiction given (i.e. answer a question outside that posed in the referral29), and must follow the rules of natural justice (qv).30 The contract usually states how the adjudicator is to be appointed. Many contracts now make provision for an adjudicator to be named in the contract. The advantage is that the adjudicator is known from the outset and, in theory, can be called upon to act very quickly. Disadvantages are that the adjudicator may not be available when a party wishes to refer the dispute, and the named adjudicator may not have the particular qualities required to resolve a specific dispute. Usually, whether or not there is provision for naming the adjudicator, there will be a default position that allows a party to apply to a particular nominating body to nominate an adjudicator. It would seem, following the decision in Makers UK Limited v. The Mayor and Burgesses of Camden London Borough Council,31 that it is acceptable to make unilateral representations on the appropriate person to be appointed as adjudicator. A nominating body is not obliged to appoint in accordance with any representations.

Administrative receiver When a company borrows money the lender is usually given some form of security over the company’s assets. If the company fails to keep the terms of the loan or encounters financial difficulties the lender may be entitled to appoint an administrative receiver. An administrative receiver is an insolvency practitioner, appointed by or on behalf of a debenture holder, who has control over the whole (or substantially the whole) of a company’s property.32 A person dealing with an administrative receiver in good faith and for 26

H G Construction Limited v. Ashwell Homes (East Anglia) Ltd (2007) 112 Con LR 128. Birmingham City Council v. Paddison Construction [2008] EWHC 2254 TCC. 28 Northern Developments (Cumbria) Ltd v. J & J Nichol [2000] BLR 158. See also Deko Scotland Limited v. Edinburgh Royal Joint Venture and Others [2003] CS 113. 29 C&B Scene Concept Design Limited v. Isobar Limited (2002) 82 Con LR 154. 30 Discain Project Services Ltd v. Opecprime Development Ltd [2000] BLR 402. 31 [2008] EWHC 1836 (TCC). 32 Insolvency Act 1986, s. 29(2)(a). 27

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Admissibility of evidence value is not concerned to enquire whether the receiver is acting within their powers.33 The administrative receiver is deemed to be the company’s agent unless the company goes into liquidation. The administrative receiver is personally liable on any contract entered into when carrying out their functions (unless the contract provides otherwise), and is entitled to an indemnity out of the company’s assets in respect of that liability.34

Admissibility of evidence The purpose of evidence (qv) is to establish facts before a tribunal, e.g. a court or arbitration. In England and Wales the law of evidence is mainly exclusionary, i.e. it deals largely with what evidence may or may not be introduced. Admissibility deals with the items of evidence that may be brought before the tribunal. The main basic rule is that the evidence must be relevant to the matter under enquiry: — hearsay (qv) evidence in general can be relied upon in civil cases.35 However, a party seeking to rely on such evidence must comply with the relevant notice provisions, which must be given to the other party. A failure to give the required notices may not prevent reliance on such evidence, but it may go to the weight attached to the evidence by the tribunal;36 — extrinsic evidence is generally inadmissible; and — opinion evidence is limited to experts. In JDM Accord Ltd v. The Secretary of State for the Environment, Food and Rural Affairs37 timesheets submitted by the claimant under ss. 1, 9 and 9(1) of the Civil Evidence Act 1995 were allowed to stand as evidence without further proof of evidence of the work done. That was unless the defendant could demonstrate that they were inaccurate. A contractual procedure required that a representative of the defendant would attend site (there were numerous sites) and record the time and activities undertaken by individuals, and the plant used. The record was to be signed each day by the representative and an employee of the claimant. In some cases no defendant’s representative was present on site, and in others the sheets were not verified on site. The verification process agreed between the parties failed because of the defendant’s breach, and therefore it could not rely on its own breach. The effect was to switch the burden of proof from the claimant to the defendant. See also: Expert witness; Parol evidence.

Advance payment A provision for advance payment was introduced into some JCT standard contracts following the Latham Report (qv), although it does not apply when the employer is a local authority. Given that an advance payment can be made for the benefit of either party, the reasoning as to why the provision should not apply to a local authority is not apparent. If the employer and the contractor agree that an advance payment is to be made by the employer to the contractor, the amount agreed and the date for payment 33

1986 Act. s. 42(3). 1986 Act, s. 44(l). 35 S. 1 Civil Evidence Act 1995. It should be noted that, apart from s. 10, the Act does not apply to Northern Ireland. 36 S. 2(4), Civil Evidence Act 1995. 37 (2004) 93 Con LR 133. 34

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Adverse possession must be inserted in the contract particulars (qv), together with a schedule showing the times and amounts for repayment (SBC clause 4.8). A standard form of bond is available to protect the employer should the contractor fail to repay the advanced sum. The default position under the contract is that a bond is required unless stated otherwise. It is difficult to envisage a situation in which a bond would not be required. The provisions of SBC, IC and DB are similar if not identical. They require any reimbursement due on the advance payment to be deducted in the certificate or application for interim payment. There is no advance payment provision within MW.

Advances on account A term used within GC/Works/1 at clause 48 to refer to payments to the contractor, at monthly intervals, during the progress of the Works. The provision is similar to those clauses in other contracts providing for payment through interim certificates (qv). Clause 48 has three alternative approaches to determine the amount to be certified under clause 50, i.e. A (stage payments), B (milestone payments) and C (valuations). The alternative to apply is identified within the abstract of particulars (qv). S. 109 of the Housing Grants, Construction and Regeneration Act 1996 (qv) requires all construction contracts (qv) to make provision for periodic payments where the duration of the work is greater than 45 days.

Adverse possession Occupation of land inconsistent with the rights of the true owner, commonly called ‘squatter’s rights’. Title to land may be acquired by adverse possession under s. 15(1) of the Limitation Act 1980. If a landowner allows a third party to remain in possession of land for 12 years (30 years in the case of Crown land) without payment of rent or other acknowledgement of title, the squatter may acquire a possessory title and the original owner’s title is excluded. A mere demand that the land be vacated is not sufficient to interrupt the period.38 Acquiring a possessory title is not easy. Mere occupation of the land is insufficient. ‘Acts must be done which are inconsistent with the (owner’s) enjoyment of the soil for the purpose for which he intended to use it.’39 Periodic cultivation of a piece of unmarked land was held to be insufficient to establish a possessory title in Wallis’s Cayton Bay Holiday Camp Ltd v. Shell-Mex & BP Ltd, where Lord Denning MR summarised the position aptly: Possession by itself is not enough to give a title. It must be adverse possession. The true owner must have discontinued possession or have been dispossessed and another must have taken it adversely to him. There must be something in the nature of an ouster of the true owner by the wrongful possessor … Where the true owner of land intends to use it for a particular purpose in the future, and so leaves it unoccupied, he does not lose his title simply because some other person enters onto it and uses it for some temporary purpose, like stacking materials, or for some seasonal purpose, like growing vegetables.40

In contrast, in Rudgwick Clay Works Ltd v. Baker,41 the incorporation of a piece of land into the curtilage of a house showed an intention to possess the 38

Mount Carmel Investments Ltd v. Smee and Another [1988] EGCS 99. Leigh v. Jack (1879) 5 Ex D 264. 40 [1974] 3 All ER 575 at 580. 41 (1984) Unreported. 39

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Adverse weather conditions land permanently, and was capable of amounting to adverse possession. The incorporation was inconsistent with the use of the land for future mining operations. The question as to whether adverse possession has been established is one of fact. Boundaries (qv) are frequently varied by adverse possession, e.g. when a fence is re-erected by a householder, and it is in this type of situation that problems may arise in a building contract. See also: Adjoining (property); Possession; Site; Title.

Adverse weather conditions The changing nature of the weather has always been the enemy of construction work. At common law, bad weather as such does not excuse the contractor for delay.42 Extraordinary weather ‘such as could not reasonably be anticipated’ may amount to an act of God (qv) or force majeure (qv). The realities of the situation are recognised by most forms of contract, which allow, to varying degrees, for bad weather. Generally they provide for an extension of time (qv) to be awarded under certain circumstances, but usually with the contractor bearing any associated costs. SBC clause 2.29.8, IC and ICD clause 2.20.8 list ‘exceptionally adverse weather conditions’ as a relevant event (qv) entitling the contractor to claim an extension of time. JCT 63, clause 23(b) referred to ‘exceptionally inclement weather’. The difference in wording makes clear the intent to cover all exceptional weather that has an adverse effect on the construction work. For example, a hot summer could scarcely be classed as inclement weather. Excessive heat and drought can be just as damaging to the progress of the Works as snow or frost. Adverse weather conditions would embrace any weather conditions that were contrary to the ideal in any particular circumstance, and the contractor must be taken to have contemplated the possibility of such weather as part of its contractual risk.43 The qualifying word ‘exceptionally’ is therefore of the utmost importance. In order to show that weather conditions were exceptionally adverse, the contractor may have to provide meteorological records for a lengthy period – say 10 or 15 years – to show that the weather was exceptional for the area at that time of year. A question that needs to be addressed is: What is the nature of weather that may be expected at the particular site at the particular time when the delay occurs, and how does this compare with the weather actually encountered? ‘Exceptional’ does not refer to the period during which the Works are delayed.44 Thus in most areas of England and Wales snow is not exceptional in January, but it is in July. In some areas, however, and at some altitudes, snow would not necessarily be exceptional in early summer. Even if the weather conditions are exceptional, they may not necessarily be ‘adverse’, because the weather must interfere with the progress of the Works at the particular time when the exceptionally adverse weather occurs. Generally it must be shown that it impacted on completion of the Works.

42 43 44

Maryon v. Carter (1830) 4 C&P 295. Mount Carmel Investments Ltd v. Smee and Another [1988] EGCS 99. Walter Lawrence v. Commercial Union Properties (1984) 4 Con LR 37.

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Affidavit The contractor is expected to allow in its tender and programme (qv) for anticipated weather conditions in the area, having regard to historical data, the time of year, and the location of the site. This allowance is – or should be – reflected in the tender price. Often the situation is not clear-cut. For example, some work may continue on internal fittings at the same time as external work is delayed owing to exceptionally adverse weather conditions. In such cases the contract administrator must enquire carefully into the contractor’s programme (qv) and the effect of the weather on completion of the Works before reaching a decision. The provisions of SBC, IC and DB should be contrasted with MW clause 2.7 and MWD clause 2.8, which make no mention of weather. The clause refers to reasons ‘beyond the control of the contractor’. This wording is broad enough to encompass any weather that delays completion beyond the date for completion (qv), not just exceptional weather. GC/Works/1 does not recognise weather conditions as a circumstance entitling the contractor to claim an extension of time. In fact clause 36(2)(e) expressly excludes weather conditions under a clause that might otherwise have included certain exceptional weather conditions. However, should the project manager order suspension of the work or any part of the work (clause 40(2)(g)) to avoid the risk of damage from the weather, then this might entitle the contractor to make a claim for an extension of time. This claim would be against the order to suspend, and not directly on account of the weather. ACA makes no specific references to the weather. However, clause 11.5 (alternative 2) allows force majeure (qv) as a basis of an extension of time claim. Wholly exceptional and unanticipated weather conditions, e.g. extraordinary rainfall, extraordinary snow, could fall under this provision. The MP form, clause 18.1, takes the same approach, with force majeure identified at clause 18.1.1. The reliance on the force majeure event is not, however, as wide as the express provision under SBC. NEC clause 60.1.13 uses an objective approach to determine whether weather gives rise to an extension of time entitlement. Measurements (e.g. rainfall, temperatures) are to be taken each calendar month to completion at a predetermined location in accordance with the details set out in the contract data. These are compared with pre-agreed records, and the weather encountered must occur on a frequency of less than once in 10 years.

A fortiori argument A fortiori means ‘so much more’ or ‘with stronger reason’. It is sometimes referred to by judges when referring to a rule applied in another case, and it is thought that the case under consideration demonstrates stronger grounds for an application of the same rule: therefore the rule should apply to the case under consideration.

Affidavit A sworn written statement of evidence sometimes used in civil actions. Affidavit evidence may be given: — by agreement; and — if the judge or arbitrator so decides. The content of the affidavit may be strictly factual or simply the opinion of the person swearing to it. The person (e.g. an architect) who is required to give affidavit evidence will give the solicitor a statement of the points to be made. The solicitor will prepare the actual document, then the architect (referred to 23

Affirmation of contract as ‘the deponent’) swears (or affirms) that it is true and signs it before an authorised person. Authorised persons include a justice of the peace, a solicitor (other than the one who drafted the affidavit), or a court official. Documents attached to, and referred to in, an affidavit are called exhibits. See also: Evidence; Oaths and affirmations.

Affirmation of contract To elect to abide by a voidable contract. Where there is a breach of contract of a kind such as to amount to a repudiation (qv), which would entitle the innocent party to terminate its obligations, the innocent party may choose to affirm the contract and treat it as still being in force. The breach itself does not automatically bring the innocent party’s obligations to an end; it must first decide how to treat the breach. Only if the breach is accepted by the innocent party do its obligations cease. If the innocent party refuses to accept the breach then the obligations under the contract remain in force. In such circumstances the innocent party will still have a right to damages (qv), and in an appropriate case (e.g. a contract for the sale of land) may obtain an injunction ordering specific performance against the other party.45 A not dissimilar situation arises where there is an actionable misrepresentation (qv), and the innocent party may likewise elect to affirm the contract. If this choice is made then the innocent party loses its right to rescission (qv). A lapse of time may be evidence that the contract has been affirmed.46 In general it may be said that clear words or actions are required, although standing by idly and remaining silent may also be sufficient where it was inconsistent with accepting the repudiation. See also: Termination; Void and voidable.

Agency An agent is a person exercising contractual authority on behalf of someone else, i.e. the principal. The important point is that the principal is bound by the acts of its agent. The architect is the employer’s agent under an ordinary building contract, even though having a duty to act fairly between the parties.47 The architect is viewed as a professional person, but one who cannot be said to be independent,48 as an agent’s primary duty is to see that they act in the principal’s interests. However, this general role as agent is to be qualified when the architect is to issue certificates: … the architect does not act as the agent of the employer but, since he is engaged by the employer, he has a contractual obligation to act fairly, impartially and in accordance with the powers given to him by the conditions.49

An agency relationship can be created by express appointment or by implication. It may also arise where someone, without prior authority, contracts on someone else’s behalf and the latter ratifies or adopts the contract. Agency may also sometimes be implied from a particular relationship between the parties where one (i.e. the principal) has apparently held out the other as their agent,

45

Hasham v. Zenab [1960] AC 316. Stocznia Gdanska SA v. Latvian Shipping Company (No. 2) [2002] 2 Lloyds’s Rep 436. 47 London Borough of Merton v. Stanley Hugh Leach Ltd (1985) 32 BLR 51. 48 Sutcliffe v. Thackrah [1974] 1 All ER 319; Pacific Associates Inc v. Baxter (1988) 16 Con LR 90; Beaufort Developments (NI) Ltd v. Gilbert-Ash NI Limited and Others (1998) 88 BLR 1. 49 Cantrell and Another v. Wright & Fuller Ltd (2003) 91 Con LR 97 at 132–133 per Judge Thornton. 46

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Agency i.e. ostensible authority. This situation commonly arises where employees holding administrative functions contract on behalf of their employers. It is the actions or conduct of the principal and not of the agent that are important in this respect.50 The key concept is that of the agent’s authority.51 Agents have actual authority according to the terms of their appointment, but may also have apparent authority according to the type of functions they perform. Agency may also be implied from a course of dealing between the parties. It is therefore important to determine which acts fall within an agent’s usual or apparent authority. For example, the manager of a builder’s merchant’s depot may act for the owner in all matters connected with the business. Those dealing with the manager are not bound by any limitations placed upon the manager’s authority by the manager’s employer unless they have notice of those limitations. This is in contrast to the agency powers of an architect, which tend to be prescribed by the appointment and the terms of the building contract. An agent’s primary duty is to act in the principal’s interests, and agents must not abuse their position. The agent is in a fiduciary (qv) relationship with the principal. Thus, if an agent makes an unauthorised personal profit during the course of the agency the agent can be compelled to hand over any profit wrongfully made. The agent would also forfeit any agreed remuneration. Similarly an agent is under a strict duty to account for all property coming into the agent’s hands on the principal’s behalf. In carrying out all duties the agent must use ordinary skill and diligence, and, except in certain circumstances, an agent cannot delegate the performance of such duties to another52 delegatus non potest delegare (qv). Delegation may be expressly or impliedly authorised by the principal. Examples of express delegation are DB article 3 (Employer’s Agent) and SBC clause 3 (Employer’s Representative). In general, agents are not personally liable on contracts made on behalf of principals, except where they fail to disclose the principal’s existence, or where it is intended that the agent should be personally liable. Usually, agents drop out of transactions once they have brought about a contract between the principal and the third party. However, if in fact an agent had no authority to contract, the aggrieved party may bring an action against the agent for a breach of an implied warranty of authority (qv). The agency relationship can be brought to an end by mutual consent or by performance. The principal may revoke the agent’s authority, and in some cases the relationship comes to an end automatically, e.g. on the death of the agent. In the context of building contracts the employer is liable to the contractor only for acts of the contract administrator within the scope of the contract administrator’s authority,53 and this principle is of importance, since the standard form contracts define the contract administrator’s powers closely. However, in many cases, particularly where the contract administrator is an employee of the building owner, there will be instances where the exercise of the contract administrator’s professional duties is sufficiently linked to the 50

GPN (In Receivership) v. 02 (UK) Ltd [2004] EWHC 2494 (TCC). Alfred McAlpine Construction Limited v. Forum Architects (a firm) and Others [2002] BLR 378. In this case no agency relationship was established. 52 De Bussche v. Alt (1878) 8 ChD 286 at 310–311. 53 Stockport Metropolitan Borough Council v. O’Reilly [1978] 1 Lloyd’s Rep 595. 51

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Agreed maximum price employer’s attitude and conduct that the architect becomes the employer’s agent, so as to make the employer liable for the architect’s default.54 In Croudace Construction Ltd v. London Borough of Lambeth (1986)55 the local authority’s chief architect named in a JCT contract was held to be the employer’s agent, and the chief architect’s failure to timeously ascertain or instruct the quantity surveyor to ascertain a contractor’s money claim was held to be a breach of contract for which the council (i.e. the employer) was liable in damages.

Agreed maximum price A term used in PPC for the price agreed between the parties that represents the maximum price to be paid pursuant to the price framework and clause 12. The term is defined at appendix 1. The agreed maximum price is subject to shared savings in accordance with clause 13.2 and other increases (and decreases) arrived at in accordance with the provisions, e.g. changes. See also: Change; Guaranteed maximum cost; Guaranteed maximum price contract.

Agreement Although an agreement between two parties, in the sense of a meeting of minds, has no legal significance in itself, agreement is a necessary component of an enforceable contract. Possibly for this reason, the word is often used to mean a contract. SBC refers to ‘Articles of Agreement’ (qv) at the start of the contract, but from then on refers to ‘Contract’ or ‘Conditions’ (qv). However, the ACA form uses ‘Agreement’ rather than ‘Contract’ throughout the contract, e.g. clause 9.1. The provisions for arbitration within building contracts are referred to as arbitration agreements, and this indicates that its existence is quite separate from that of the building contract itself.56

Agreement to negotiate English law does not recognise ‘a contract to negotiate a contract’ or an ‘agreement to agree’. In the context of the construction industry this is illustrated by Courtney & Fairbairn Ltd v. Tolaini Brothers (Hotels) Ltd,57 where an agreement ‘to negotiate fair and reasonable contract sums’ was held not to amount to a binding contract. There was no agreement on the price, or on any method by which the price was to be calculated. Since the law does not recognise a contract to make a contract or an agreement to agree, it cannot recognise a contract to negotiate a contract. Such an agreement fails for uncertainty (qv). This proposition may not be as far-reaching as it first appears, because in some cases the courts may find a means of filling gaps left in a contract.58 In Bell Scaffolding (Aus) Pty Ltd v. Rekon Limited and Alba Hire & Sales Ltd59 the court had to consider the phrase ‘agreed prices on an individual basis’, which the defendants argued was unenforceable for uncertainty as it amounted

54

See the first instance decision in Rees & Kirby Ltd v. Swansea City Council (1983) 25 BLR 129. (1986) 6 Con LR 70. Premium Nafta Products Limited and Others v. Fili Shipping Company Limited and Others [2007] 4 All ER 951. 57 (1974) 2 BLR 100. 58 Foley v. Classique Coaches Ltd [1934] 2 KB 1. 59 [2006] EWHC 2656 (TCC). 55 56

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All risks to ‘an agreement to agree’. The courts did not accept this argument but instead found that the parties were referring to a specific price list. Within this judgment reference is made to the court’s willingness to strive to uphold an agreement once some performance had been made. The importance of the principle in building contracts is, however, that the parties should be agreed on all the essential terms of the contract.60 In practical terms it is essential to ensure that vital terms are not left ‘to be agreed’ or ‘subject to agreement’ – phrases that are often seen in practice. This can be an issue in relation to letters of intent (qv), where the parties have not concluded a contract but the work needs to progress in order to meet critical dates. Negotiations between the parties remain ongoing. Though not necessarily good practice, letters of intent are sometimes employed to permit a contractor to place orders and organise men and machines so as to be in a position to commence work in earnest once all matters have been agreed. In drafting such letters of intent it is often useful for the parties to set out the reason for the letter, and, indeed, it is usual for this to be done at the beginning of the letter. Such matters as what remains still to be agreed, the amount of work required and the total cost the employer is prepared to pay should be stated. The idea behind the agreement to negotiate can sometimes be given effect, for example in an agreement that neither party will negotiate with any other party for a specified period of time. See also: Conditional contract; Subject to contract.

Alien enemy A person who is the subject of a state at war with the United Kingdom, or a person, including a British subject, who is voluntarily resident or carrying on business in enemy or enemy-occupied territory. Such persons: — may be allowed to leave the UK or they may be interned; — cannot enter into a contract with a British subject, and if a contract was made before the outbreak of war (qv), an alien enemy’s rights are suspended except that they may defend an action in contract brought against them. Alien enemies may contract and enforce contracts if they are present in the UK by Royal licence; — are not permitted to bring actions in tort (qv), although they may defend an action against them.

All reasonable endeavours See: Best endeavours. All risks The risks against which Works insurance must be taken out under certain of the JCT standard forms: for example, SBC clause 6.7 options A, B and C.2, as detailed at Schedule 3; and IC and ICD clause 6.7 options A, B and C.2, as detailed at Schedule 1. A new definition of all risks was introduced in 1986, and largely replaced the previous clause 22 or 6.3 perils, which are now called ‘specified perils’ (qv). The main additional risks in ‘all risks’ are impact, subsidence, theft and vandalism. A comprehensive definition is set out within the relevant JCT forms, e.g. SBC clause 6.8. Under this definition ‘all risks’ insurance is cover against any physical loss or damage to work executed, materials on site, and the reasonable cost 60

G Percy Trentham Ltd v. Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25.

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Alteration or amendment of a contract of removal and disposal of debris, including any shoring and propping of the Works consequential upon such physical loss or damage. However, the cost of repair, replacement or rectification due to the following are excluded. — Property that is defective due to: and tear, • wear obsolescence, • deterioration, rust or mildew. • — Any work or site materials lost or damaged as a result of its own defect in design, specification, material or workmanship. This would include any other work executed that is lost or damaged as a consequence because it relied for its support or stability on the defective work. — Loss or damage caused by: invasion, act of foreign enemy, hostilities, civil war, rebellion, • war, revolution, insurrection, military or usurped power, confiscation, commandeering, nationalisation or requisition or loss or destruction of or damage to any property by or under the order of any Government de jure or de facto or public, municipal or local authority; disappearance or shortage that is revealed only when an inventory • is made, or is not traceable to an identifiable event; an excepted risk (qv). • The definition across SBC, DB, IC, ICD, MW and MWD is virtually, if not, identical. A footnote in the contracts points out that ‘all risks’ policies issued by insurers are not standardised and, in effect, care should be taken to ensure that the risks are covered, or the definition amended accordingly. In the 1998 series of JCT Standard and Intermediate contracts additional items 3.4 and 3.5 (dealing with civil commotion (qv) and terrorism respectively) were included to apply if the contract was being carried out in Northern Ireland. The current JCT suite of contracts omits those provisions, because there is an adaptation schedule for use with JCT contracts in Northern Ireland.

Alteration or amendment of a contract The forms of contract in common use in the construction industry have been carefully drafted to take account of most of the situations that regularly arise during the course of building work. The forms are regularly updated in line with decisions of the courts and statute. However, employers may wish to incorporate some special provisions in a particular contract to suit their requirements. It is perfectly feasible to alter or amend a standard form, provided: — the contractor is made aware of the alterations or amendments at the time of tender, or at least before the contract is executed; — if proposed after the contract is executed, both parties must expressly agree the proposed amendments; — the amendments are carried out carefully, so that no inconsistencies result and the implications are followed through the whole contract; — the amendments do not contravene legislation. For anything other than minor amendments it is advisable to seek the advice of a specialist in building contracts and construction law. There are pitfalls if radical alterations are required, as an amendment may have a ‘ripple effect’ through the contract. A principal danger concerns the forms negotiated by all sides of industry, e.g. the JCT forms, which therefore are not caught by the 28

Ambiguity provisions of the Unfair Contract Terms Act 1977 (qv). Extensive tampering with the terms of such a contract may well cause them to be viewed as the employer’s ‘written standard terms of business’ under s. 3 of the Act and/or to be construed contra proferentem (qv) where applicable. Two other common problems are worth mention. An employer sometimes wishes to stipulate that the building must be completed in sections on particular dates. In order to do this effectively, great care must be taken to make the appropriate alterations throughout the contract; otherwise the employer may be unable, for example, to deduct liquidated damages (qv) for late completion of some or all of the sections.61 Most JCT forms (exceptions being MW and MWD) have a completion by sections option available to overcome these problems, and this should always be used when sectional completion is desired. An employer who amends clauses 2.26 to 2.29 of SBC will lose the entitlement to freeze fluctuations after the completion date (qv) unless the appropriate clause in the fluctuations provisions (Schedule 7 clauses A.9, B.10 or C.6) is also struck out. Any amendments should be made to the printed form executed by the parties, and signed or initialled by both parties. It is not sufficient merely to refer to amendments in the bills of quantities62 (qv) or specification (qv), because most JCT forms contain a priority clause ensuring that the provisions of the printed form prevail over any of the other contract documents (qv).63 An alternative would be to delete the priority clause and allow the usual principles of interpretation of contracts to prevail. See also: Priority of documents.

Ambiguity A word, phrase or description of double, doubtful or unclear meaning. Not of certain meaning. ACA clause 1.5 refers to any ambiguity or discrepancy within or between the contract documents. The contractor is to notify the architect upon the discovery of an ambiguity or discrepancy, who may issue an instruction addressing the matter. The inclusion of ambiguity in this clause makes it broader in meaning than the equivalent clauses in SBC (2.15), or IC and ICD (2.13), which refer to discrepancies, divergences and inconsistencies. For example, if a clause in the specification could be read in different ways to produce two entirely different meanings, where a JCT form was used it could be argued by a contractor that if one meaning gave rise to no discrepancy between documents, that should be the meaning to be used, and the contractor would have no duty to notify the architect. However, under ACA it would appear to be sufficient to require the contractor to notify the architect that an ambiguity exists, even if there is no discrepancy. There may be instances where it may be in the contractor’s interests for it to plead ambiguity, although to be successful in obtaining a variation under the clause the contractor would have to show that it could not have been found or foreseen at the date of the agreement through the exercise of skill, care and diligence. 61 Trollope & Colls Ltd v. North West Metropolitan Regional Hospital Board (1973) 9 BLR 60; Bramall & Ogden Ltd v. Sheffield City Council (1983) 1 Con LR 30. 62 English Industrial Estates Corporation v. George Wimpey & Co Ltd (1972) 7 BLR 122. 63 Gleeson v. Hillingdon London Borough (1970) 215 EG 165.

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Ancient monument

Ancient monument An historical or archaeological building or site scheduled by the Secretary of State for the Environment under s. l of the Ancient Monuments and Archaeological Areas Act 1979, as amended. In the case of monuments in England this duty is in fact carried out by the Ancient Monuments Branch of the Department of the Environment after consultation with the Historic Buildings and Monuments Commission. Under s. 2 of the 1979 Act it is an offence to carry out construction work to the scheduled monument without consent. The 1979 Act also introduced the concept of ‘areas of archaeological importance’ or archaeological areas (qv). SBC clauses 3.22 to 3.24, ACA clause 14, GC/Works/1 clause 32(3) and NEC clause 73.1 address what is to happen if fossils, antiquities (qv) and other objects of interest or value are found on site.

Anticipatory breach of contract When one party to a contract makes known, before the time for carrying out that obligation has arrived, that it will not fulfil an obligation. A breach of contract of this kind, like any other breach, can vary from the slight to the very serious or fundamental breach, such as where a contractor states that it will abandon the Works. When faced with an anticipatory breach of contract, the innocent party may accept the breach immediately and sue for breach of contract, or accept the breach as repudiation if it is serious enough. Alternatively, the innocent party may opt to wait until the time for performance arrives, and sue or accept the repudiation at that stage. It is usually wise to accept such breach sooner rather than later, to allow the situation to be properly managed.

Antiquities Ancient relics of various kinds. In building works they could be part or parts of ancient structures or artefacts, coins or works of art. Most standard forms of contract have provision for ownership on discovery and the safeguarding of such items until they can be examined and removed from site. For example, see SBC clauses 3.22 to 3.24, ACA clause 14, GC/Works/1 clause 32(3) and NEC clause 73.1. In practice, many small items such as coins are easily ‘lost’ unless the likelihood of discovery is appreciated and constant supervision of excavations is maintained. The discovery of larger antiquities, such as ancient pavements, is often greeted with dismay by employer and contractor alike because of the probable delay to the Works. See also: Ancient monuments; Archaeological areas; Fossils; Title; Treasure trove.

Appeal A term referring to an application and the proceedings before a court or other tribunal for reconsideration of a decision reached by a lower court or tribunal. Appeals are usually made about questions of law, or perhaps procedure. Questions of fact are not usually subject to appeal. So far as litigation (qv) is concerned, the Civil Procedure Rules (qv) altered the appeal system in England and Wales. A party wishing to appeal a decision of any court normally requires permission from the court to which the appeal is being made. The appeal system is complicated: — Appeals from decisions of district judges go to circuit judges in the County Court. 30

Appendix — Appeals from decisions of circuit judges usually go to the High Court, and from the High Court to the Court of Appeal. — Appeals from decisions of masters, registrars or district judges go to the High Court. — Appeals from the Court of Appeal go to the House of Lords if either the Court of Appeal or the House of Lords gives permission to appeal. Appeals to the House of Lords concern important points of law – generally, matters that are of wide application. So far as arbitration (qv) is concerned, the Arbitration Act 1996 s. 69 sets out the fairly restricted grounds on which a challenge or appeal against an award (qv) may be instigated. A point of law can be appealed to the High Court, but there are various conditions. Many standard building contracts provide that the parties agree that either party may apply to the courts to determine a question of law or appeal on a question of law arising out of an award. SBC clause 9.7 is an example. This kind of clause has been upheld in the courts.64 It is worth noting that the decision of an adjudicator is not subject to appeal. A dispute or difference referred to and decided by an adjudicator and later referred to arbitration or the court is heard in full. The decision of the adjudicator is in effect ignored by the court or arbitrator, and will be of no effect following the court judgment or arbitrator’s award. See also: Courts.

Appendix An addition to a book or document, usually subsidiary to the main work. In standard form contracts appendices or similar, e.g. contract particulars (qv), are used for two principal purposes. The first is to allow for the inclusion of project-specific data, e.g. the start date. The second is to include supplementary standard details and comprehensive provisions in support of a clause within the main body of the contract, avoiding breaking the flow of the clauses, e.g. copies of bonds. For example, under some of the JCT 98 contracts such subsidiary additions were included by means of an appendix, but within SBC they are referred to as the contract particulars (qv) and schedules (qv). In clause 1.1 the contract particulars are stated to be part of the agreement, and the schedules are part of the conditions. The contract particulars are completed, before the contract documents are executed, in accordance with the information given in the documents accompanying the invitation to tender. IC, ICD, MW and MWD each contain a similar ‘contract particulars’, although the schedules do differ. If entries in the contract particulars are filled in so as to be inconsistent with the provisions of the contract terms themselves, then, at least under JCT terms, those entries will be construed contra proferentem (qv), and the printed contract terms will prevail.65 Other examples include ACA, where there are two appendices. Appendix A sets out the requirements for the Construction Industry Scheme (qv) (clause 24), and Appendix B sets out the conciliation procedure. In addition there is

64 65

Vascroft (Contractors) Ltd v. Seeboard plc (1996) 52 Con LR 1. Bramall & Ogden Ltd v. Sheffield City Council (1983) 1 Con LR 30.

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Application for interim payment the time schedule, which complements clause 11, addressing the date(s) for possession, the date for taking over, the maintenance period and liquidated damages. There is provision for numerous entries for when the Works are completed in sections. In addition, dates stating when information is to be provided under clause 2 by either or both the architect and contractor are to be included. A further schedule is included for clause 16.1B when interim payment is to be by means of stage payments. The NEC uses neither the term ‘appendix’ nor ‘schedules’ but contract data (qv), which is in two parts, i.e. part one and part two.

Application for interim payment The term used in DB for the periodic interim submissions made by the contractor. Payment under DB is driven by the contractor making an application, which then triggers the relevant timescales for notices and payment by the employer. This is in contrast to SBC, IC, ICD, MW and MWD, where the employer’s notices and payment are driven by the architect’s certificate. Under SBC, IC and ICD the contractor may submit an application, e.g. SBC clause 4.9, but it is not obliged to do so. Should such an application be made, then the quantity surveyor has to supply the contractor with a statement, in the same level of detail as the application, showing where the quantity surveyor disagrees with the contractor’s application. Under MP the contractor is to submit a detailed application for payment (clause 28) to the employer prior to the employer issuing an interim payment advice. Again, the submission of an application by the contractor is not a condition precedent (qv) to the employer issuing an interim payment advice on the dates stated in the contract particulars. Under ACA clause 16.2 (option A or B) the contractor is to submit an interim application stating the amount due, and this would appear to be a precondition to the architect issuing a certificate.

Apportionment Generally, English law does not provide for apportionment, particularly if the defendant is liable only in contract. There are exceptions to the general rule, as follows: — There may be an adjustment based upon the Law Reform (Contributory Negligence) Act 1945. — The Civil Liability (Contribution) Act 1978 (qv) enables contributions to be recovered from any other person who is liable for the same damage, whether in contract or tort or otherwise. — The parties may expressly or by implication permit apportionment through the provisions within their particular contract. The Law Commission produced a working paper in 199066 that reached a provisional conclusion that where, in contract, damage is suffered partly through the fault of the claimant and partly through the fault of the defendant, then it is right for damages to be apportioned. In John Doyle Construction Limited v. Laing Management (Scotland) Ltd,67 a case under Scots law, the court had to address a global claim under a works

66

The Law Commission’s Working Paper No. 114 (1990) ‘Contributory negligence as a defence in contract’. 67 (2002) 85 Con LR 98 at paragraph 38 per Lord Macfadyen.

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Apportionment package contract. Lord Macfadyen said, ‘The global claim may fail, but there may be in the evidence a sufficient basis to find causal connection between individuals’ losses and individual events, or to make a rational apportionment of part of the global loss to the causative events for which the defender has been held responsible.’ In the same case before the Court of Session68 Lord Drummond Young delivered an opinion and addressed the issue of apportionment in greater detail. The court viewed the possibility of apportionment as a third tier in the approach to addressing global claims, the first tier being the separation, where possible, of individual events and their consequences; if it was not possible then where events are said to be concurrent one should look for the dominant cause (qv) as being the operative event. If neither of these approaches were appropriate then the final option would be to undertake an apportionment. The judge said: In the third place, even if it cannot be said that events for which the employer is responsible are the dominant cause of the loss, it may be possible to apportion the loss between the causes for which the employer is responsible and other causes. In such a case it is obviously necessary that the event or events for which the employer is responsible should be a material cause of the loss. Provided that condition is met, however, we are of opinion that apportionment of loss between the different causes is possible in an appropriate case. Such a procedure may be appropriate in a case where the causes of the loss are truly concurrent, in the sense that both operate together at the same time to produce a single consequence. For example, work on a construction project might be held up for a period owing to the late provision of information by the architect, but during that period bad weather might have prevented work for part of the time. In such a case responsibility for the loss can be apportioned between the two causes, according to their relative significance. Where the consequence is delay as against disruption, that can be done fairly readily on the basis of the time during which each of the causes was operative. During the period when both operated, we are of opinion that each should normally be treated as contributing to the loss, with the result that the employer is responsible for only part of the delay during that period. Unless there are special reasons to the contrary, responsibility during that period should probably be divided on an equal basis, at least where the concurrent cause is not the contractor’s responsibility. Where it is his responsibility, however, it may be appropriate to deny him any recovery for the period of delay during which he is in default.69

The judge went on to say: Apportionment in this way, on a time basis, is relatively straightforward in cases that involve only delay. Where disruption to the contractor’s work is involved, matters become more complex. Nevertheless, we are of opinion that apportionment will frequently be possible in such cases, according to the relative importance of the various causative events in producing the loss. Whether it is possible will clearly depend on the assessment made by the judge or arbiter, who must of course approach it on a wholly objective basis. It may be said that such an approach produces a somewhat rough and ready result. This procedure does not, however, seem to us to be fundamentally different in nature from that used in relation to contributory negligence or contribution among joint wrongdoers. Moreover, the alternative to such 68 John Doyle Construction Limited v. Laing Management (Scotland) Ltd [2004] CS 141 (11 June 2004) at paragraphs 15 to 19 and 31 per Drummond Young LJ. 69 John Doyle Construction Limited v. Laing Management (Scotland) Ltd [2004] CS 141 (11 June 2004) at paragraph 16 per Drummond Young LJ.

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Apportionment an approach is the strict view that, if a contractor sustains a loss caused partly by events for which the employer is responsible and partly by other events, he cannot recover anything because he cannot demonstrate that the whole of the loss is the responsibility of the employer. That would deny him a remedy even if the conduct of the employer or the architect is plainly culpable, as where an architect fails to produce instructions despite repeated requests and indications that work is being delayed. It seems to us that in such cases the contractor should be able to recover for part of his loss and expense, and we are not persuaded that the practical difficulties of carrying out the exercise should prevent him from doing so.70

In the later case of City Inn Limited v. Shepherd Construction Limited71 Lord Drummond Young again addressed the issue of apportionment, but this time under a version of the JCT 1980 form of contract and specifically clause 25. The judge recognised that various causes of delay may interact in a complex manner, and, considering when a dominant cause (qv) could not be identified, said: The architect must make a determination on a fair and reasonable basis. Where there is true concurrency between a relevant event and a contractor default, in the sense that both existed simultaneously, regardless of which started first, it may be appropriate to apportion responsibility for the delay between the two causes; obviously, however, the apportionment must be fair and reasonable. Precisely what is fair and reasonable is likely to turn on the exact circumstances of the particular case. A procedure of that nature is in my opinion implicit in the wording of clause 25.3.1 and .3; both of these provisions direct the architect to give an extension of time by fixing a completion date that he considers to be fair and reasonable.72

The judge also concluded that apportionment could apply to loss and/or expense under clause 26 when considering between events for which the employer is responsible and those for which the contractor is responsible. The judge’s reasoning underlying the apportionment approach concerning a clause 25 extension of time is premised upon the architect having to reach a decision on an extension of time that is ‘fair and reasonable’. Clause 26 makes no similar reference to the architect reaching a decision on the contractor’s entitlement to loss and/or expense based upon what is ‘fair and reasonable’. The words ‘fair and reasonable’ are not to be found in clause 26. Loss and/or expense have been equated to damages at common law, and the architect is required to ‘ascertain’ (qv) the loss and/or expense incurred or suffered by the contractor. These do not tend to support an architect having any discretion to decide on what they consider to be a fair and reasonable entitlement to loss and/or expense. Unfortunately, the judge failed to examine clause 26 in any detail. The wording of clause 25 in the City Inn Limited case is similar to that of clause 2.29 in SBC. The decisions in the John Doyle and City Inn cases are both under the law of Scotland, and as such can only be persuasive so far as the English courts are concerned. There is no guarantee that they will be followed in England.

70

John Doyle Construction Limited v. Laing Management (Scotland) Ltd [2004] CS 141 (11 June 2004) at paragraph 17 per Drummond Young LJ. 71 [2007] CSOH 190. 72 [2007] CSOH 190 at paragraph 18.

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Approval and satisfaction

Appropriate deduction A term used in JCT contracts, e.g. SBC clause 2.38. During the rectification period (qv) the contractor is entitled to and is obliged to return to site to remedy defects, shrinkages or other faults in its work. The employer must permit the contractor to do so unless it is decided otherwise, when the architect should instruct the contractor accordingly and make an appropriate deduction in respect of the work not rectified. In these circumstances the appropriate deduction is not the cost of employing another contractor to do the work but what the cost would have been to the original contractor to carry out the work.73 That deduction has been held to be appropriate where late notification of defects to the contractor is concerned. The defects are still breaches of contract, but the contractor cannot be obliged to make good.74 However, the position is different if the instruction not to make good is issued because the contractor has either neglected or refused to make good within a reasonable time, or because the contractor’s work record is so bad that the contract administrator has no confidence that it is capable of making good. In such instances an appropriate deduction would appear to be the full cost of making good by others, provided that the employer mitigates its losses. For example, it may be appropriate that competitive quotations are obtained, though particular circumstances may dictate otherwise. Where the defects are trifling, it is thought that the employer would need a very good reason for preventing the contractor from returning.75

Appropriation of payments Setting apart money for a specific purpose out of a larger sum. It usually arises when there is more than one debt between the same debtor and creditor, or when payments are made on account for work done by a contractor in relation to particular items of work, e.g. variations. This cannot be done if there is only one contract and the variations have been ordered under it. The question can arise only if extra work was ordered outside the terms of the contract, and if the employer has paid money generally on account. For example, a contractor is due to be paid £4,000 on contract X, £1,000 on contract Y, and £500 on contract Z by the same employer. The employer may send a single cheque for £5,000. The employer should state how the payment is made up, e.g. £3,500 for contract X, £1,000 for contract Y and £500 for contract Z, leaving £500 owing for contract X. If the person making the payment fails to appropriate the sum paid, then it is open to the person receiving payment to make an appropriation.

Approval and satisfaction Most contracts, either in the printed conditions or in documents annexed to the contract, e.g. bills of quantities (qv) or specification (qv), make provision for the approval of materials, workmanship or specific operations. The extent of the approvals required varies from contract to contract. It is sometimes expressed as being ‘to the satisfaction of…’. The implications of such provisions are not always obvious.

73 74 75

William Tomkinson v. Parochial Church Council of St Michael (1990) 6 Const LJ 319. Pearce & High v. John P Baxter and Mrs A Baxter [1999] BLR 101. City Axis v. Daniel P Jackson (1998) 64 Con LR 84.

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Approval and satisfaction In building contracts there are three possible sources of approval: — the employer. — the architect. — a statutory authority, e.g. building control. Unless expressly excluded, the expression of satisfaction by the employer or architect is binding on the parties to the contract. NEC clause 14.1 expressly states that acceptance of work by either the project manager or the supervisor does not relieve the contractor of its responsibilities for design and completing the Works. Approval by a statutory authority is not final and binding contractually, because it represents an additional safeguard for the employer. The architect, for example, may require a higher standard than that of the building control officer. Where the architect’s approval is specified in addition to the requirement that the work is to be in accordance with the contract, the architect’s approval will not override the latter requirement. Thus, if the architect approves certain materials that do not conform strictly to the contract, the employer can require the contractor to substitute different materials at a later stage, because the courts have held the two requirements to be cumulative.76 Even though the contract may not expressly state so, the courts will expect the architect’s satisfaction to be exercised reasonably (qv). For example, if the specification required one priming coat, one undercoat and one coat of gloss paint to be applied to internal doors, to the architect’s satisfaction, it would not be considered reasonable if two coats of gloss paint were required to obtain a finish that met with the architect’s approval. However, the architect is entitled to withhold approval until the best possible finish is achieved, given the limited specification. Neither the architect nor the employer is entitled to withhold approval without a genuine reason. For example, the architect’s refusal to accept the contractor’s making good at the end of the rectification period (qv) simply to avoid the release of retention money is not a valid reason. Architects must act within their authority when requiring work or materials to be to their satisfaction. As far as the contractor is concerned, that authority can be discovered only by examining the contract documents. If there is no requirement for the architect’s approval then, strictly, approval need not be sought. However, the contractor will still have express and implied obligations under the contract to carry out the Works correctly. Moreover, the architect must not certify for payment work that is defective. In practice, many aspects of the contract imply the architect’s approval. SBC, IC and ICD have clauses that make the final certificate (qv) conclusive about the architect’s satisfaction where something has been expressly reserved to the architect’s satisfaction.77 Neither ACA nor GC/Works/1 has a similar provision. The provision is of significance for the architect. It is not unusual for a specification to be littered with provisos that work or materials must be to the architect’s satisfaction, or ‘to the architect’s approval’. It may be that a ‘catch-all’ clause will be attempted, such as: ‘Unless otherwise stated, all materials and workmanship must be to the architect’s satisfaction.’ The result may

76

National Coal Board v. William Neill & Son [1984] 1 All ER 555. A fuller discussion of the situation that existed prior to the amendments to the final certificate in JCT contracts can be found in Final certificate. 77

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Approximate quantities be that the final certificate becomes conclusive about the architect’s satisfaction for all materials and workmanship. In the context of the SBC, IC and ICD forms such clauses probably have the opposite effect to what the architect intended. Instead of being limited in effect, the final certificate becomes conclusive evidence that all materials and workmanship are to the architect’s satisfaction. The architect is under no obligation to express approval of the work as it progresses; indeed it would be most unwise to do so. The architect’s approval cannot be implied through silence. Approval may be implied through the issue of certificates (qv), but usually there is a clause restricting such implication, e.g. SBC clause 1.11. The Court of Appeal muddied the position by apparently ignoring the equivalent clause in an earlier edition of this JCT contract.78 In practice, an architect can hardly avoid giving certain approvals as the work proceeds, otherwise the architect may rightly be regarded as extremely uncooperative, and may be in breach of duties under the contract. SBC clause 3.20 requires that if work is specified to be to the architect’s reasonable satisfaction, then any dissatisfaction must be expressed within a reasonable time of the work being executed. This appears to be a rather onerous clause so far as architects are concerned, and is almost the equivalent of placing an obligation on the architect to discover defective work for the contractor. Depending upon the particular terms of the contract, the architect’s approval or satisfaction will be subject to review on adjudication (qv), arbitration (qv) or litigation (qv) unless it is stated to be conclusive. However, in making provision for the appointment of a new architect following the death, or ceasing to act for any reason, of the original architect, JCT contracts stipulate that the new architect may not disregard or overrule any certificate or instruction given by the original architect, except to the extent that the original architect if still in post would have had authority to change, overrule or disregard. It is important that the contractor’s interests be safeguarded where the employer has sole control over the situation. The provision cannot mean that such certificates and instructions, once issued, can never be revised. What it does mean is that a change to a previous decision will rank as a variation, for which the contractor is entitled to be paid. See also: Equal and approved.

Approved documents Documents issued under s. 6 of the Building Act 1984 giving ‘practical guidance with regard to the requirements of any provision of the Building Regulations’ (qv). Their legal effect is stated in the Act. If proceedings are brought against a contractor by a local authority (qv) for contravention of the Building Regulations, and the contractor has complied with the requirements of an ‘approved document’, such compliance will tend to remove liability. Conversely, the contractor is not automatically liable if it fails to comply, but the onus is then on the contractor to show that it has met the relevant functional requirements of the regulations in some other way. See also: Building control.

Approximate quantities Measured quantities that are fairly correct, or near to the actual, but not accurate given the incomplete or imprecise information avail78

Crown Estates Commissioners v. John Mowlem & Co Ltd (1994) 70 BLR 1.

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Arbitration able at the time of measurement. SBC has a specific version ‘With Approximate Quantities’. It is a remeasurement contract, not a lump sum contract, and therefore there is no contract sum (qv) to adjust, but rather an ascertained sum. Even SBC ‘With Quantities’, which is intended to have a full and accurate measured set of bills of quantities (qv), acknowledges that some quantities may be measured approximately. Under clause 4.3 the value of work for which approximate quantities has been included in the contract bills is to be omitted from the contract sum (clause 4.3.2.1). The value of the work executed against the approximate quantities is added to the contract sum (clause 4.3.3.3). Under SBC, if the approximate quantities included within the bills of quantities are not a reasonably accurate forecast of the quantity of work executed, then this may be grounds entitling the contractor to an extension of time under clause 2.29.4. The difference in quantities must delay completion of the Works. Likewise, clause 4.24.4 provides the same ground as a relevant matter entitling the contractor to apply for loss and/or expense. Again, the difference in quantity must affect the regular progress of the Works. In an otherwise standard bill of quantities, approximate quantities may be included for elements of work such as the substructure or drainage where the extent of the work cannot be properly or even reasonably accurately measured. It is not uncommon for the quantity surveyor to include items in the bills of quantities for the excavation of rock or running sand, or for the necessity to excavate below the water table. The quantity is given only as an estimate, and may be identified as approximate. The purpose is to obtain rates and/or prices in the eventuality that such conditions are encountered. As the work proceeds, it is remeasured at the rates which the contractor has inserted against the item in the bills of quantities. Approximate quantities (or sometimes provisional sums (qv)) are also taken for such things as cutting holes through walls and floors for plumbing and other services. They are often taken from a schedule supplied by the specialist concerned, and are commonly referred to as ‘builder’s work’. The term ‘provisional quantities’ (qv) is often used erroneously when what is meant are approximate quantities.

Arbitration A contractual agreement to refer disputes or differences for settlement by an independent private tribunal consisting of one or more arbitrators (qv). It is an essential feature of arbitration that the parties agree to be bound by the decision of the tribunal, which is called an award (qv) and usually published in a written document. The award is final and conclusive, subject to limited rights of appeal. In theory, the decision can be obtained in a cheaper and quicker manner than through the courts, but this has not always been the case in practice. In Scotland the arbitrator is styled ‘the arbiter’, the award is called a ‘decree arbitral’, and different statutory provisions apply. Arbitration agreements in writing (s. 5 of the Arbitration Act) are regulated by the Arbitration Act 1996, which applies to England, Wales and Northern Ireland. The arbitration agreement can be entered into before or after the dispute has arisen. An oral arbitration agreement can be entered into, but would not be subject to the Act. S. 1 of the Arbitration Act 1996 states: (1) The provisions of this Part are founded on the following principles, and shall be construed accordingly 38

Arbitration (a)

the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense; (b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; (c) in matters governed by this Part the court should not intervene except as provided by this Part. The arbitrator may be appointed by agreement of the parties or by an agreed third party, e.g. the President of the Chartered Institute of Arbitrators or other professional body. In theory, arbitration offers the parties an opportunity to choose the appropriate tribunal, a choice on the form the procedure takes, the location for the hearing, and privacy. Therefore in certain circumstances it may be the appropriate forum to decide a dispute. However, for some disputes arbitration can be no cheaper than litigation (qv), and may be more expensive, since the parties are responsible for the arbitrator’s fees and expenses, and the cost of accommodation for the hearing. Most standard form building contracts confer wide powers on the arbitrator to ‘open up, review and revise any decision, opinion, instruction, certificate’ etc. of the contract administrator. It used to be thought that no corresponding power was available to the court, but this view has now been comprehensively rejected, and the courts have the same powers as conferred on the arbitrator under the contract.79 Essentially, arbitration is a voluntary process premised on the agreement of the parties. The powers of the arbitrator are limited, especially as regards joining third parties and compelling the attendance of witnesses. However, s. 43 of the Act does enable a party with the agreement of the arbitrator to apply to the High Court to compel witnesses to attend. The procedure for an arbitration can be flexible, and may be adapted by agreement to suit the needs of the parties. In practice, most arbitrations dealing with significant and substantial disputes normally follow court procedure. In general the stages for an arbitration are as follows. — Preliminary meeting at which the parties agree with the arbitrator to determine procedure, timetable, etc. — Service of statement of case, defence, etc. These define the matters in dispute. — Disclosure of documents (qv) followed by each party inspecting the other’s documents. — Exchange of factual witness statements and, in appropriate cases, reports of expert witnesses. — The hearing, when each party or their advocate presents their case, including calling witnesses. Although the normal rules of evidence (qv) are generally followed, there is some flexibility. — The arbitrator makes an award (qv). In 1988 the JCT published Arbitration Rules, which were incorporated in all the JCT arbitration agreements. The 1998 JCT contracts replaced those rules 79 The House of Lords in Beaufort Developments (NI) Ltd v. Gilbert-Ash NI Ltd (1998) 88 BLR 1 overruled the decision in Northern Regional Health Authority v. Derek Crouch Construction Ltd (1984) 26 BLR 1.

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Arbitration agreement/clause with the JCT edition of the Construction Industry Model Arbitration Rules (CIMAR), and these latter rules are incorporated in SBC, DB, IC, ICD, MW and MWD. CIMAR provide three alternative procedures for the conduct of an arbitration, and give the parties themselves an opportunity to choose which of the three procedures applies. There are also strict timescales. The courts retain wide powers to control arbitrations, and under the Arbitration Act 1996 there is the possibility of an appeal (qv) against an arbitrator’s award for errors in law. The court can order the arbitrator to give reasons for the decision. It is difficult to obtain leave to appeal against an award, except on a substantial matter of law that is of public importance.80 In practice, the courts are reluctant to interfere with the arbitration process unless it can be shown that the arbitrator has made a serious error, or there has been a serious irregularity in the process, or bias. See also: Arbitration agreement; Construction Industry Model Arbitration Rules; JCT/CIMAR Arbitration Rules 2005.

Arbitration agreement/clause Section 6 of the Arbitration Act 1996 defines an ‘arbitration agreement’ as ‘an agreement to submit to arbitration present or future disputes’. The arbitration agreement must be in writing if the arbitration is to be subject to the Act. The essential point is that there must be a contractual obligation to arbitrate. Although expressed as a separate clause in the contract, it is actually considered to be a separate agreement between the parties, which survives determination of the contract or the liquidation of a party.81 Most of the standard forms of building contract contain an arbitration agreement. For example, SBC article 8A and clause 9, ACA clause 25C and GC/ Works/1 clause 60 are typical, although the MP does not offer arbitration as an alternative. Such provisions make it a term of the contract that disputes between parties shall be settled by arbitration if arbitration is chosen by the parties. Under the JCT 98 forms of contract arbitration was the default procedure, but this position has changed under the JCT 05 contracts. The default under later JCT contracts is litigation and not arbitration. This change appears to have first come about under the MP form. If arbitration is chosen, the effect is that neither party can refer the dispute to litigation unless the other party agrees. This is because under s. 9 of the Act either party can require the court to order a stay of proceedings (qv) while the matter is decided in arbitration. The court would have no discretion, and could refuse a stay only if it was satisfied that the arbitration agreement was ‘null and void, inoperative, or is incapable of being performed’. Arbitration clauses do differ in their drafting. An illustration of this can be seen by comparing SBC Article 8 and ACA clause 25. The precise wording of the clause may place limits upon the type of dispute that can be referred to the arbitrator, e.g. ‘arising under’ or ‘arising out of or in connection with’ the contract. The latter was viewed as offering a wider scope of dispute that can

80

Surefire Systems Ltd v. Guardian ECL Ltd [2005] EWHC 1860 (TCC) and The Coal Authority v. (1) FW Davidson (2) WE Davidson [2008] EWHC 2180 (TCC), which sets out a statement of the principles when considering an appeal under s. 69 of the Arbitration Act 1996. 81 Premium Nafta Products Limited and Others v. Fili Shipping Company Ltd and Others [2007] 4 All ER 951.

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Arbitrator be referred to an arbitrator,82 but given the House of Lords decision in Premium Nafta Products Limited and Others v. Fili Shipping Company Ltd and Others this is no longer the case.83 In addition, the clause may place timescales upon when a matter has to be referred or when an award has to be appealed. It is possible to incorporate an arbitration agreement into a contract by reference if it is referred to in very clear words.84 Failure to do so may not be fatal.85 If a contract contains no arbitration agreement there is nothing to prevent the parties coming to an ad hoc agreement after a dispute has arisen to refer the matter to arbitration, but this is rare in practice.

Arbitrator An impartial referee selected or agreed upon by the parties to hear and determine the matter in dispute between them. In one sense an arbitrator resembles a judge, but unlike a judge an arbitrator derives jurisdiction from the consent (i.e. agreement) of the parties. The procedure followed is a matter to be determined from the express or implied terms of the arbitration agreement (qv), and various powers are conferred on arbitrators by Acts of Parliament, specifically the Arbitration Act 1996. The arbitrator must be impartial (a duty is owed equally to both parties). ‘Thereafter, he stands squarely between the two parties having no special affiliation to either’.86 S. 33(1) of the Arbitration Act 1996 states: The tribunal shall: (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined. Arbitrators may be chosen for their professional expertise or technical knowledge, but certain important criteria must be observed. The arbitrator should: — not have an interest in the dispute or a subsisting relationship with either party that might affect the arbitrator’s impartiality; — have a general technical knowledge of the matter in dispute; — be able to act judicially. Within arbitration agreements (qv) it is usual for there to be provision for the parties to agree on an arbitrator, failing which the arbitrator is to be appointed by the president or vice-president of a selected appropriate professional body, e.g. the Royal Institution of Chartered Surveyors or the Chartered Institute of Arbitrators. The Chartered Institute of Arbitrators, 12 Bloomsbury Square, London WC1A 2LP, is the principal professional body concerned with arbitration. It runs training courses for prospective arbitrators, and this training includes a period of pupillage. The selection of an arbitrator who is listed on one of the Institute’s panels of arbitrators may offer some guarantee of the arbitrator’s 82

Ashville Investments Ltd v. Elmer Contractors Ltd (1987) 37 BLR 55. [2007] 4 All ER 951. 84 Aughton Ltd v. M F Kent Ltd (1991) 57 BLR 1. 85 Roche Products Ltd v. Freeman Process Systems (1996) 80 BLR 102. 86 Mustill & Boyd, Commercial Arbitration 2nd edn, 1989, p 223. 83

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Arbitrator’s award professional competence as an arbitrator. The majority of appointing bodies nominate as arbitrators only those who are members of one of the Institute’s panels.

Arbitrator’s award See: Award. Archaeological areas ‘Areas of archaeological importance’ may be designated by the Secretary of State for the Environment and certain local authorities under s. 33 of the Ancient Monuments and Archaeological Areas Act 1979. Once an area has been designated, it is an offence to carry out any operations within it that disturb the ground, without serving an ‘operations notice’ on the appropriate authority, which is likely to then introduce various controls. Few areas have been so designated, e.g. York and Chester.

Architects Act 1997 The Act came into force in July 1997. It repealed Part III of the Housing Grants, Construction and Regeneration Act 1996, the Architects (Registration) Act 1931, the Architects Registration Act 1938, the Architects’ Qualifications (EEC Recognition) Order 1987 and the Architects’ Qualifications (EEC Recognition) Order 1988. The Act created the Architects Registration Board (qv). In addition to the Board the Act makes provision for a statutory professional conduct committee that is responsible for disciplinary matters.

Architect’s Appointment Introduced in July 1982 by the Royal Institute of British Architects (RIBA) to assist in the agreement of fees, services and responsibilities between architect and client. It was the successor to the RIBA Conditions of Engagement (qv) and followed the report of the Monopolies and Mergers Commission on architects’ and surveyors’ services, which recommended the abolition of the mandatory fee scale. There was also a Small Works Edition (effective from September 1982) for jobs where the total construction cost did not exceed £80,000 (1989 prices). The document was arranged in four parts: One – Preliminary and basic services provided by the architect. Two – Other services normally charged on a time or lump sum basis. Three – Conditions of appointment. Four – Recommended methods of calculating fees for services and expenses. A Memorandum of agreement tied up the appointment on a firm legal basis. The document was superseded by the Standard Form of Agreement for the Appointment of an Architect (SFA/92) (qv) in 1992 and the revised editions in 1999 (SFA/99, CE/99, SW/99), which were further updated in 2004. The RIBA produced a further set of documents in 2007, and a substantially revised version is expected in 2009. The Architect’s Appointment is still very occasionally used by architects, although it does not comply with the Housing Grants, Construction and Regeneration Act 1996 (qv) and other legislation. See also: ACA Standard Form of Agreement for the Appointment of an Architect (ACA SFA/08); Standard Agreement for the Appointment of an Architect (S-Con07-A); Standard Form of Agreement for the Appointment of an Architect (SFA/99).

Architects Registration Board (ARB) The successor body to the Architects Registration Council (qv). It was established on 1 April 1997. The principal Act is now the Architects Act 1997 (qv), which consolidates the Architects 42

Architects Registration Board (ARB) (Registration) Acts 1931–1969 and certain other Acts relating to architects, such as Part III of the Housing Grants, Construction and Regeneration Act 1996. Persons wishing to use the title ‘Architect’ for business purposes must be registered with the ARB. The Board is keen to enforce the restriction. Registration may be achieved by: — gaining a qualification after passing an examination that is recognised by ARB; and — completing at least two years’ practical experience supervised by an architect, one of the years being undertaken after completion of a recognised five-year course of study and gaining the qualification; and — passing a written and/or an oral examination in professional practice recognised by ARB. Architects can be removed from the register: — if an architect makes an application in writing, stating the grounds; — if an architect fails to pay the annual retention fee at the appropriate time after a written request to do so; — if at the time of registration the architect was subject to a disqualifying decision in another European Economic Area (EEA) state of which ARB was unaware; — if an architect fails to notify ARB of a change of address after being requested to do so; — if an architect is guilty of unacceptable professional conduct or serious professional incompetence, or has been convicted of a criminal offence that may have relevance to their fitness to practise as an architect. The duties of ARB are stated as follows: — to maintain and publish a register of architects; — to prescribe the admission criteria; — to protect consumers from misconduct or incompetence by architects; — to require appropriate evidence from firms wishing to practise under the title ‘architect’; — to draw up a code of conduct; — to prosecute unregistered persons who practise under the title ‘architect’. An unregistered person who practises or carries on business under any name containing the word ‘architect’ is guilty of a criminal offence. Such a person is liable to a heavy fine. A person who is a member of the RIBA but not registered may not be styled ‘Chartered Architect’ and may not even use the affixes FRIBA, ARIBA or RIBA, because they contain the prohibited word.87 Only the title and not the function is protected. Unregistered persons can style themselves ‘architectural consultants’ or ‘architectural designers’ if they so wish. It may be that such titles will be put onto the prescribed list in due course. The members of ARB consist of: — Seven members elected in accordance with an electoral scheme made by the Board with the approval of the Privy Council after consultation with bodies that are representative of architects. All registered persons may take part in such elections.

87 Jones (on behalf of the Architects Registration Board of the United Kingdom) v. Ronald Baden Hellard (1998) 14 Const LJ 299.

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Architects Registration Council (ARCUK) —

Eight members who are appointed by the Privy Council after consultation with the Secretary of State and others. These members represent the interests of the users of architectural services and the general public, and no registered person may be appointed.

Architects Registration Council (ARCUK) Set up by the Architects (Registration) Act 1931 to control the architectural profession in England, Wales, Scotland and Northern Ireland. The Act was followed by the Architect’s Registration Acts of 1939 and 1969. ARCUK ceased to exist in 1997, being replaced by the Architects Registration Board (qv).

Arising under A phrase used in relation to adjudication by statute, which provides that disputes arising under a contract may be referred to adjudication. The phrase is also used in arbitration agreements, although invariably in arbitration it is widened to include disputes in ‘connection with’ the contract. It had been thought that there was a difference between the phrases, but a House of Lords case88 has decided that the use of the words ‘disputes arising under a contract’ should not be construed too narrowly, and is wide enough to include those disputes that arise ‘in connection with the contract’. See also: In connection with.

Arrangement, deed or scheme of A person who is unable to pay their debts may agree with creditors to discharge their liabilities by composition or part payment. This can be done privately, or by application to the High Court or County Court. If the deed of arrangement is executed privately, the provisions of the Deeds of Arrangements Act 1914 must be complied with. A deed of arrangement is a contract, and its effect depends on its own terms. A scheme of arrangement is an insolvent debtor’s proposal for dealing with debts by applying assets or income in proportionate payment of them. Part VIII of the Insolvency Act 1986 deals with such voluntary arrangements. The scheme must be approved by the creditors or the majority of them. The court has power in bankruptcy (qv) proceedings to approve a voluntary scheme in lieu of adjudging the debtor bankrupt. The term is often used for schemes proposed by limited companies in like circumstances. A statutory procedure is laid down, and a company scheme of arrangement requires the approval of the court. It may compromise claims, alter the rights of shareholders, or resolve other difficulties. Under Part VIII of the Insolvency Act 1986, in specified circumstances the court may declare a moratorium for an insolvent debtor who intends to make a proposal to the creditors for a composition in satisfaction of debts or a scheme of arrangement of the debtor’s affairs. This voluntary arrangement requires the approval of the creditors, and if so approved is implemented under supervision; it is not subject to the 1914 Act. Such arrangements can provide grounds for termination under some of the standard forms. For example: — SBC and IC clause 8.1 state that if either party ‘enters into an arrangement, compromise or composition in satisfaction of his debts’ then for 88

Premium Nafta Products Limited and Others v. Fili Shipping Limited and Others [2007] 4 All ER 951.

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As-built drawings the purposes of the conditions they are insolvent. If a party is insolvent then the other party may terminate by notice the contractor’s employment under the contract: the employer under clause 8.5 and the contractor under clause 8.10. — ACA clause 20.3 states that if either party ‘shall make or offer to make an arrangement or composition with its creditors’ then it is grounds for termination by the other party, and again a notice is required. — GC/Works/1 clause 56(6)(C) includes voluntary arrangements under Part VIII of the Insolvency Act 1986 in its definition of insolvency as a ground for determination by the employer. There is no similar provision of determination for the contractor. This may not be unusual, given that the employer is intended to be a government body or department.

Articles of agreement An ‘article’ is a term used to refer to a clause in an agreement, and sometimes means agreement. The articles of agreement are the formal opening parts and recitals (qv) of a contract or agreement, e.g. the JCT and ACA forms of contract.

Artificial person An entity, other than a human being, that is recognised in law as a legal person capable of acquiring rights and duties, e.g. a corporate body such as a local authority, a limited company, or the bishop of a diocese. In general, a corporate body can exist only if it has been formed under the authority of the state, and today the only methods of incorporation are a charter from the Crown and an Act of Parliament. See also: Corporation; Limited company; Local authority.

Artists and tradesmen A phrase found in the JCT 63 contract at clauses 23(h) and 24(l)(d). The full phrase read ‘artists, tradesmen or others’. It has been held that the words ‘or others’ were not to be construed ejusdem generis (qv), and could refer to statutory authorities engaged by the employer under contract and not carrying out their statutory duties.89 Thus, in practice, the phrase refers to anyone engaged by the employer under a separate contract, sometimes called ‘employer’s licensees’. The phrase was removed from the JCT 80 form, and clauses 29, 25.4.8 and 26.2.4 substituted a much clearer wording, which was wider in scope than the JCT 63 provisions. The equivalent clauses is SBC are 2.7, 2.29.6 and 4.24.5. Clause 2.7 now refers to work to be carried out ‘by the Employer himself or by any of the Employer’s Persons’ (qv). Delay caused by such work being undertaken could result in the contractor being entitled to an extension of time (clause 2.19.6) and/or loss and expense (clause 4.24.5).

As-built drawings Drawings provided that show the actual construction and installation of all the work carried out, including methods of construction, materials used and services. It is most likely that the finally completed Works will differ, for a number of possible reasons (e.g. variations, site layout final coordination), from that which was initially designed and which the contractor was to construct. 89

Henry Boot Construction Ltd v. Central Lancashire Town Development Corporation Ltd (1980) 15 BLR 1.

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Ascertain They are usually provided by the contractor for the purposes of the health and safety file, but as far as JCT contracts are concerned are also important in relation to practical completion (qv). Practical completion under SBC clause 2.30 is made dependent upon: — practical completion in a physical sense; — the contractor having complied sufficiently with clause 2.40 (where there is a contractor’s designed portion, JCT contracts require the contractor to supply to the employer the contractor’s design documents and such information as is specified in any contract documents showing the contractor’s designed portion as built); and — the contractor having complied sufficiently with clause 3.25.3 (the contractor is to provide information reasonably required by the planning supervisor for the health and safety file). Where the employer carries responsibility for design then it is usual and sensible for the employer’s designers (e.g. architect, engineer) to prepare the as-built drawings, e.g. under SBC and IC. Where the contractor is responsible for the design then it is usually responsible for producing the as-built drawings, e.g. DB clause 3.37, or when the contractor is responsible for a contractor’s designed portion under SBC clause 2.40. Under the latter the contractor would produce drawings only for the contractor’s designed element and not for the complete Works, so the as-built drawings would be prepared by both the architect and the contractor. When the contractor is responsible for supplying all or some of the as-built drawings there is usually a link to the issue of a certificate or statement of practical completion, e.g. DB clause 2.27.1 or SBC 2.30.1. In addition, the supply of these drawings is likely to form part of the health and safety file produced under the CDM Regulations, e.g. DB clause 3.18.5. It is sensible to set out in the bills of quantities (qv), Employer’s Requirements (qv) or other similar documents the number, type and scale of drawings to be produced by the contractor should it carry an obligation to supply as-built drawings.

Ascertain To find out for certain. It is used in the SBC, IC and ACA forms in relation to financial claims. The contracts intend that the calculation of money due to the contractor is to be an accurate process rather than a rough assessment or the expression of an opinion or a fortuitous guess. It has been held: Furthermore ‘to ascertain’ means ‘to find out for certain’ and it does not therefore connote as much use of judgment or the formation of opinion had ‘assess’ or ‘evaluate’ been used. It thus appears to preclude making general assessments as have at times to be done in quantifying damages recoverable for breach of contract.90

A subsequent case addressed this point:91 In my view it is unhelpful to distinguish between the degree of judgment permissible in an ascertainment of loss from that which may properly be brought to bear in an assessment of damages. A judge or arbitrator who assesses damages for breach of 90 Alfred McAlpine Homes North Ltd v. Property and Land Contractors Ltd (1995) 76 BLR 65 at 88 per Judge Lloyd. 91 How Engineering Services Limited v. Lindner Ceilings Floors Partitions plc [1999] 2 All ER (Comm) 374 at 383 per Dyson J.

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Assent contract will endeavour to calculate a figure as precisely as it is possible to do on the material before him or her. In some cases, the facts are clear, and there is only one possible answer. In others, the facts are less clear, and different tribunals would reach different conclusions. In some cases, there is more scope for the exercise of judgment. The result is always uncertain until the damages have been assessed. But once the damages have been assessed, the figure becomes certain; it has been ascertained.

The SBC form clauses 4.23 and 3.24 and the ACA form clauses 15.3 and 17.5 make clear that it is the architect’s duty to ascertain the amount of loss and/or expense. The architect can, under certain provisions, delegate the ascertainment to the quantity surveyor. Should the architect decide to do so, then the architect needs to give clear instructions, sufficient enough to permit the quantity surveyor to complete the task. Under an earlier version of what is now SBC it was indicated that the architect need not accept the quantity surveyor’s quantification.92 However, under the wording in SBC, if the architect delegates the function of ascertainment to the quantity surveyor it is thought that the architect is bound by the quantity surveyor’s figure. Note that the architect has no power to delegate the initial decision to the quantity surveyor: that is, whether or not in principle there is a valid entitlement. A variation to this responsibility is to be found in SBC clause 5.3 Schedule 2 where the contractor submits a quotation (qv). If the contractor does so, it must include the period of any extension of time and the amount of any loss and/or expense required against the instruction. Paragraph 3 of Schedule 2 places the responsibility for accepting or not accepting the contractor’s quotation with the employer, and the quotation is submitted to the quantity surveyor. The contractor’s loss and expense figures and period of delay, being calculated before the event, can be only estimates and not ascertainments. But once they are accepted by the employer, which acceptance has to be in writing, the architect then issues an instruction confirming the acceptance. The limited nature of the quantity surveyor’s general powers under JCT contracts has been confirmed as follows. His authority and function under the contract are confined to measuring and quantifying. The contract gives him authority, at least in certain instances, to decide quantum. It does not in any instance give him authority to determine liability, or liability to make any payment or allowance.93

As soon as possible A stricter obligation than ‘forthwith’ (qv) or ‘in a reasonable time’. If an act is to be done as soon as possible, all circumstances must be taken into account.94 Therefore supply of goods as soon as possible means the supply within the time that would be enough to carry out the supply, assuming that the supplier had everything necessary, and taking account of other actions to which the supplier was already committed.95 See also: Directly; Immediately.

Assent Agreement or compliance. 92

R B Burden Ltd v. Swansea Corporation [1957] 3 All ER 243. County & District Properties Ltd v. John Laing Construction Ltd (1982) 23 BLR 1 at 14 per Webster J. 94 Verlest v. Motor Union Insurance Co Ltd [1925] 2 KB 137. 95 Hydraulic Engineering Co Ltd v. McHaffie (1879) 4 QBD 670. 93

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Assignment

Assignment A contract creates on the one hand rights or benefits and on the other obligations or liabilities. How these can be transferred to a third party differs. The transfer of a right or benefit to a third party can be undertaken by means of an assignment. The obligations and liabilities remain with the assignor. So, for example, contractor C might assign the right to receive retention monies from employer E to the bank B,96 but E cannot assign its obligation to pay C under the building contract. Or a contractor cannot assign its obligation or liability to construct the Works to another. If this were the case, a party could release itself from an obligation simply by assignment. A liability or obligation can be transferred to a third party only by means of novation (qv). An assignment may be completed: — Under s. 136 of the Law of Property Act 1925. Known as a statutory assignment. S. 136 requires the assignment to be in writing,97 to be absolute, and a written notice must be given to the other contracting party. Once these requirements have been fulfilled then a party may sue upon the obligation as if they were the assignor. The notice can be given at any time prior to the commencement of proceedings. — In equity. An equitable assignment of a legal interest does not have to be in writing. However, an equitable assignment of an equitable interest must be in writing.98 Parties are free to restrict their ability to assign any right or benefit by means of express provision within their agreement.99 Many building contracts include clauses restricting the right to assign. If a party purports to assign in such circumstances without consent, the assignment is of no legal effect.100 SBC clause 7.1 requires ‘the other’s written consent’ prior to an assignment being effective. Often such clauses are amended to remove the need for the employer to obtain the contractor’s consent. ACA clause 9.1 also forbids assignment, with the proviso that the contractor may assign any monies due or to become due to it under the contract, and employers may assign any of their rights after takingover of the Works. This is a perfectly sensible provision. The employer, for example, may wish to assign the benefit of the building to another after it is completed. However, the employer remains liable to the contractor for any further payments as they become due. GC/Works/1 clause 61 provides that the contractor is not to assign or transfer the contract, or any part, share or interest under it, without the written consent of the employer. The right to make a claim or cause of action101 for, say, a debt or damages can be assigned provided the assignee has sufficient interest, as recognised in law, in the benefit of the assignment:102 e.g. a person could not assign a right to claim damages for personal injuries as an assignee does not have a recognisable interest in the benefit.

96

For example, Re Tout and Finch Ltd [1954] 1 All ER 127. Herkules Piling v. Tilbury Construction Limited (1992) 61 BLR 107. 98 S. 53(1)(c) of the Law of Property Act 1925. 99 Linden Gardens Trust Ltd v. Lenesta Sludge Disposals Ltd; St Martins Corporation Ltd v. Sir Robert McAlpine & Sons Ltd [1994] AC 85 HL. 100 Helstan Securities Ltd v. Hertfordshire County Council (1978) 20 BLR 70. 101 Technotrade Ltd v. Larkstore Ltd [2006] EWCA Civ 1079. In this case the benefit of any claim for breach of contract could be validly assigned. 102 Trendtex Trading Corporation v. Crédit Suisse [1982] AC 679. 97

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Assignment An employer may assign the benefit of a building contract, i.e. the right to have the contractor carry out the Works, unless the rights in question are of a personal nature.103 Equally, an employer may assign the benefit of any warranties given by the contractor where the warranty is capable in law of assignment. Where the warranty provides for the return of a contractor to remedy defects, this is enforceable, and damages would flow in the usual way for breach. If the warranty merely vouched that the building was defect-free, the assignee could sue only for losses actually suffered by the assignor, or which would have been suffered had the employer retained the building, and the benefit of the warranty.104 If a contractor no longer wishes to perform its part of the contract, it may have the contract performed vicariously, unless the contract required personal performance, e.g. design by a particular architect. In other words a contractor may sub-contract or sub-let part of the Works. This is not assignment. The only way for one party to transfer the benefit and burden of a contract to another party and be released from any further obligations is by way of novation (qv). In essence, all three parties agree to discharge the first contract between A and B and to replace it with a new contract between A and C on similar if not identical terms. Again this is not assignment. The differences between novation (qv), assignment and sub-letting have been set out as follows: Novation. This is the process by which a contract between A and B is transformed into a contract between A and C. It can only be achieved by agreement between all three of them, A, B and C. Unless there is such an agreement, and therefore a novation, neither A nor B can rid himself of any obligation which he owes to the other under the contract. This is commonly expressed in the proposition that the burden of the contract cannot be assigned, unilaterally. If A is entitled to look to B for payment under the contract, he cannot be compelled to look to C instead, unless there is a novation. Otherwise B remains liable, even if he has assigned his rights under the contract to C. … Similarly the nature and content of the contractual obligations cannot be altered unilaterally. If a tailor (A) has contracted to make a suit for B, he cannot by an assignment be placed under an obligation to make a suit for C, whose dimensions may be quite different. It may be that C by an assignment would become entitled to enforce the contract – although specific performance seems somewhat implausible – or to claim damages for its breach. But it would still be a contract to make a suit that fitted B, and B would still be liable to A for the price. A contract that A will build a house for B, and follow his instructions on such variations as the contract may allow, cannot be converted by assignment into an obligation to follow the instructions of C. (b) Assignment. This consists in the transfer from B to C of the benefit of one or more obligations that A owes to B. These may be obligations to pay money, or to perform other contractual promises, or to pay damages for a breach of contract, subject of course to the common law prohibition on the assignment of a bare cause of action. But the nature and content of the obligation, as I have said, may not be changed by an assignment. It is this concept which lies, in my view, behind the doctrine that personal contracts are not assignable… Thus if A agrees to serve B as chauffeur, gardener or valet, his obligation cannot by an assignment make him liable to serve C, who may have different tastes in cars, or plants, or the care of his clothes. … (a)

103 104

Tolhurst v. Associated Portland Cement Manufacturers (1900) Ltd [1903] AC 414. Darlington Borough Council v. Wiltshier Northern Ltd [1995] 1 WLR 68 (CA).

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Attachment of debts (c)

Sub-contracting. I turn now to the topic of sub-contracting, or what has been called in this and other cases vicarious performance. In many types of contract it is immaterial whether a party performs his obligations personally, or by somebody else. Thus a contract to sell soya beans, by shipping them from a United States port and tendering the bill of lading to the buyer, can be and frequently is performed by the seller tendering a bill of lading for soya beans that somebody else has shipped.105

See also: Contracts (Rights of Third Parties) Act 1999; Novation; Privity of contract; Sub-contract; Sub-contractor; Sub-letting.

Attachment of debts Another name for garnishee proceedings. See also: Garnishee (Garnishee order).

Attendance Generally this refers to the services and/or provisions the contractor is to provide for or make available to a sub-contractor. Such items commonly include roads, pavings and paths, standing scaffolding, standing power-operated hoisting plant, the provision of temporary lighting and water supplies, clearing away rubbish, provision of space for the sub-contractor’s offices and for the storage of its plant and materials, and the use of messrooms, sanitary accommodation and welfare facilities. If the sub-contractor requires any further items of attendance these should be clearly identified in the sub-contract documents. This is common for specialist sub-contractors, e.g. piling. A further definition of the terms ‘general attendance’ and ‘special attendance’ can be found in the Standard Method of Measurement (qv).

Attestation Witnessing of any act or event. In relation to contracts, it is the practice of having contracts or other documents signed or sealed in the presence of a witness, who also signs and adds the witness’s address and description as evidence that the document was properly signed or sealed. One witness is generally sufficient. Different forms of attestation clause are used in the case of contracts executed as deeds and those that are merely executed by hand. In Northern Ireland there is no longer a requirement for a seal (qv) to be attached to a document when it is executed as a deed, and the mere fact of a seal is no longer evidence that a document is a deed unless other criteria are met. A document can be executed as a deed, without sealing, by a company if it is signed by two directors, or by a director and the company secretary, or by a single director whose signature is witnessed,106 or by an individual who must sign in the presence of a witness who attests the signature. A company may still affix its common seal if desired. In each case it is essential that the document makes clear on its face that it is executed as a deed.107 Figure 2 is specimen attestation clauses. In Scotland the requirements are different. Contracts and documents are not executed as deeds. See also: Consideration; Limitation Act 1980. 105 St Martins Property Corporation Ltd and St Martins Property Investments Ltd v. Sir Robert McAlpine & Sons Ltd and Linden Gardens Trust Ltd v. Lenesta Sludge Disposals Ltd (1992) 57 BLR 57 at 76 per Staughton LJ. 106 The law for the execution of deeds by companies was clarified by the Regulatory Reform (Execution of Deeds and Documents) Order 2005. 107 Law of Property (Miscellaneous Provisions) Act 1989 and the Companies Act 1989; in Northern Ireland Schedule 4 of the Companies (No. 2) Order (Northern Ireland) 1990 and article 3 of The Law Reform (Miscellaneous Provisions) (Northern Ireland) Order 2005; all of which are due to be superseded by the Companies Act 2006, which applies to England, Wales and Northern Ireland when fully in force in October 2009.

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Attestation

Figure 2 Specimen attestation clauses, indicating just one of the parties to the contract. In each case the contractor would have to sign an equivalent clause; ‘Contractor’ would be substituted for ‘Employer’ in each case.

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Available/availability

Available/availability Capable/capability of being used; particularly available at the place where a thing can be used.108 SBC clause 2.8.3 refers to the contractor keeping a copy of the contract drawings, the unpriced bill of quantities (qv), the CDP documents, the descriptive schedules or other like documents, the master programme, and the drawings and details ‘upon the site and available’ to the architect. The obligation would clearly not be satisfied, nor would the materials be ‘available’, if they were at the contractor’s head office.

Avoidance Setting aside or making void (qv), especially a contract, e.g. when one party withdraws from a voidable (qv) contract. Where a bond (qv) contains a condition providing that it is void on the happening of a certain event, it is said to be ‘conditioned for avoidance’.

Award The decision of an arbitrator (qv). The arbitrator’s award must be: —

final (the arbitrator may make interim awards, but these must be final with regard to the matters they address); — certain in its meaning; — consistent in all its parts. It must: — deal with all matters referred to arbitration; — comply with any special directions in the submissions. Provision is made in s. 47 of the Arbitration Act 1996 for interim awards to be made at any time, e.g. in respect of matters of principle or for part of the sum claimed. The award is usually in writing, and the date of the award can be decided and stated by the arbitrator or tribunal (s. 54(1)). If not so stated, the date is the date on which the award is signed by the arbitrator. If there are several arbitrators, it is the date on which the last arbitrator signs (s. 54(2)). The award usually contains reasons, although this was not always the case, but s. 70 of the Arbitration Act 1996 empowers the High Court to order an arbitrator to state the reasons for the award if there is any appeal on a question of law under the Act. S. 66 of the Act provides for an award to be enforced in the same way as a judgment or order of the court.

108

Roberts v. Dorman Long & Co Ltd [1953] 2 All ER 428.

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B Bailee A person to whom the possession (qv) of goods is entrusted by the owner for a particular purpose, but with no intention of transferring ownership (qv). A common example in the construction industry is the hirer of plant. The bailee (hirer) receives both possession of the plant and the right to use it, in return for a price to be paid to the bailor (owner). A bailee has qualified ownership of the goods. See also: Hire.

Bailment The legal relationship which exists where goods are lent to or deposited with another person on the condition that they will be re-delivered or delivered elsewhere to order in due course. Bailment may be gratuitous (e.g. a simple loan) or as a pledge or pawn. It may also be for reward, e.g. hire. A common example of bailment is where goods are left with someone for repair, and in such a case the bailee of uncollected goods is given a power of sale under the Torts (Interference with Goods) Act 1977.

Balance of probabilities The general rule in civil cases is that the party who asserts must prove: in other words, that party will usually carry the legal burden of proof. The burden of proof (qv) is usually upon the plaintiff or claimant to show that the facts necessary to secure a judgment existed. The civil law standard of proof is to persuade the relevant tribunal ‘on a balance of probabilities’. That is to say, ‘it is more likely than not’. Lord Denning described ‘balance of probabilities’ as follows. It must carry a reasonable degree of probability, but not so high as is required in a criminal case. If the evidence is such that the tribunal can say: ‘We think it more probable than not’, the burden is discharged, but if the probabilities are equal it is not.109

This standard of proof will normally apply not just before the courts but also to proceedings before either an arbitrator or an adjudicator. The balance of probabilities is also the standard that an architect must bring to bear when considering a contractor’s claim, e.g. an application for loss and/or expense (qv). The balance of probabilities may be contrasted with the more onerous standard in criminal law of proving facts beyond reasonable doubt.

Bankruptcy The procedure by which the State takes over the assets of an individual who is unable to meet their debts. The purpose is twofold: — to ensure equal distribution of assets among creditors, subject to an order of preference; — to protect debtors from the pressing demands of their creditors, and to enable them to start again.

109

Miller v. Minister of Pensions [1947] 2 All ER 372 at 374.

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Banwell Report The procedure is laid down in Part IX of the Insolvency Act 1986. If the court makes a bankruptcy order, the official receiver (qv) will be the receiver and manager of the bankrupt’s estate until the creditors have appointed a trustee in bankruptcy in whom the bankrupt’s property vests. Very complex rules are laid down for the administration of the bankrupt’s estate. In most cases a bankrupt is automatically discharged from bankruptcy three years from the date of the bankruptcy order. Undischarged bankrupts are precluded from holding certain offices and carrying out certain functions, as well as being subject to onerous obligations during the continuance of the bankruptcy. See also: Insolvency; Liquidation.

Banwell Report A report produced by a government committee under the chairmanship of Sir Harold Banwell. The proper title of the report is The Placing and Management of Contracts for Building and Civil Engineering Work (HMSO 1964). Far-reaching recommendations were made for tendering and contract procedures. Following the report, open tendering (where tenders are invited from any contractor who cares to apply) was discouraged, and the membership of the National Joint Consultative Committee for Building was broadened to embrace a wider spectrum of the industry. The Codes of Procedure for Single and Two-Stage Selective Tendering (qv) resulted. So far as the JCT is concerned these have now been superseded by alternatives 1 and 2 within Practice Note 6, Main Contract Tendering, paragraphs 47 to 50.

Barrister A lawyer who is a member of one of the four Inns of Court and who has been called to the Bar by the Inn. A practising barrister has rights of audience in all courts in England and Wales, but only limited contact (although growing) with clients. Many barristers now accept direct access from certain of the professions. A growing number of barristers specialise in construction law. Many do not practise in the court system but only in adjudication and arbitrations, or in private commerce, and are referred to as non-practising barristers.

Base date An expression referred to in JCT contracts, from which certain events are related. For example, in IC at clause 4.3.2 it states: ‘To the extent that after the Base Date the supply of goods and services to the Employer becomes exempt from VAT …’. Although a definition is shown in most of the JCT contracts (e.g. SBC, IC and ICD), the definition is nothing more than a reference to the date within the contract particulars (qv). The base date can be any date agreed by the parties. The expression was substituted for the term ‘date of tender’ in 1987 on the basis that the date of tender might change should tenderers be given a longer period of time for any reason. It was considered more practical to stipulate a date, which would not vary, for the purpose of setting a datum for such things as fluctuations (e.g. SBC Schedule 7 paragraph A.1.1) or exercise by the UK government of any power (e.g. SBC clause 2.29.12). In practice the base date is usually set as what would previously have been the date of tender, or a date close to this, e.g. 10 days prior to the date of tender.

Base rate Used within MP to mean ‘the rate set from time to time by the Bank of England’s Monetary Policy Committee, or any successor’. Under clause 30 either party is entitled to simple interest at 5% above the base rate should the other party 54

Best endeavours fail to make payment in accordance with the contract. The clause at sub-clause 3.2 expressly states that the parties agree clause 30 to be a substantial remedy for the purposes of the Late Payment of Commercial Debts (Interest) Act 1998 (qv). Other JCT contracts have a similar provision, but do not use the defined term ‘base rate’, e.g. SBC clause 4.13.6. A similar provision is included within the NEC at clause 51.2, although interest is compounded.

Basic method/Alternative method These referred to the approaches for nominating sub-contractors under JCT 80 clause 35. These approaches were replaced by the 1991 method, which was incorporated into JCT 98. SBC no longer has the facility for the nomination of a sub-contractor or supplier, so the procedures no longer apply. See also: Nominated sub-contractor.

Beneficial occupation A phrase sometimes used by contractors who contend that if the employer takes possession of or occupies the Works before practical completion (qv) then the employer is thereby precluded from recovering liquidated damages (qv). This is because the employer has the benefit of occupying the premises, and it is the failure to achieve occupation that liquidated damages are intended to compensate. The contention appears to have no basis in law. Indeed there is case law to suggest that, where there is no specific provision for partial possession (qv), liquidated damages may be recovered even though the employer has taken possession, provided that practical completion has not been certified.110 An employer may be able to use and occupy part or all of the Works with the consent of the contractor (e.g. SBC clause 2.6), but this presence has no effect on the contractor’s exclusive possession of the Works, nor on the contractor’s obligations and entitlements with regard to liquidated damages, retention, defects, liability and insurance.111 Should an employer begin to occupy the site, or a part of the site, it should be made clear on what basis such occupation is given or taken. Where necessary, agreement should be reached and recorded in writing. See also: Early use.

Beneficiary or Beneficiaries In a general sense it means the party or parties who are to receive the benefit, whatever that may be. In construction it tends to be used when referring to the party who is to benefit from a collateral warranty or third party rights, e.g. funder, tenant, future purchaser. Under the CE form, ‘Beneficiaries’ is a defined term to mean exactly that. The Beneficiaries are identified at part 8. See also: Collateral contract/Collateral warranty; Contracts (Rights of Third Parties) Act 1999.

Best endeavours The classic definition is found in the case Sheffield District Railway Co v. Great Central Railway Co,112 where the judge said: ‘best endeavours means what the words say; they do not mean second best endeavours … the 110

BFI Group of Companies v. DCB Integration Systems Ltd (1987) CILL 348; Herbert Construction UK Ltd v. Atlantic Estates plc (1993) 70 BLR 46. 111 Impresa Castelli SpA v. Cola Holdings Ltd (2002) 87 Con LR 123. 112 (1911) 27 TLR 451.

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Betterment words mean that the [obligor] must leave no stone unturned …’. Those acting under such an obligation will probably be expected to take all practical courses of action available. Such an obligation does not equate to a guarantee or an absolute obligation.113 There are limits as to what is to be expected from a person, and the courts are likely to take into account the circumstances prevailing at the time of performance, commercial matters, and any conflicting obligations. The phrase is used in the SBC, IC and ICD contracts, i.e. clauses 2.28.6.1 and 2.19.4.1 respectively. It must be read in the context of the contract in order to determine its meaning. In these contracts it is the duty of the contractor to use its best endeavours to prevent delay. The carrying out of the duty is a precondition to the awarding by the architect of an extension of time. Best endeavours, in this context, means that the contractor must constantly do everything reasonably practicable to prevent delay, short of incurring substantial additional expenditure. It has been described as doing everything prudent and reasonable to achieve an objective114 – what a prudent, determined and reasonable party acting in its own interests would do to achieve the objective.115 In the majority of cases best endeavours means simply that the contractor must continue to work regularly and diligently (qv), and nothing more. Put another way, provided the contractor is working regularly and diligently, and has not contributed to the delay through its fault, the contractor can be said to have used its best endeavours. The point is often disputed. If, for example, the contractor could reduce delay by switching a gang of bricklayers from one portion of the work to another, but does not do so, it could reasonably be said that the contractor is not using its best endeavours. Similarly, if the contractor foresees delay, the contractor must reprogramme if it is practicable to do so.116 It has been held that there is a distinction between ‘best endeavours’ and ‘reasonable endeavours’ (qv), with the latter being less stringent than the former. An obligation to use reasonable endeavours requires a party to take only one reasonable course, not all of them, whereas an obligation to use best endeavours probably requires a party to take all reasonable courses available to them.117 The phrase ‘all reasonable endeavours’ is equivalent to ‘best endeavours’.118

Betterment An improvement on the required standard. The reinstatement or repair of property to a higher or better standard or condition in respect of damage caused by others, and in respect of which damages are claimed. The general rule is that damages will not be awarded for betterment unless the claiming party has no reasonable choice.119 A claimant can choose to rebuild to a higher standard than before, but will have to make an allowance for betterment unless they can show it is the only way of overcoming the consequences of the other side’s breach of contract.120

113

Midland Land Reclamation Ltd and Another v. Warren Energy Ltd (1997) EWHC 375 (TCC). Victor Stanley Hawkins v. Pender Bros Pty Ltd (1994) 10 BCL 111. 115 IBM UK v. Rockware Glass (1980) FSR 335. 116 John Mowlem & Co v. Eagle Star and Others (1995) 44 Con LR 134. 117 Rhodia International Holdings Ltd and Another v. Huntsman International LLC [2007] EWHC 292. 118 Hiscox Syndicates Ltd and Another v. The Pinnacle Ltd (2008) EWHC 145 (Ch). 119 Voaden v. Champion [2002] 1 Lloyd’s Rep 623. 120 Richard Roberts v. Douglas Smith Stimson (1988) 46 BLR 50. 114

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Bid

Bias An attitude of mind that prevents the making of an objective determination of the issue that has to be resolved.121 A tendency or inclination to decide an issue influenced by external considerations and without regard to its merits. It is essential that contract administrator avoid actual or apparent bias in carrying out their functions under the building contract, especially as regards certifying or giving or withholding approval or consent. Contract administrators as certifiers must act fairly, reasonably and impartially between employer and contractor. Failure to act fairly, or acting as a result of improper pressures or influence, will result in the decision being of no effect. For example, in Hickman & Co v. Roberts (1913)122 the architect was instructed by the employer not to issue a certificate until the contractor’s account for extras was received, and the architect advised the contractor accordingly. The House of Lords held that the need for the architect’s certificate was dispensed with, and the contractor was entitled to sue without a certificate. In arbitration proceedings the arbitrator must show no bias. The Arbitration Act 1996 does not refer to ‘bias’, but under s. 24 a party may apply to the court for removal of an arbitrator on the grounds that circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality. This probably covers situations where unfairness might be suspected or foreseen, as where a person with close links with one of the parties accepts an appointment as arbitrator.123 Bias against one party will also disqualify a person from appointment as an arbitrator. The question always is whether there is a predisposition to decide for or against one party without proper regard to the merits of the dispute. If that question is answered affirmatively, then the courts can intervene. Apparent animosity to one party or its witnesses may amount to bias.124 The Court of Appeal125 and the House of Lord126 have had to consider the matter of judicial bias. It would appear that the test applied was whether a judge had a greater than a de minimis (qv) personal interest with the case: if so, then the judge would be disqualified from hearing the case. The parties could waive (qv) any right to object if they were aware of the interest. It is likely that the same test would apply to an arbitrator. The same principles would seem to apply to an adjudicator (qv). See also: Arbitration; Arbitrator.

Bid A contractor’s offer, which will include its price for carrying out work, whether submitted in competition with others or not. It is another name for the contractor’s tender (qv). The bid, though predominantly seen as the contractor’s price, is premised on other criteria, which are usually set out within the documents on which the bid or tender was invited, e.g. bills of quantities (qv), drawings (qv), specification (qv). These documents will normally identify the quality and quantity of work, the period for completion, etc.

121

Glencot Developments & Design Co Ltd v. Ben Barrett & Son (Contractors) Limited (2001) 80 Con LR 14. 122 [1913] AC 229. 123 Veritas Shipping Corporation v. Anglo-American Cement Ltd [1966] 1 Lloyd’s Rep 76. 124 Catalina v. Norma (1938) 82 SJ 698. 125 Locabail (UK) Ltd v. Bayfield Properties Ltd [2000] QB 451. 126 R v. Bow Street Metropolitan Stipendiary Magistrate ex p. Pinochet Ugarte (No. 2) [2000] 1 AC 119.

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Bill of variations The buyer at an auction sale makes a bid, i.e. an offer, which the auctioneer is free to accept or reject. The same applies to a tender. See also: Tender.

Bill of variations A document setting out the financial adjustments to the contract price to take account of variations or changes permitted under the contract. This is sometimes known as the ‘final account’ (qv) or ‘computation or statement of the adjusted contract sum’. It is normally prepared by the quantity surveyor, and should be produced within the period specified in the contract. Under SBC it is to be issued by the architect before the issue of the final certificate (qv). However, the ‘final account’ is not a precondition to the issue of the final certificate.127 The contractor must present the quantity surveyor with all the documents necessary to allow the quantity surveyor to produce a detailed statement of all the variations to the original bills of quantities (qv). These documents may take the form of invoices, sub-contractors’ accounts, measurements, etc. The quantity surveyor normally prices the variations in accordance with the approach or approaches set out within that particular contract. In practice some items are settled by negotiation, and agreed, but in most contract forms (e.g. SBC clause 5) the quantity surveyor is required to make a valuation. It is good practice to send the finished ‘statement’ to the contractor prior to the final certificate, whether or not the contract requires it. SBC clause 4.5.1 sets out the relevant procedure, and the statement of adjustments prepared under SBC (clause 4.5.2) is in fact a bill of variations and not a ‘final account’. Contrary to the views of some contractors, none of the standard forms makes the contractor’s agreement to the ‘final account’ a precondition to the issue of the final certificate. The use of the term ‘final account’ implies that the document would address all matters, e.g. loss and/or expense and liquidated damages. This is not always the case. For example, under SBC a separate ascertainment for loss and/or expense is prepared, and liquidated damages are recovered directly by the employer outside the financial administration of the contract. In contrast, under DB loss and/or expense is included within the final account (clause 4.2.3.4). ACA clause 9 refers to the contractor submitting its final account and all documents that may be required by the architect in computing the ‘Final Contract Sum’. GC/Works/1 refers to the final account in clause 49, and includes a detailed procedure, including the preparation by the quantity surveyor of a draft final account. See also: Variation of work.

Bills of quantities Detailed descriptions of all the labour and materials (i.e. work) required to produce the Works. Their main purpose is to allow rates and/or prices to be fixed for every item of labour, materials and work, and thus to arrive at a total price. The rates and prices become the basis for preparing interim payments (i.e. certificates) and the valuing of variations. The bill is commonly divided into sections: 127

Penwith District Council v. VP Developments Ltd [1999] EWHC Technology 231 21 May.

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Bills of quantities — The preliminaries (items are priced on a fixed and time-related basis). — Preambles. — The measured work. — Provisional sums and dayworks. The preliminaries contain information and requirements of a general nature to help the contractor to arrive at a price for the Works. Among items to be included are the following: — Name and address of the employer. — Name and address of the architect. — Name and address of the quantity surveyor. — Description of the site, including access and working space. — Visiting the site. — Trial holes. — Inspection of drawings. — Possession. — General description of the Works. — Form and type of contract, including amendments. — Plant, tools and vehicles. — Safety, health and welfare. — Notices and fees. — Setting out. — General foreman, person-in-charge. — Maintenance of roads. — Safeguarding the Works. — Police regulations. — Obligations and restrictions imposed by the employer. — Water for the Works. — Lighting and power for the Works. — Injury to persons and property, and damage to the Works. — Insurance of employer’s liabilities. — Clearing away. — Temporary roads, etc. — Temporary offices, messrooms, sanitary accommodation, etc. — Temporary offices for use of architect, quantity surveyor, clerk of works. — Temporary telephone facilities. — Temporary screens, fencing, hoarding, etc. — General scaffolding. — Works by the local authority or statutory undertaking. — Protecting the Works. — Drying the Works. — Removal of rubbish. A full description of the items to be included in the preliminaries can be found in the Standard Method of Measurement seventh edition at section A pages 17–22. The preambles section amplifies the descriptions of work, and may include the specifications for materials and workmanship. They support the descriptions within the measured work section. The measured work section includes the quantities, together with the relevant description of the item, and these make up the major portion of the bills. They are usually arranged under trades in the approximate order under which they 59

Body of deed will be carried out. Each trade has a preamble that provides a general description of the work for the contractor, followed by a detailed series of descriptions of every part of the particular trade. Alongside each description the quantity is expressed in lineal, square or cubic measurement (e.g. lin m or m1, sq m or m2, cu m or m3, or enumerated (e.g. No. 5 or item)). Weights are given in kg or tonnes. Space is provided for the contractor to insert a rate opposite each item, and to arrive at a total for each item by multiplying the quantity by the rate. The prices can be totalled by the contractor at the foot of each page and the totals carried to a collection at the end of each trade. The collections are gathered together on a sheet at the end of the document (i.e. a general summary) and totalled to arrive at a price for the whole work. The approach to measurement of the bills should be clearly stated therein. Where there are exceptions or departures they must be specifically stated in relation to particular items. The rules usually adopted are the Standard Method of Measurement of Building Works (SMM), compiled by the Royal Institution of Chartered Surveyors and the Construction Confederation, which became operative on 1 July 1988. It was revised in 1998, and the latest version is the seventh edition (SMM7). It is a set of rules, based on the Common Arrangement of Work Sections, providing a standard basis for measurement. Use of SMM7 is mandatory under the JCT contracts where bills of quantities are to be used, e.g. IC clauses 1.1 and 2.12.1. Thus if, on such contracts, it is intended to depart from the SMM7 for any reason, the departure must be clearly stated within the bills of quantities, e.g. IC clause 2.12.2. The preparation of bills of quantities is normally undertaken by a quantity surveyor from the information (drawings, schedules and specifications (qv)) produced by the designers, e.g. architect, engineer. The traditional process is complex, and usually involves the following stages: — Taking off, i.e. taking the measurements from architect’s drawings. — Abstracting, i.e. the gathering together of quantities for like items. — Billing, i.e. writing up the final bills of quantities. A detailed specification (qv), which should be prepared by the architect, is commonly bound into the bills between the preliminaries and the measured quantities. Bills of quantities are included as one of the contract documents in SBC (With Quantities and Approximate Quantities editions), ACA and GC/Works/1 With Quantities contracts. They are often referred to as the ‘contract bills’. The use of computerised systems has simplified the preparation of bills of quantities. It is sometimes useful to prepare what is known as bills of approximate quantities in order to determine rates for various items of work and materials when the precise quantity cannot be established prior to submission of tenders. This method does not result in the determination of a contract sum. It permits an approximation of the total price to be obtained before work begins, and allows for those individual rates to be applied to the actual quantities upon remeasurement on site as the Works progress. Such a bill is often used for alteration or renovation work, or in the rare instances where work must begin before the designers have sufficiently completed the design information. See also: Activity schedule; Bill of variations; Discrepancies; Schedule of rates.

Body of deed The operative part of a deed (qv) that sets out the terms of the agreement between the parties. 60

Bond

Bond A bond is an agreement, normally executed as a deed, where one person, usually called the surety (e.g. a bank or insurance company), agrees to be answerable for the debt or default of another (e.g. a contractor) to a third party, usually referred to as the beneficiary (e.g. the employer). The primary obligation of the contractor is underwritten by the surety, i.e. a guarantee. As the agreement is a guarantee, it must be in writing.128 The provision of a bond should be adhered to strictly. Any alteration to the primary obligations (e.g. between the employer and contractor) without the consent of the surety can discharge the surety from their liability under the bond.129 There are several different types of bond, but in general their purpose is to guarantee payment of (or up to) a fixed sum by way of compensation for nonperformance of a contractual obligation. In this context, a performance bond is an undertaking given by a surety to indemnify the beneficiary (usually the employer) against the contractor’s failure to perform the contract. In the United Kingdom performance bonds are usually ‘on default’ bonds (i.e. their operation is conditioned on the contractor defaulting on its obligations). Contracts within the international arena tend to require ‘on demand’ bonds. On demand bonds are increasing in use within the United Kingdom, and they have been described (in the absence of fraud) as the equivalent of ‘cash in hand’, and can be called in irrespective of any failing on the part of the contractor.130 They tend to be favoured by financial institutions that provide bonds. This is because, when they receive a demand made in conformity with the criteria set out in the bond, they can pay without the necessity of carrying out any kind of investigation. Investigations result in the surety incurring costs. The surety will not be too concerned, as it will have ensured that it had security from the contractor for such an eventuality, and will therefore not be ‘out of pocket’. There are a growing number of cases from the English courts relating to performance bonds. Such bonds are commonly capped at 10% of the contract sum, and there will be a premium to be paid by the employer, usually included within the tendered price. The effect of a bond, like that of any other contract, depends on its precise wording, and this can be particularly important where it is vital to have funds available to complete the Works if the original contractor defaults.131 Moreover, the surety may be entitled to set off or counterclaim any amounts due, before making payments.132 Making a call on a bond may not always be straightforward as illustrated in OTV Birwelco Limited v. Technical & General Guarantee Company Limited 133 and in order to succeed a party should ensure that it complies fully with the requirements in the bond. The Association of British Insurers has produced a Model Form of Guarantee, a default bond. It is a brief document, comprising of eight clauses, drafted in relatively simple language along with an explanatory guide. When used the bond tends to be subject to amendment by employers or more accurately their advisers. One of the principal reasons lies in the drafting of clause 1. This states 128

S. 4 Statute of Frauds 1677. Holme v. Brunskill (1878) 3 QBD 495. 130 Balfour Beatty Civil Engineering v. Technical and General Guarantee Co Ltd [2000] CLC 252. 131 Paddington Churches Housing Association v. Technical & General Guarantee Co Ltd [1999] BLR 244. 132 Trafalgar House Construction (Regions) Ltd v. General Surety and Guarantee Co Ltd (1995) 73 BLR 32. 133 [2002] 84 Con LR 117. 129

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Bonus clause that the surety guarantees to the beneficiary that it will satisfy any damages sustained following a breach of contract by the contractor. Any losses suffered by the beneficiary which do not flow from a breach of contract would not, it could be argued, be covered by the bond e.g. insolvency. Alternatively, ‘damages’ may not cover all the losses suffered by the beneficiary, e.g. liquidated damages may well be classified as a debt. The guidance notes stress that the bond does not require amending to cater for these situations but practitioners tend to err on the side of caution and make appropriate amendments. SBC has three bonds in Schedule 6 at the rear of the contract. One is a bond for use where the employer and the contractor agree to operate the advance payment (qv) provision; the second is used where the employer has agreed that payment can be certified for off-site materials (qv); and the third is for use in place of the employer deducting retention (qv). These bonds are on terms agreed between the Joint Contracts Tribunal (qv) and the British Bankers’ Association. Other bonds which are occasionally used include bid bonds. These are used to guarantee a contractor’s intentions following submission of a tender for complicated or large projects.

Bonus clause A clause in a contract with the object of encouraging the contractor to complete the Works before the contractual completion date by offering a financial incentive. The NEC clause option X6, MP clause 20, CE clause 7.28 and GC/Works/1 clause 38A are examples of standard forms that include such provisions, though they are not common. Many are optional, e.g. GC/Works/1 clause 38A. An amount is prescribed (e.g. an amount per day), and is payable to the contractor for the period for which completion of the Works, or a part, is early. It may be subject to certification by the contract administrator. The bonus amount specified need not bear any relationship to the amount the employer pre-estimates will be gained through early completion. Therefore there is no necessity for a bonus amount to be a genuine pre-estimate of the employer’s gain. The employer may stipulate any sum deemed appropriate, which is quite unlike liquidated damages (qv). A default by the employer that prevents a contractor from earning the bonus may result in the contractor seeking to recover the lost bonus as damages for breach of contract,134 but unless the clause expressly provides to this effect, circumstances beyond the contractor’s control that delay completion will not entitle it to the bonus.135 It is also open to question whether a bonus clause is a significant incentive to the contractor. It is perhaps better to specify a shorter contract period at the tendering stage, so that the contractor may price accordingly. Some contractors believe that a bonus clause must always be present in any contract that includes a liquidated damages clause, presumably on a ‘carrot and stick’ principle. This argument is without any rationale, or legal foundation. GC/Works/1 clause 38(4) empowers the contractor to submit to the project manager for consideration by the employer written proposals that the contractor thinks will enhance the ‘buildability of the Works, reduce the cost of the

134 135

Bywaters v. Curnick (1906) HBC, 4th edn, vol 2, p 393. Leslie v. Metropolitan Asylums Board (1901) 68 JP 86.

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BPF System Works or the cost of maintenance or increase the efficiency of the completed Works’. If accepted, any savings are shared equally between employer and contractor, and the completion and programme dates are adjusted and any necessary extension of time is granted. This is not the same as a bonus clause, but it operates on a similar principle, i.e. that the contractor will be rewarded if some advantage is achieved for the employer. MP clause 25 serves to a similar end. See also: Constructing Excellence; Engineering and Construction Contract.

Boundaries The demarcation lines between the ownerships of land. Boundaries should be defined in the title deeds, although frequently they are obscure. Common reference is made to walls, fences, hedges and watercourses. Ownership usually, but not invariably, extends to the centre line of highways (qv) and watercourses. If the boundary is not clear from the title, it may be possible to settle the matter on site in the presence of both owners. There are certain presumptions that may be useful (see Figure 3). If the parties cannot agree, the matter can be settled, though expensively, by the courts. Encroachment over or under a boundary will give rise to an action for trespass (qv), but may also give rise to a variation of the boundary by adverse possession (qv). Boundary encroachment is a matter that requires attention during construction works, e.g. a tower crane jib or excavations adjacent to the boundary line.

BPF System In December 1983 the British Property Federation, which is representative of the interests of property owners, published a manual describing a new system for the organisation of contract management. The manual has not been revised, and is still current, although some supporting documentation has been withdrawn. It should be treated with care in view of changes in legislation, e.g. the Housing Grants, Construction and Regeneration Act 1996 (qv) and the Contracts (Rights of Third Parties) Act 1999 (qv). The BPF System divides the design and build process into five stages: — concept — preparation of brief — development of design — tender documentation and — construction. The manual specifies these stages, and notes the duties of the parties. The system redefined traditional roles, introducing a client’s representative (qv), who manages the project on behalf of the client, and a design leader (qv), who has overall responsibility for pre-tender design, and for sanctioning any contractor’s design. A significant feature of the system was that, in general, payment is based on a schedule of activities (qv) rather than on traditional bills of quantities. This has since been introduced as an option within certain standard forms, e.g. SBC. The BPF System aims to remedy the main problems that arise under the traditional system of contracting: — incomplete initial design, leading to extensive variations and disruption of the building programme; — higher costs than expected; — delays in completion. 63

BPF System

boundary fence

boundary

boundary

wall

boundary

hedge

ditch if public road on this side boundary is here

Figure 3

boundary

Boundaries: presumption of ownership.

The system emphasises the need for production of a detailed brief at the outset, and for the client to determine their full requirements at an early stage. It also sets out to establish clear lines of communication and the demarcation of responsibilities, as well as the notion of fixed fees for consultants and essentially a fixed-price contract. The system is intended to be flexible, and is not a rigid formula suitable in its entirety for every project. Properly operated, it may save time and costs and achieve high quality in building. 64

Brief Following the publication of the manual, a BPF edition of the ACA Form of Building Agreement (qv) was published, together with a Model Consultancy Agreement and various forms for use with the system. The JCT design and build form (WCD 98) was amended so as to be compatible with the system. DB is simply a development of WCD 98 and therefore remains compatible. Copies of the BPF manual are obtainable from The British Property Federation, 7th Floor, Warwick Row, London SW1E 5ER.

Breach of contract When a party without lawful excuse fails or refuses to carry out obligations due under the contract, or performs defectively, or incapacitates itself from performing. The breach may be total (i.e. refusing to perform the contract at all, in which case it is known as ‘repudiation’ (qv)) or it may be partial, e.g. a refusal to carry out a part of the Works. The breach may vary in degrees of seriousness, depending upon whether it is breach of a condition or a warranty (qqv). The typical common law remedy is to sue for damages, although other remedies, such as an entitlement to an agreed sum, specific performance (qv), or an injunction may be available. In certain situations a party may be entitled to more than one remedy, e.g. damages and an injunction. The remedies applied by the court will depend upon the seriousness and nature of the breach. A breach does not in itself discharge the contract; to do so the breach must be repudiatory in nature, and must be accepted by the other party. A number of events that would be breaches of contract (e.g. failure to give possession of the site on the agreed date, late provision of design information) are expressly addressed under the terms of the standard forms of contract, together with remedies. For example, SBC clauses 4.23 to 26 provide for the contractor to obtain financial recompense for certain specified happenings by the employer, not all of which amount to a breach of contract, e.g. variation instructions. Under the JCT contracts it is always open to the injured party to seek damages at common law rather than through the contractual provisions, e.g. SBC clause 4.26. However, this may not be the case under all standard form contracts, as some have an exclusive remedies provision, e.g. NEC clause 12.4 and MF/1 clause 44.4. See also: Anticipatory breach of contract; Damages; Fundamental breach.

Bribery and corruption Promising, offering or giving money, secret commission, gifts, or the like to a person so as to influence their conduct. Secret dealings of this type, as between e.g. an architect and a contractor, would entitle the employer to terminate the architect’s employment and to recover any commission paid.136 The employer may also be able to treat the building contract as at an end. Some building contracts deal expressly with this matter (e.g. GC/Works/1 clause 24; SBC clause 8.6), and entitle the employer to terminate the contract or the contractor’s employment under the contract. Corrupt practices are a criminal offence under the Prevention of Corruption Acts 1889 to 1916, whether in connection with a contract or otherwise.

Brief A concise statement or expression. Instruction with regard to a planned operation. 136

Reading v. Attorney General [1951] AC 507.

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Brown clause The instructions provided by a solicitor to a barrister to enable the barrister to represent a client in legal proceedings. In the context of construction the briefing usually refers to the process during which a designer (e.g. the architect) obtains from the client instruction in order to define the problem that the design is to solve, i.e. an employer is able to identify their requirements. ‘Brief’ is a defined term in CE at clause 1.1. It is defined as the document or documents describing the requirements that the supplier has to satisfy by the performance of the services (qv). The documents are to be listed in part 2 of the contract particulars (qv), and copies are to be attached to the contract. The documents may well be drawings, a specification, a bill of quantities or a schedule of services.

Brown clause A contract term providing for liquidated prolongation costs (qv). It is rarely used. The provision would remove the need for the ascertainment of a contractor’s entitlement to loss and/or expense. The difficulty for a contractor would be to determine the amount of its anticipated losses for inclusion within the provision. There would be a significant number of unknowns, not least of which would be the timing of any delay, i.e. at what stage during the project the delay occurred. The losses suffered by a contractor are likely to be significantly different if the delay were to occur at the end of the project, as against a delay occurring during the middle of the project.

Budget price A price given by a person, e.g. by a contractor, not intended to be precise, but which is intended to be indicative and to cover the cost of all the work of which the person has been informed. Therefore it is often a figure somewhat greater than the likely cost. A ‘budget estimate’ is similar, in that it is a rough estimate possibly produced by the quantity surveyor (qv) or the contractor, and pitched slightly higher than the likely price. It is not usually intended to be capable of acceptance to form a binding contract. Within PPC ‘budget’ is defined at appendix 1 as ‘the Client’s monetary allowance for the Project referred to in clause 12.3 of the Partnering Terms and as stated in the Price Framework’. Clause 12 addresses prices, and clause 12.3 specifically states that prices are to be developed and agreed in accordance with clause 12 to establish an agreed maximum price within the budget stated by the client in the Price Framework or such other price as is achievable, consistent with the partnering documents. See also: Estimate.

Builder The individual, partnership or firm carrying out building works. Most contracts now refer to the ‘contractor’ (qv) or ‘constructor’, e.g. PPC. The CE is an exception in that it refers to ‘supplier’ (qv).

Building Defined in s. 121 of the Building Act 1984 as ‘any permanent or temporary building and, unless the context otherwise requires, it includes any other structure or erection of whatever kind or nature (whether permanent or temporary)’. The definition embraces vehicles, vessels, hovercrafts or other movable objects of any kind under the heading ‘structure or erection’, provided that circumstances prescribed by the Secretary of State prevail. The exercise of the 66

Building Regulations Secretary of State’s power is qualified, and the circumstances must justify treating the object as a building. The definition is very broad, and it should be noted that the definition in the Building Regulations (qv) made under the Act is comparatively tight: ‘any permanent or temporary building, but not any other kind of structure or erection’.

Building control The system of controls over the construction and design of buildings, other than planning controls. In England and Wales the basic framework is contained in the Building Act 1984, which consolidates all earlier primary statutory material, and in the Building Regulations (qv), which set out legal and construction rules in greater detail. Local Acts (qv) also contain building control provisions. In Northern Ireland the equivalent legislation is the Building Regulations (Northern Ireland) Order 1979, as amended by the Planning and Building Regulations (Amendment) (Northern Ireland) Order 1990. In Scotland the system of control is based on the Building (Scotland) Acts 1959–1970, as amended, and in regulations made under them, i.e. the Building Standards (Scotland) Regulations 1990. See also: Approved documents.

Building Employers’ Confederation See: Construction Confederation Building line An imaginary line drawn parallel to the highway at a specified distance from the back of the footpath (if any). The dimensions are specified by the local planning authority as part of their overall responsibility for development control. The significance of the line is that no building or part of any building (with certain minor exceptions) may be erected between the building line and the highway. The authority has considerable discretion in fixing the line, depending upon all the circumstances. The main purpose of a building line is to ensure privacy and sight lines. Thus the building line on housing estates may be generally five metres from the back of the footpath, whereas in a town centre it may well be the back of the footpath. Individual consultation with the local planning officer is necessary to establish the line required in any particular situation.

Building owner Usually, but not invariably, the person or firm known in most forms of building contract as ‘the employer’. It is the person or firm that owns the site, or will own the structure on completion (qv). The Party Wall Act 1996 (qv) defines ‘building owner’ in section 20 as ‘an owner of land who is desirous of exercising rights under this Act’, thus giving the term a technical significance for the purposes of the Act.

Building Regulations The Building Regulations 2000 (as amended) form the basis of the system of building control (qv) in England and Wales. In Northern Ireland it is the Building Regulations (Northern Ireland) 2000 (as amended). They are set out in the form of functional requirements, and are supported by a wide range of ‘approved documents’ (but not in Northern Ireland), which give practical guidance in respect of their provisions. The Regulations are arranged in three parts: — General. — Application. — Procedural and miscellaneous provisions. 67

Buildmark In the context of building contracts, the contractor must comply with the Building Regulations.137 Most of the standard form contracts make this clear: e.g. SBC clause 2.1 imposes on the contractor an express duty to comply with all statutory obligations. Such a term would be implied in any event.

Buildmark The trade mark of the NHBC combined 10-year warranty and insurance protection scheme. For homes registered with the NHBC since October 2005 the cover available is divided into four categories, as follows. — Before the property is completed: Should the builder become insolvent, then the cover offered is either reimbursement to the customer of any monies paid to the builder or completion of the dwelling to NHBC standards. — First two years following completion: The home owner is covered for physical damage caused by a defect resulting from the builder not complying with NHBC standards. The cover runs from the date of legal completion or, if later, the date when NHBC agrees the dwelling is substantially complete. There are upper financial limits on the cover available. Under this category of cover the builder, in the first instance, is to put right any defects or damage. The home owner is to notify the builder of any defects right away. The NHBC offers a free dispute resolution procedure for disputes between the builder and home owner on defects and damage. The NHBC will put right any defects and damage the builder was obliged to rectify but fails to do so. Should the builder become insolvent, the cost of any works for which they would otherwise have been liable is covered. There is also restricted cover should the builder become insolvent and action is taken against the home owner for the land being contaminated at the time the dwelling was purchased by the first home owner. — Cover in years 3 to 10: The NHBC provides cover to the home owner up to a maximum identified in the policy. There is an excess of around £1,000. The cover is to put right any damage caused by a defect in any of the identified elements, e.g. foundations, load bearing walls. — Additional cover: Additional cover is available to a home owner against a breach of the specified Building Regulations, provided the NHBC is engaged to undertake building control. In addition, cover is also available to cover the cost of cleaning any contaminated land that was contaminated at the time of the first purchase. Further information is obtainable from http://www.nhbc.co.uk. See also: National House-Building Council.

Burden of a contract The obligation that rests upon one party to a contract, e.g. under a building contract the contractor’s obligation to execute and complete the Works. A contracting party cannot relieve itself of its contractual burden without the consent of the other party.138 See also: Assignment; Novation.

Burden of proof The persuasive burden or the obligation on a party to persuade a tribunal of the truth of each fact necessary to establish the various elements 137 138

Street v. Sibbabridge Ltd (1980) Unreported. Tolhurst v. Associated Portland Cement Manufacturers (1900) Ltd [1903] AC 414.

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By-law of a claim or defence where the defence is more than a simple denial. In other words ‘he who asserts must prove’.139 It also means the obligation to adduce evidence about a fact to justify a finding on that fact by the court. The burden of proof can shift from one party to another as a fact in issue is evidenced. The burden of proof can be met by evidence, formal admissions, judicial notice or a combination of these.

Business case A defined term at appendix 1 of PPC. It is defined as ‘a business case proposed by the Constructor pursuant to clause 10.3 of the Partnering Terms, comprising prices and proposals seeking to justify Client approval of a Direct Labour Package or Preferred Specialist without market testing’. This business case is to be developed and presented on an open book (qv) basis by reference to the project brief, project proposals and relevant designs. Basically, the constructor is seeking to use their own labour or a sub-contractor that is not chosen through competition. Therefore the justification (i.e. business case) is made on grounds other than a competitive price. The business case is analysed by the client and the core group (qv), and the constructor (qv) may be requested to submit further information to demonstrate best value to the client (clause 10.4). If the client and core group are not satisfied, then they may reject the business case (clause 10.5) and require that it be tested by comparison against comparable specialist tenders obtained in competition under clause 10.6, i.e. market testing.

Business day A term specifically used within the JCT contracts to mean ‘any day which is not a Saturday, a Sunday or a Public Holiday’, e.g. SBC clause 1.1. It is referred to in the contract particulars against clause 4.9.2, which identifies the date (s) for the issue of interim certificates. There is provision for the insertion of the first date, and thereafter it is the same date in each month or the ‘nearest’ business day, which is not necessarily the ‘next’ business day. It is also used in SBC at clause 8.2.3 confirming that, subject to proof to the contrary, a notice given by special or recorded delivery is deemed to have been received on the second business day following the date of posting. Elsewhere in SBC and other JCT contracts, reference is made to an act having to be undertaken within a specified period of days, and no mention is made within the clause of business days, e.g. clause 4.13.3. The calculation of the period in this instance would be governed by clause 1.5, and would include Saturdays and Sundays but exclude public holidays (qv). Clause 1.5 complies with s. 116 of the Housing Grants, Construction and Regeneration Act 1996 (qv). See also: Day.

By-law A form of delegated legislation (qv) made by local authorities and certain other public bodies, and confirmed by a relevant central government department. They are a kind of local law enforceable in the courts, which have power to review them and determine whether or not they have been properly made. Building control (qv) was formerly exercised through local building by-laws (now replaced by Building Regulations (qv)).

139

Joseph Constantine Steamship Line v. Imperial Smelting Corporation Ltd [1942] AC 154 at 174 per Viscount Maugham.

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C Calderbank offer An offer to settle a dispute or difference made in arbitration or litigation and expressed to be made ‘without prejudice as to all matters except costs’. It was commonly called a ‘Calderbank offer’, after the case140 in which the procedure was judicially approved. However, the procedure in litigation is now covered by CPR Part 36. Such offers should be genuine, and may be made in recognition of liability, or as a tactical decision to protect a party’s position on costs (which can be substantial in either litigation or arbitration), or a combination of both. Sometimes in arbitration it is referred to as a ‘sealed offer’, following the previous and now outdated practice of giving the tribunal a sealed envelope and asking that it not be opened until all substantial matters have been addressed except for costs. It is similar to a CPR Part 36 offer by a defendant in litigation,141 although in arbitration an important distinction is that no money is actually paid into the equivalent of the court. The offer should be made in writing, and should make clear that the detail is not to be made known to the tribunal until after the tribunal has issued or made a decision on all matters except costs. At some stage during the proceedings the tribunal will be requested (or the envelope handed over) by the parties, or possibly the question may be asked of the parties by the tribunal, to issue a decision or decisions addressing all matters except costs.142 When addressing costs, the tribunal may treat the offer as having the same effect as a payment into court.143 Important components of such an offer are that: — it is expressed in clear terms so that there can be no doubt about what is being offered or precisely what is covered by the offer; — it should stipulate a period for acceptance (e.g. probably at least 21 days); otherwise, depending on the other terms of the letter and circumstances, it will be open for a reasonable period; — it must offer to pay the other party’s reasonable costs incurred up to the point of acceptance, provided that falls before the expiry of the acceptance period, or for the period of 21 days; — it must state whether interest and VAT are included; — it must state whether any counterclaim is taken into account in the offer. If the offer is accepted, then that will bring matters to a close so far as they are covered by the offer. If it is not accepted, then the tribunal will have to consider the letter when deciding on liability for costs. If the offer would have put the claimant in an identical or better position than having completed the 140

Calderbank v. Calderbank [1975] 3 All ER 333. CPR r 36.10(3). Chinney Construction Co Ltd v. Po Kwong Marble Factory Ltd [2005] 3 HKEC 1042. This case involved an arbitration in Hong Kong, and Chinney failed to bring Calderbank letters to the attention of the arbitrator before the final award was published. The arbitrator refused to readdress the issue, once notified, given that a final award had been published. The Hong Kong Court of first instance referred the matter back to the arbitrator for reconsideration on the ground of a procedural mishap, as Chinney was able to establish that it mistakenly believed that the arbitrator would entertain further submissions on costs prior to the issue of his final award. 143 The Trustees of Stokes Pension Fund v. Western Power Distribution (South West) Plc [2005] BLR 497. 141 142

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Capacity to contract arbitration or litigation, then the claimant who rejected the offer will normally have to pay its own and the other party’s costs from the expiry of the acceptance date for the offer. The rationale behind this is that the arbitration or litigation process was futile, and the claimant could have been in the same or better position by accepting the offer at the time it was made. See also: Costs; Without prejudice.

Calendar month See: Month. Capacity to contract The general position in law is that any person can enter into a binding contract if they have the legal capacity to do so. As with any general rule there are a number of exceptions or qualifications. These may be listed under the following heads. — Corporations: Corporations are seen as a separate legal entity in law. All corporations are restricted in their actions by the rules under which they were formed. For example, a company registered under the Companies Act 1985144 is restricted by its articles of association, and a local authority is restricted by various statutes (qv). Corporations may make binding contracts if such contracts are within the powers conferred upon them. If they attempt to make contracts outside their powers, such contracts are ultra vires (qv) and void. A corporation acts through its appointed agents, e.g. directors or company secretary. Directors registered under the Companies Act have authority to bind the corporation. — Minors: Persons under the age of 18. As a general rule a minor may enter into a binding contract only if the contract is: • for necessaries; or • for the minor’s benefit. The law looks to protect minors from their inexperience, and prevent adults from taking an advantage, but this has to be balanced, in that the law should not cause unnecessary hardship for adults who deal fairly with minors. ‘Necessaries’ include such things as food and clothing, although the concept is by no means clear. Whether an items falls into the category of ‘necessaries’ will depend upon all the circumstances. Contracts for the minor’s benefit include contracts of apprenticeship and education. The courts, as with ‘necessaries’, will take into account all the circumstances when deciding whether a contract is for the minor’s benefit. Certain other contracts are voidable, e.g. contracts concerning (a) land, (b) shares in companies, (c) partnership, and (d) marriage settlement. All other contracts entered into by a minor are invalid, i.e. void. Contracts that are of a long-term nature, such as the acquiring of an interest in land or a firm, will become binding upon the minor unless the minor repudiates them before or soon after reaching the age of 18. It is possible for a minor to have liability in either tort or restitution. — Mental patients: Contracts are generally voidable, i.e. the legal relations that would otherwise be established can be avoided at the instance of

144 The Companies Acts have been consolidated in the Companies Act 2006, which is coming into effect in parts, to be completed by October 2009.

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Care, duty of one of the parties. It will depend upon the person’s disability, i.e. provided the person was so insane when the contract was made that the person did not know what they were doing, and the other party was aware of it. If the insane person recovers sanity, such person may be bound by a contract made during the period of insanity, unless the person repudiates the contract within a reasonable time. — Drunkards: Contracts made with a person when drunk generally fall under the same rules as contracts with insane persons. However, it is possible that the courts may have a broader discretion on whether to set aside contracts purportedly made under the influence of drink. — Aliens: Generally, in peacetime, an alien has the same capacity to contract as a British national. — Agents: The capacity to form a binding contract on behalf of a principal depends upon the terms of the agency (qv). — Unincorporated associations (qv): Unlike a corporation or an individual person, an association is not usually viewed in law as a separate legal entity. Therefore the association does not have the capacity to enter into a legally binding contract, though certain exceptions exist as a consequence of statute, e.g. trade unions. When such an association (e.g. a members’ club) enters into contract, it does so on behalf of all the individual members. Each member benefits from the contract, and also carries the liabilities under the contract. Officers of an association need to be sure that they are suitably authorised to act on behalf of all or the majority of members when executing a contract on behalf of the association. If not, they may find that they have contracted as an individual and therefore are personally liable. See also: Alien enemy; Corporation.

Care, duty of A term of art referring to the obligation owed by persons or parties to one another to establish whether interests are protected by the law of negligence. The seminal case is that of Donoghue v. Stevenson145 (i.e. the snail in the bottle case), in which Lord Atkin espoused a general concept for a duty of care expressed by means of the ‘neighbour principle’. Briefly stated, the neighbour principle is that you must take reasonable care to avoid acts or omissions that you can reasonably foresee would be likely to injure your neighbour. Duty of care is one of the three hurdles to be cleared in order to succeed in a negligence action. The other two are: (a) establishing a breach of the duty of care, and (b) that the damage suffered is as a result of that breach. In essence, the notion of a duty of care is concerned with defining the boundary of when or where liability will exist and thereby an individual’s interest is protected. The problem seems to have been that the ‘neighbour principle’ makes no distinction between physical harm (personal injury and property) and pure economic or financial loss, and whether it was caused by conduct or by words. The high point in the expansion of the duty of care boundary was in the 1970s,146 but this then retracted in the late 1980s and early 1990s.147 It 145

[1932] AC 562. Anns v. Merton Borough Council [1977] 2 All ER 492. 147 Murphy v. Brentwood District Council (1990) 50 BLR 41 and Department of the Environment v. Thomas Bates & Sons Ltd (1990) 50 BLR 61. 146

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Care, standard of became clear, following Murphy v. Brentwood District Council, that the duty would not extend to the recovery of pure economic loss, or recovery for defective goods or property, but encompassed recovery for personal injury or damage caused to property other than that which was defective. That said, a distinction exists between negligent statements148 and negligent conduct, with the former permitting the recovery of pure economic loss. It would seem that the scope of the duty of care is continually changing, though now on an incremental basis. A party may owe concurrent duties in both contract and tort.149 A duty of care has been imposed upon: (a) manufacturers and producers to the ultimate user or consumer; (b) designers to third parties; (c) lawyers; and (d) builders to occupiers of property. See also: Negligence.

Care, standard of In actions for negligence (qv) it is necessary to establish that the defendant has failed to discharge the duty of care expected, i.e. a breach of that duty. This standard of care is that of the ‘reasonable man’, who is a hypothetical creature of ordinary prudence and intelligence. Negligence is the omission to do something which a reasonable man guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do.150

An example of this in everyday life is the act of driving a car, when a duty of care is owed to other road users and pedestrians. However, the duty of care may be expressed as a specific term in an agreement between parties, thereby giving it a contractual status, e.g. the appointment of an architect.151 A party holding itself out as being capable of attaining a certain standard of skill (e.g. an architect, a contractor, or an engineer) must demonstrate the skill generally possessed by people in that particular trade or profession. So, when discharging the duty that they have either contracted to undertake, or which is imposed upon them in law (i.e. in the tort of negligence), the contractor or professional person is to be judged by the generally accepted standards prevalent at the time the task is carried out: Where you get a situation which involves the use of some special skill or competence, then the test as to whether there has been negligence or not is not the test of the man on the top of the Clapham omnibus, because he has not got this special skill. The test is the standard of the ordinary skilled man exercising and professing to have that special skill; it is well established law that it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art.152

This test has been approved time and again. The terms of a contract may impose a higher standard, but generally the contractor must exercise in relation to its work the standard of care that is to be expected of a reasonably competent building contractor.153 148

Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] AC 465. Henderson v. Merrett Syndicates Ltd [1995] 2 AC 145. Blythe v. Birmingham Waterworks Co (1856) 11 Ex 781 at 784 per Alderson B. 151 SFA 99 clause 2.1. 152 Bolam v. Friern Hospital Management Committee [1957] 2 All ER 118 at 121 per McNair J. 153 Worlock v. SAWS & Rushmoor Borough Council (1982) 22 BLR 66 CA. 149 150

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Case stated The basic test establishes the degree of knowledge or awareness that the professional person ought to have. If, in fact, a person holds a higher degree of knowledge or awareness and acts in a way that, in light of that actual knowledge, that person ought reasonably to have foreseen would cause damage, the person may be liable in negligence even though the ordinary skilled professional would not have that knowledge.154 See also: Foreseeability; Reasonable skill and care.

Case stated An appeal in writing from a lower tribunal to a higher tribunal, e.g. from a magistrates’ court to the Crown Court. The lower court must state the case for the decision reached, expressing the facts of the case and the legal issues. The appeal is made on points of law and not facts. A procedure existed under the Arbitration Act 1950 by which an arbitrator could make an award in the form of alternatives, depending upon the interpretation of a point of law. The point was put to the High Court for resolution as a ‘case stated’. The procedure was abolished in England by the Arbitration Act 1996. The Arbitration Act 1996 has provision under s. 45 for the determination of a preliminary point of law by the court, but this is different from what was previously known as a ‘case stated’. The section is non-mandatory, and may be excluded by the agreement of the parties. Under s. 45 the court is not empowered to consider such an application unless certain criteria have been satisfied, and in any event an application is subject to the discretion of the court.155 The application must be made with the agreement of all parties to the arbitration, or if not then the party making the application must have the agreement of the tribunal. The application must state the grounds upon which the application is made, and the court must be satisfied that the application was made without delay, and that a decision is likely to save substantial costs. In all cases the court must be satisfied that the point of law will substantially affect the rights of one of the parties. Unless the parties otherwise agree, the tribunal may continue with the arbitral proceedings, and even publish an award, while the application to the court under this section is pending. See also: Arbitration; Points of law.

Cash discount Commonly considered to be a discount for prompt payment by the payer, e.g. main contractor. The discount is allowed or offered by the payee (e.g. sub-contractors and/or suppliers), usually for payment within a specified period. In the construction scenario it would be unusual for a contractor to be under an obligation to pass the discount on to the employer, and conversely the employer would not guarantee to the contractor that a discount will be received. It would be a matter between the contractor and the sub-contractor or supplier. Cash discounts are a matter of negotiation, but tend to range between 2.5% and 5%. Some contractors simply look upon it as additional profit. Where the discount is conditional upon a payment period, it would appear that the contractor has no right to the discount unless payment is made within the stipulated period. However, it has been held that where the discount is not made dependent upon payment within a specific period, the contractor is entitled to 154

Wimpey Construction UK Ltd v. Poole (1984) 27 BLR 58. Taylor Woodrow Holdings Ltd (2) George Wimpey Southern Counties Ltd v. Barnes & Elliott Ltd [2006] BLR 377. 155

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Causa causans deduct such discount whenever payment is made.156 If a provisional sum, upon which the contractor expected to make a profit from a cash discount, were to be omitted, the contractor would have no claim for the lost discount. Following the Housing Grants, Construction and Regeneration Act 1996 (qv) and the Late Payment of Commercial Debts Act 1999 (qv), there would seem to be less need for a payee to offer such incentives as cash discount. They now have available the options of suspending performance or seeking to recover simple interest should payment not be made within the agreed timescales.

Causa causans The immediate cause. The last link in the chain of causation (qv), and must be recognised as different from the causa sine qua non, which is some earlier link but for which the causa causans would not have operated. In relation to monetary claims for direct loss and/or expense under building contracts, it means that the loss and/or expense must have been caused by the breach or act relied upon, and not merely be the occasion for it.157 Many have a confused view of causation, which leads them to submit claims that have little or no hope of success. For example, where a contractor seeks to recover direct loss and/or expense under SBC clause 4.23 in respect of a variation (relevant matter 4.24.1), then the loss and/or expense must flow from the variation instruction as a causa causans. If, for example, a variation instruction required the contractor to obtain materials from a specified supplier, who, in breach of the supply contract with the contractor, delivered late or delivered defective materials, the causa causans is the supplier’s breach of the supply contract and not the variation instruction, which is no more than a causa sine qua non. Refer to the simple precedence diagram at Figure 4, which further illustrates the point. See also: Causation; Foreseeability; Remoteness of damage. causa causans contractor unable to obtain specified roof tiles

architect’s instruction in respect of alternative roof tiles

contractor’s order to supplier for roof tiles

late delivery of roof tiles

delay to roof tiling contractor notifies roofing sub-contractor when he will be required on site

arrival of roofing subcontractor on site at due time

causa sine qua non activities

Figure 4 Chain of causation.

156 157

Team Management Services plc v. Kier Management and Design Ltd (1993) 63 BLR 76. Weld-Blundell v. Stevens [1920] AC 956.

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Causation

Causation The relationship between cause and effect. The concept is very important in the context of liability, e.g. negligence (qv). In many cases a wrongful act starts off a series of events that lead to damage being suffered, and this is referred to as a ‘chain of causation’. If liability is to be established, the loss or damage suffered or incurred by the injured party must be shown to have been caused by the wrongful act. Thus, if the effective cause of the damage was not the original event but some intervening event, the defendant would not be liable – novus actus interveniens, meaning a new act coming in between the act of causation and the effect, sometimes called a ‘supervening act’. In the context of building contracts, for example, when seeking to recover loss and/or expense or for breach of contract, the contractor must establish that the loss or expense was caused by the event or breach upon which it relies. For example, a contractor seeks to recover loss and/or expense under SBC clause 4.24.5, e.g. a late instruction. The circumstances are: — the architect issued an instruction during the course of the work to vary all door furniture. The issue of the instruction was delayed, but this was not material or critical at the time of issue; and — the contractor promptly places an order and the supplier confirms a satisfactory delivery date; and — the supplier fails to deliver on time; and — the contractor suffers loss and expense due to the delay in delivery. A delay in the issue of the instruction is not the cause of the contractor’s loss. The issue is one of late delivery. A contractor may well argue that no loss would have been suffered if the architect’s instruction had never been issued, or that the delay in the issue had set the chain of events in motion. However, the supervening event prevents recovery from the employer, and the contractor’s redress should be against the supplier. The supervening event might well have resulted from the contractor’s inefficiency or failure. If, however, the architect’s delayed issue of the instruction resulted in the contractor having to accept a delivery date later than the construction programme required, then the instruction or delayed instruction might well be the cause of any loss and/or expense suffered by the contractor. A graphic example of the concept of causation is illustrated in the case of Lubenham Fidelities & Investment Co v. South Pembrokeshire District Council and Wigley Fox Partnership.158 It involved two contracts under the JCT 1963 form of contract. An architect negligently issued defective interim certificates, which resulted in underpayment to the contractor, and the contractor withdrew from the sites. The contractor lost its claim against the employer because it broke the chain of causation by persisting in its suspension of the Works despite the service by the employer of a preliminary notice of determination. The contractor was held to be solely responsible for the termination of the contract by the employer, i.e. it had unlawfully suspended for alleged underpayment. Although the negligence of Wigley Fox (the architect administering the contracts) was the initial trigger, this was overtaken and overwhelmed by the contractor’s serious breach of contract, i.e. suspension of the Works without valid grounds. See also: Causa causans; Foreseeability; Remoteness of damage. 158

(1986) 6 Con LR 85.

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Certificates

Caveat emptor A well-known Latin phrase meaning ‘let the buyer beware’. The basic common law rule is that when a buyer takes goods from a seller without obtaining a warranty, then the buyer accepts the risks associated with quality and suitability. In effect the buyer relies upon its own judgement. No remedy is available if the buyer relied upon the bare representations of the seller, unless the representations were shown to be fraudulent. Modern legislation has attenuated this principle, particularly in the case of purchases by consumers: e.g. in most situations the Sale of Goods Act 1979 implies a condition that goods are of satisfactory quality (qv) and will be reasonably fit for their intended purpose. See also: Sale of goods; Unfair Contract Terms Act 1977.

CDM Regulations 2007 See Construction (Design and Management) Regulations 2007.

Central office overheads The term is used in PPC, and defined at appendix 1 as the ‘agreed central office overheads as distinct from Site Office Overheads and Profit’. Both site office overheads and profit are also defined. At clause 12.4 central office overheads, site overheads and profit are fixed at the agreed amounts set out in the price framework, and form a part of the agreed maximum price (qv). They may be varied, but only upon agreement between the client and the constructor. Such amount is paid in accordance with clause 20. Though not expressly stated, the agreed amounts would cover head office costs relating to buildings, staff and other resources necessary for the running of a construction company but not project specific.

Certificate of making good A certificate issued under SBC clause 2.39 when, in the opinion of the architect, the contractor has made good all defects, shrinkages and faults notified under clause 2.38. The defects, shrinkages or faults are notified by means of an instruction or a schedule issued no later than 14 days following expiry of the rectification period (qv). The issue of the certificate results in the release of the balance of retention under clause 4.20.3, and is one of the triggers for the issue of the final certificate (qv). The same phrase is also used in IC and ICD clause 2.3, MW clause 2.11 and MWD clause 2.12, but in those instances, although the certificate is one of the triggers for the final certificate, it does not release the balance of retention: that must wait until the issue of the final certificate. See also: Retention fund; Retention monies.

Certificates The tangible expression of a certifier’s (e.g. an architect’s) professional opinion for the purposes specified in the contract.159 Many of the standard forms of contract provide for the architect or contract administrator to issue certificates of various types and at various times. It is unusual for a contract to specify that a certificate must take a specific form. However, standard pro formas for some certificates are available for use with certain contracts, and should be used. Where no standard form is available, a certificate must be specifically prepared. A certificate may take the form of a letter, but so as to avoid any uncertainty the letter or document should be 159 Token Construction Co Ltd v. Charlton Estates Ltd (1973) 2 BLR 3; Cantrell and Another v. Wright & Fuller Ltd (2003) 91 Con LR 97.

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Chain of causation headed ‘Certificate of …’ and begin ‘This is to certify …’. The certificate should be signed by the person responsible for issuing it, or by someone expressly empowered to sign on behalf of the certifier. Even if it is signed by a person on behalf of the authorised person, the authorised person would remain liable for any errors in the certificate. It is important that all certificates are issued promptly, and in accordance with the timescales set out in the contract. It would seem that a certificate cannot be issued early (e.g. before practical completion, or before defects have been made good, or before money is due to the contractor), but it can be issued late: that is, provided the certifier acts reasonably or, if appropriate, in accordance with the parties’ requirements.160 It is possible for a contractor to have a claim in damages against the employer following a failure by the architect to issue a certificate required by the contract. It would seem that the employer has to be aware of the architect’s failure and fail to remedy the situation, for it to amount to a breach of contract by the employer.161 An employer does not warrant the performance of a certifier when they have no knowledge of a failure to perform.162 A certificate is a document issued under a contract, and usually, once issued, may not be altered or amended (except possibly for patent errors) unless the contract allows otherwise, e.g. ACA clause 19.5. A certificate is not ‘issued’ merely because it has been signed by the relevant person (e.g. the architect). It must be put into circulation by either being handed or sent by post to the employer.163 The effect of a certificate is dependent upon the actual wording in the contract.164 For example, in many of the JCT standard form contracts an architect’s certificate is a condition precedent (qv) to the contractor receiving payment. If the architect refuses to issue a certificate, it is possible in certain circumstances for a contractor to sue for payment without it.165 Interference or obstruction with the issue of a certificate is, under some standard forms, a ground upon which the contractor may terminate its employment under the contract, e.g. SBC clause 8.9.1. That said, such interference by an employer is likely to amount to a breach of contract. See also: Final certificate; Interim certificates.

Chain of causation See Causation. Change In a general sense it means making or becoming different. It is the substitution of one thing for another. Different from a previous state. It is a defined term in DB referring to changes or variations, i.e. clause 5.1. It has a restricted meaning referring to a change in the Employer’s Requirements that results in an alteration or modification of the design, quality or quantity of

160

Cantrell and Another v. Wright & Fuller Ltd (2003) 91 Con LR 97 paragraphs 110, 125 and 126. Cantrell and Another v. Wright & Fuller Ltd (2003) 91 Con LR 97 paragraph 99; Croudace Construction Ltd v. London Borough of Lambeth (1986) 6 Con LR 70. 162 Hong Huat Developments Co (Pte) Ltd v. Hiap Hong & Co Pte Ltd (2000) 82 Con LR 89. In this case the courts used the words ‘lay employer’. Whether the use of ‘lay’ has any significance is not clear. 163 London Borough of Camden v. Thomas McInerney & Sons Ltd (1986) 9 Con LR 99. 164 East Ham Borough Council v. Bernard Sunley & Sons Ltd [1965] 3 All ER 619. 165 Page v. Llandaff Rural District Council (1901) HBC, 4th edn, vol 2, p 316; Croudace Construction Ltd v. London Borough of Lambeth (1986) 6 Con LR 70. 161

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Chattels the Works. A change includes the imposition by the employer of any obligation or restriction in regard to access, working space, working hours or the execution of the Works in any specific order. What is expressly excluded from the definition is a change necessary to put right work not in accordance with the contract. A change under MP is similar to that in DB, and is defined in clause 1. Within MP a change involves: (a) an alteration to the Requirements or Proposals that gives rise to an alteration in the design, quality or quantity of anything required to be executed under the contract; (b) the alteration of any existing restriction or obligation set out in the Requirements or Proposals, or the imposition of a new restriction or obligation; and (c) any matter in the contract that is required to be treated as a change. An example of this last category would be clause 10, which addresses discrepancies in the documents. There is an overriding exclusion that any alteration or matter that results from a default or the negligence of the contractor is not a change. The procedure for the valuation of changes is set out at clause 26. Within PPC a change is defined at appendix 1 as ‘any change in all or any part of the Project by way of addition, omission or variation of any kind or … by way of expenditure of a provisional sum identified in the Price Framework’. The detailed procedures for dealing with changes are set out at clause 17. The partnering team may suggest changes to the client if they believe they are in the interests of the project. Within prescribed timescales, the constructor is to make a ‘constructor’s change submission’ following a request from the client (clause 17.2). This submission is defined at appendix 1 as comprising the constructor’s proposals as to the effect of a proposed change: that is, the effect on the agreed maximum price, based on the priced framework, and on the date for completion. If the constructor’s submission is not accepted, and the client wishes to proceed with the change, then there is a fallback mechanism for valuing the change (i.e. on a fair and reasonable basis under clause 17.4) if the client and constructor cannot otherwise agree. The ascertainment is undertaken by the client’s representative, and again this is to address the effect on the agreed maximum price and the completion date.

Change of parties See: Assignment; Sub-letting; Novation. Charging order A judgment creditor can apply to the court for an order imposing a charge on a debtor’s property (e.g. house or land) as a means of enforcing a judgment. The court’s discretion to charge a debtor’s property in this way is derived from s. 1 of the Charging Orders Act 1979. The creditor is not entitled to the order as of right, but the order will usually be made unless the debtor can persuade the court that in all the circumstances it should not be made. The charge may be enforced by an order for sale. S. 75 of the Arbitration Act 1996 empowers the court to make orders charging property under s. 73 of the Solicitors Act 1974 or Article 71H of the Solicitors (Northern Ireland) Order 1976 in respect of arbitral proceedings as though the proceedings were in court.

Chattels Any property other than freehold land. Chattels real are leasehold interests in land, and chattels personal are all other things capable of being owned, e.g. goods and materials. See also: Personal property. 79

Cheque, payment by

Cheque, payment by Payment by cheque is a conditional payment. Creditors are not bound to accept cheques in payment of debts, but if they do, the debts will be discharged, provided the cheques are honoured by the bank. Theoretically, under most of the standard form contracts payment of amounts due on a certificate (qv) ought to be made in legal tender (qv), as none of the standard forms makes provision for payment by cheque. In practice, payment by cheque (provided the cheque is honoured) would be sufficient. It may well be argued that there is an established custom (qv) in the industry to that effect. Certainly, if certified payments have been made and accepted by cheque, and the cheques have been duly honoured, it is likely that the courts would not look kindly on a claim that a later payment by cheque amounted to a breach of contract (qv).

Choses in action; in possession Personal rights that are enforceable by legal action. Choses in action are intangible rights, such as a debt or the right to recover damages. In contrast, choses in possession (things in possession) are items of personal property capable of physical possession. In general, they can be assigned, and are transferred on death or bankruptcy (qv). See also: Assignment; Personal property.

Circuitry of action Claims by two parties that are effectively equal and opposite, and which cancel each other out.166

Civil commotion A phrase used to describe a situation that is more serious than a riot (qv) but not as serious as civil war (qv).167 The essential element is one of turbulence or tumult, though it is not necessary to show that the acts were done at the instigation of a third party. The activities of protesters, in public places, may well amount to civil commotion. Civil commotion may amount to force majeure (qv). SBC clause 2.29.10 and IC clause 2.20.20 provide that civil commotion that delays the Works is a ground for extension of time (see also DB clause 2.26.9). Under both these contracts civil commotion that causes suspension of the Works for a specified period is a ground on which the employer or the contractor may terminate the contractor’s employment (clause 8.11.1.4). It used to be referred to in the JCT contracts as being one of the excluded risks if the contract was carried out in Northern Ireland. The reference has been discontinued, and the provision is dealt with in the Northern Ireland Adaptation Schedule. See also: Commotion; Disorder.

Civil Liability (Contribution) Act 1978 S. 1 provides that if a party pays damages in respect of a civil action but is not entirely responsible for the claimant’s loss, then the party can seek a contribution towards the damages from any other party that is partly to blame. Section l(l) states: any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise). 166

See Mifflin Construction Ltd v. Netto Food Stores Ltd, 26 October 1993, Unreported; Hydrocarbons Great Britain Ltd v. Cammell Laird Shipbuilders Ltd and Automotive Products plc (1991) 53 BLR 84. Levy v. Assicurazioni Generali [1940] AC 791.

167

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Civil war The words ‘same damage’ are to be given their natural and ordinary meaning.168 It is not necessary that there was a judgment against the claimant. If the claimant has settled out of court, or on the basis of money paid into court, the claimant has still suffered a loss. However, it is conceivable that a party might settle when it may have obtained a judgment in its favour. It may not be reasonable for other parties to compensate the claimant for its poor judgement in settling. Consequently s. 1(4) states that a claimant who has settled is entitled to a contribution only if the facts of the case reveal that it would have been held liable, had it not settled. For example, a building owner may sue the architect in negligence (qv), and the architect may seek contributions from the contractor and sub-contractors for their liability. However, this right would not apply against someone entitled to an indemnity from the tortfeasor, e.g. an employer under 6.1 and 6.2. In all cases the amount of contribution is a matter for the court’s discretion. The amount is to be ‘just and equitable’ having regard to the person’s liability for the damage in question. There are occasions when a party may have to pay the claimant’s full loss even though it is liable for only a part of that loss. Certain standard terms of engagement (e.g. SFA/99 clause 7.3) and collateral warranties (e.g. JCT CWa/P&T clause 1.3) attempt to overcome this by introducing what is known as a ‘net contribution clause’ (qv). The clause provides that the defaulting party will pay only such part of the overall loss suffered by the claimant that it would have had to pay if all other parties so liable had paid their own particular contributions. See also: Indemnity clauses; Standard Agreement for the Appointment of an Architect (S-Con-07-A); Standard Form of Agreement for the Appointment of an Architect (SFA/99).

Civil Procedure Rules (CPR) They came into effect on 26 April 1999 and replaced the Rules of the Supreme Court (the ‘White Book’). They are available in many formats, i.e. textbook, loose-leaf, CD-ROM and on the Internet. They result from the recommendations made by Lord Woolf in a review of civil justice.169 The rules sought to address the criticisms that civil justice was too slow, too costly, and too complex. Judicial case management lay at the heart of the reforms. The rules apply to both the High Court and county courts. They are expressed in ‘parts’, and written in much simpler language than previously. In addition there is a useful glossary. Some old expressions, such as ‘writ’ or ‘pleadings’, were discarded in favour of more understandable terms: e.g. ‘writ’ is now ‘claim form’ (qv) and ‘pleadings’ are now ‘statements of case’. Each part of the rules is followed by the appropriate practice direction that sets out the administrative procedures. The overriding objective of the rules is set out in Part 1, and is to enable the courts to deal justly with cases.

Civil war A continuous and large-scale state of hostilities between two or more sets of armed forces within a single state, often between a government and an

168 Royal Brompton Hospital NHS Trust v. Hammond and Others and Taylor Woodrow Construction (Holdings) Limited (No. 3) (2002) 81 Con LR 1 HL. 169 Lord Woolf, Access to Justice, July 1996, Stationery Office.

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Claim insurgent group. A civil war is greater in scope than an insurrection (qv). In most standard forms of contract civil war would fall within force majeure (qv), e.g. as grounds for an extension of time (qv), if civil war is not separately identified. In a number of JCT contracts civil war is an identified exclusion within the definition of ‘All Risks Insurance’, e.g. clause 6.8. See also: Civil commotion; Commotion; Disorder; Riot.

Claim The ‘assertion of a right’. ‘Claim’ is not used in the JCT contracts, but it is used within ACA, e.g. clause 7.2. Under JCT contracts such as SBC, IC and ICD ‘claim’, if used, should convey the concept of additional payment sought by the contractor outside the contractual machinery, or a contractual entitlement. The word is commonly used to refer to a contractor’s application for loss and expense and/or an award of an extension of time (qv). Strictly speaking, the contractor does not submit or make a claim, but gives notices to the architect/contract administrator to address the content of the notice in accordance with the provisions in the contract. There are two main categories of claim that may be made by a contractor: — Contractual claims are those made in accordance with the specific provisions of the contract, e.g. ‘direct loss and/or expense’ under DB clause 4.19 or ACA clause 7.2. This type of claim is also, though rarely, described as being ex contractu, i.e. arising from the contract. The authority of the contract administrator, and the scope of that authority to address such claims, will depend upon the precise wording in the contract. For example, the scope of loss and/or expense that the architect can address within MW and MWD is much narrower than that in SBC, IC or ICD. See clause 3.6.3 in MW and MWD. — Common law claims are those that arise apart from the express provisions of the contract. They include claims in tort (qv), for a quantum meruit (qv), for a quantum valebat (qv), and for breach of an express or implied term of the contract or warranty (qv). Some, but not all (e.g. see NEC clause 12.4), of the current standard forms protect a party’s right to pursue additional or alternative claims, e.g. SBC clause 4.26. They are sometimes called ex contractual or extra contractual claims. Typically, express provisions within contracts tend to set out: (a) the grounds upon which relief can be sought; (b) the requirements for any notices; (c) the party responsible for calculating quantum, i.e. time or money; and (d) provision for payment or adjustment to the completion date. In order to secure the benefit of such an express provision, any procedural requirements such as notices must be observed.170 Most current forms (except MW, which has a limited provision for the contractor to recover loss and/or expense) tend to require notice in writing, and restrict what is recoverable. For example, the JCT contracts refer to ‘direct’ loss and/or expense, and it must not be recoverable elsewhere under the contract, e.g. in the valuation of variations. GC/Works/1 clauses 43 and 46 refer to ‘expense’, which must be ‘beyond that otherwise provided for in or reasonably contemplated by the contract’. This is an objective test. 170

Steria Ltd v. Sigma Wireless Communications Ltd (2007) 118 Con LR 177.

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Claim form There is no automatic link between an extension of time and the recovery of loss and/or expense. The grant of an extension of time is not usually a precondition to the recovery of loss and/or expense.171 Confusion exists, probably because some of the grounds for an extension of time are also grounds for loss and/or expense. Most standard forms allow for the recovery of both disruption and prolongation loss and/or expense. Contractors are sometimes labelled ‘claims conscious’ on the basis that they are aware of their contractual rights and seek to recover accordingly. The label fails to recognise the validity of such rights, and a so-called ‘claims conscious’ contractor may simply be an efficient contractor. There are, of course, some contractors who make totally unjustified claims, either as a matter of routine, on the basis that some will hit the target, or because they have underpriced at tender stage. They are their own worst enemies, and should not be labelled ‘claims conscious’, for they are nothing of the kind. They are simply inefficient, or possibly incompetent. There is a third category of claim, ex gratia claims, which are those without legal foundation and which are usually made on moral or hardship grounds. In exceptional circumstances there may be an advantage in meeting such a claim as a matter of grace, e.g. if the contractor is on the brink of insolvency (qv) and, as a result, the employer would face greater expense if the contractor could not carry on and a further contractor had to be employed to complete. However, such claims deserve to be treated with great caution.

Claim form A term introduced by the Civil Procedure Rules (qv) to replace ‘writ’ (qv). Legal proceedings are started by the issue of a claim form by the court at the request of a claimant (qv). Details are contained in CPR Part 7. An alternative procedure is set out in CPR Part 8 for use in specified circumstances. CPR Part 16 gives four essentials for a claim form. It must: — contain a concise statement of the claim; — state the remedy sought; — if the claim is for money, contain a statement of value as set out in Rule 16.3; and — contain any other matters that may be set out in a practice direction. Importantly, the form must be verified by a statement of truth. Particulars of the claim (qv) should be contained in or served with the claim form in a separate document, although they may be served later.172 Upon receipt of the particulars of claim a defendant may serve an admission, an acknowledgement of service, or a defence.173 A careful study of the relevant parts of the rules is necessary to obtain a full understanding of the requirements for a claim form in a given situation. For example, if the claimant is acting as a representative of another, then the extent of this capacity must be stated on the form. Similarly, if the defendant (qv) is sued as a representative then again the extent of this capacity must be stated. Rule 16.4 specifies the particulars of claim that must be included. If they are not so included, the claim form must state that those particulars will follow.

171

H Fairweather Ltd v. London Borough of Wandsworth (1987) 39 BLR 106. CPR Rule 7.4. 173 CPR Rule 9.2. 172

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Claimant Significantly, the court may grant any remedy to which the claimant is entitled, even if the remedy is not specified on the form.

Claimant One who claims or asserts a right. The term has always been used in arbitration (qv), and may be used in adjudication (qv) submissions rather than the cumbersome ‘referring party’. It is now used in litigation under the Civil Procedure Rules (qv) in place of the ‘plaintiff’.

Clause The numbered division or term in a legal document, or in a Bill presented to Parliament. All standard forms of contract have numbered terms for ease of reference. A new clause normally indicates a change in subject matter. Thus in IC and ICD clause 1.7 deals with ‘giving or service of notice or other documents’, and clause 1.5 deals with ‘reckoning periods of days’. In most of the JCT standard forms clauses are referred to as ‘conditions’. This general reference is not to be confused with the subdivision of contract terms into ‘conditions’ (qv) and ‘warranties’ (qv), which are terms of art and carry a distinct legal meaning. Clearly, not every clause in a JCT contract is a ‘condition’ in this legal sense.

Clerical errors Clerical errors in a document, e.g. wording in a contract or a certificate, tend to be viewed or taken as if the error had been corrected: that is, provided the error is clearly apparent, and the true word or clause reference or meaning is patently obvious.174 See also: Error.

Clerk of works An inspector employed on the Works to ensure that the standards of materials and workmanship comply with the contract provisions. The clerk of works is specifically mentioned in SBC and GC/Works/1 at clauses 3.4 and 4(2) respectively. SBC states that the clerk of works is to be appointed by the employer and under the direction of the architect. The clerk of works may give a ‘direction’ (qv) provided it is in respect of a matter for which the architect is expressly authorised, under the contract, to issue an instruction. The direction is of no effect unless the architect confirms it by means of an instruction within two working days. The duty of the clerk of works is usually to act solely as an inspector. GC/Works/1 refers to the appointment of a clerk of works or resident engineer at clause 4(2). It expressly states that they can exercise the powers given to the project manager under clause 31, which deals with matters of quality. It would seem that the project manager may delegate other powers to the clerk of works. The extent of these further delegated powers is not clear, and any such delegated powers should be in writing and copied to the contractor. Other contracts, such as the ACA and MW (qv), do not expressly refer to a clerk of works, but there is no reason why one should not be employed. Unless an appropriate amendment was made to the contract the clerk of works would possess no authority under the contract, although they could still be the ‘eyes and ears’ of the architect on site. It may be prudent to include an express provision in the contract documents ensuring that the clerk of works has access to the site. SFA/99(qv) and CE/99 do not expressly refer to the employment of a 174

R M Douglas Construction Ltd v. C E D Building Services (1985) 3 Con LR 124.

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Client’s representative clerk of works, but clause 3.10 refers to the appointment of site inspectors, which could include clerks of works and others. In practice, a clerk of works’ duties will be somewhat broader than laid down in the contract as far as the architect is concerned. They will often include inspecting, reporting in detail, advising, and generally being the ‘eyes and ears’ of the architect on site. The clerk of works should have a wealth of practical experience supplemented by sound technical knowledge. Clerks of works could be liable in negligence should they not perform their duties competently. This may affect the architect’s potential liability for inspection of the Works (qv), particularly when the clerk of works is engaged by the employer. In Kensington, Chelsea & Westminster Health Authority v. Wettern Composites Ltd and Others175 the vicarious liability (qv) of the employer for the negligence of the clerk of works was considered. Although the clerk of works was under the architect’s direction and control, it was found on the facts that the clerk of works had been negligent, though to a lesser extent than the defendant architects. The judge described the relationship between clerk of works and architect as that ‘of the Chief Petty Officer as compared with that of the Captain of the ship’. The clerk of works was held 20% responsible and the employer was held to be a contributor to the negligence to the same extent, since it was vicariously liable for its employee’s negligence. Damages were reduced accordingly. The negligent architects were responsible for the balance of 80% of the damages. It is very important that the duties of the clerk of works are clearly defined and made known, to avoid difficult situations and misunderstandings arising during the contract: this could be done at the first site meeting. The Institute of Clerks of Works of Great Britain Incorporated (ICW) was formed in 1882. It admits members, after examination and/or interview, as licentiate or member. A useful publication is the Clerk of Works and Site Inspectors Handbook produced by the ICW, which also produces a selection of other documents, such as a form of appointment.

Client A person or party using the services of another such as a professional person. This word is used in the RIBA Conditions of Engagement documents SFA/99, CE/99, SW/99, S-Con-07-A, C-Con-07-A and D-Con-07-A to describe the building owner or employer. These documents, published by RIBA Publishing, set out the conditions to govern the relationship between architect and client. Within certain of the more recent standard forms, such as the CE and PPC, ‘client’ replaces the word ‘employer’. In CE ‘client’ is defined at clause 1.1 as ‘the person identified in the Agreement as the Client who is procuring the Project (who may also be the Purchaser)’. Within PPC the ‘client’ is defined at appendix 1 as ‘the party named in the Project Partnering Agreement to fulfil the role of Client as described in the Partnering Documents’.

Client’s representative A term used to describe a person authorised to act on behalf of a client. They may be an architect, a project manager or other professional. The scope of that authorisation will vary, depending on the agreement with the client. 175

(1984) 31 BLR 57.

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Code of Practice for the Selection of Main Contractors Under the BPF System (qv) and the supporting form of contract, the client’s representative is the person or firm responsible for managing the project on behalf of and in the interests of the client (qv). However, the BPF edition of the ACA contract (qv) simply gives the representative the same authority and powers as those of the architect, except that the client’s representative is given a specific right, which the architect under the ACA does not have, to delegate functions. The term is also used in PPC and defined at appendix 1 as the party named in the project partnering agreement to fulfil the role of client representative, as described in the partnering documents. They are to be replaced in accordance with the partnering terms. The authority of the representative is set out at clause 5.2. They are to represent the client in all matters relating to the project, except membership of the core group (qv), and any other limitations set out in the project partnering agreement. The representative’s duties are identified at clause 5.1. In general, the client’s representative administers the ‘partnering agreement’ on behalf of the employer. See also: Employer’s representative.

Code of Practice for the Selection of Main Contractors This is a document prepared by the Construction Industry Board in May 1997 and published by Thomas Telford. It has replaced the Codes of Tendering procedures produced by the National Joint Construction Council (NJCC), which no longer exists as a body. The Code focuses on competitive tendering for work where the contractor simply carries out the construction (the traditional approach) or where the contractor designs the building and constructs it (the design and build approach). It is structured as follows: — Glossary of ‘key players’ (client, consultant, etc.) and ‘technical terms’ (approved list, compliant tender, etc.) — Introduction — Qualification and compilation of the tender list — Tender invitation and submission — Tender assessment — Tender acceptance — Annex 1: Tender enquiry documents — Annex 2: Process for the selection of main contractors (in flowchart form) The Code stresses the need for clarity and certainty in the selection process. There is a caution about including a contractor on the list that has some connection with the client. It is suggested that, to achieve best value, quality and value should be considered when selecting the successful contractor, and all tenderers must be informed of the criteria and any weighting system. Time for submission of tenders is important. The Code includes a useful flowchart for this process. The Code sets out criteria for qualification for inclusion on the tender list that are similar to the criteria in the NJCC Code. Advice is given about the use of approved lists of tenderers, and the need to review at regular intervals. Compiling the tender list is divided into stages: — Preparing a preliminary list of potential tenderers. — Enquiry about willingness to tender, skills and experience, and including key details of the project. 86

Code of Procedure for Single-Stage Selective Tendering 1996 —

From information received prepare the final list. There is no specifically recommended number of tenderers, but the tender list should be the minimum consistent with effective competition, and the conditions of tender must be the same for all. A maximum of three is suggested for the final list in the case of design and build, and a maximum of six for construction only tenders. The Code suggests that reserves should be identified in case someone on the list drops out. The actual tender invitation and submission process is illustrated by another helpful flowchart. Multiple rounds of tendering should be avoided. Information for inclusion in the invitation is listed as an annex at the back of the Code. Standard forms of tender are recommended. The times for return of tenders are suggested as 12 weeks minimum for design and build projects and eight weeks minimum for construct only projects. These are sensible times, but probably longer than the periods observed in practice. The Code gives advice about matters such as questions during the tendering period, extension of the period, and arrangements for receipt of tenders to ensure confidentiality. Assessing tenders properly requires that non-compliant tenders be rejected. A key factor in dealing with tenders containing an arithmetical error is whether tenderers have been notified that the overall price or the pricing document is dominant. Where the overall price is dominant, the tenderer should either stand by the price or withdraw. If the pricing document is dominant, the client can request another overall price to match the rates. Advice is given about interviewing tenderers after submission, and about the selection of preferred and next preferred tenderers. Further advice is given about notifying successful tenderers, and the notification of unsuccessful tenderers. See also: Code of Procedure for Single-Stage Selective Tendering 1996; Code of Procedure for Two-Stage Selective Tendering 1996; Error; Invitation to tender; JCT Practice Note 6; Tender.

Code of Procedure for Single-Stage Selective Tendering 1996 A document produced for the benefit of all who commission building work. It aimed to introduce generally accepted standards into the traditional tendering procedure. The code was prepared by the National Joint Consultative Committee for Building in collaboration with: — the Scottish Joint Consultative Committee; — the Joint Consultative Committee for Building, Northern Ireland. The NJCC no longer exists as a body, and therefore the Code is not available in an updated form. Therefore a degree of caution needs to be exercised by anyone using the Code. For example, reference is made to the duties of the parties under the CDM Regulations 1994, which were changed in 2007. The code has been largely replaced by the Code of Practice for the Selection of Main Contractors, produced by the Construction Industry Board. The Code assumes that a standard form of building contract is to be used. If a non-standard form of contract is used, then modifications may be necessary. There are clear benefits to all parties involved, in that a standard procedure is to be followed when inviting and accepting tenders (qv). The Code recommends that the number of tenderers for a project should not exceed a maximum of six, and in certain circumstances should not exceed four. 87

Code of Procedure for Single-Stage Selective Tendering 1996 The restrictions help avoid unnecessary abortive costs in preparing unsuccessful tenders, as these can be recovered only by increasing pricing levels generally within the building industry, i.e. successful tenders. In preparing a shortlist of tenderers the following must be borne in mind: — the firm’s financial standing; — recent experience of building over similar contract periods; — general experience and reputation of similar building types; — the adequacy of management; — health and safety competence; — quality assurance position; and — adequacy of capacity. Each firm on the shortlist should be sent a preliminary enquiry to determine whether it is willing to tender. The enquiry should contain: — job title; — description; — name of employer; — names of professional team; — name of planning supervisor (now CDM coordinator); — location of site, including plan; — approximate cost range; — number of tenderers; — principal named/nominated sub-contractors (if any); — form of contract, noting important additions or deletions; — procedure for correction of priced bills; — contract executed as a deed or under hand; — anticipated date for possession; — contract period; — anticipated date for dispatch of tender documents; — length of tender period; — length of time tender must remain open for acceptance; — guarantee requirements; and — special conditions. Once a contractor has confirmed its intention to tender, then it should submit a tender. If circumstances arise that make it necessary for it to withdraw, then it should notify the employer or the employer’s nominated agent (e.g. architect) before the tender documents are issued or, at the latest, within two days thereafter. If a contractor has expressed a willingness to tender, but is not chosen for the final shortlist, it must be informed immediately. Note: — Tender documents should be dispatched on the stated date. — Tenders must be submitted on the same basis. — Alternative offers based on alternative contract periods may be admitted if requested on the date of dispatch of documents. — Standard forms of contract should not be amended. — A time of day should be stated for receipt of tenders, and tenders received late should be returned unopened. — The tender period should depend on the size and complexity of the job, but be not less than four working weeks (20 working days). If any tenderer requires clarification of a point, it must notify the employer or the employer’s agent (e.g. architect), who should inform all tenderers of their response. If a tenderer submits a qualified tender, it should be given the oppor88

Code of Procedure for Single-Stage Selective Tendering 1996 tunity to withdraw the qualification without altering the tender figure; otherwise the tender should normally be rejected. Under English law a tender may be withdrawn at any time before acceptance (qv), which is why some forms of tender specify that the contractor has been paid a nominal sum (often £1) in consideration for keeping the tender open. Where there is consideration for keeping it open, the tender cannot be withdrawn until expiry of the specified period. Under Scottish law it cannot be withdrawn unless the words ‘unless previously withdrawn’ are inserted in the tender after the stated period of time the tender is to remain open for acceptance. After tenders are opened, all but the three lowest tenderers should be informed immediately. The lowest tenderer should be asked to submit its priced document (e.g. bills) within four working days. The other two are informed that they may be approached again. After the contract has been let, each tenderer should be supplied with a list of tender prices. The quantity surveyor must keep the priced bills strictly confidential. If there is an error in pricing, the code sets out alternative ways of dealing with the situation, as follows: — Alternative 1. The tenderer should be notified and given the opportunity to confirm or withdraw its tender (i.e. the total sum). If withdrawn, the next lowest tenderer is considered. If the lowest tenderer confirms its offer, an endorsement should be added to the priced bills that all rates, except preliminary items, contingencies, prime cost and provisional sums, are to be deemed reduced or increased, as appropriate, by the same proportion as that by which the corrected total exceeds or falls short of the original price. — Alternative 2. The tenderer should be given the opportunity to confirm its offer or correct the error. If the error is corrected and the tender is no longer the lowest tender, then the next tender should be examined. If the error is not corrected, then an endorsement is required within the priced document (e.g. bills). Corrections must be initialled or confirmed in writing, and the letter of acceptance must include an appropriate reference. The lowest tender should be accepted, after correction or confirmation, in accordance with the alternative chosen. If alternative 1 applies, the choice facing the tenderer should simply be to confirm or withdraw. An employer may be tempted not to stand by the application of alternative 1 in such circumstances. An employer must be aware that the agreement to use the code and one of the alternatives is binding on all parties. It is possible that an employer who stipulated alternative 1 and subsequently allowed a price correction could be liable in damages for a breach of warranty, at least to the next lowest tenderer, for the abortive cost of tendering.176 176 There may be an implied contract between a public body and a tenderer. See Harmon v. House of Commons (1999) 67 Con LR 1 and Blackpool and Fylde Aero Club Ltd v. Blackpool Borough Council [1990] 1 WLR 1195. See also J & A Developments Ltd v. Edina Manufacturing Ltd, Armoura Ltd and Others [2006] NIQB 85 as an extreme case, where the employer seeking to reduce the tender price was ordered to pay a large sum to the original lowest tenderer as loss of profit, as well as its wasted costs of tendering.

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Code of Procedure for Two-Stage Selective Tendering 1996 An employer does not usually undertake to accept any tender, and is not normally responsible for the costs of tendering.177 There may be good reason for an employer to accept a tender other than the lowest. Although an employer is entitled to do so, it will not please the other tenderers. The code is devised to remove such practices. If the tender under consideration exceeds the estimated cost of the project, negotiations should take place with the successful tenderer to reduce the price. The quantity surveyor would normally produce what are called ‘reduction bills’ or ‘adjustment bills’. These would be priced and signed by both parties as part of the contract bills. See also: Code of Practice for the Selection of Main Contractors; Code of Procedure for Two-Stage Selective Tendering 1996; Error; Invitation to tender; JCT Practice Note 6; Tender.

Code of Procedure for Two-Stage Selective Tendering 1996 Single-stage selective tendering is considered to be appropriate for most building contracts. Where it is thought desirable to involve the contractor at an early stage, then two-stage tendering may be adopted. This Code was produced for the benefit of all who commission building work, and it aimed to introduce generally accepted standards into the procedure. The Code was prepared by the National Joint Consultative Committee for Building in collaboration with: — the Scottish Joint Consultative Committee; — the Joint Consultative Committee for Building (Northern Ireland). The NJCC no longer exists as a body, and therefore the code is not available in an updated form. Therefore a degree of caution needs to be exercised by anyone using the code. For example, reference is made to the duties of the parties under the CDM Regulations 1994, which were changed in 2007. The code has been largely replaced by the Code of Practice for the Selection of Main Contractors produced by the Construction Industry Board. In practice the contractor may have an input into the design process, but the Code is not concerned with design or design liability. It assumes the use of standard forms of building contract after the second stage. If other forms of contract are to be used, then some modification may be necessary. Two-stage tendering involves a first-stage competitive tendering procedure to select the contractor on the basis of pricing of documents related to a preliminary design. Thus a level of pricing is provided for use in subsequent negotiations. During the second stage a tender is produced, using a second-stage pricing document (e.g. bills of quantities (qv)), which properly documents the finished design. The process is most suited to large or complex schemes, where the involvement of the contractor at an early stage is desirable. It is important to remember that, although the system is often used when designs are fairly crude and time is short, the time taken to conclude negotiations may not produce any overall savings in time against single-stage tendering at a later stage in the design process. During the first stage it is important to: — provide a competitive basis for selection; — establish the layout and design;

177

William Lacey (Hounslow) Ltd v. Davis [1957] 2 All ER 712 is a case in which an employer was held to be liable in a specific set of circumstances.

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provide clear pricing documents that are flexible enough to form the basis for the detailed pricing of the second-stage tender. Provision must be made for fluctuations between the first- and second-stage tenders; — clearly state the respective obligations and rights of the programme for the second stage and the conditions of contract; and — state the contract terms. The exact nature of the first-stage documents will depend upon the circumstances. It is not intended that any contract for the execution of the work will be entered into at the end of the first stage. The number of tenderers for the first stage should be restricted to six. When preparing a shortlist of tenderers the following must be borne in mind: — the firm’s financial standing; — recent experience of building over similar contract periods; — general experience and reputation in respect of similar building types; — adequacy of management; — health and safety competence; — quality assurance position; and — adequacy of capacity. Each firm on the shortlist should be sent a preliminary enquiry to determine whether it is willing to tender. The enquiry should contain: — job title; — description; — name of employer; — names of professional team; — name of planning supervisor (now CDM coordinator); — location of site including plan; — approximate cost range; — number of tenderers; — principal named/nominated sub-contractors (if any); — form of contract, noting important additions or deletions; — correction of priced document; — second-stage contract executed as a deed or under hand; — anticipated date for possession; — contract period; — anticipated date for dispatch of tender documents; — length of tender period; — length of time tender must remain open; — guarantee requirements; and — special conditions. Once a contractor has confirmed its intention to tender, then it should do so. If circumstances arise that make it necessary for it to withdraw, then it should notify the employer or the employer’s agent (e.g. architect) before the tender documents are issued. If a contractor has expressed a willingness to tender, but is not chosen for the final shortlist, then it must be informed immediately. Note: — tender documents should be dispatched on the stated date; — tenders must be submitted on the same basis together with the priced document; — standard forms of contract should not be amended; — a time of day should be stated for receipt of tenders, and tenders received late should be returned unopened; and 91

Code of Procedure for Two-Stage Selective Tendering 1996 — the tender period should depend on the size and complexity of the job, but should be not less than five weeks. If any tenderer requires clarification of a point, then it must notify the employer or the employer’s agent (e.g. architect), who should inform all tenderers of the response. If a tenderer submits a qualified tender, it should be given the opportunity to withdraw the qualification without altering its tender figure; otherwise the tender should normally be rejected. Under English law a tender may be withdrawn at any time before acceptance (qv), which is why some tenders specify that the contractor has been paid a nominal sum (often £1) in consideration for keeping the tender open. Where there is consideration for keeping it open, the tender cannot be withdrawn until expiry of the specified period. Under Scottish law it cannot be withdrawn unless the words ‘unless previously withdrawn’ are inserted in the tender after the stated period of time the tender is to remain open for acceptance. After the tenders have been examined, all the tenderers except the three adjudged most favourable should be informed immediately. The quantity surveyor must keep the priced documentation (which should be submitted at the same time as the tender) strictly confidential. If there is an error in pricing, the tenderer should be given the opportunity to confirm the offer or correct genuine errors. If the tenderer corrects and is no longer the most favourable tender, the next tender should be examined. If the tenderer does not correct, but stands by its tender, then the tender must be appropriately endorsed to recognise that the tender figure stands, notwithstanding the error. Any corrections must be initialled or confirmed in writing. The tender considered to offer the best value should be recommended for acceptance. If one tender is not clearly the most favourable, two or more tenders may be given to the employer, together with a recommendation, for their decision. Confirmation of the most favourable first-stage tender should be undertaken in writing, along with a declaration of the intention to proceed to the second stage. In addition, the intention of the parties should be clearly recorded in respect of: — grounds for withdrawal from the second stage; — any entitlement to costs incurred, and the methods of ascertaining them if the parties fail to conclude the second-stage negotiations to their mutual satisfaction; and — reimbursement for any work undertaken on site if the second-stage procedure is aborted. ‘Acceptance’ of the first-stage tender can be a delicate operation. An employer, in particular, does not wish to find itself in the position of having entered into a contract for the completion of Works. Therefore the terms of the letter of ‘acceptance’ of the first-stage tender must be carefully worded. It is feasible for a binding agreement to be entered into covering the second-stage process and how matters are to be addressed during that stage, e.g. costs. The second stage is the completion of the design, production drawings and bills of quantities, and the pricing of the bills from the first-stage tender ‘information’, i.e. rates and prices. Though most of the contractual provisions should be agreed as part of the first stage, a number of issues are likely to remain for resolution during the second stage. 92

Collateral contract/Collateral warranty The total of the priced bills is then recommended to the employer for acceptance as the contract sum. The code states that no contract will have been entered into until the employer has accepted the sum. That may or may not be the case in practice. The parties should make clear, preferably in writing, their precise intentions in that respect. If agreement cannot be reached, then the second-stage procedure may be restarted with the next, most favourable, tenderer; the stage one process may be repeated. After a contractor is appointed, all the unsuccessful tenderers should be notified and, if feasible, a list of the first-stage tender offers provided. If cost has not been the sole grounds for acceptance, this fact should be stated. A model preliminary enquiry for invitation to first-stage tenderers is appended to the code, together with a model formal invitation to tender and form of tender. Notes are included for use in Scotland. If the procedure does work well in practice it is probably because both parties, after the completion of the first stage, have an interest in bringing the procedure to a successful conclusion. See also: Code of Practice for the Selection of Main Contractors; Code of Procedure for Single-Stage Selective Tendering 1996; Errors; Invitation to tender; JCT Practice Note 6; Tender.

Collaborate To work in partnership. Collateral contract/Collateral warranty An independent contract that is collateral to another contract and distinct from a product guarantee. They can be created in several ways. Undertakings may be given that are collateral to another contract. They may be considered to be independent of that other contract either because they cannot fairly be regarded as having been incorporated therein, or because rules of evidence hinder their incorporation, or because the main contract is defective in some way or is subject to certain requirements of form or is made between parties other than those by or to whom the undertaking is given. Such undertakings are often referred to as collateral contracts, or ‘collateral warranties’.178

Promises made by the employer to the contractor during pre-contract negotiations may give rise to such a contract or warranty.179 The classic case is Shanklin Pier Ltd v. Detel Products Ltd,180 where the employer contracted with a third party to paint the pier. The defendants induced the employer to specify their paint, and gave assurances as to its quality. The paint was properly applied by the third party, but did not live up to the defendant’s promises. It was held that there was a collateral contract between the parties under which the employer could recover the amount it had to spend to correct matters. In Greater London Council v. Ryarsh Brick Co Ltd181 it was held that where a supplier makes statements to a prospective purchaser about the quality of its goods, and because of those statements the purchaser causes a third party, such as a building contractor, to buy them, a collateral contract may arise between the supplier and

178

Chitty on Contracts, 30th edn, Sweet & Maxwell (2008) 12-033. Bacal Construction (Midlands) Ltd v. Northampton Development Corporation (1976) 8 BLR 88, where statements about ground conditions were held to give rise to such a warranty. 180 [1951] 2 All ER 471. 181 (1985) 4 Con LR 85. 179

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Commencement agreement the purchaser, so that if the goods prove defective, the purchaser can sue the supplier under the collateral contract. In the construction industry the use of formal subsidiary collateral contracts between an employer and a sub-contractor is common. There is no privity of contract (qv) between the employer and any sub-contractor, whether named or otherwise, and it is unlikely that third parties will be allowed to acquire rights under the Contracts (Rights of Third Parties) Act 1999 (qv), although circumstances may dictate otherwise. SBC, IC and DB include provision within them (i.e. Section 7) for the supply of collateral warranties (i.e. enforceable promises) by a sub-contractor in favour of the employer, or the contractor in favour of the employer’s funder or a future tenant or purchaser of the Works. This creates a direct contractual link that otherwise would not exist. The JCT has produced standard warranties for use with the SBC, IC and DB contracts, e.g. CWa/P&T and SCWa/P&T. In addition, the JCT has produced a standard warranty for use with IC (and ICD) called the ICSub/NAM/E agreement, for execution by any sub-contractor named under the IC procedures, i.e. clause 3.7. The warranty is executed by the sub-contractor in favour of the employer: under it the sub-contractor gives a warranty to the employer in respect of any design of the Works completed by the sub-contractor. This creates an important link for the employer, as the main contractor under IC is not liable for any design undertaken by a subcontractor named under clause 3.7. See IC Schedule 2 Named Sub-Contractors paragraph 11.1. Collateral warranties, sometimes referred to as ‘duty of care agreements’, are often required from architects and other members of the professional team. Although standard warranties have been produced that have the approval of a number of professional institutes and the British Property Federation, construction professionals are commonly asked to enter into warranties on forms that are specially drafted by their clients’ advisers. Such forms usually have clauses dealing with the following matters: — reasonable skill and care of the warrantor; — liability for reinstatement and/or consequential losses;182 — design obligations; — prohibition on specifying certain materials; — licence to use copyright material; — obligation to continue professional indemnity insurance cover; — assignment of the warranty; and — step-in rights/take-over provisions (usually by a funder) in specified circumstances. It is sensible for any consultant required to execute a warranty by a client to ensure that the wording is agreed or approved by the consultant’s indemnity insurers prior to execution. See also: Warranty.

Commencement agreement Defined at appendix 1 within PPC (qv) as an agreement governing commencement of the project on site, executed in accordance

182

Glasgow Airport Limited v. Messrs Kirkham & Bradford (2007) CSIH 47. In this case the judge made clear that, in the absence of clear wording, liability would exist for consequential losses.

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Common law with clause 15.1 of the partnering terms and based on the form set out in part 2 of appendix 3. The agreement is signed by the partnering team once all the preconditions have been satisfied for commencement on site, as set out at clause 14. The agreement is prepared by the partnering adviser (qv) following notification from the client’s representative based on the template at appendix 3 part 2. Once completed, a copy is sent to each member of the partnering team, who are given a minimum of 10 working days within which to comment. Subject to amendment based on any comments received, the document is then executed.

Commercial Court The Commercial Court deals with complex cases arising out of business disputes concerning: — business contracts; — carriage of goods; — oil and gas reserves and the like; — insurance; — banking and finance; — the purchase and sale of commodities; — construction of ships; — business agency; and — arbitration. It is part of the Queen’s Bench Division of the High Court, and staffed by judges with special knowledge of commercial law and commercial matters. The work of the Commercial Court is governed by Part 58 of the Civil Procedure Rules. The procedure is more flexible than the ordinary procedure, and by consent the strict rules of evidence can often be relaxed. Many important questions relating to arbitration (qv) are determined in the Commercial Court, especially since the Arbitration Acts 1979 and 1996. However, appeals in construction arbitrations are usually dealt with by the Technology and Construction Court (qv), formerly known as the Official Referees Court.

Commission A body set up by the Crown or other authority, generally to enquire into and report upon something. An order, especially to an agent, to do something. Thus an architect or other consultant is said to have received a commission when a client requests that the consultant act on the client’s behalf, e.g. to prepare the designs for a building. A form of remuneration that is related to the value or type of business generated. It is a common way of paying sales representatives, the theory being that if a person is paid in proportion to what is sold, then more will be sold. An agent must not take any secret commission, i.e. one of which the principal is unaware. See also: Agency.

Common law The rules and principles expressed in judicial decisions over the centuries. It is not codified, and covers all law other than law made by statute (qv). Its essential feature is the doctrine of judicial precedent (qv), which is one of the most important sources of English law. Even where there is a comprehensive written contract there may be implied terms (qv) that derive from common law.183 However, the more comprehensively drafted the contract, the less likely it is that terms will be implied. 183

London Borough of Merton v. Stanley Hugh Leach Ltd (1985) 32 BLR 51.

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Commotion At common law, unless the parties have agreed to the contrary, a building contractor impliedly undertakes that: — it will undertake work in a good and workmanlike manner; — it will supply good and proper materials; and — (where the contract is to build a house) the house will be reasonably fit for human habitation. In other cases the obligation is to ensure that the completed structure will be reasonably fit for its intended purpose.184 Express terms (qv) of the contract will replace such implications, and the third limb of this duty will not normally apply where the employer appoints an architect or other designer.185 See also: Equity.

Commotion A term used in ACA at clause 11.5 (alternative 2) as a ground for awarding an extension of time (qv). Various stages of violence are listed, ranging from war (qv) to disorder (qv). In this context it seems that the term refers to a violent disturbance between a riot (qv) and a disorder, although the dictionary allows both ‘violent disturbance’, ‘upheaval’ and ‘political insurrection’ as definitions. In other contracts, commotion in this sense probably comes under the head of force majeure (qv). See also: Civil commotion; Civil war; Insurrection.

Company See: Corporation. Compensation event A term used in clause 6 of the NEC to mean the 19 events listed in clause 60.1. They include such things as variations (known as instructions to change the work information), tests, antiquities and weather. The effects of these events on both time and cost are addressed together under the procedures set out in clause 6. See also: Engineering and construction contract (NEC).

Competent Generally being able to act in certain circumstances, including the ability to perform a job or occupation, or to reason or make decisions. Also meaning properly qualified, in the sense of an electrician who undertakes electrical work and a CDM Co-ordinator appointed under the CDM Regulations 2007. When used in a strictly legal context about a court, it is to denote the extent of its jurisdiction, or of a witness, to show that they are able to give evidence. It is also used in the context of making a will, in that to make a will a person must be competent. To be competent to make a will a person must understand what a will is, what they have to bequeath, and those whom they wish to be beneficiaries. In the law of evidence, competent means relevant and/or material to the matter in issue. It is also used in contracts to stress that a particular person must be suitably qualified to do a particular job. When considering ‘competent’ in the Quarries (General) Regulations 1956, the judge said:

184 185

Hancock v. B W Brazier (Anerley) Ltd [1966] 2 All ER 901. Test Valley Borough Council v. Greater London Council (1979) 13 BLR 63.

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Completion I am not prepared to hold either that ‘competent’ means the most competent person available … or that it means that he shall be so competent that he never makes a mistake. In my judgment, it means a man who, on a fair assessment of the requirements of the task, the factors involved, the problems to be studied and the degree of danger implicit, can fairly be regarded by the manager, and in fact is regarded at the time by the manager, as competent to perform …186

SBC clause 3.2 refers to the contractor having a ‘competent person-incharge’. The intention is clearly that such a person must be able to do the relevant work with skill. Under this provision the competent person is also the contractor’s representative on site. Clause 1.2 of ACA requires the contractor to exercise ‘all the skill, care and diligence to be expected of a properly qualified and competent contractor experienced in carrying out work of a similar scope, nature and size’ to the project in hand. It is a question of fact whether or not a person is ‘competent’, i.e. has the necessary qualities and skills. GC/Works/1 clause 5 requires the contractor to employ a ‘competent agent’ to supervise the execution of the Works.

Complete agreement clause Sometimes referred to as an entire agreement clause or whole agreement clause. A clause used where the parties wish to ensure that their agreement is restricted to the executed written documents. If a contract includes an effective complete agreement clause it means that all terms must be set out in the document, as promises, dealings and negotiations leading up to the written agreement cannot be relied upon. It is an express provision in a contract that aims to prevent a party from relying on any statements or representations except as expressly stated in the contract. The effect of any such clause will depend upon the precise wording in each case. It would normally cover any pre-contractual negotiations that considered different terms, or any discussions superseded by the finally executed documents, thereby attempting to narrow the possible causes of action any party might bring to those based or set out in the contract executed by the parties. Such clauses may be used to exclude reliance on misrepresentation,187 collateral warranties188 and even implied terms189 in certain situations. Such a clause could not oust an implied term necessary to give the contract business efficacy. An example of an entire agreement clause is NEC clause 12.4.

Completion In general, the point in time when the contract works are finished. Different forms of contract qualify completion in various ways. Completion under the JCT contracts is when the Works have achieved practical completion (qv).190 In the NEC clause 11.2 completion is defined as when the contractor has: — done all the work that the Works information states it is to do by the completion date; and — corrected all notified defects that would have prevented the employer from using the Works and others (qv) from doing their work. 186

Brazier v. Skipton Rock Co Ltd [1962] 1 All ER 955 at 957 per Winn J. Watford Electrics Ltd v. Sanderson CFL Ltd [2001] EWCA Civ 317. 188 Deepak Fertilisers v. ICI [1998] 2LR 139. 189 Exxonmobil Sales and Supply Corporation v. Texaco Ltd [2003] EWGC 1964. 190 Emson Eastern Ltd (In Receivership) v. E M E Developments (1991) 26 Con LR 57. 187

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Completion date If the work that the contractor is to do by the completion date is not stated in the Works information, completion is when the contractor has done all the work necessary for the employer to use the Works and for others to do their work. ‘Completion’ is also used in connection with a house purchase to mean the execution of the prescribed deed of transfer, when the purchase price is paid and the legal estate passes to the purchaser. See also: Completion date; Practical completion.

Completion date All standard forms of contract make provision for stating a specific date by which, or a period within which, the work is to be completed. Usually, failure by the contractor to so complete will result in its having to pay or allow the employer liquidated damages (qv) at a specified rate. It is usual for there to be a provision in the contract to allow the completion date to be altered (i.e. extensions of time (qv)) for specified reasons. Where no completion date is expressly stated or agreed, the contractor would be under an obligation to complete within a ‘reasonable time’ (qv). In those circumstances, even if liquidated damages were identified in the contract, the employer would be unable to recover them if the Works remained incomplete through the default of the contractor, even after the lapse of what was considered to be a ‘reasonable time’. That is because there would be no specific date from which the damages could be calculated.191 An employer’s remedy would lie in unliquidated or general damages on proof of loss. SBC clause 1.1 defines the completion date as the date for completion of the Works, or a section as stated in the contract particulars (qv), or such other date as is fixed either under clause 2.28 or by a pre-agreed adjustment (qv). The agreed date for completion is to be inserted in the contract particulars (qv) at the time the contract is executed, and is subject to alteration by the architect under the extension of time provisions (clauses 2.26 to 2.29) or as a consequence of a Schedule 2 quotation (qv). Clause 2.30 refers to the contractor as having discharged its obligations when practical completion (qv) is achieved. Therefore a contractor is to achieve practical completion on or before (clause 2.4) the completion date. The drafting approach is similar under IC, ICD and DB, except that they do not provide for adjustment for a Schedule 2 quotation or equivalent. Within CE, completion date is defined at clause 1.1 as the date or dates when the purchaser (qv) certifies that the ‘Services or Services within any relevant Section are complete in accordance with clause 3.7’. The supplier (qv) is to give five business days’ notice of its intention to request a certificate certifying completion. ACA does not refer to a completion date, but to a date on which the Works are fit and ready for taking-over (clause 12). The date for taking-over is to be inserted in the time schedule (qv). GC/Works/1 refers to completion at clause 34(1), and clause 1(1) refers to the date for completion as being calculated from the date of possession, or from the date of acceptance of tender as provided in the abstract of particulars (qv). The date is calculated using the periods inserted within the abstract of particulars. 191

Miller v. London County Council (1934) 151 LT 425.

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Concise Agreement for the Appointment of an Architect (C-Con-07-A) At NEC clause 11.2(3) the completion date is stated as ‘the completion date unless changed in accordance with this contract’. The date is inserted in the contract data (qv), and can either be inserted by the employer in part one, or left to the contractor to offer a completion date as part of its tender and to be inserted in part two. The contractor, under clause 30.1, is to complete on or before the completion date. The completion date is subject to adjustment in accordance with clause 6. Within PPC the phrase is defined at appendix 1 as the date when the project achieves project completion in accordance with clause 21 of the partnering terms. The date is inserted within the commencement agreement, and is arrived at following the procedure set out at clause 6.2. See also: Essence of the contract; Practical completion.

Composition Essentially, an agreement between a debtor and their creditors on the basis that the creditors agree with the debtor, and either expressly or by implication with each other, that they will accept less than the amounts due from the debtor in full satisfaction of their claims.192 The agreement may be made orally or in writing, or a combination of the two. It is referred to in some standard form contracts (e.g. SBC clause 8.1.1) in relation to one of the parties entering into an arrangement, compromise or composition in relation to its debts and falling within the definition of ‘insolvent’. It thereby provides one of the grounds for termination of the contractor’s employment under SBC, IC and DB.

Compromise See: Settlement. Conciliation A form of alternative dispute resolution that is similar to mediation (qv). In conciliation a conciliator attempts to assist the parties in dispute to reach an acceptable compromise. The conciliator should be impartial and encourage negotiation, rather than being partial. Conciliation has the following characteristics. — It is voluntary: the parties choose to conciliate or not. — It is private and confidential, and thus the outcome should remain private unless the parties agree otherwise. — The parties are free to agree to the resolution or not. Clause 66A(2) of ICE provides for what is termed ‘amicable dispute resolution’, including, by agreement, conciliation. Conciliation is to be carried out under the ICE Conciliation Procedure. ACA has provision for conciliation under clause 25A. It is not clear why it is made part of the contract, because an essential of conciliation is mutual consent. Therefore the parties can always consent to it if they deem it appropriate to do so. There is nothing to be gained by forcing the conciliation process on either party.

Concise Agreement for the Appointment of an Architect (C-Con07-A) Published by the RIBA in 2007 as part of a suite of appointment documents available for use by architects and their clients. The appointment documents comprise a concise conditions of appointment, a model letter, and a schedule of services. In addition there are notes on use and completion. The 192

Capes v. Ball (1873) LR 8 Exch 186.

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Conclusive evidence document is presumably intended for use on the same kinds of project for which architects previously used CE/99. This form has been produced in association with the RIAS and the RSAW, but not the RSUA or ACA. The form is available in electronic format. This form has received criticism, and practitioners appear to find it excessively complex. The use of the present tense throughout is not conducive to clarity, and features included in SFA/99 are missing from this form. It offers less protection to architects than CE/99. At the time of writing, this form is said to be undergoing revision. See also: Standard Agreement for the Appointment of an Architect (S-Con-07-A).

Conclusive evidence The evidence is decisive in respect of the relevant matter(s). No further evidence may be brought to contradict or qualify that evidence in any way. The final certificate (qv) under JCT 63 (until the 1976 revision) was final in two senses: — the last occasion on which the architect could certify payment; and — the final certification that the Works had been carried out in accordance with the contract. The operative clause was 30(7), which stipulated that the final certificate was to be conclusive evidence (unless proceedings had been commenced before issue of the certificate, or an arbitration request had been made within 14 days of issue) in any proceedings that the Works had been properly carried out and completed in accordance with the terms of the contract. This meant that the employer had no redress against the contractor if, for example, a month after the issue of the final certificate the employer discovered that none of the walls was vertical. Even if the employer sued through the courts, the final certificate was conclusive ‘in any proceedings’. The employer could, of course, sue the architect, which was why architects waited as long as possible before issuing the final certificate. Sometimes the final certificate was never issued. A small sum of money was left outstanding, in the hope that the contractor would not consider it worthwhile to take legal action and thereby the architect would never have to issue a final certificate. Certain things were excluded from the conclusive effect of the final certificate, i.e. fraud, dishonesty or fraudulent concealment, and any defect including omissions in the Works that reasonable inspection at any reasonable time before the issue of the final certificate would not have revealed. The latter are usually referred to as ‘latent defects’ (qv). The position under JCT 98 (clause 30.9) and IFC 98 (clause 4.7) was different, and in SBC (clause 1.11) and IC and ICD (clause 1.11) is the same as their 98 counterparts. The final certificate is conclusive evidence: — that where the quality of materials or the standard of workmanship are expressly stated to be to the approval of the architect, they are to the architect’s reasonable satisfaction, but the certificate is not conclusive that other materials or workmanship comply with the contract; — that any necessary effect has been given to all the terms of the contract that require an adjustment of the contract sum, except for accidental errors in arithmetic; — that all and only such extensions of time as are due, if any, have been given; and 100

Conclusive evidence — that reimbursement of any loss and/or expense is in final settlement of all and any claims arising from any matter referred to in clause 4.25 (SBC) or clause 4.18 (IC), whether for breach of contract, duty of care, statutory duty, or otherwise. The proviso regarding fraud (qv) and the commencement of adjudication, arbitration or litigation proceedings remains. The difference from JCT 63 is important, because it means that if nothing is expressly stated in the contract to be to the approval of the architect, the conclusiveness affects only the financial aspects of the certificate. In any action brought by an employer after the issue of the final certificate, the contractor is not able to rely on the certificate as proof that the Works are in accordance with the contract. However, even in relation to the matters listed in clause 1.10, the effect of the final certificate is merely to limit the evidence that might otherwise be called.193 Architects will no doubt limit the situations in which they require work or materials to be expressly stated to their approval. It should be noted that SBC clause 1.11 makes clear that, other than as stated in clause 1.10, no certificate is conclusive evidence that any work, materials or goods or any design completed by the contractor is in accordance with the contract. IC and ICD clause 1.11 is to similar effect. A discussion of the situation that arose after the judgment in Crown Estates Commissioners v. John Mowlem & Co Ltd194 can be found under final certificate (qv). MW and MWD do not make the final certificate conclusive about any matter. DB is not administered by means of certificates, but the final account and final statement have the same conclusive effect under clause 1.9 as the final certificate under SBC. However, there appears to be a significant problem with the stated procedure. The final account and final statement are to be prepared by the contractor and submitted to the employer. Under clause 4.12.4 the employer has a specified period of time within which to ‘dispute’ (qv) the final account or final statement. If the employer does not dispute them during the prescribed period, the final account and final statement are conclusive regarding the balance due either to the contractor or to the employer, as appropriate. If the employer does dispute them, or disputes part of them, the final account and final statement are conclusive only in respect of the part not disputed. Therefore it seems that if the whole of the account and statement is disputed, none of it becomes conclusive. It is sometimes said that in order to dispute the final account, adjudication, arbitration or other proceedings must be started. Common sense and a strict reading of the contract suggest that this approach is unnecessary. In order to dispute the final account, all that is required is for the employer to write to the contractor, stating that the employer disagrees with all or part of the final account. The difficulty is that total conclusiveness is achievable under clause 4.12.4 only if the employer disputes nothing. Although the concept of partial conclusiveness is recognised in clauses 4.12.4 and 4.12.7, other clauses do not seem to accept anything other than total conclusiveness. Payment under clauses 4.12.8 and 4.12.9, and the conclusiveness of the final statement in respect of

193 194

P & M Kaye Ltd v. Hosier & Dickinson Ltd [1972] 1 All ER 121. (1994) 70 BLR 1.

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Concurrent delay various matters under clause 1.9.1, are dependent upon the final statement not being disputed. Once a dispute is registered, there appears to be no way of making the final account conclusive. ACA clause 19.5 expressly states that the final certificate does not relieve the contractor of any liability under the contract, and therefore is not conclusive. GC/Works/1 (clause 50(7)) states that no certificate (qv) is to be conclusive, and also that any certificate may be modified or corrected by any subsequent certificate. See also: Approval and satisfaction.

Concurrent delay At its simplest, it is two or more occurrences that operate at the same time to delay the progress of the Works. Where the delays in question act on different activities, the matter is easily resolved by inputting the delays, one at a time, into the contractor’s programme and checking the results as the process continues. This is most easily and quickly done using computerised programming software. Only delays that the particular contract allows as grounds for extension of time need be inputted; delays that are the fault of the contractor will be ignored in this exercise. More difficult are the instances where the causes of delay operate at the same time on the same activity, for example where the architect is late in supplying foundation drawings, but the contractor could not start excavations in any event because its plant had broken down. The response from the courts has been wide ranging. In some instances the courts have favoured the dominant cause approach.195 One has to ask oneself what was the effective and predominant cause of the accident that happened, whatever the nature of the accident may be.196

The test has been said to be that of the ordinary bystander. In another case dealing with the question of dominance it was held that if a breach of contract by a defendant was held to entitle a claimant to claim damages, it must first be held to be an effective or dominant cause of their loss.197 In Henry Boot (Construction) Ltd v. Malmaison Hotel (Manchester) Ltd, it was said: Secondly, it is agreed that if there are two concurrent causes of delay, one of which is a Relevant Event, and the other is not, then the contractor is entitled to an extension of time for the period of delay caused by the Relevant Event notwithstanding the concurrent effect of the other event.198

This must be a correct view where the two concurrent delays operate on different activities, and, as noted earlier, computer analysis effectively disregards the delay that is not a relevant event, thereby giving credit only for the delay caused by the relevant event.199 It is in cases where two causes operate on one activity at the same time that difficulties arise.

195

See Fairfield-Mabey Ltd v. Shell UK (1989) 45 BLR 113; Yorkshire Dale Steamship v. Minister of War Transport [1942] 2 All ER 6. 196 Yorkshire Dale Steamship v. Minister of War Transport [1942] 2 All ER 6 at 10 per Viscount Simon. 197 Galoo Ltd and Others v. Bright Grahame Murray TLR 14 January 1994. 198 (1999) 70 Con LR 32 at 37 per Dyson J. 199 The approach was applied in Steria Ltd v. Sigma Wireless Communications Ltd (2007) 118 Con LR 177 and City Inn Limited v. Shepherd Construction Limited [2007] CSOH 190.

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Condition precedent A useful view of concurrency was given in a later case: However, it is, I think, necessary to be clear what one means by events operating concurrently. It does not mean, in my judgment, a situation in which, work already being delayed, let it be supposed, because the contractor has had difficulty in obtaining sufficient labour, an event occurs which is a Relevant Event and which, had the contractor not been delayed, would have caused him to be delayed, but which in fact, by reason of the existing delay, made no difference. In such a situation although there is a Relevant Event, ‘the completion of the Works is [not] likely to be delayed thereby beyond the Completion Date.’ The Relevant Event simply has no effect upon the completion date.200

In practice, concurrency – in the second, difficult sense – is relatively uncommon. Most delays are consecutive. The test is to examine the critical path. Delays affecting different activities must usually be consecutive unless there are two or more critical paths. Although it is not uncommon to find several critical paths running in parallel, true concurrency is rare. See also: Apportionment; Delay; Extensions of time.

Condition A term in a contract that is of fundamental importance to the contract as a whole. These are to be contrasted with other less serious terms called warranties (qv). In this sense both words are legal terms of art. If a condition is breached by one party, the other party may accept the breach,201 treat their obligations under the contract as at an end (i.e. rescind the contract), and sue for damages (qv). Alternatively the injured party could affirm the contract and simply sue for damages. It is therefore crucial to appreciate which terms are conditions and which are simply warranties, because breach of a warranty does not entitle the innocent party to rescind the contract. Ultimately it is for the court to decide the question, unless the parties have themselves specified that certain terms are to be treated as conditions. The JCT and GC/Works/1 forms refer to the body of the printed contract form as ‘conditions’. Within the JCT contracts ‘Conditions’ is usually a defined term. For example, refer to CE clause 1.1, which states that ‘Conditions’ are: the clauses set out in sections 1 to 12 of these Conditions and the Schedules to these Conditions, together with and including any supplementary conditions set out or referred to in Part 9 of the Contract Particulars.

In this sense the word is used either generally or to have the specific meaning given in that contract, and not as conditions in the aforementioned legal sense, as some clauses are warranties or minor terms. The ACA form refers to its terms as ‘clauses’, which is less liable to give rise to misunderstanding. Clause 2.1 of the SBC is a good example of what is likely to amount to a condition in a legal sense, since it sets out the contractor’s fundamental obligations. See also: Condition precedent; Condition subsequent; Material breach.

Condition precedent A condition that makes the rights or duties of the parties dependent upon the happening of an event. The right or duty does not arise until the condition is fulfilled. For example, under SBC clause 4.23 the making 200

Royal Brompton Hospital NHS Trust v. Hammond and Others (No. 7) (2001) 76 Con LR 148 at 173 per Judge Seymour. 201 Photo Production Ltd v. Securicor Transport Ltd [1980] AC 827 at 849 per Lord Diplock.

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Condition subsequent of a written application by the contractor at the proper time appears to be a condition precedent to payment under the contractual machinery for reimbursement of direct loss and/or expense (qv). Similarly, before an employer can claim liquidated damages under many forms of contract, the architect’s certificate of delay or non-completion is a condition precedent, e.g. SBC clause 2.31, IC clause 2.22 and ACA clause 11.3. It is sometimes open to question whether or not a term is a condition precedent. It may assist if it is expressly stated to be such, but even then the courts will sometimes refuse to hold that a term is a condition precedent if to do so would be contrary to commercial sense in a special situation.202 It has been held that if a notice provision is to rank as a condition precedent, it must state a time for service and make clear that a failure to serve will result in the loss of a right.203 The position was considered in relation to a clause giving entitlement to an extension of time (qv) ‘provided that the sub-contractor shall have given within a reasonable period written notice to the contractor of the circumstances giving rise to the delay’. It appears that the courts are prepared to take a straightforward approach and, in an important judgment, it was held: … if there is a genuine ambiguity as to whether or not notification is a condition precedent, then the notification should not be construed as being a condition precedent, since the provision operates for the benefit of only one party i.e. the employer, and operates to deprive the other party (the contractor) of rights which he would otherwise enjoy under the contract. … in my judgment the phrase … is clear in its meaning. … In my opinion the real issue which is raised on the wording of this clause is whether those clear words by themselves suffice, or whether the clause also needs to include some express statement to the effect that unless written notice is given within a reasonable time the subcontractor will not be entitled to an extension of time. In my judgment a further express statement of that kind is not necessary. I consider that a notification requirement may, and in this case does, operate as a condition precedent even though it does not contain an express warning as to the consequence of non-compliance.204

The phrase in question is fairly typical of the kind of proviso that is applied in standard form contracts, particularly in regard to extensions of time and applications for loss and/or expense. If, as seems likely, all such similar clauses would be interpreted as conditions precedent, contractors will no longer be able to treat the giving of such notices as relatively unimportant. See also: Condition; Condition subsequent.

Condition subsequent A provision that terminates the rights of the parties upon the happening of an event, for example a clause in a contract that provides for the termination of the contract on the outbreak of war (qv). See also: Condition; Condition precedent.

202

Koch Hightex GmbH v. New Millenium Experience Company Ltd [1999] EWCA Civ 983. Bremer Handelsgesellscaft MBH v. Vanden Avenne-Izegem PVBA [1978] 2 Lloyd’s Rep 109. 204 Steria Ltd v. Sigma Wireless Communications Ltd (2007) 118 Con LR 177 at 203–204 per Judge Stephen Davies. 203

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Conditions of Engagement (RIBA)

Conditional contract Where an offer (qv) is made subject to a condition and is accepted, including the stipulated condition, by the other party. Different legal consequences may result: — where the parties have not settled all the terms, or the agreement is conditional on a further agreement, in which case there is no contract. This interpretation is always adopted where the parties express their agreement as being ‘subject to contract’ (qv). Another possibility is that the agreement will be void for uncertainty, e.g. as in Lee-Parker v. Izzet,205 where agreement was reached ‘subject to the purchaser obtaining a satisfactory mortgage’. — where there is complete agreement, but it is suspended until the happening of a stated event (see: Condition precedent), e.g. the obtaining of planning permission or an export licence. In some cases this may impose an obligation on one party to bring about the stipulated event, or at least not to prevent it from happening.206 Dependent upon the wording used, the condition may not prevent the contract coming into existence, but merely suspends some aspect of performance required under the contract until the condition is satisfied.

Conditions of contract The clauses or terms in the main body of the contract. They are sometimes referred to as the ‘operative clauses’. In this sense ‘condition’ must be differentiated from the same word (i.e. a term of art) used to denote a provision of fundamental importance to the contract. See also: Condition; Condition precedent; Condition subsequent.

Conditions of Engagement (RIBA) A document issued by the Royal Institute of British Architects for the benefit of clients and architects. It determined the minimum fees for which RIBA members could undertake work, and the professional services that clients could expect to receive in return. The Conditions of Engagement were mandatory for members of the RIBA. They were replaced in July 1982 by the Architect’s Appointment (qv) and in 1992 by the Standard Form of Agreement for the Appointment of an Architect (SFA/92). This was supplemented in 1995 by the Conditions of Engagement (CE/95), probably intended for medium-sized commissions, and in 1996 by the Small Works Agreement (SW/96). SFA/92 had special design and build versions for the ‘employer/client’ appointment and for the ‘contractor client’ appointment. There were also supplements, e.g. for historic building works. In 1999 new versions were produced as SFA/99, CE/99 and SW/99, together with design and build supplements and sub-consultancy terms. These terms were updated in April 2004. In August 2007 the RIBA introduced new forms of appointment, including S-Con-07-A, C-Con-07-A and D-Con-7-A, which are roughly equivalent to SFA/99, CE/99 and SW/99. The latest terms, which have not been uniformly well received by architects, were undergoing revision in 2008. See also: Standard Agreement for the Appointment of an Architect (S-Con-07-A); Standard Form of Agreement for the Appointment of an Architect (SFA/99). 205 206

[1972] 2 All ER 800. Mackay v. Dick (1881) 6 App Cas 251.

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Confidence, breach of

Confidence, breach of See: Confidentiality. Confidential communications See: Privilege. Confidentiality The law recognises that certain relationships give rise to a duty to maintain confidentiality. Damages (qv) or an injunction (qv) may be awarded as appropriate for breach or threatened breach of that duty. The obligation to respect confidence is not limited to cases where the parties are in contractual relationship … If the defendant is proved to have used confidential information, directly or indirectly obtained from the plaintiff without consent … he will be guilty of an infringement of the plaintiff’s rights.207

This is a developing area of the law, and protection is not confined to business relationships. Some standard contracts deal expressly with the matter, e.g. ACA clause 3.3. Clause 29 (2) of GC/Works/1 also deals explicitly with confidentiality of information. SBC clause 2.8.4 states that the documents will not be used for any purpose other than the contract. SFA/99 clause 6.4 and S-Con07-A clause A6.4 are confidentiality clauses between architect and client. Even where the contract is silent, it is clear that the relationships in contract can easily give rise to a duty to maintain confidentiality. The principle is that someone who has received information in confidence should not take unfair advantage of it. However, it is now established that the courts can take the public interest into account.208 It is common practice for fax cover sheets or emails to contain a warning to any person who may receive them in error that the fax or email may contain confidential and/or privileged information, and that it is not to be copied or otherwise distributed. In appropriate cases an injunction may be obtained to restrain use.209 The Court of Appeal has allowed publication of material covered by the Official Secrets Act 1989, as the information was already in the public domain.210 It remains to be seen what impact this will have on the concept of confidentiality and the ability to restrain its breach by injunction.

Confirmed acceptance The term is used and defined within Schedule 2 of SBC. It is used in connection with a Schedule 2 quotation, and refers to the architect/ contract administrator confirming the employer’s acceptance in writing. See paragraph 3.2 at Schedule 5, which requires the following to be set out in the confirmation: — that the contractor is to carry out the variation; — the adjustment to the contract sum for undertaking the variation, including the amounts for loss and/or expense and preparing the quotation; and — any adjustment to the completion date. A ‘pre-agreed adjustment’ (qv) is referred to at clause 2.26.2. The valuation rules set out at SBC clause 5.2.1 do not apply to a Schedule 2 quotation. The contract sum is adjusted by the amount stated within the confirmed acceptance under clause 4.3.1. 207

Saltman Engineering Co Ltd v. Campbell Engineering Co Ltd [1963] 3 All ER 413 at 414 per Lord Greene MR. 208 Lion Laboratories Ltd v. Evans [1984] 2 All ER 417. 209 Peter Pan Manufacturing Corporation v. Corsets Silhouette Ltd [1963] 3 All ER 402. 210 Attorney General v. Times Newspapers Ltd [2001] EWCA Civ 97.

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Consideration

Consequential loss The use of the word ‘consequential’ has caused some debate, but in the context of building and related contracts its meaning seems quite clear. In Croudace Construction Ltd v. Cawoods Concrete Products Ltd 211 the Court of Appeal decided that ‘consequential loss or damage’ means the loss or damage that does not result directly and naturally from the breach. Damages are not consequential if they result directly and naturally from the breach or event upon which reliance is placed. Loss that directly and naturally results in the ordinary course of events from a breach of contract is recoverable as ‘direct loss and/or expense’ under SBC clause 4.23 and similar provisions in other contracts. Supply contracts tend to contain terms purporting to exclude the supplier’s liability for ‘consequential loss or damage’ caused by such matters as late delivery, defects in materials supplied and so on. ‘Consequential loss’ clauses merely protect suppliers etc. ‘from claims for special damages which would be recoverable on proof of special circumstances and for damages contributed to by some supervening cause’.212 In Millar’s Machinery Co Ltd v. David Way & Son213 a contract provided that suppliers did ‘not accept responsibility for consequential damages’. It was held that this clause did not exclude liability for the buyer’s expenses in obtaining other machinery to replace the defective machine. See also: Causation; Damages; Direct loss and/or expense; Foreseeability.

Considerate Constructors Scheme The scheme is a national initiative, set up by the construction industry, to improve its image. Sites that are registered with the scheme are monitored, with the object of assessing performance in relation to a code of considerate practice that contains eight points. The code covers three areas in regard to registered sites, as follows. — The environment: They should make every effort to reduce negative effects on the environment. — The workforce: They should provide proper facilities for those who work on them. — The general public: They make every effort to reduce negative impacts on the area in which they are working.

Consideration Something that is given to, done by or a detriment suffered by one party in return for some action or inaction on the part of the other party. It must have some legal value. It is a vital part of a simple contract (but not of a contract executed as a deed, i.e. a specialty contract (qv)). There are some general rules that apply to consideration: — Genuine: It must not be a vague promise, or one in which there is no legal benefit to the other party or legal detriment suffered by the promising party. — Legal: It must not be unlawful. — Possible: It must be capable of fulfilment at the time the contract is made, or at the time stipulated for performance. This must be distinguished from the consideration becoming impossible during the course of the contract. 211

(1978) 8 BLR 20. Saint Line Ltd v. Richardsons, Westgarth & Co Ltd [1940] 2 KB 99 per Atkinson J at 103. 213 (1934) 40 Com Cas 204. 212

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Constructing Excellence Present or future: It cannot be something already done or given at the time the contract is made.214 — Something that moves from the promise: The parties entering into the contract must provide the consideration. Consideration need not be adequate but merely sufficient. If two parties have entered into a genuine contract where what is given by one of the parties does not appear to be equivalent to what is given by the other, the courts will rarely intervene. There are exceptions to this general rule, and in some instances the existence of consideration may be difficult to prove. In the case of building contracts the consideration will be the carrying out of the Works by the contractor and the payment by the employer. It used to be relatively clear that a promise on the part of one party to do something that they were already obliged to do was not good consideration.215 In modern times the courts are more ready to find the existence of consideration so as to reflect the true intention of the contracting parties than had previously been the case. In Williams v. Roffey Brothers & Nicholls (Contractors) Ltd216 the Court of Appeal held that a main contractor’s promise to pay extra to a sub-contractor to complete on time was an enforceable contract and did not fail for lack of consideration. The Court treated the practical benefits gained by the contractor as sufficient to render it enforceable, even though there was no detriment to the promisee. Russell LJ said: ‘A gratuitous promise, pure and simple, remains unenforceable unless given under seal.217 But where, as in this case a party undertakes to make a payment because by doing so it will gain an advantage arising out of the continuing relationship with the promisee the new bargain will not fail for want of consideration.’ Consideration may be classified as: — Executed consideration: This exists where the consideration on one side consists of the doing of an act, the doing of which brings the contract into existence. A good example is a typical estate agent’s contract to sell a house. The client says ‘I will pay you 2% if you sell my house.’ There is no contract until the house is sold, and so the estate agent is not liable if they do not try to sell the house, and the client can withdraw the agency before the house is sold. — Executory consideration: This exists where the consideration consists of an exchange of promises to be performed in the future. See also: Contract; Frustration. —

Constructing Excellence A non-profit-making organisation that aims to help deliver a streamlined approach in the identification and implementation of construction industry reform. It offers a first point of contact for those in the construction industry seeking information and activities regarding reform. Its mission statement is to deliver individual, corporate and industry excellence in construction. It is said to achieve its objectives by influencing government in the formulation of policy, and by working with key stakeholder groups, e.g. 214

Dent v. Bennett (1839) 4 My & Cr 269. Stilk v. Myrick (1809) 2 Camp 317. 216 [1990] 2 WLR 1153. 217 At that time a seal was necessary to form a contract. Now, not only is it unnecessary, the mere existence of a seal does not, of itself, create a deed. 215

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Construction contract the Department for Business, Enterprise & Regulatory Reform (formerly the DTI), the Strategic Forum for Construction, and central and local government. It has its head office at 25 Buckingham Palace Road, Victoria, London SW1W 0PP, and regional centres throughout the United Kingdom. More information can be found at its website at www.constructingexcellence.org.uk.

Construction The word has different meanings, depending upon when it is used. The process of ascertaining the meaning of a written document is called ‘construing the contract’ and the meaning arrived at is called the ‘construction of the contract’. In arriving at a conclusion the courts apply well-established principles of construction. The expression ‘construction’, as applied to a document, at all events as used by English lawyers, includes two things: first the meaning of the words; and secondly their legal effect, or the effect which is to be given to them.218 The object sought to be achieved in construing any commercial contract is to ascertain … what each [party to the contract] would have led the other reasonably to assume were the acts that he was promising to do or to refrain from doing by the words in which the promises on his part were expressed.219

A distinction is sometimes drawn between ‘construction’ and ‘interpretation’, but it has been doubted whether this serves a practical purpose.220 The common meaning is to fit together, build, erect or assemble. ‘Construction work’ is defined at some length in Regulation 2(1) of the Construction (Design and Management) Regulations 2007 (qv), and in the Site Waste Management Plans Regulations 2008 (qv) at clause 2. In addition, ‘construction operation’ is defined in s. 105 of the Housing Grants, Construction and Regeneration Act 1996 (qv).

Construction Confederation This is the body that looks after the interests of its contractor members in matters such as wages, working rules and contract conditions. It was originally formed as the National Association of Master Builders of Great Britain in 1878. In 1901 the name changed to the National Federation of Building Trades Employers of Great Britain and Ireland. ‘Great Britain and Ireland’ was taken out of the name in 1928. By 1984 the name had become the Building Employers’ Confederation, changing to the Construction Confederation in 1997. Its constituent organisations are: — Major Contractors Group — National Contractors Federation — National Federation of Builders — Civil Engineering Contractors Association — British Woodworking Federation — Scottish Building Federation. It is one of the members of the JCT Ltd.

Construction contract A term found in the Housing Grants, Construction and Regeneration Act 1996 (qv), part II. It is defined in s. 104 as an agreement for the carrying out, arranging for the carrying out, or providing labour for the 218

Chatenay v. The Brazilian Submarine Telegraph Company Ltd [1891] 1 QB 79 at 85. Pioneer Shipping v. BTP Tioxide [1982] AC 724 at 736. 220 Lewison, K, The Interpretation of Contracts, 4th edn, Sweet & Maxwell (2007) at page 19 footnote 2. 219

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Construction Contracts (Northern Ireland) Order 1997 carrying out of construction operations (qv). It is expressly stated to include agreements for architectural design or surveying work, or for providing advice on building, engineering, interior or exterior decoration, or the laying-out of landscape. There are specified exclusions, which include supply only contracts, operations for the extraction of oil, gas or minerals, and the demolition or assembly of plant and machinery where the primary activity relates to such areas as nuclear processing, power generation and others.

Construction Contracts (Northern Ireland) Order 1997 The Order that came into force in Northern Ireland on 1 June 1999. It is substantially the same as part II of the Housing Grants, Construction and Regeneration Act 1996 (qv). A Scheme for Construction Contracts (Northern Ireland) Regulations Northern Ireland 1998 has also been produced that is virtually identical to the Scheme for Construction Contracts (England and Wales) Regulations 1998. See also: Scheme for Construction Contracts.

Construction (Design and Management) Regulations 2007 Regulations that place particular duties on clients, their agents, designers and contractors to take account of health and safety, to coordinate and manage it effectively during all the stages of a project from inception to eventual repair and maintenance procedures. They came into force on 6 April 2007 throughout Great Britain and, in certain circumstances, elsewhere (see regulation 20). They superseded the Construction (Design and Management) Regulations 1996. The Regulations are detailed, and they are administered by the Health and Safety Executive. The key parts of the Regulations are as follows. — Clients and their agents must be reasonably satisfied that they are using competent persons to fill the crucial roles, and that sufficient resources are devoted to the project. — A CDM coordinator must be appointed to take responsibility for coordinating the health and safety elements of the project at design stage. The client/CDM coordinator is responsible for the pre-construction information, and for preparation of the health and safety file. — Designers must perform their duties to avoid, reduce or control risks during construction and maintenance. — A principal contractor (usually the contractor on site) must develop the pre-construction information, and prepare the construction phase plan prior to commencement on site. The principal contractor must ensure that everyone on site complies with the plan and with all relevant health and safety legislation, including providing any necessary information. — Other contractors involved in the project must cooperate with the principal contractor. — A health and safety file is produced on completion of the project that not only satisfies the usual requirements for a maintenance manual, but also warns of particular risks and dangers. — Domestic householders do not have duties under the Regulations. Civil liability is excluded by regulation 45, with the exception of obligations under the regulations and the schedule identified in regulation 45. Consequently, an employer would in general have no recourse against a contractor who was in breach of the Regulations. Therefore most standard forms make express 110

Construction Industry Model Arbitration Rules (CIMAR) provision for the employer and the contractor to comply with the Regulations so that failure to do so will amount to a breach of contract and will be actionable in adjudication, arbitration or the civil courts as appropriate (e.g. SBC clause 3.25). The Health and Safety Executive has produced an approved code of practice (managing health and safety in construction) referring to the Regulations. The approved code has a special legal status. If a person is prosecuted for breach of health and safety law, and it is proved that the person has failed to comply with the code, they will be found to be at fault by a court unless they are able to show that they complied with the law in some other way. It is in other words a reversal of the burden of proof. A breach of the regulation is a criminal offence with unlimited fines in the Crown Court and up to £5,000 in the magistrates’ court.

Construction Industry Council (CIC) A non-profit-making body, set up as a company limited by guarantee. It was established in 1988, and it is concerned with all aspects of the built environment. It represents over 500,000 professionals working for, or in association with, the construction industry and over 25,000 construction firms. Among its many activities it maintains a panel of adjudicators, and it publishes many useful publications, including warranties, a model adjudication procedure (qv), and consultants’ terms of appointment.

Construction Industry Council Model Adjudication Procedure (CIC Procedure) These are rules for the conduct of adjudication (qv) in compliance with the Housing Grants, Construction and Regeneration Act 1996 (qv). They were first issued in February 1998, and were produced by a task force consisting of representatives of all the major professional and contracting institutes, the Official Referees’ Solicitors Association, and the CIC. The CIC procedure (3rd edition) has been held not to comply with s. 108 of the Housing Grants, Construction and Regeneration Act 1996,221 and the Scheme for Construction Contracts (England and Wales) Regulations 1998 would therefore be applicable to any contract referring to the CIC procedure (i.e. the third edition). The point at issue has been corrected within the fourth edition.

Construction Industry Model Arbitration Rules (CIMAR) Rules for the conduct of construction arbitration (qv). They were first issued in February 1998, and were originated by the Society of Construction Arbitrators in response to the Arbitration Act 1996. The rules have been endorsed by a number of key bodies within the construction and engineering industry. The Joint Contracts Tribunal (qv) provides for the use of the CIMAR in the arbitration provisions in JCT contracts, in lieu of the formerly prescribed JCT Arbitration Rules, e.g. SBC clause 9.3. However, clause 9.3 refers to the JCT 2005 edition of the Rules, and the parties are not automatically bound by any subsequent amendment of the Rules. However, the parties may jointly opt to use any amended Rules by notice in writing to the arbitrator These rules, together with the Arbitration Act 1996, amount to a significant overhaul of the arbitration process. The rules comprise the following. (1) Objective and application (2) Beginning and appointment 221

Epping Electrical Company Ltd v. Briggs and Another [2007] BLR 126.

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Construction Industry Scheme (CIS) (3) Joinder (4) Particular powers (5) Procedure and evidence (6) Form of procedure and directions (7) Short hearing (8) Documents only (9) Full procedure (10) Provisional relief (11) Default powers and sanctions (12) Awards and remedies (13) Costs (14) Miscellaneous Appendix I Definitions Appendix II Sections referred to within the body of the rules but not reproduced therein. In addition, the JCT edition adds JCT Supplementary and Advisory Procedures. These procedures are partly mandatory, but mainly advisory. There are also notes added by the Society of Construction Arbitrators. See also: JCT/CIMAR Arbitration Rules 2005.

Construction Industry Scheme (CIS) The governing legislation is the Income and Corporation Taxes Act 1988. The scheme in its current form (The Income Tax (Construction Industry Scheme) Regulations 2005 as amended by The Income Tax (Construction Industry Scheme) (Amendment) Regulations 2007) came into force on 6 April 2007. Under the Scheme all payments made from contractors to sub-contractors must take account of the sub-contractor’s tax status as determined by HM Revenue & Customs. Before a contractor can make a payment to a sub-contractor for construction work, they need to verify that the sub-contractor is registered. HM Revenue & Customs will check whether the sub-contractor is registered, and tell the contractor the rate of deduction they must apply to the payment, or whether the payment can be made without any deductions. Essentially the scheme provides that no party designated a ‘contractor’ (qv) under the scheme may make a payment under a contract for construction operations (qv) unless the sub-contractor is registered with HM Revenue & Customs. Under the scheme the terms ‘contractor’ and ‘sub-contractor’ have particular meanings, which are much wider than they normally are. Parties who are normally seen as ‘clients’ may well fall within the definition of ‘contractor’ under the scheme. Under the scheme a contractor is either a business that engages sub-contractors for construction operation (i.e. a ‘mainstream’ contractor) or a business that spends on average £1 million or more per year over a three-year period on construction operations (i.e. a ‘deemed’ contractor). Any concern that is deemed to be a contractor will continue to be deemed a contractor until HM Revenue & Customs is satisfied that during each of three successive years its expenditure on construction operations has been less than £1 million. So this means, for the purposes of the scheme, that local authorities and government departments may well be classed as contractors. A sub-contractor is a business that carries out construction work for a contractor. 112

Construction operations

Construction management A contractual arrangement, the essential features of which are that a construction manager (who may well be a contractor) is appointed to act solely in a management capacity, for which the employer pays a fee. Each professional and each trade contractor is contracted directly to the employer. In this respect it is significantly different from a management contract (qv). The individual trade packages are tendered separately in sequence to obtain the overall best price for the project. The construction manager is one of the professional team, and acts as leader and coordinator of all the consultants and trade contractors. It has been held that a construction manager was a professional person providing professional services, and as such could be liable to the client if in breach of their obligations.222 The particular contractual structure is more conducive to this relationship than the traditional management contract, where the contractor is rarely a permanent part of the design team. The precise details of the construction manager’s role may vary, but commonly the construction manager will carry out all administrative functions in respect of the trade contractors, for example in issuing certificates of all kinds and giving instructions to the trade contractors. In order for the construction manager to be able to do this effectively, it is important that each contract contains a set of powers and duties that interlock with all other contracts, and that each contract, in addition, makes express provision for the coordinating role of the construction manager, so that all members of the team know exactly the extent of their roles. Advantages are: — input from the contractor (construction manager) at an early stage; — early start on site; — should be lowest overall cost; — employer has total control; and — the system is ideally suited to fast track projects. Disadvantages are: — no certainty of final cost; — the employer takes a high proportion of the risk. This is especially so since the employer enters into individual contracts with each trade contractor; and — there is no guaranteed completion date. The Joint Contracts Tribunal Ltd (qv) published, as part of its 2005 suite of contracts, the Construction Management Appointment (CM/A) and the Construction Management Trade Contract (CM/TC). In addition, standard collateral warranties have been produced for use with these contracts. That said, many construction management projects proceed under specially drafted ad hoc contract documents. However, suggestions that existing forms such as ACA and IC can easily be adapted for use are without merit.

Construction operations A term used in the Housing Grants, Construction and Regeneration Act 1996, Part II (qv). A detailed explanation of its meaning is to be found in s. 105. The first part of the section defines the term, and the second part clarifies processes that are not included. Broadly, construction

222

Great Eastern Hotel Co Ltd v. (1) John Laing Co Ltd (2) Laing Construction plc (2005) 99 Con LR 45.

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Construction phase operations include construction, alteration, repair, maintenance and demolition of building and civil engineering work; supply and installation work; cleaning, if carried out with other construction operations; ancillary work, such as foundations, excavations and clearance; and painting and decorating. Processes not included are: drilling or extraction of oil or gas; extraction of minerals; assembly, installation or demolition of plant or machinery etc., where the main activity is nuclear processing; power generation; water or effluent treatment; and production, transmission or bulk storage of chemicals, oil, food etc. The manufacture or supply only of components or materials, and the making or installation of purely artistic works are also excluded. The Act makes provision for the Secretary of State to add to or change any of the operations that are to be treated as construction operations (s. 105(3)). The term is also used in the Construction Industry Scheme (CIS) (qv), and it is defined in s. 567 of the Income and Corporation Taxes Act 1988 in terms somewhat similar, but not identical, to those noted above.

Construction phase A term used in the Construction (Design and Management) Regulations 2007 (qv) and defined in regulation 2 as ‘the period of time starting when construction work in any project starts and ending when construction work in that project is completed’. The definition is important, because, among other things, the client has to prepare the pre-construction information and provide this to the contractor. From the pre-construction information the principal contractor must have prepared the construction phase plan (qv) before the construction phase begins (Regulation 23(1)(a)). The principal contractor is to plan, manage and monitor the construction phase to ensure, so far as reasonably practicable, that it is carried out without risk to health and safety (Regulation 22(1)(a)).

Construction phase plan Projects that are notifiable under the Construction (Design and Management) (CDM) Regulations 2007 (qv) require such a plan to be prepared by the principal contractor. Paragraph 4(g) of the Explanatory Notes explains that this plan replaces the health and safety plan previously prepared by the planning supervisor under the 1994 Regulations. Regulation 16 places an obligation upon the client to ensure that the contractor has a plan, which complies with regulation 23, in place prior to commencement of the construction phase, and regulation 19 requires that the contractor take reasonable measures to ensure that the Works are undertaken in accordance with the plan. Where it is not possible to comply with the plan the contractor shall take appropriate action to ensure that matters of health and safety are addressed. The plan is defined at regulation 1 as ‘a document recording the health and safety arrangements, site rules and any special measures for construction works’. Regulation 23 is the key in regard to the plan, and states as follows. — Before starting the construction phase the contractor must have prepared a plan. The plan must be sufficient to ensure that the construction phase is planned, managed and monitored in a way which enables the construction works to be undertaken, so far as reasonably practicable, without risk to health or safety. When preparing the plan the contractor must pay ‘due regard’ to: 114

Constructor’s services

•

the information provided by the designers under regulations 11(6) and 18(2). Regulation 11(6) requires designers to provide clients, other designers and contractors with sufficient information to enable them to comply with the regulations. Regulation 18(2) requires designers to provide with their design, information about the structure, its construction or maintenance. • Further, the contractor has to take into account the pre-construction information provided by the employer under regulation 20(2)(b). — The contractor, from time to time, is to update, review, revise and refine the construction phase plan throughout the project. This is so that the project continues to be undertaken in a planned, managed and monitored way without risk to health and safety; and — arrange for the construction plan to be implemented in a manner which ensures the health and safety of all persons carrying out the construction works and persons affected by it. The contractor is to take reasonable steps to ensure that the plan identifies the risks to health and safety arising from the construction Works, and that it includes suitable measures to address such risks, including the implementation of any site rules. Regulation 1 defines ‘construction phase’ as ‘the period of time starting when construction work in any project starts and ending when construction work in that project is completed’. Within SBC and IC there is provision within the contract particulars for identifying a period during which the contractor has to prepare the construction phase plan prior to work commencing on site. In addition, under clause 2.1 of SBC it is a requirement upon the contractor to carry out the Works in accordance with the construction phase plan, which under the contract is a defined term. See also: Construction Sites Directive.

Construction Sites Directive The common abbreviation for the European Council Directive 92/57/EEC on the implementation of minimum safety and health requirements at temporary or mobile construction sites. Effect is given to this Directive, except for certain details, by the Construction (Design and Management) Regulations 2007 (CDM Regulations) (qv).

Constructive acceleration See: Acceleration of work. Constructor Used within PPC and defined at appendix 1 as the party identified in the project partnering agreement to fulfil the role as described within the partnering documents (qv): in effect, the party who is commonly referred to as the ‘contractor’ in other forms of contract.

Constructor’s change submission See: Change. Constructor’s services Defined in appendix 1 within PPC to mean ‘any design and other services, other than Pre-Construction Activities, agreed to be performed by the Constructor’ in accordance with the partnering documents prior to the date of the commencement agreement (qv). However, they expressly exclude the pre-construction activities (qv). The constructor’s services are set out in a schedule forming part of the partnering contract. 115

Consultant

Consultant Literally, a specialist who gives advice or assistance. The term may cover professional persons such as a quantity surveyor or architect, as well as firms of management consultants or contract advisers. Some of the standard forms of building contract mention consultants specifically, e.g. MP and PPC. It is important to remember that a consultant will have no express authority to issue instructions under any of the standard forms unless it expressly states so in the contract. It is not advisable for consultants to have such authority, because it is essential that the control of the work rests in the hands of one person, i.e. the architect or contract administrator under JCT contracts, or whoever is designated to fulfil the role under other standard forms. The practice of consultants, other than the authorised contract administrator, giving instructions directly to the contractor or in some cases a sub-contractor should be avoided. Even the contract administrator has no authority to give instructions directly to sub-contractors. Under the BPF System (qv) consultants are defined as persons or firms contracted by the client (qv) to produce design and cost services additional to those provided by the design leader (qv). They may be experts in any relevant field, and are paid a fixed fee to cover all costs and expenses. Consultants under that system work under the terms of a model consultancy agreement prepared by the BPF, and are responsible only for their own part of the work. The design leader (qv) is responsible for the coordination of the work of all consultants. The RIBA has prepared standard sub-consultancy agreements for use by all disciplines sub-consulting to an architect. Within PPC ‘Consultant’ is a defined term meaning ‘any party, including the Client Representative and the’ CDM coordinator ‘providing the Client design or other services in relation to the Project’. The ‘Consultant’s Services’ is also a defined term, being those services set out in the consultant services schedule (also a defined term). The schedule is a document forming part of the partnering contract describing the role, expertise and responsibilities of each consultant. In addition, the ‘Consultant’s Payment Terms’ are also set out in the partnering contract. Clause 1.5 clarifies that only the client (i.e. no other partnering team member) is responsible for making all payments to the consultants, in accordance with the payment terms, irrespective of whether the consultant becomes a partnering team member. In MP a pre-appointed consultant is to be identified in the requirements, and is a consultant appointed by the employer with the intention of that consultant being novated (qv) to the contractor. The novation is to be in accordance with clause 24. See also: Conditions of Engagement.

Consultant switch A procedure whereby a consultant engaged by the employer ceases acting for the employer and commences acting for a contractor on a project. This is common when the procurement system is design and build, or one of its derivatives. The ‘switch’ usually takes place on the appointment of the design and build contractor. It is essential that two separate agreements are executed, each containing different, but appropriate, terms to suit the very different situations and services. The first contract must come to an end before the second is executed. Usually, the consultant enters into a contract with the employer for the first part of the project, generally up to tender stage, on the understanding that the consultant will enter into a new contract with the suc116

Consumer cessful contractor for the construction part of the project. Contractors tender on the understanding that the successful tenderer will enter into a contract with the consultant. The consultant and employer remain liable to each other in respect of the first part of the project. The process is commonly, but inaccurately, referred to as ‘novation’ (qv), which is a completely different process requiring the execution of a three-party agreement with the aim of bringing one contract (i.e. between parties A and B) to an end and substituting another contract on identical terms between parties B and C. The novation agreement brings the rights and liabilities of the outgoing party to an end, and the incoming party assumes those liabilities and rights. True novation is sometimes operated instead of consultant switch, but neither novation nor consultant switch is to be recommended. One of the supposed advantages is that the design team, on being transferred to the contractor to complete the design and production drawings, will be able to develop them while remaining true to the original concept in a way that would not otherwise occur. This exceedingly optimistic view ignores the fact that each consultant, on being switched or novated, will thereupon owe a duty to the contractor in respect of the completion of the production information (qv). This may simply mean that the consultants are obliged to comply with the contractor’s instructions to produce a scheme that is inexpensive to construct, but is perhaps not what the design team originally had in mind. It is difficult for the procedure to operate without creating the potential for a conflict of interest for the consultant. Some bespoke terms of appointment aggravate the situation by requiring the consultants to report back to the employer in specific instances after the switch. In addition, matters of confidentiality may well arise.

Consultation It is the act of seeking information, opinion or advice. The person doing so must provide sufficient information and give sufficient opportunity to allow the advice to be given.223 There is no implication that the advice or information need be acted upon, although it is probably implied that, where the contract requires one party to consult another, the information and advice should inform the action. Consultation is required between architect and contractor in SBC 05 clauses 3.18.2 and 3.18.3. Within PPC consultation is defined as ‘such consultation as shall be reasonable without delaying the Project and without delaying any necessary action of any Partnering Team member for the benefit of the Project’. By way of illustration, ‘consultation’ is referred to in clauses 15.1 (Commencement Agreement) and 7.5 (Replacement of individuals).

Consumer Defined in the Unfair Terms in Consumer Contracts Regulations 1999 (qv) as any natural person who, in contracts covered by the Regulations, is acting for purposes outside that person’s trade, business or profession. The definition is very important. A person may be very knowledgeable in regard to the issue in question, but the law will treat that person exactly the same under the Regulations as someone without such knowledge when acting as a private individual. 223

Fletcher v. Minister of Town and Country Planning [1947] 2 All ER 496.

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Contingency Under the Unfair Contract Terms Act 1977 (qv) a party deals as a consumer if the contract is not made in the course of a business, but the other party does make the contract in the course of a business. Importantly, if the contract is governed by the law of sale of goods or hire purchase, the goods must be of the type ordinarily supplied for private use or consumption.

Contingency An unexpected event. It is common for a contingency sum to be inserted into the bills of quantities (qv) or other relevant pricing document. The amount will depend upon the nature of the Works, and is usually calculated as a percentage of the expected contract sum, e.g. 3%. The purpose of the sum is to cover the cost of unforeseen items. The sum is usually included within the provisional sums section of the pricing document. If, unusually, there are no such items, the whole of the sum is deducted from the contract sum, and represents a saving to the employer. A contingency sum is not intended to cover work additional to that originally envisaged, nor the correction of errors. In certain types of building, e.g. old or complex existing structures, the contingency sum may be increased to reflect the higher risk of unforeseen eventualities arising, e.g. if hidden rainwater pipes, ‘unusual’ structures or rot are discovered. It is also a term used to cover the fee arrangement where the basis of remuneration is ‘no win no fee’. Such an arrangement is becoming more prevalent when solicitors or claims consultants act on behalf of a contractor in pursuing a claim. They agree to accept a percentage of what they recover, rather than a flat fee payable in any event.

Continuous improvement A term used in connection with prime contracting (qv). An essential facet of the system is that work processes and methods must be mapped out and programmes in place to achieve improvement. Because this is an ongoing process, it cannot take place unless the other essential element is in place, that of a long-term relationship between the prime contractor and suppliers. Improvement must be achieved in terms of what the client receives, and the profitability of the whole supply chain. See also: Right first time; Supply chain partners; Supply clusters.

Contra proferentem A principle or rule of construction meaning literally ‘against the profferer’. Ambiguities that cannot be resolved using rules of construction are decided against the party who put the words forward. If there is an ambiguity in a document which all the other methods of construction have failed to resolve so that there are two alternative meanings to certain words, the court may construe the words against the party who put forward the document and give effect to the meaning more favourable to the other party.224

The rule does not seem to apply to ‘negotiated’ standard form contracts, such as the current JCT forms, where the document is prepared by representatives of actual and potential users.225 Probably, however, the rule would apply where an employer makes substantial amendments to the printed text, so that it ceases 224

Furst, S, and Ramsey, V, Keating on Construction Contracts, 8th edn (2006) at paragraph 3-030. Tersons Ltd v. Stevenage Development Corporation (1963) 5 BLR 54, a decision on the 4th edition of the ICE Conditions of Contract. 225

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Contract to be a ‘negotiated document’ and is put forward as the employer’s own. Probably, also, it applies to manuscript or typewritten insertions, e.g. in the contract particulars in the JCT forms, where these are inconsistent with the printed conditions.226 A well-known example of the application of the contra proferentem principle in the construction industry is the decision of the Court of Appeal in Peak Construction (Liverpool) Ltd v. McKinney Foundations Ltd,227 which involved Liverpool Corporation’s own form of contract. See also: Construction; Interpretation of contracts; Unfair Contract Terms Act 1977.

Contract A binding agreement between two or more persons that creates mutual rights and duties, and which is enforceable in law. There must be an intention to create a legal relationship. Thus a simple promise to do something for a person is not legally binding. For example, if A agrees to give £5 to B, and in return B agrees to clean A’s car, a legally binding contract is in existence. If B simply promises to clean A’s car it is unlikely that a contract would exist, and A could do nothing if B failed to keep the promise. There are two basic forms of contract: — Specialty contracts (qv), or contracts executed as deeds. This form of contract is commonly used by local authorities and corporations (qv). — Simple contracts (qv), or contracts made in writing or orally. If written, they may be recorded in correspondence, or there may be a document(s) signed by the parties. This type of contract is the most common. Table 1 illustrates the major differences between specialty and simple contracts.

Table 1

Attributes of specialty and simple contracts compared. Specialty

Simple

(1)

Form

The contract is created by the deed.

Usually, writing is merely evidence of the contract, which exists apart from and in the absence of writing.

(2)

Consideration

There need be none.

It must always be present.

(3)

Limitation period (Limitation Act 1980)

12 years from the date on which the cause of action arises.

6 years from the date on which the cause of action arises.

(4)

Estoppel

Statements in a deed are conclusive evidence of their truth as between the parties to the deed, unless there is a latent ambiguity, or fraud, duress or mistake is proved.

Statements in a simple contract are subject to rebuttal evidence.

226 227

Bramall & Ogden Ltd v. Sheffield City Council (1983) 1 Con LR 30. (1970) 1 BLR 114.

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Contract A number of features are essential in order to enter into a valid contract, as follows: — There must be an offer (qv) by one party. — There must be an unqualified acceptance (qv) by the other party of that offer. — There must be consideration (qv), except in the case of deeds. — The parties must have capacity to contract (qv). — There must be an intention to create a legal relationship.228 — There must be genuine consent; for example, there must be no duress involved. — The object of the contract must be possible. — The object of the contract must be legal. For example, an agreement to defraud the Inland Revenue would not be a binding contract.229 It is not uncommon in the construction industry for a contract to be formed, but for it to be difficult to discern a formal offer and acceptance, owing to the volume or type of correspondence exchanged between the parties. In such circumstances the important thing is whether it can truly be said that the parties eventually came to an agreement on the essential terms. Determining whether a contract has come into existence, and the precise nature of its terms, can prove a difficult task. Contracts may be: — valid, if they satisfy all the requirements for a legally binding contract; — void, if they are not contracts at all, because they are lacking in some important respect, e.g. the lack of a proper acceptance; — voidable, if a contract is not void per se, but can be made void at the instance of one of the parties; — unenforceable, if the contract is valid, but the terms cannot be enforced because of some special reason, e.g. the operation of the Limitation Act 1980. Contracts for construction works are normally concluded using one of the standard forms available. They have the following advantages: — They are drafted specially for construction work. — They are comprehensive, and continually updated in the light of experience and developments in the law. — The contents are generally understood by the industry. — Certain contracts are negotiated documents, and therefore not to be construed contra proferentem (qv) against either party. See also: ACA Form of Building agreement; Anticipatory breach of contract; Assignment; Breach of contract; Burden of a contract; Contracts (Rights of Third Parties) Act 1999; Discharge of contract; Divisible contract; Entire contract; Essence of the contract; Formalities of contract; Fraudulent misrepresentation; GC/Works/1; Illegal contract; Implied contract; Innocent misrepresentation; JCT contracts; Limitation of actions; Misrepresentation; Mistake; Novation; Performance; Privity of contract; Quasi-contract; Rectification; Repudiation; Rescission; Standard form of contract; Sub-letting.

228 229

Harvey v. Facey [1893] AC 552. A L Barnes Ltd v. Time Talk (UK) Ltd [2003] EWCA Civ 402.

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Contract documents

Contract agreement A term used in GC/Works/1 and defined in clause 1 as ‘the formal agreement (if any) executed by the Employer and the Contractor recording the terms of the Contract’.

Contract area A term used in the JCT Measured Term Contract 2006 at the first recital to identify the area or location within which the employer requires the maintenance and minor works to be carried out. It defines the geographical area within which the Works are to be undertaken.

Contract bills An expression used to refer to the bills of quantities (qv) if they are, as is usual, to become part of the contract documents (qv). Invariably such bills will have been priced by the contractor. The contract bills are defined in SBC clause 1.1 as the priced bills of quantities referred to in the second recital and signed by the parties to the contract. The contract makes frequent reference to them, for example in clause 2.7, ‘where the Contract Bills provide the information necessary …’.

Contract data A term used in the NEC. It is similar in purpose to the contract particulars (qv) in the JCT contracts and to the abstract of particulars (qv) in GC/Works/1. It is in two parts: data provided by the employer (part one) and data provided by the contractor (part two). It includes the variable parts of the contract, such as the names of the parties, the start date, and the assessment date for payment. The information to be included in part two would usually be provided by the contractor at tender stage. See also: Engineering and Construction Contract (NEC).

Contract date In a general sense the date when the contract or agreement came into being. Most contracts require the insertion of a date by the parties at the very beginning of the document. For example, SBC states ‘This Agreement is made the …’. It is the date on which the last of the contracting parties formally executes the contract. In practice there is often a misunderstanding about this date, and it is quite common for the parties to (wrongly) insert the date when the contractor commenced work on site, rather than the date of execution. Within the NEC contract ‘date’ is a defined term meaning ‘the date when the contract came into existence’. ‘Contract date’ is referred to in clauses 19.1 (Prevention), 60.1.(12) and (19) (Compensation Events) and 91.7 (Termination).

Contract documents A document is anything on which marks have been made with the intention of communicating information. Such things as writing, printing, typescript, computer printout, drawings and photographs are documents. The documents that are brought together to form the evidence of a contract, agreed by the parties and signed as such, are termed the ‘contract documents’. Most of the standard forms of contract define what the contract documents are to be. For example, see SBC, IC and DB at clause 1.1; ACA recital C; GC/ Works/1 clause 1(1); and MW 3rd recital. The printed form, drawings, specification (qv), bills of quantities (qv), schedules and schedule of rates (qv) are commonly included, depending on the type of contract. It is important, although rarely completely achieved in practice, that the documents be consistent with one another. In the case of inconsistencies, some standard forms provide that the printed conditions shall prevail over 121

Contract drawings any other provisions should there be a conflict, e.g. SBC clause 1.3. This reverses the general rule that specially written terms take precedence over printed terms, and sometimes leads to unwelcome results.230 Thus, under JCT terms, if the employer by a clause in the bills of quantities was given 21 days to honour the interim certificates, it would have no effect unless the corresponding clause in the printed conditions had been properly amended and initialled by the parties. All the contract documents should be signed by the parties, and identified as being contract documents: for example, ‘This is one of the contract documents referred to in the Agreement dated …’ and signed by the parties would suffice. See also: Bills of quantities; Contract bills; Contract drawings; Priority of documents; Specification.

Contract drawings The drawings specifically referred to as such in the contract. They are usually identified by a drawing number, together with any revision number. The drawings should each be signed by the parties, and bound in with the rest of the contract documents (qv). Standard forms tend to make provision for the architect or contract administrator to issue such further drawings or details as are reasonably necessary to explain and amplify the contract drawings, so as to enable the contractor to carry out and complete the Works in accordance with the contract, e.g. SBC clause 2.12.1. However, such additional drawings cannot modify the contractor’s obligations as contained in the contract documents unless they amount to a change or variation. What this means is that the architect or contract administrator cannot, without a variation in cost to the contract sum, change anything contained in the contract documents, e.g. the drawings or contract bills. The contract drawings are usually small-scale drawings: plans, elevations, sections, site plan. It is important that they are as accurate as possible, and they must be the same drawings on which the contractor submitted its tender. It is not unknown for drawings to be revised between the date of invitation to tender and the signing of the contract, but it should be the original tender drawings that are signed and bound into the contract, unless the parties agree otherwise. See also: Contract documents.

Contract particulars The phrase used to describe that part of the 2005 suite of JCT contracts where the project-specific details are inserted, e.g. the completion date (qv), or liquidated damages insurance (qv) option. It was previously called the appendices within the 1998 suite of JCT contracts. Whereas the appendices were located at the rear of the contracts, the contract particulars are now located at the front in most of the JCT contracts. One exception is the MP (qv) form, where the contract particulars are located at the back of the contract. Generally, the contract particulars are split into two parts, with part 2 addressing the project specific details concerning third party rights or collateral warranties as applicable. There are nine parts to the contract particulars within the CE (qv) form. See also: Appendix.

230

English Industrial Estates Corporation Ltd v. George Wimpey & Co Ltd (1972) 7 BLR 122.

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Contractor

Contract sum The amount or consideration (qv) that the employer agrees to pay to the contractor for carrying out the Works. It is identified within the contract documents. Many of the standard forms (i.e. the lump sum contracts) contain provision for adjusting the contract sum, and therefore the amount of the final account (qv) may well be greater or less than the contract sum. The ‘contract sum’ itself, however, is clearly defined as a precise amount of money. Therefore the contract sum can never change, although it can be adjusted. When adjusted, it is known as the ‘adjusted contract sum’. The issue may be very important under certain circumstances. If an architect bases fees on a percentage of the contract sum, the architect’s fee will remain the same no matter how much additional work is instructed, or how many contractor’s claims for loss and/or expense are certified. To overcome that problem, a percentage fee should be based on the ‘adjusted contract sum’, the ‘final account’ or some other such phrase. RIBA appointment documents use the phrases ‘construction cost’ or ‘total construction cost’ to deal with the situation. Remeasurement or prime cost standard forms of contract do not have a contract sum. For example, SBC with approximate quantities uses the phrase ‘ascertained final sum’. This is because the contractor undertakes to carry out the Works not for a lump sum fixed price but for a price to be ascertained using the measured quantities actually completed, and the agreed rates and prices. The contract sum is generally stated to be exclusive of VAT.

Contract sum analysis A written analysis of the contract sum provided by the contractor in accordance with the stated requirements of the employer. It is referred to in SBC Without Quantities (option B), IC, ICD and DB. The contract sum analysis is not a contract document except under DB, although in all circumstances where it is used, it is the priced document used for the purposes of undertaking a valuation. JCT Practice Note 23 (1987) explained the purpose, use and content of the contract sum analysis in detail. These uses included: — valuation of variations and provisional sum work; — enabling the calculation of fluctuations in accordance with the formula rules; and — helping the calculation of interim certificates and payments. Though this practice note is not current, these general statements still remain relevant.

Contractor One who enters into a contract with another. Generally meaning the person or firm that contracts with the employer and undertakes to construct the project. The word is used to make the distinction between a person who enters into a contract to carry out work and services, often called an independent contractor, and a person who is a servant or employee of the person for whom the work is done. The contractor, unlike the employee, is not subject to detailed control. In the construction industry a contractor is invariably the person, partnership or company that carries out construction work. The standard forms of contract refer to the contractor in this sense. ‘Contractor’ is defined in the Construction (Design and Management) Regulations 2007 (qv) as ‘any person who carries on a trade, business or other 123

Contractor’s design documents undertaking (whether for profit or not) in connection with which he (a) undertakes to or does carry out or manage construction work, (b) arranges for any person at work under his control (including, where he is an employer, any employee of his) to carry out or manage construction work’. An entirely different definition of ‘contractor’ is referred to in the Construction Industry Scheme (CIS) (qv). Reference should be made to s. 57 of the Finance Act 2004 and HM Customs & Revenue leaflet CIS340. A contractor for these purposes embraces not only construction companies, but also many employers. This is why the employer under a JCT contract must state whether it is a ‘contractor’ for the purposes of the Scheme. Local authorities and government departments are included, and also businesses that do not include construction operations among their trading activities, but carry out or commission construction work on a regular basis on their own property so that they may trade. A party is a contractor for the purposes of the CIS if it is a business or other concern that pays sub-contractors for construction work. There are two groups of contractors under the CIS: — mainstream contractors — deemed contractors. Mainstream contractors include: — any firms that carry on construction operations and pay others for work carried out under the CIS; — any property developers or speculative builders, erecting and altering to make a profit; — gang-leaders organising construction labour. A gang-leader is also a sub-contractor; — foreign businesses that carry out construction operations in the UK. Deemed contractors include some firms, local authorities, government departments and other organisations not within the construction industry, but which regularly carry out or commission construction work on their own properties. They are deemed contractors if their average annual expenditure on construction operations in the period of three years ending with their last accounting date exceeds £1 million. If they have not been trading for all of the last three years, they are deemed contractors if their total expenditure on construction operations for the trading part of the three years exceeds £3 million. Any concern that is deemed to be a contractor because one of these conditions is met will continue to be deemed a contractor until HM Revenue & Customs is satisfied that during each of three successive years its expenditure on construction operations has been less than £1 million.

Contractor’s design documents The phrase is used within SBC and IC when referring to the documents produced by the contractor in connection with the contractor’s designed portion. It is also used in DB. They are defined as the drawings, details and specifications of materials, goods and workmanship and other documents prepared by or for the contractor in relation to the design of the Works.

Contractor’s designed portion This phrase is used within SBC, ICD and MWD to refer to that part of the Works to be designed by the contractor. These contracts are drafted on the premise that the bulk of the design is to be undertaken by or on behalf of the employer. However, they do have provision for discrete 124

Contractor’s Proposals parts of the design to be undertaken by the contractor. Those parts to be designed by the contractor are identified within the recitals, e.g. SBC seventh recital. The predecessors to SBC, ICD and MWD did not have this facility, although a contractor’s designed portion supplement was available for use with JCT 98. The design of piling or the steelwork connections are typical examples of design that may be passed to the contractor under this provision. The employer provides Employer’s Requirements (qv) for that part or parts to be designed by the contractor, and in response the contractor submits Contractor’s Proposals. These documents, along with the bill or specification or work schedules, form part of the contract documents (qv). As a result of an express term inserted in the contract, the contractor is not responsible for verifying any design set out in the Employer’s Requirements, e.g. ICD clause 2.34.4. Were it not for this term, it is likely that the contractor would be liable for checking the adequacy of the preliminary design that was to be completed.231 In connection with the contractor-designed element, SBC has provisions setting out the liability of the contractor (clause 2.19.1), for the contractor to supply as-built drawings (clause 2.40), for the employer to have a licence to use the design in connection with the Works (clause 2.41), and for the contractor to take out professional indemnity insurance (clause 6.11). Similar provisions exist within ICD, but the provisions within MWD are not as comprehensive.

Contractor’s persons A term used within SBC, DB and IC to refer to the contractor’s employees and agents, all other persons who are employed on or in connection with the Works or any part, and any other person properly on the site in connection with the Works. This is a broad definition, but it expressly excludes the architect/contract administrator, quantity surveyor, employer, employer’s persons and any statutory undertakers. Within SBC it is referred to in clauses 2.11 (information release schedule), 2.29.6 (relevant events), 4.24.5 (relevant matters), 6.2 (liability of contractor – injury or damage to property), 6.14 (compliance with Joint Fire Code) and within section 8 (termination) at clauses 8.7.2.1, 8.9.2, 8.11.2 and 8.12.2.1.

Contractor’s Proposals The phrase is used in SBC and ICD in connection with the contractor’s designed portion, and in DB when referring to the contractor’s response to the Employer’s Requirements. The response could take various forms, e.g. drawings, specifications, models, perspectives, or videos. The proposals should answer the Employer’s Requirements. Contractors should submit a detailed specification covering all the work and materials they will use to complete the project. Contractors sometimes include a programme and a method statement232 as part of the proposals, thereby making them parts of the contract document. This requires both the employer and the contractor to comply with them in every particular. It would be better if the programme, at least, were not a contract document. The contractor should fill any gaps in the Employer’s Requirements by including the information in its proposals, but they should not contain any provisional sums unless they are set out in the Employer’s Requirements. SBC

231 232

Co-operative Insurance Society v. Henry Boot Scotland Ltd (2002) 84 Con LR 164. Yorkshire Water Authority v. Sir Robert McAlpine and Son (Northern) Ltd (1985) 32 BLR 114.

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Contractor’s skill and care and IC cater for adjustment of provisional sums included in the Employer’s Requirements but not in the Contractor’s Proposals. See clause 5.2.3. Under both SBC and ICD the contractor is expressly stated not to be responsible for design included within the Employer’s Requirements, e.g. SBC clause 2.13.2. Under WCD 98 and the contractor’s designed portion supplement to JCT 98 it is probable that the contractor is responsible for checking to make sure that the original design worked before completing such design.233

Contractor’s skill and care In the absence of any express terms in the contract, it will be implied that a contractor: — will carry out its work in a workmanlike manner; — will supply good and proper materials; and — will ensure that the completed structure is reasonably fit for its intended purpose. In the case of a dwelling it must be reasonably fit for human habitation. This limb is normally not applicable where the employer is responsible for design and the contractor’s obligation is simply to comply with the specification234 produced by the employer’s designers. These implied terms may be excluded from the contract. This may be by an express statement or by implication. An express statement may be subject to the provisions of the Unfair Contract Terms Act 1977 (qv). Exclusion by implication would arise if the parties set out a clear and complete specification for certain aspects of the Works. Other factors may also operate to reduce the liability of the contractor – for example if the employer has the services of an architect or other construction professional upon whose advice they rely.235 ACA makes the position quite clear, so far as that contract is concerned, by including a provision (i.e. clause 1.2) that expressly refers to and preserves all implied warranties or conditions, and puts upon the contractor the duty to perform its obligations under the contract with ‘all the skill, care and diligence to be expected of a properly qualified and competent contractor experienced in carrying out work of a similar scope, nature and size to the Works’.

Contracts (Rights of Third Parties) Act 1999 The Act came into force on 11 May 2000, and it applies throughout the United Kingdom. It interferes with the principle of privity of contract (qv) by giving an entitlement to third parties, who are not parties to the contract in question, to enforce certain rights under the contract. Specific criteria must be satisfied: — the contract expressly gives or purports to give the third party a right; — the terms confer a benefit (unless it is clear that the parties did not intend a benefit to be conferred); and — the third party must be identified in the contract. That can be by name, by class or by description. (Note that the third party may not have existed at the time the contract was entered into, e.g. a newly formed limited company.) Such a right may be enforced only in accordance with the terms of the contract. The party against whom the third party seeks to enforce the terms may 233

Co-operative Insurance Society v. Henry Boot Scotland Ltd (2002) 84 Con LR 164. Lynch v. Thorne [1956] 1 All ER 744. 235 Rotherham Metropolitan Borough Council v. Frank Haslam Milan & Co Ltd (1996) 59 Con LR 33. 234

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Contributory negligence rely on any defence and remedy available under the contract, and may raise any set-off or counterclaim. In some instances the third party may be treated as a party to an arbitration agreement in the contract. The parties can rescind or vary the contract in order to remove the right, but not if: — the third party has communicated its agreement to the term; — the parties know that the third party has relied on the term; or — it was reasonably foreseeable that the third party would rely on the term, and it has relied on it. The Act allows parties to include a term in the contract by which they can rescind or vary the contract without the consent of the third party, or set out the circumstances for obtaining the third party’s consent. Alternatively, the parties to a contract may expressly exclude the effect of the Act (i.e. third party rights) under that contract. This was the approach adopted by many bodies when producing standard forms, e.g. MW and MWD clause 1.5. Certain contracts are excluded from the operation of the Act, including promissory notes and other negotiable instruments, contracts of employment, and agency contracts. Construction contracts and consultant appointments do not fall within the exception. SBC and DB have provision for the inclusion of third party rights at clause 7 and part 2 of the contract particulars. The third party rights provisions are set out at Schedule 5. However, at clause 1.6 they each exclude any third party rights other than those identified at clause 7. The ACA at recital J expressly excludes any third party rights. It was forecast at inception that the Act would put an end to the use of collateral warranties (qv). In view of the opportunities to negate the operation of the Act in respect of particular contracts, it still seems unlikely that the demise of collateral warranties is imminent.

Contributory negligence A defence in an action at common law for damages arising from negligence, the defence being that the injured party’s own actions amounted to negligence, and caused or contributed to their injuries. This position was altered by the Law Reform (Contributory Negligence) Act 1945, which provided that, where a person suffers damage partly as a fault of their own negligence and partly as the fault of others, a claim in respect of the others’ negligence is not defeated simply by reason of the fault of the person who suffers the damage. In an action for negligence the damages recoverable are reduced to such an extent as the tribunal considers just and equitable, having regard to the claimant’s share of responsibility for the damage caused. The Act applies to claims in tort, but may also apply to a contractual liability. The term in the contract must be one of having to take ‘reasonable skill and care’, and there must be a concurrent obligation in negligence.236 The Act would not apply where the obligation is simply one that arises from the contract.237 An illustration of the application of the Act is the case of Sahib Foods Ltd v. Paskin Kyriakides Sans (a firm),238 where a fire destroyed a food factory.

236

Forsikringsaktieselskapet Vesta v. Butcher [1989] AC 852. Barclays Bank plc v. Fairclough Building Ltd (No. 2) (1995) 76 BLR 1. 238 (2003) 93 Con LR 1. 237

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Cooperate The architects specified combustible materials, although the employer’s actions both in the intended use of the room and in its actual use contributed towards the damage. The overall losses suffered were in the region of £27 million, which was reduced by some 66% owing to the employer’s contribution to the cause and spread of the fire. See also: Civil Liability (Contribution) Act 1978.

Cooperate To work together towards a common goal. There is an implied term in every building contract that the employer will do all that is reasonably necessary to complete the contract. The position is succinctly put in a well-known quotation: If A employs B for reward to do a piece of work for him which requires outlay and effort on B’s part … generally speaking, where B is employed to do a piece of work which requires A’s cooperation … it is implied that the necessary cooperation will be forthcoming.239

There are clear limits on the implied term to cooperate: I can think of no term that can properly be implied other than one based on the necessity for cooperation. It is, no doubt, true that every business contract depends for its smooth working on cooperation, but in the ordinary business contract, and apart, of course, from express terms, the law can enforce cooperation only in a limited degree – to the extent that it is necessary to make the contract workable. For any higher degree of cooperation the parties must rely on the desire that both of them usually have that the business should get done.240

This probably extends to all those things that an architect must do to enable the contractor to carry out the Works, and the employer is liable for any breach of this duty.241 In Cantrell and Another v. Wright & Fuller Ltd the judge, addressing the late issue of a certificate under a JCT contract, said: ‘the parties and the architect must work together and mutually cooperate if the contract is to be brought to a successful conclusion.’242 The duty to cooperate is sometimes expressly stated in the contract, e.g. the Standard Form of Agreement for the Appointment of an Architect (SFA/99) (qv) clause 1.6. It is common to see variations on such clauses in partnering (qv) agreements, e.g. CE clause 2.1.

Copyright Rights relating to creative work of an artistic, dramatic, literary or musical nature. They usually belong to the originator or creator, and to acquire protection the work must be recorded in a material form. Work does not have to be published or registered to hold copyright protection. Copyright subsists with the creator of the work for a specified period depending upon the category of the work, e.g. literary, sound or film. It is usually the creator’s lifetime plus a period thereafter, e.g. 50 years.243 The period for architectural design work is 70 years from the end of the calendar year within which the creator dies. Copyright prevents others from carrying out restricted acts, which differ 239

Luxor (Eastbourne) Ltd v. Cooper [1941] AC 108 at 118 per Lord Simon. Mona Oil Equipment Co v. Rhodesia Railways [1949] 2 All ER 1014 at 1019 per Devlin J. 241 London Borough of Merton v. Stanley Hugh Leach Ltd (1985) 32 BLR 51. 242 (2003) 91 Con LR 97 at paragraph 101 per Judge Thornton. 243 The Duration of Copyright and Rights in Performance Regulations 1995 (SI 1995 No. 3297). 240

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Copyright depending upon the category of work, e.g. no one may produce, reproduce or copy that work without express permission. Ownership of copyright may be transferred from the creator, or a licence (qv) may be given to someone to reproduce the work while the creator retains the ownership of the right. In published works it is usual, though not essential, to show that copyright is claimed thus: © Anne Davis (2007). Copyright is governed by the Copyright Designs and Patents Act 1988. An important innovation is the introduction of ‘moral rights’ (qv). The author of the copyright work in general has the right to be identified as the author. Ss. 77(4) to (5) refer to architectural works. The creator has the right to be identified whenever any kind of copy of the work is issued to the public. They also have the right to be identified on the building. The creator must assert their right before it can be infringed. If there is a delay in asserting the right, the court can take it into account in awarding any remedy. The right not to have the work subjected to derogatory treatment is also recognised. Treatment is said to be derogatory if it is a distortion or mutilation of the work, or is otherwise prejudicial to the author’s honour or reputation. When this principle is applied to a building, the author has the right to require the identification to be removed. An author may take action for breach of statutory duty if a moral right is infringed. The court may grant an injunction (qv) on terms that the infringing act must cease unless an appropriate disclaimer is made dissociating the author. Designers (e.g. architects) have copyright in their designs. An architect commissioned to design a building retains the copyright in the design, but normally the client has a licence to reproduce that design as a building, provided the client has agreed the matter with the architect or has paid a sufficient fee such that the architect’s agreement to the use of the design is implied.244 In the RIBA Standard Form of Agreement for the Appointment of an Architect (SFA/99) (qv), the position is clearly set out, as follows. — Copyright in all documents and drawings prepared by the architect and in work executed remains the property of the architect. — The client has a licence to reproduce and use the designs for any purpose, provided that it relates to the project on the particular site and may allow consultants and contractors providing services for the project to do likewise. The purposes are broadly drafted, but they expressly exclude any right to reproduce the design to extend the project or, of course, any other project. — The architect is not liable if the copyright material is used for a purpose other than that for which it was intended. That would be the ordinary common law position in any event. — If the copyright material is used after the architect has finished performance of the services and before practical completion (qv), the client must obtain the architect’s consent and/or pay any agreed licence fee before proceeding to execute the work, provided that the architect shall not withhold consent unreasonably. This is clearly to overcome the problem faced by many architects when a client will only agree to engage them for limited work, but wishes to take the benefit of the architect’s designs. 244

Stovin-Bradford v. Volpoint Properties Ltd and Another [1971] 3 All ER 570.

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Core group If the architect suspects that a client, or anyone else, is about to use the architect’s material without either express or implied consent, they can apply to the court for an injunction to restrain them. Note, however, that the courts will not grant an injunction if the work has been commenced, because they consider that damages in the form of a suitable fee for reproduction will amply recompense the architect, and stopping expensive building work is not generally justified in such circumstances. What constitutes commencement of building work may be a difficult matter to decide.245 It may also be difficult to prove infringement of copyright. It is easy to show that a design has been copied if every detail is exactly the same as the original, but the position is not so straightforward if portions of the design have been copied. If there is effectively only one answer to a design problem, an architect will not be liable for infringement of copyright by arriving at the same solution as another architect previously engaged on the same project. Small alterations to a design will not overcome the rights of the original designer. But if a substantial and recognisable feature of the original design is copied, the original designer is likely to have a better case. The issue is a matter of degree, and very uncertain in many instances. The designer should try to negotiate a suitable fee rather than resort to the courts in such instances. In an action for breach of copyright the court may have regard to the flagrancy of the infringement, and any benefit accruing to the defendant by the infringement, when considering whether to award additional damages ‘as the justice of the case may require’. Section 107 of the 1988 Act makes certain infringements of copyright a criminal offence. The penalty may be a fine, or imprisonment, or both.

Core group A term used and defined within PPC at appendix 1 as the individuals identified in the project partnering agreement as core group members, subject only in each case to replacement in accordance with the partnering terms. The core group are seen as one of the ‘control mechanisms’ whose role is to review and stimulate progress of the project. Under clause 3.3 the group are to meet on a regular basis to ensure the implementation of the partnering contract (qv) and fulfil the functions specifically identified within the partnering terms, e.g. finalisation of key performance indicators (KPIs) (qv) under clause 23.1. Meetings of the core group are convened by the client’s representative (qv) and chaired by an agreed individual to address the issues in a stated agenda (clause 3.5). Decisions of the core group are to be by consensus of those present at the relevant meeting (clause 3.6).

Corporation An artificial legal entity having a distinct legal existence, name, a perpetual succession and a common seal. Corporations are classified as: — Corporations sole, which consist of only one member at a given time and are the successive holders of certain offices, e.g. the Bishop of Durham. It is an office or function as opposed to its holder in a private capacity. — Corporations aggregate, which consist of many members. They come into existence either by grant of a royal charter or by or under authority of an Act of Parliament, e.g. a limited liability company. The corpora245

Hunter v. Fitzroy Robinson & Partners (1978) 10 BLR 84.

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Cost reimbursement contract tion is a separate legal entity distinct from the individuals who are its members at any given time. Such corporations act through their agents, e.g. directors of a registered company. Contracts made beyond the powers of the corporation, as laid down in its charter or limited by statute, are ultra vires (qv) and void. This is not of great importance as regards building contracts. Corporations can make contracts in the same form as is available to private individuals. The age-old requirement of the common law that corporations had to contract under seal (qv) was abolished by the Corporate Bodies Act 1960.

Corporeal property Tangible property, such as land or goods, that has a physical existence; in contrast with incorporeal property, which consists of intangible legal rights. A corporeal hereditament is a tangible interest in land (i.e. the land itself) and things that are annexed to or form a part of it (i.e. fixtures (qv)), while an incorporeal hereditament (qv) is a right over land, such as a right of way or other easement (qv). The word ‘hereditament’ denotes that the property is inheritable. See also: Personal property; Real property.

Corroboration To corroborate is to confirm or support. Evidence (qv) that tends to strengthen other evidence. This is not strictly necessary in English law, but it is always desirable. A tribunal may act on the testimony of one witness alone, but in certain specified cases (e.g. perjury) corroboration is required. See also: Hearsay; Parol evidence.

Corrupt practices Many standard form contracts contain clauses forbidding the contractor from indulging in corrupt practices, such as the giving of bribes or the taking of secret commissions. GC/Works/1 clause 24 is such a provision, and entitles the employer to determine the contract and/or to recover from the contractor the amount or value of the bribe. SBC, IC and ICD clause 8.6 and MW and MWD clause 6.6 confer a similar right to terminate the contractor’s employment ‘under this or any other contract’ for such practices, which are, in any case, a criminal offence under the Prevention of Corruption Acts 1889 to 1916. Very strict legal rules at common law enable the employer to rescind a contract tainted by corrupt practices, and to recover any secret bribes or commission in any case.246 See also: Bribery and corruption; Fraud.

Cost reimbursement contract A type of contract by which the contractor receives all its costs together with a fee. There are four common variants for determining the fee, as follows. — Cost plus percentage: The contractor is paid the actual cost of the work, reasonably incurred, plus a fee, which is a percentage of the actual cost, to cover its overheads and profit. This form of contract is often used for maintenance work, or for work where it is difficult to estimate the work to be done, or for emergency work. It is possible to invite tenders on the basis of the percentage, but there is no incentive for the contractor to 246

Salford Corporation v. Lever (1891) 63 LT 658.

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Costs make good progress or to save money, because its fee rises with the total cost of the job. The JCT (qv) has produced the Prime Cost Building Contract (PCC), which can be based upon percentage fee. — Cost plus fixed fee: Similar to the cost plus percentage contract, and used for similar situations. The important difference is that, because the fee is a fixed lump sum, the contractor has more incentive to finish quickly and maximise its profit as a percentage of turnover. It is usual for some indication of the total cost to be given to tenderers. PCC has provision for use with a fixed fee. — Cost plus fluctuating fee: Similar to the fixed fee contract, and used for similar situations. An estimate is made of the total cost. The amount of the fee received by the contractor varies inversely to the costs actually achieved. Thus, if the costs are less than the estimated costs, the contractor receives a greater fee, calculated in accordance with an agreed sliding scale, and vice versa. It is to the contractor’s advantage to reduce costs and finish the work quickly. PCC can also be used for this approach. — Target cost: Used in similar situations to PCC, but can also be used for a wide variety of conditions. A priced bill of quantities (qv) or a priced schedule is agreed, and a target cost is derived for the project. The contractor’s fee is usually quoted as a percentage of the target cost. Provision is made for the target cost to be adjusted to take account of variations and fluctuations. The contractor is paid its actual costs reasonably incurred. The total of these costs is compared with the adjusted target cost. If they show a saving, the fee is increased in accordance with a pre-agreed formula, and vice versa. The disadvantage of this type of contract lies in the complex measurement procedures involved, and the difficulty of agreeing targets and percentages. The NEC has two target cost options: Option C Target contract with activity schedule, and Option D Target contract with bills of quantities. See also: Engineering and construction contract; Management contract; Prime cost; Prime contracting; Target cost; Value cost contract.

Costs When a party pursues an action, whether in litigation or arbitration, they will incur costs in so doing – for example, the cost of legal advice, representation, or that of an expert witness. Following a conclusion on the substantive matters, the tribunal may have to turn its attention to deciding who is to bear the costs incurred by the party, and possibly the tribunal – ‘may’ in that it is always open to the parties to agree on costs. The normal position is that ‘costs follow the event’, and the unsuccessful party will pay the costs of the successful party, although this position may be altered. It may be altered if a part 36 payment had been made into court, or a sealed or Calderbank offer (qv) made in arbitration. It is possible under the CPR for the court to make cost orders on an issue basis, i.e. judging success on an issue-by-issue basis rather than looking at the overall position. Not all costs are recoverable by the successful party. Costs are usually assessed on what is called the standard basis, i.e. reasonable costs reasonably incurred, and are proportionate to the nature of the dispute. This usually results in a successful party recovering up to 80% of their overall costs. Therefore this likely shortfall is a factor that must be considered when considering a potential settlement. 132

Counsel The alternative method of determining costs is on what is called an indemnity basis. This means that the costs are assumed to be reasonable unless shown to the contrary. It is rare for all costs to be recovered, even on the indemnity basis. If the parties cannot agree, then liability and quantum would be decided by the court or arbitrator, as the case may be. In recent times the courts have given adverse cost orders against a party who was not willing to mediate, even though that party may have been successful in any litigation.247 In Nigel Witham Ltd v. (1) Robert Leslie Smith (2) Jacqueline Isaacs (No. 2)248 the judge said that in exceptional circumstances a late mediation caused by one party’s unreasonable delay may lead to an adverse cost order. It would seem, following the decision in McGlinn (Ian) v. (1) Waltham Construction Ltd (2) Huw Thomas Associates (3) D J Hartigan & Associates Ltd,249 that costs incurred in complying with a pre-action protocol (qv) may not be recoverable if that claim is not pursued in court. Inter-party costs in adjudication are normally borne by each party, with the adjudicator having authority simply to decide what proportion of the adjudicator’s fees each party is to bear. It is always open to the parties to agree to give the adjudicator the power to deal with and award the parties’ costs.250 Some unscrupulous bespoke contracts always require the referring party to pay the costs of the responding party, no matter what the outcome, although such provisions may well be made unenforceable.251 Indeed, such provisions are likely to be contrary to s. 13 of the Unfair Contract Terms Act 1977 (qv). See also: Commercial Court; Sealed offer; Security for costs; Technology and Construction Court – Judge of.

Costs assessment A process under the Civil Procedure Rules (qv), which used to be known as taxation of costs (qv). Costs are principally dealt with under Parts 43 to 48, and the accompanying practice directions. Essentially, it is the process by which the court determines the amount of costs to be paid by a party following the giving of an order for costs, if the parties cannot agree on the amount.

Costs judge See: Taxation of costs. Counsel A barrister (qv) or group of barristers. Since 3 April 1989 arbitrators, and members of certain professional bodies such as the RIBA, RICS and ICE, have been able to obtain counsel’s opinion direct without the necessity to engage a solicitor to instruct counsel on their behalf. This is called ‘direct professional access’, and is limited to obtaining opinions or seeking advice in conference. Construction professionals cannot instruct counsel direct to appear in court proceedings, and for conducting litigation they must employ a solicitor. There is no such bar in respect of arbitration proceedings. 247

Hurst v. Leeming [2002] EWHC 1051. [2008] EWHC 12 TCC. [2005] 102 Con LR 40. 250 Northern Developments (Cumbria) Ltd v. J & J Nichol [2000] BLR 158. 251 Should the proposed reforms to the H.G.C.R. Act 1996 become legislation. See: Bridgeway Construction Ltd v. Tolent Construction Ltd (2000) CILL 1662. 248 249

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Counterclaim

Counterclaim In legal proceedings a defendant may respond to a claim for damages by serving both a defence and a claim for damages against the claimant (qv). This latter claim is termed a ‘counterclaim’ or ‘crossclaim’. The counterclaim is not part of the defence, and may have no relevance to the original claim. It may, however, be properly described as a set-off (qv), and so be a defence as well as a counterclaim. It may simply be a claim that the defendant intended to pursue in any event. It is for the court to decide whether it is convenient to deal with both claim and counterclaim at the same time. If the court decides that it is not convenient, the counterclaim may be struck out, and it is then for the defendant to bring a separate action, as claimant, on the substance of the counterclaim. It follows from s. 14 of the Arbitration Act 1996 that the respondent in an arbitration may not raise an unrelated counterclaim in that same arbitration against the claimant unless the claimant agrees to that counterclaim being heard. Otherwise, such an unrelated counterclaim can be brought only by serving a further notice of arbitration. A similar situation is to be found in statutory adjudication, because the adjudicator may consider only the questions referred by the party seeking the adjudication and the respondent’s defence to those questions. A counterclaim should be distinguished from abatement. Abatement is merely a defence that reduces the quantum of a claim, and can never exceed the claim, whereas a true counterclaim is an action capable of existing on its own, and may exceed the quantum of the claim. See also: Abatement; Set-off.

Counter-offer For a contract to come into existence there must be an offer (qv) by one party and an unqualified acceptance (qv) by the other. A counter-offer is one where the recipient of an offer does not accept the offer, but in turn makes an offer, on different terms, for acceptance. Sometimes this may be done unknowingly. For example, if an offeree signifies ‘acceptance’, but with qualifications, this is not true acceptance, but merely a counter-offer, which the initial offeror is free to accept or reject. A counter-offer destroys the original offer, which may not be subsequently accepted by the original offeree.252 If contractor A requests a quotation from supplier B, B’s quotation is the offer. It may contain special terms of business. If A writes purporting to accept the offer subject to its own contract terms then this is a counter-offer. This process of exchanges may continue, and is sometimes referred to as the ‘battle of forms’. In these circumstances, if there is a contract at all it is often the last set of terms referred to that is decisive. The correct approach is to see whether one party has accepted the other’s terms by express words or conduct, e.g. by acting upon them. This can be difficult to establish on the facts, but can be, for example, the acceptance of materials from a sub-contractor onto site by a main contractor.253 However, in some cases there will be no contract at all, because neither party has accepted the other’s offer or counter-offer. See also: Acceptance.

252 253

Hyde v. Wrench (1840) 3 Beav 334. Chichester Joinery Ltd v. John Mowlem & Co plc (1987) 42 BLR 100.

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Courts

Course of dealing Where parties have dealt with each other consistently using certain terms in a significant number of previous transactions of a particular type, and they enter into a further agreement of the same type, the previously used terms may be incorporated into their latest agreement.254 The situation is relatively rare, and the criteria are strictly examined. It certainly does not entitle a party to rely on the terms used on one or two previous occasions as governing the parties in a subsequent contract. See also: Contract.

Courts The Concise Oxford Dictionary255 defines a court as an ‘assembly of judges or other persons acting as tribunal’ as well as a ‘place or hall in which justice is administered’. Courts can be classified in several ways. Figure 5 represents diagrammatically the major courts in England and Wales. They are divided into superior and inferior courts. Inferior courts are those that are subject to control by the High Court. Only the decisions of superior courts play any part in the development of judicial precedent, and it is only decisions of superior courts that have binding authority in later cases (see: Judicial precedent). Some courts have only criminal jurisdiction, while others hear civil matters only. Some are hybrid, and can hear both civil and criminal cases. Magistrates’ courts deal mostly with minor criminal matters, and are normally staffed by justices of the peace, who have no formal legal qualifications, but must undergo some training. Paid district judges (formerly stipendiary magistrates) – who have formal legal qualifications – are appointed in London and major centres. Magistrates’ courts have limited civil jurisdiction, e.g. hearing certain family matters. Crown courts deal with serious criminal matters, and also hear appeals from decisions of magistrates’ courts. They are part of the Supreme Court of Judicature, and are served by High Court judges and circuit judges. County courts deal with the bulk of civil litigation. There is no monetary limit on the amount of the claim in either contract or tort, but higher value or complex matters are litigated in the High Court. They are staffed by district judges, circuit judges and recorders. There is no jury. The High Court of Justice (which is part of the Supreme Court of Judicature) is divided into three: — Queen’s Bench Division; — Family Division; — Chancery Division. High Court judges are appointed by the Crown on the advice of the Lord Chancellor from the ranks of eminent practising barristers and possibly solicitors of long standing. Building contract disputes are normally dealt with in the Queen’s Bench Division, generally by the judges of the Technology and Construction Court (qv). The Court of Appeal consists of a Criminal and a Civil Division. They are presided over by the Lord Chief Justice and the Master of the Rolls respectively,

254 J Spurling Ltd v. Bradshaw [1956] 1 WLR 461; McCutcheon v. David McBrayne Ltd [1964] 1 WLR 125. 255 Sykes, JB, 6th edn, Clarendon Press (1979).

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Courts Superior Courts House of Lords [Lords of Appeal in Ordinary]

Court of Appeal [Lords Justices of Appeal]

High Court of Justice [Puisne judges] Queen’s Bench Division

Chancery Division

Family Division

County Court

Crown court

Magistrate’s Court

Lands Tribunal

Arbitration

Local Authority decisions Inferior Courts

Civil

Criminal

Lines of Appeal Criminal commital Supreme Court of judicature

Figure 5

Diagram showing the organisation of the English court system.

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Covenant and consist of Lords Justices of Appeal, who are usually promoted from the High Court bench. They sit in courts of two or three, and hear appeals (qv) from both county courts and the High Court. The Criminal Division hears appeals against conviction and sentence. The House of Lords, as a judicial body, consists of Lords of Appeal in Ordinary, together with the Lord Chancellor. Appeals are heard by the Appellate Committee of the House of Lords, usually sitting as a committee of five, but in very important cases there may be seven members. Before an appeal can be heard the appellant must obtain the permission of the Court of Appeal or the Appeal Committee of the House of Lords itself. In practice, only matters of the greatest importance proceed this far. The structure of the courts in Northern Ireland is very similar to that in England and Wales, although it is a separate jurisdiction. The decisions of the respective High Courts and Courts of Appeal are not strictly binding on each other, but usually they will be followed if in other respects the law on a particular matter is the same. The structure in Scotland is different. The House of Lords is the final appellate court for Northern Ireland and Scotland as well as for England and Wales. The Judicial Committee of the Privy Council hears appeals from such Commonwealth countries as retain the right of appeal, colonial territories, ecclesiastical courts, the Isle of Man and Channel Islands, and certain professional tribunals. See also: Commercial Court.

Covenant A promise or an agreement executed as a deed. A covenant can also be implied by law in certain cases, e.g. leases. Restrictive covenants most directly affect the construction industry. They restrict the use of freehold land according to the original agreement. They are attached to the land, not the person, so that a person buying land also takes on the benefit or burden of any restrictive covenant that applies to the land (s. 56 Law of Property Act 1925). Thus a covenant may restrict the building of anything on land A for the benefit of the owner of land B. New owners may purchase the land, but the restrictive covenant remains, unless of course the two owners (who must be the only ones affected) agree that the covenant may be removed. In the case of a restrictive covenant imposed on all the owners of land in a particular area for the benefit of that area (i.e. a ‘building scheme’), such as a housing estate, the covenant can be enforced by any of the owners. To enforce a restrictive covenant, the following conditions must be satisfied: — The covenant must confer a benefit on the land or other land. — The covenant must be preventive, i.e. to stop something occurring, and must not require the expenditure of money. A covenant to build and keep a boundary wall in good condition is not restrictive. — The party seeking to enforce the covenant must show that it has been assigned the benefit of the covenant, or that the covenant attaches to its land. Outmoded restrictive covenants may be modified or discharged by the Lands Tribunal (qv). An express covenant may be made, usually between landlord and tenant, in written form. It often covers such things as the tenant’s duty to repair, insure against fire, or pay the rent. 137

CPR An implied covenant is one that is not written down, but is implied by law. Common implied covenants relating to landlord and tenant, if not expressly stated, are that the tenant will have ‘quiet enjoyment’ of the land (no other party can question their right to the land), and that the tenant will pay the rent. See also: Restrictive covenant.

CPR See: Civil Procedure Rules. Criminal liability Liability that arises under the criminal law, as opposed to civil law. Conviction of a criminal offence may result in a fine, imprisonment, or some other punishment. A crime is an offence against the State. The law has declared various kinds of conduct criminal. For the most part, criminal liability in the building industry will result from breach of some specific statutory provision or requirement of regulations, e.g. regulation 21 (notification of project by the CDM coordinator) of the Construction (Design and Management) Regulations 2007 (qv) or regulation 5 of the Site Waste Management Plans Regulations 2008 (qv).

Critical path A term used when referring to a project programme, which has been defined as ‘the sequence of activities through a Project network from start to finish, the sum of whose duration determine the overall Project duration’.256 There may be more than one critical path on a project.

Cross-examination The second stage in the examination of witnesses during judicial or arbitral proceedings, when the witness is questioned by or on behalf of the opposing party. Leading questions may be put, and a very wide range of questions is allowed. The object of cross-examination is to shake the witness’s testimony and establish matters that are favourable to the crossexamining party. The witness can be asked questions the answers to which tend to discredit them by showing that they are a person not to be believed. See also: Examination-in-chief; Re-examination; Witness.

Crown The term ‘the Crown’ may mean the Queen acting as head of state on the advice of her ministers, and is largely synonymous with the term ‘the State’. In the context of building contracts the term means the various government departments. In general, the Crown has the same power to make contracts as local authorities, companies in the private sector, or individuals, but the following should be noted. — There are limits on the contractual capacity of the Crown, although their extent is not entirely clear. In practical terms, building and other contracts with Crown departments can be enforced by and against the Crown under the Crown Proceedings Act 1947. — There are special Crown contracting procedures, which have been developed over the years. See also: GC/Works/1 contract.

256

Mirant Asia-Pacific Construction (Hong Kong) Ltd v. (1) Ove Arup and Partners International Limited (2) Ove Arup and Partners Hong Kong Limited [2007] EWHC 918 (TCC).

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Custom

Crown privilege The Crown has a right to object to producing a document in court on the ground that it is contrary to the public interest to do so. This is also known as public interest immunity (PII). The privilege (qv) is claimed by an affidavit (qv) sworn or a certificate signed by the appropriate Minister, which states that the Minister has examined the document personally and objects to it being produced. The courts may, however, question a claim of Crown privilege.

Culpable delay A phrase used to describe a period of time after the date for completion (qv) or any extended date and before the date of practical completion (qv). It is delay for which the contractor is responsible and for which, under most standard forms, the employer may claim liquidated damages.

Custom A long-standing practice or usage, binding on those within its scope. It is a subsidiary source of law, but largely unimportant today. Evidence of trade custom or usage may be given and proved to show that words in a contract are to be interpreted in a particular way. For example, in Myers v. Sarl257 evidence was allowed to show that ‘weekly account’ was a term of art well known in the building trade at that time. Implied terms may also be established by proving trade custom or usage, e.g. ‘reduced brickwork’ as meaning brickwork nine inches thick.258 It must be established, however, that the custom relied on is: — open and notorious, i.e. generally accepted and acted upon; — not contrary to law;259 — reasonable and certain in its operation. In general, customs will be implied only if they are not expressly excluded, and where they do not contradict any other terms implied by the general law. They are difficult to prove in practice. See also: Implied term.

257

(1860) 3 E & E 306. Symonds v. Lloyd (1859) 141 ER 622. 259 Crowshaw v. Pritchard & Renwick (1899) 16 TLR 45. 258

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D Damage Damage is any harm suffered by a person. For an action (qv) to lie (i.e. for it to be possible to take legal action), it must be wrongful damage.

Damages Damages are the sum of money or the compensation awarded by a tribunal or claimed by the claimant (qv). See also: Consequential loss; Direct loss and/or expense; Remoteness of damage; Restitutio in integrum; Special damages.

Damages at large A term sometimes incorrectly used when generally referring to unliquidated damages, ‘at large’ meaning that the amount of any damages is at liberty until proven and ascertained. See also: Time at large.

Damages for delay A phrase used within ACA in the margin headings at clauses 11.3 and 11.4. In general terms it is referring to damages recoverable by the employer from the contractor if the Works are not completed by the relevant completion date. Clause 11.3 has two alternatives. Alternative 1 is used when liquidated and ascertained damages are specified within the time schedule (qv). Alternative 2 is for use when no liquidated and ascertained damages are specified within the time schedule, and the employer is to recover such ‘damage, loss and/or expense’ as may arise as a consequence of the contractor failing to offer the Works or any relevant part for taking over in accordance with the dates in the time schedule (qv), i.e. unliquidated damages.

Dangerous premises A local authority (qv) has the power to deal with premises that are in a dangerous or defective condition under sections 76 to 81 of the Building Act 1984. The procedure is by way of a complaint to the magistrates’ court (qv). The court may make an order requiring work to be carried out where any building or structure or part thereof is in such a condition as to be dangerous to a person (i) in the street, (ii) within the premises themselves, or (iii) in adjoining premises. Section 78 contains an emergency procedure that can be invoked where immediate action is required. The local authority may take any action necessary to abate the nuisance (qv) and recover expenses from the person in default. See also: Abatement; Occupier’s liability.

Date (or dates) for completion A defined term within many standard contracts, including some of the JCT forms, e.g. clause 1 within SBC, DB, IC and ICD, simply referring to a date identified within the contract particulars (qv). Under SBC clause 2.3 the contractor is to complete the Works ‘on or before’ the relevant date identified in the contract particulars. Given this wording, a contractor may finish the Works before the specified date.260

260

Glenlion Construction Ltd v. The Guinness Trust (1987) 39 BLR 89.

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Day Within GC/Works/1 it is the date or dates ascertained in accordance with the abstract of particulars. Alternatively, where an extension of time has been awarded or acceleration agreed, then the date is adjusted accordingly. The contractor’s obligation under clause 34.1 is to complete the Works in accordance with the contract by the date or dates for completion. In PPC, as stated at appendix 1, it is the agreed date for project completion (qv) as stated in the commencement agreement (qv). Again, this would be subject to adjustment should the constructor be entitled to an extension of time in accordance with clauses 18.3 and 18.4. See also: Completion date; Practical completion.

Date of possession A defined term within many of the JCT contracts, e.g. clause 1 within SBC, DB, IC and ICD, simply referring to a date identified within the contract particulars (qv). Under SBC clause 2.3 the contractor is to take possession of the site – or, in the case of a section, the relevant part – on the date of possession. The contractor retains possession until practical completion (qv). Within PPC it is defined (i.e. at appendix 1) as the agreed date for commencement of the project on site as stated in the commencement agreement (qv). From the date of possession the constructor takes possession of the site in accordance with clause 15.3: e.g. the constructor is responsible for the site and project security. The constructor’s obligations in respect of the site cease on project completion (clause 21). See also: Possession.

Day There are a surprising number of different ways of calculating a day, given that a day comprises the time taken by the earth to rotate one revolution about its axis. It is a 24-hour period calculated from a definite or given point. Thus it has been held that a period of 30 days stated within a marine insurance policy amounted to a period of 30 consecutive 24-hour periods commencing at the time of the ship’s arrival.261 However, this approach is not necessarily of general application, even within the field of marine insurance, as it has also been held that a period of days commenced at midnight on the date of issue of a policy.262 It may therefore be a matter of the specific wording in a contract to determine what is meant, and when any given 24-hour period is to commence. A calendar day is reckoned from midnight to midnight, and is also sometimes referred to as a natural day or civil day. Within GC/Works/1 ‘Days’ is defined as calendar days. Contracts commonly refer to a day as meaning a calendar day, although sometimes reference is made to a working day. In the absence of any express definition in the contract, a working day is any day other than Saturdays, Sundays, Good Friday, Christmas Day, a bank holiday, or a day declared to be a non-working or non-business day.263 The term ‘working day’ must be expressly stated in the contract if that is what is meant. It will not be implied, unless to do otherwise would make nonsense of the particular provision. Bank 261

Cornfoot v. Royal Exchange Assurance Corporation [1904] 2 KB 40. Cartwright v. MacCormack [1963] 1WLR 18. 263 Lafarge (Aggregates) Ltd v. London Borough of Newham [2005] EWHC 1337 (comm). Saturdays were held not to be working days on the basis that notices, even relating to construction contracts, were sent from offices to offices that did not work on Saturdays. 262

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Dayworks holidays are defined under the Financial Dealings Act 1971. It has been held that no account is to be taken of fractions of a day, so that if an adjudicator’s decision is to be reached by 16.24 hours on the 17 November, it is still within time if reached by 18.29 hours on the same date.264 ACA refers throughout to ‘working days’, which is defined at Article G as meaning Monday to Friday inclusive, but excluding any day that is a public holiday in the country in which the Works are to be executed, and any day that is a holiday under the Building and Civil Engineering Annual and Public Holiday Agreements in force from time to time. For example, see clauses 12.2 and 16. In many cases under this form of contract the actual numbers of days stated in a specific clause may be altered by the parties. The JCT contracts, in conformity with part II of the Housing Grants, Construction and Regeneration Act 1996 (qv), set out which days are excluded when an act is to be undertaken within a specified period of days. For example, IC clause 1.5 states that public holidays are to be excluded, and clause 1.1 defines a public holiday as meaning Christmas Day, Good Friday, and any day that is a bank holiday under the Banking and Financial Dealings Act 1971. The effect is that most weekends will be counted as days for the purpose of reckoning a notice period specified in days. This may raise difficulties for construction firms, which tend to close down for a two-week period over Christmas and New Year, and possibly around Easter. Unless arrangements are in place to check the mail during a holiday period, they may return to find that the time within which they had to undertake a task has expired without them ever knowing that it had started. In addition, a number of the JCT contracts use the term ‘business day’ (qv). In SBC it is defined at clause 1.1 as any day that is not a Saturday, Sunday or public holiday, and referred to in the contract particulars (qv) against clause 4.9.2 for ascertaining the date of issue of interim certificates: i.e. ‘and thereafter the same date in each month or the nearest Business Day in that month’. If a contract requires a notice to be given within a specified period of days, then the period begins immediately after the relevant date, i.e. the date of issue. Therefore if a notice is to be given within 14 days then the notice expires on the fifteenth day. However, if 14 clear days’ notice is required, the notice does not expire until the sixteenth day. In adjudication, s. 116 (3) of the Housing Grants, Construction and Regeneration Act 1996 provides that periods exclude Christmas Day, Good Friday or a bank holiday. Thus when reckoning periods, e.g. the 28 days for an adjudicator to reach a decision, Saturdays and Sundays are included. See also: Month; Notice; Year.

Dayworks If works are carried out by the contractor, and the works cannot properly be valued by measurement, then they may be valued on a prime cost (qv) basis. The time spent and materials used are recorded. SBC makes provision (clause 5.7) that vouchers (commonly called ‘daywork sheets’) must be delivered to the architect or the architect’s representative for verification not later than the end of the week following that in which the work was carried out. The vouchers are to show the time spent on the work by the 264

Aveat Heating Ltd v. Jerram Falkus Construction Ltd (2007) 113 Con LR 13.

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Death operatives, the operatives’ names, and the plant and materials used. The valuation must comprise either: (a) the prime cost of the work (as defined in the ‘Definition of Prime Cost of Daywork carried out under a Building Contract’ current at date of tender, and issued by the RICS and the Construction Confederation) plus the percentage additions as set out by the contractor in the contract; or (b) if the work is of a specialist nature, and the body representing the contractors in that trade has issued a definition, the prime cost calculated in accordance with that definition plus the percentage additions in the contract bills. Similar provisions are included within IC and DB. GC/Works/1 provides for valuation by dayworks at clause 42(5)(d), i.e. the value of materials used and plant and labour employed in accordance with the basis of charge for dayworks described in the contract. Under clause 42(12) the contractor is to give the quantity surveyor reasonable notice of the commencement of the work, and deliver vouchers to the quantity surveyor by the end of the week following that in which the work was done. Neither the ACA nor MW expressly provides for valuation by means of dayworks. Clauses 17 and 3.6 respectively provide instead for a valuation to be agreed or, failing agreement, to be valued on a fair and reasonable basis. In practice it is likely that, on occasion, valuations using a ‘daywork approach’ will take place. The NEC does not expressly refer to valuation by dayworks, although the approach to valuation by means of the schedule of cost components or the shorter schedule of cost components is something akin to valuation by means of dayworks. Where it has been decided that valuation by means of dayworks is the proper approach under the contract, and the vouchers have been signed by an authorised person, then the person undertaking the valuation (e.g. the quantity surveyor) has no authority to substitute their own estimate of the hours to do the work in place of those shown on the signed vouchers.265 It has been held that where the employer has put in place a system that requires verification by means of signing, but neglects to do so, then the daywork sheets submitted by the contractor, without further proof, will amount to evidence of the work done, unless they can be demonstrated to be inaccurate.266

Death The cessation of vital biological functions essential for a living organism. The general rule is that upon death the benefit or burden under a contract passes to the party’s legal representatives. Those representatives may have an obligation to the deceased’s estate to seize any opportunity to secure suitable terms that bring any contract to a premature end rather than fulfil outstanding obligations in full. An exception to this rule would be personal contracts where the death of the party performing the services brings to an end certain rights and liabilities. This situation may occur in respect of an individual designer, e.g. architects, and would apply, for example, if an employer had engaged a sculptor to embellish some part of the building and the sculptor died. Fulfilment of the contract would be rendered impossible, as it could not be performed by a representative. If an action for breach of contract has been commenced against a party prior to their death, then the action remains unaffected. In 265

Clusky (trading as Damian Construction) v. Chamberlain (1994) April BLM 6. JDM Accord Ltd v. Secretary of State for the Environment, Food & Rural Affairs (2004) 93 Con LR 133. 266

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Debenture addition, the designer’s representatives (e.g. those of an architect) could seek to recover any outstanding fees (i.e. in accordance with the terms of the contract) at the time of death. JCT contracts make no express provision for the death of the architect or contract administrator, although the 1998 series of contracts did so. SBC clause 3.5 refers to the architect or contract administrator (and quantity surveyor) ceasing to hold the post for the purposes of the contract. That obviously includes death. The employer is to nominate a replacement within 21 days. If the original nominee was an architect, the replacement ought to be an architect also. If the original nominee was a chartered surveyor, the replacement should have the same qualifications. That must be implied from the wording of the contract. The contractor, having tendered in the knowledge that an architect, a chartered surveyor or a building technician was to administer the contract, is clearly entitled to expect a replacement with the same qualifications.267 Unless the employer is a local authority and the replacement is an official, the contractor may object within seven days of notification of the name of the replacement. In general, claims for negligence against a party do not lapse on the death of that party, but may be pursued against the heirs of the deceased. A partnership ends with the death of any one partner. However, the terms of the partnership usually provide for the remaining partners to immediately form a new partnership so as to allow the business to continue – often retaining the deceased partner’s name as part of the title. See also: Frustration.

Debenture A document or instrument, usually a deed issued by a company, which acknowledges a debt, or is security for a loan of a sum with interest. It may contain a charge that is fixed on property that is definite or ascertainable, or a floating charge over property that is subject to change. A debenture holder has the right to make an immediate appointment, without notice, of a receiver (qv) (in the case of a floating charge a receiver or receiver and manager) if: — there has been a default in repayment of interest; and — the security is in jeopardy. There is usually a provision in the debenture to the effect that the receiver or receiver and manager shall be deemed to be an agent of the company. The company’s assets do not vest in the receiver, but the receiver has power to realise the assets by sale. The receiver does not become a party to any current contracts of the company, and therefore cannot vary them.268 Furthermore, the receiver ‘must fulfil company trading contracts entered into before his appointment or he renders it liable to damages if he unwarrantably declines to do so’.269 See also: Bankruptcy; Insolvency; Liquidation.

Debt Something that is owed, normally taken to be a sum of money owed by one party to another, and recoverable by means of legal action. Liquidated damages due to the employer are often stated to be ‘recoverable as a debt’. A speedy

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Scheldebouw BV v. St James Homes (Grosvenor Dock) Ltd (2006) 105 Con LR 90. Parsons v. Sovereign Bank of Canada [1911] AC 160. 269 George Barker (Transport) Ltd v. Eynon [1974] 1 All ER 900. 268

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Deemed variation way to do this, if the debtor has no defence or counterclaim, may be to apply for summary judgment (qv). If a party is unable to pay its debts as they fall due, it is insolvent (qv), which may result in bankruptcy (qv) in the case of an individual, or liquidation (qv) in the case of a company registered under the Companies Acts.

Deceit A tort (qv) consisting essentially of a false representation of fact, made with the intention that the other party should rely on it, and which causes it damage. The party making the false representation makes it knowing it to be false, or without belief in its truth, or is reckless or careless as to whether it is true or false. See also: Fraud.

Deduct To take away, withhold or put aside. Used when referring to an adjustment of an amount due to the contractor. Within SBC the obvious reference to deduction is at clause 4.3.2, which sets out the amounts to be deducted from the contract sum, e.g. provisional sums, fluctuations. Alternatively, at clause 2.38 an ‘appropriate deduction’ (qv) is to be made to the contract sum for the value of defects not made good by the contractor. Further amounts can be withheld or deducted from an amount due within an interim certificate by means of a notice under clause 4.13.4. Similar provisions exist in other standard form contracts, e.g. ACA clause 12.4 covering the cost to the employer of making good defective work. See also: Withholding notice.

Deed See: Specialty contract. Deed of arrangement See: Arrangement, deed or scheme of. Deemed To be treated as. The word is used not only in statutes (qv) but also in contracts. The ‘deemed’ thing must be treated for the purposes of the statute or contract as if it were the thing in question. For example, clause 3.2 of SBC states that instructions given by the architect to the person-in-charge ‘shall be deemed to have been issued to the Contractor’, i.e. such instructions shall be treated as though they have been issued to the contractor. What is ‘deemed’ is conceded not to be true, but treated as being true.270 The preliminaries to bills of quantities may state that the contractor will be deemed to have inspected the site and made all necessary enquiries about the nature of the ground. This means that the contractor is to be treated as having done so, even if it is perfectly clear to all parties that the contractor has never set foot on site.

Deemed variation Generally, something that is treated as being a variation even though an instruction may not specifically state as much, or an instruction is not required to be issued. For example, SBC at: — clause 2.14.3 where there are errors, etc. in the contract bills; — clause 2.17.2.2 in relation to divergence (qv) between statutory requirements and the contract documents; or 270 Re Cosslett (Contractors) Ltd, Clark, Administrator of Cosslett (Contractors) Ltd in Administration v. Mid Glamorgan County Council [1996] 4 All ER 46. The judgment was upheld on appeal ([1997] 4 All ER 115).

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Defamation —

Schedule 3 paragraph B3.5 (insurance of the Works under option B) where the restoration, replacement or repair following damage to the Works is treated as a variation. See also: Deemed.

Defamation A tort (qv) that consists of the publication to a third party of false and derogatory statements about another party, without lawful justification. A statement is defamatory if it exposes the party defamed to ‘hatred, ridicule or contempt’, or causes the party to be shunned or avoided, or has a tendency to hurt it in its profession or trade. Defamation in a permanent form (e.g. in writing) is called libel (qv), whereas in an impermanent or in transitory form (e.g. the spoken word) it is called slander. Each repetition of a defamatory statement, whether oral or written, amounts to a separate publication, and each person repeating it is liable, as well as the person who originated the statement. Defamation is of little importance in the context of building contracts, save as regards ‘reasonable objections’ made under a clause in a contract, e.g. the appointment of a replacement architect or quantity surveyor under SBC clause 3.5. Provided such objections are made reasonably, they will be given privilege (qv), unless the maker was actuated by malice (spite or ill will) or published the objection beyond those who had an interest to receive it, i.e. the employer. The same principle applies to references about the character and abilities of a former employee. There are particular duties owed to employees to exercise due care and skill in the preparation of references. It is not sufficient that employers believe what they say to be true. They must exercise reasonable care in checking the truth.271

Default A failure to meet an obligation or duty, e.g. failure to pay an amount due. The word is used frequently in building contracts, especially in indemnity clauses (qv). SBC clause 6.2 refers to ‘negligence, breach of statutory duty, omission or default of the contractor’. An earlier version of the clause was considered by the court in City of Manchester v. Fram Gerrard Ltd,272 where it was held that a ‘default’ does not necessarily require the injured party be able to sue the defaulter. Kerr J cited the decision of Parker J in Re BayleyWorthington & Cohen’s Contract,273 where it was said: ‘Default must … involve either not doing what you ought to do or doing what you ought not, having regard to your relations with the other parties concerned in the transaction; in other words, it involves breach of some duty you owe to another or others. It refers to personal conduct and is not the same thing as breach of contract.’ On the facts available, the judge held that ‘default’ is established ‘if one of the persons covered by the clause either did not do what he ought to have done, or did what he ought not to have done in the circumstances, provided … that the conduct in question involves something in the nature of a breach of duty’. It was held on the facts that the conduct of sub-contractors in applying and using a waterproof coating that contained a phenolic substance, and misin-

271

Spring v. Guardian Assurance plc and Others (1994) 3 All ER 129. (1974) 6 BLR 70. 273 [1909] 1 Ch 648. 272

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Defect(s) (Defective work) forming the plaintiffs about the curing period, amounted to ‘default’ in the context of the indemnity clause. More recent authority from the Court of Appeal considered whether there is a difference between breach of contract and default. It concluded that ‘default’ in a contractual document means a breach of contract, especially if damages are said to be incurred.274

Defect(s) (Defective work) In the context of building contracts, a defect or defective work is work that is not in accordance with the contract. It is common for standard forms to make express provision for dealing with defects or defective work. An employer holds common law rights in respect of any defect or defective work, because such defects amount to breaches of contract. However, such common law rights may be affected by the express provisions of a contract. The architect may have a degree of discretion in accepting or rejecting work, but no power to insist upon a higher standard than that laid down in the contract documents. There is, of course, an implied term (qv) in every building contract to the effect that the contractor will do the work in a good and workmanlike manner.275 A contractor who complies precisely with a detailed specification may not be liable if that specification proves inadequate.276 However, the better view is that a contractor who discovers that a particular detail, if constructed, would lead to seriously defective work has a duty to point out the defect to the employer.277 SBC deals with defective work, by implication, in many clauses requiring the contractor to carry out the work properly (notably clause 2.1), and expressly at clauses 2.38, 3.18.1 and 8.4.1.3. These clauses give the architect power to have defective work removed from the site (clause 3.18.1), and to have defects that appear during the rectification period (qv) made good, although the architect can instruct (with the employer’s consent) that defects should not be remedied when an appropriate deduction (qv) is made (clause 2.38). The contract also gives the employer power to terminate the contractor’s employment if the contractor neglects to remove defective work and thereby the Works as a whole are materially affected (clause 8.4.1.3). Clause 3.17 empowers the architect to instruct the contractor to carry out tests on materials or executed works, or to open up the Works for inspection. The cost of such tests or inspections is to be added to the contract sum if the materials or work are in accordance with the contract documents. ACA similarly deals with defective work at clauses 8.1(a), 12 and 20.1(d). These clauses give the architect powers comparable to those in SBC. The employer has similar powers of termination if the contractor persistently neglects the architect’s requests to remedy the defective work. Clause 8(1)(c) allows the architect to issue instructions covering testing and inspection. GC/Works/1 empowers the project manager, at clause 40(2)(d), to require the removal or re-execution of any work, and clause 21(l) obliges the contractor 274

Perar BV v. General Surety & Guarantee Co Ltd (1994) 66 BLR 72. Test Valley Borough Council v. Greater London Council (1979) 13 BLR 63. 276 Lynch v. Thorne [1956] 1 All ER 744. 277 Equitable Debenture Assets Corporation Ltd v. William Moss Group and Others (1984) 2 Con LR 1; Victoria University of Manchester v. Hugh Wilson and Lewis Womersley (1984) 2 Con LR 43. 275

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Defects certificate to make good at its own cost any defects in the Works notified by the employer as having appeared during the maintenance period (qv). This is backed up by default powers, including determination by the employer under clause 56(6)(a) for a failure to comply with an instruction requiring the rectification or making good of defective work. An architect has no duty to the contractor to discover defective work.278 However, SBC clause 3.20 comes perilously close to imposing such a duty in given circumstances. It provides that, where materials, goods or workmanship are expressly stated to be to the reasonable satisfaction of the architect, then any such dissatisfaction must be expressed within a reasonable time of its execution. Within NEC ‘Defect’ is defined as: — a part of the Works not in accordance with the Works Information; or — a part of the Works designed by the contractor that is not in accordance with the applicable law or the design previously accepted by the project manager. Under the NEC (clause 42) the project manager can instruct the contractor to ‘search’ for defects until the defects date (qv). The instruction is to set out reasons for the search, which may include uncovering work, providing materials or facilities for tests, or undertaking tests: in effect this is similar to the ‘test and inspection’ clauses included within the other standard contracts. If no defect is discovered, then the instruction may amount to a compensation event (qv) under clause 60.1(10). Clause 42.2 obliges both the contractor and the supervisor (qv) to notify the other of defects they discover prior to the defects date (qv). See also: Defects clause; Latent defect; Patent defect; Rectification period.

Defects certificate A certificate issued by the supervisor (qv) under NEC clause 43.3. The certificate is issued at the later of either the defects date (qv) or the last defects correction period (qv). The certificate is defined at clause 11.2(6) as either a list of defects that the contractor has not corrected, or a statement that no defects exist. Clause 43.1 expressly states that the employer’s rights regarding any latent defects not listed by the supervisor, or not found, are not affected by the issue of the certificate by the supervisor. The project manager is to assess the cost to the employer of any defects listed in the certificate. Under clause 45 this assessment is dependent upon whether or not the contractor was given access by the employer to correct the defect during its defect correction period. If the answer is ‘yes’, then the assessment is based on the cost to the employer, and if ‘no’ then the assessment is based on the cost to the contractor. The amount is to be paid by the contractor to the employer, and the Works information is treated as having being changed to accept the defect. See also: Defects clause.

Defects clause A clause in a contract that allows the contractor, for a specified period, to return to the site to remedy defective work at no cost to the employer. Its purpose is to remove the necessity for the employer to bring an action for damages at common law in respect of defective work. If work is defective, the 278

Oldschool v. Gleeson (Construction) Ltd (1976) 4 BLR 103.

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Defects liability period employer will be able to bring an action (subject to the statutory limitation period) even though the defects liability or rectification period (qqv) has expired. This may be subject to the effect, if any, of express terms, e.g. the final certificate (qv) issued under IC. Such clauses offer a benefit to the contractor, in that they create a right to return to rectify defective work that comes to light during the ‘defects period’, e.g. the defects liability or rectification period. This could prove significant should an employer fail to give the contractor an opportunity to rectify the defective Works, but simply engages a second contractor to undertake the Works at a significant cost. The employer may be limited to recovering by way of damages from the first contractor what it would have cost that contractor to undertake the Works, rather than the amount paid to the second contractor279 – that is, unless the employer could demonstrate that by engaging the second contractor this somehow mitigated the employer’s overall losses, e.g. business interruption. Many of these clauses include provision for the defects not to be made good by the contractor, and for an ‘appropriate adjustment’ or ‘appropriate deduction’ (qv) to be made to the contract sum, e.g. NEC clause 35, SBC clause 2.38. The employer’s consent is usually required, and the contract administrator is required to issue an appropriate instruction confirming that the contractor is not to make good the defect. See also: Defects liability period; Limitation of actions; Maintenance clause; Rectification period.

Defects correction period A term used in the NEC referring to the specific period a contractor has to remedy a defect once notified, e.g. clause 43.2. The term is referred to in the core clause 4, and not otherwise defined. The period is inserted by the employer in the contract data (qv) part one, and allows for the insertion of different periods to cover different elements of the Works. Clause 43.2 states that the period to correct a defect begins at completion (of the Works) for a defect notified before completion, and begins when the defect is notified (i.e. between completion and the defects date) for other defects. If no period is inserted, then the contractor would have a reasonable time within which to remedy a defect. The term ‘defects correction period’ does not mean the same as, or is not similar to, the term ‘rectification period’ (qv) or ‘defects liability period’ (qv) used in other contracts. The equivalent period to these within the NEC is created by the defects date, e.g. clause 42.2.

Defects date A term used within NEC (e.g. clause 42) referring to the period that equates to the rectification period (qv) or defects liability period (qv) used in other contracts. See also: Defects clause; Defects correction period.

Defects liability period A period of time after the Works are completed during which the contractor is to make good any patent defects that become known. Within certain of the latest JCT contracts it is now referred to as the rectifica279

Pearce & High v. John P Baxter and Mrs A Baxter [1999] BLR 101.

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Defects liability period tion period (qv); however, the term is still used within some standard forms, e.g. PPC clause 21.4. The start of the period is signalled by the date the Works: — have achieved practical completion (e.g. SBC clause 2.30; IC clause 2.21; and MW clause 2.10); or — are completed in accordance with the contract (GC/Works/1 clause 39 and PPC 21.2); or — are fit and ready for taking-over (ACA clause 12): or — when, dependent upon the form of contract, partial possession (e.g. see IC clause 2.25) has taken place. GC/Works/1 and ACA refer to the period as the ‘maintenance period’. Many contractors and architects use the same terminology, which is misleading, given that ‘maintenance’ (qv) has an entirely different meaning from rectification of defects. The duration of the period of time is a matter for the contracting parties. Usually a period of six months is seen as appropriate for general building work, and three months for minor or simple building work. There is nothing to prevent much longer periods from being specified, provided the contractor is aware at the time of tender and is allowed to price accordingly. It is common for mechanical and engineering work to require a 12-month period, thereby spanning the full range of seasonal variations in temperature and humidity. The period for landscaping may also be 12 months, to allow planting to establish itself over a substantial period of time and be subject to all the seasons. Most standard forms make no provision for periods of different lengths to cover different elements within the same contract. Most contracts refer to ‘period’ in the singular, and provide for only one certificate or statement of completion of making good defects, one release of retention, and one final notification or schedule of defects. An exception to this would be when sectional completion applies. Any attempt to insert two periods within, say, SBC where sectional completion did not apply, although common, would be incorrect. The answer would be to insert the longer period and apply this to the whole of the Works. The main forms of contract use the phrase ‘which (may, shall) appear’ during the period to indicate the extent of the contractor’s liability. Although, at first sight, it seems that this would not cover defects that existed at practical completion, it has been held that the words do include defects that appear prior to practical completion, and that This construction avoids absurdities which would arise if the contractual arrangements for dealing with defects were to distinguish between those arising prior to and after the date of practical completion.280

However, the ACA makes express provision to deal with outstanding Works at taking-over by means of a written undertaking by the contractor to the employer that the contractor will complete the outstanding Works immediately upon the issue of the taking-over certificate, i.e. clause 12.1. Many of the standard forms refer to ‘defects, shrinkages and other faults’ (MW refers to ‘excessive shrinkages’), although GC/Works/1 at clause 21 simply refers to defects. The phrase must be interpreted ejusdem generis (qv), 280

William Tomkinson v. Parochial Church Council of St Michael (1990) 6 Const LJ 319 at 322 per Judge Stannard.

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Defective Premises Act 1972 so that ‘other faults’ must be similar to defects and shrinkages (qv). Under SBC the contractor’s obligation is to make good defects arising from: — workmanship or materials not being in accordance with the contract documents (qv); and — any failure of the contractor to comply with its obligations in respect of the contractor’s designed portion (clause 2.38). In contrast, under GC/Works/1 clause 21 the contractor is to make good at its own cost any defects resulting from what the employer considers to be defaults by the contractor or its agents or sub-contractors, and which appear during the maintenance period. The architect has the whole of the defects liability period and, in the case of the SBC and ACA forms, a further 14 and 10 days respectively following the end of the period during which to notify the contractor of defects. The contractor has a reasonable time (qv) within which to make good the defects at its own cost, although this may not be the case under the NEC (see: Defects correction period). What is a reasonable time will differ, as for example defective paintwork is less significant than a failed heating system. When all the defects have been made good it is usual for the architect or project manager, as the case may be, to issue a certificate to that effect: e.g. SBC clause 2.39 and NEC clause 43.3. Within PPC the phrase is defined (i.e. at appendix 1) as ‘the period following Project Completion during which the constructor shall have responsibility for the rectification of defects in accordance with clause 21.4’. It is sometimes thought that the end of the defects liability period signals the end of the contractor’s liability for defects in the Works. That view is wrong. The defects liability period is primarily for the contractor’s benefit, so that it can rectify defects. It enables the contractor to deal with these matters at minimum cost, but it does not remove the employer’s common law rights to sue for breach of contract within the statutory limitation period. Sometimes an employer will be justified in refusing to allow the contractor back on site to make good defects, but the reason for refusal must be more than trivial.281 If the employer authorises the architect to instruct the contractor not to make good defects, and employs others to do so, or if the architect does not notify the contractor of defects until after the end of the defects liability period, the amount deductible from money payable to the contractor is confined to what it would have cost the contractor to make good if it had been allowed to make good.282 Under SBC and IC this is referred to as an ‘appropriate deduction’ (qv). Of course, if the contractor is notified of defects at the appropriate time, and simply refuses to address them, then the employer is entitled, subject to following the specified procedures, to employ others to carry out the remedial work and recover all the costs involved from the contractor, provided they are reasonable and subject to the employer’s duty to mitigate. See also: Limitations of actions.

Defective Premises Act 1972 The construction of dwellings is subject to the provisions of this Act, which came into force on 1 January 1974. The Act does not apply to Scotland or Northern Ireland.283 Where an ‘approved scheme’ 281

City Axis v. Daniel P Jackson (1998) 64 Con LR 84. Pearce & High v. John P Baxter and Mrs A Baxter [1999] BLR 101. 283 In Northern Ireland the equivalent is the Defective Premises (Northern Ireland) Act 1972. 282

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Defence operates in relation to a dwelling, then the Act does not apply. The NHBC (qv) scheme no longer falls within the definition of an ‘approved scheme’. ‘Dwelling’ is not defined within the Act, but appears to relate to any building used as a residence (including blocks of flats), as well as dwellings created by conversion or enlargement. It does not apply to the repair of an existing dwelling.284 Section 1(1) provides: Any person taking on work for or in connection with the provision of a dwelling … owes a duty … to see that the work which he takes on is done in a workmanlike or, as the case may be, professional manner, with proper materials and so that … the dwelling will be fit for human habitation when completed.

The measure of the standard required is fitness for habitation.285 This covers a failure to complete necessary works as much as undertaking works poorly. The provision is ‘in addition to any duty a person may owe apart’ from the Act, and extends the common law duties owed to the buyer of a house in the course of erection in a number of ways. It extends a benefit to every person acquiring an interest in the dwelling, i.e. subsequent purchasers, subject to the limitation period, which arises ‘at the time when the dwelling was completed’ or, in the case of rectification work, ‘at the time when the further work was finished’. A builder who carries out work in compliance with instructions given by or on behalf of the person for whom the dwelling is being built, e.g. an architect under SBC or MW contracts, is given a defence. Under s. 1(2) they have no liability under the Act ‘to the extent that he does (the work) properly in accordance with those instructions … except where he owes a duty to (the client) to warn him of any defects in the instructions and fails to discharge that duty’. Clauses excluding or restricting liability under the Act are not enforceable under s. 6(3). This would probably extend to such provisions as SBC clause 1.11, insofar as it makes an architect’s final certificate (qv) conclusive under certain circumstances. It is important to appreciate that the Act is very widely drawn. The duty imposed by s. 1(l) extends not only to builders, developers, sub-contractors and suppliers, but also to architects and other designers. As a consequence of s. 1(4) (b) it probably also extends to local authorities, housing associations, etc. when exercising their powers under the Housing Acts. See also: National House-Building Council Scheme.

Defence A written or oral statement answering the allegations made by one party against another. Within court proceedings it is referred to as a ‘statement of case’. A document that sets out the reasons put forward by the defendant (qv) to show why a claim made by the claimant (qv) should not succeed. They are normally carefully drafted, and couched in formal language. They may range from a complete denial of the claimant’s allegations, possibly coupled with a counterclaim (qv), to an admission of the claim while raising matters in justification. There are 284

Jacobs v. Morton and Partners (1994) 72 BLR 92. For example see (1) Mr Alexander John McMinn Bole (2) Miss Stephanie Van Deen Haak v. Huntsbuild Ltd and Richard Money (t/a Richard Money Associates) [2009] EWHC 483 (TCC). 285

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Defined terms many variations in the form of defence, depending upon the ingenuity of the defendant’s legal advisers. Defence is dealt with under Part 15 of the CPR. Within arbitration a defence may also be called a statement of case, as in litigation, but this is not necessary. To some extent it will depend upon the nature and size of the dispute, and on whether the parties are legally represented. It is also sometimes referred to as a ‘statement of defence’, or simply a ‘response’ or ‘reply’. Within adjudication the defence is called the ‘response’ or ‘response to the referral’.

Defendant The party against whom legal proceedings are brought; in Scotland known as the ‘defender’. In arbitration the person is referred to as the ‘respondent’. In adjudication the defendant is usually referred to as the ‘responding party’ or the ‘respondent’.

Deferment of possession A term used within a number of JCT forms. A failure by an employer to give the contractor possession of the site on the date identified within the contract may well amount to a breach of contract, and may possibly prevent an employer recovering liquidated damages. To avoid this possible breach, certain of the JCT contracts include a provision permitting the employer to defer giving possession of the site to the contractor, e.g. SBC clause 2.5, IC clause 2.5 and DB clause 2.4. The provision is optional, and has to be stated within the contract particulars (qv) as applying. It can apply to individual sections. Deferment can be up to a maximum of six weeks, and should a lesser period apply, then this is also to be stated within the contract particulars. Note that it is the employer, and not the architect, who can defer possession. There is no procedure stated for applying. However, it would seem sensible that any deferment be stated in writing by the employer. Should an employer invoke the provision, the contractor may well be entitled to an extension of time (e.g. SBC clause 2.28 and 2.29.3) and loss and/or expense (e.g. SBC clause 4.23).

Defined terms Terms such as ‘Completion Date’, ‘Contract Documents’, ‘Retention’, ‘Works’, which are used frequently throughout a contract to readily identify particular persons, things or even concepts (for example ‘Confirmed Acceptance’ in SBC Schedule 2 paragraph 3.2). Many contracts include a list or schedule of such defined terms, e.g. SBC clause 1.3 or PPC appendix 1. In many instances the use of such definitions saves having to insert large sections of explanatory text on each occasion. To indicate that a word or phrase is defined, it is standard drafting practice to provide them with a capital initial letter, for example ‘Base Date’. It is particularly important to clearly differentiate between ‘Works’ (qv) and ‘work’. The NEC (clause 11.1) takes the practice a stage further, by not only capitalising the initial letter of particular words, but also identifying words or terms by italicising the whole of the word or terms included in the contract data section of the contract. This can be confusing at first, especially when a phrase such as ‘The Completion Date is the completion date unless…’ (clause 11.2(3)) occurs, although it makes sense in the context of the contract as a whole. See also: Contract data. 153

Delay

Delay To cause something to be carried out or provided later than envisaged. In the context of building contracts the term ‘delay’ is typically used to indicate that the Works are not progressing as intended or to programme. Generally it means that completion of the Works may not be achieved by the date specified in the contract documents (qv). Most standard forms provide for the employer to deduct liquidated damages (qv) if the contractor fails to achieve completion by the due date. In order to preserve the employer’s right to deduct such damages, provision is usually made for the contractor to be given extensions of time (qv) in specified circumstances. In the absence of such a clause there would be no means of extending time other than by agreement of the parties.286 SBC clauses 2.27 and IC and ICD clause 2.19 place an obligation upon the contractor to notify the architect of all delays that may affect the regular progress of the Works. ACA clause 11.5 (alternatives 1 and 2) is not absolutely clear on the point, and it may well be that the contractor is obliged to notify only those delays for which it is seeking extension of time, although this may not have been the intention of the drafters. Under GC/Works/1 clause 36(1) it seems that the contractor is obliged to notify only of delays for which it is seeking an extension of time. However, under clause 35 the contractor’s agent is to attend monthly progress meetings, and three days before each meeting, is required to submit a report to the project manager, which must, among other things, ‘explain any new circumstances arising since the previous meeting which in his opinion have delayed or may delay completion’. This would seem to cover all delays. Under MW clause 2.7 and MWD clause 2.8 it would seem that the contractor is obliged only to give notice of a delay for which it is seeking an extension of time. Under NEC (clause 16.1 early warning) both the project manager and the contractor are to notify the other as soon as either becomes aware that a matter will delay completion or delay meeting a key date. Should the matter be a compensation event (qv) and the contractor fail to notify the project manager within eight weeks of becoming aware of that matter, then the contractor may lose its entitlement to an adjustment to the completion date. See also: Acceleration of work; Extensions of time.

Delay damages A term used in the NEC at secondary option clause X7. It is equivalent to a liquidated damages (qv) clause used in other standard forms. The rate per day that is to apply is that stated in the contract data part one for the period between the completion date (qv) until completion (qv) or until the employer takes over the Works (qv). Under this provision, if an employer has to repay back damages to a contractor previously deducted, then interest becomes payable. The interest is calculated from the date the damages were paid by the contractor until the date of their repayment.

Delegated legislation By-laws, rules and regulations made by local authorities, Secretaries of State, etc. under powers delegated to them by Parliament. It is sometimes referred to as secondary legislation.

286

Peak Construction (Liverpool) Ltd v. McKinney Foundations Ltd (1970) 1 BLR 111.

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Design Parliament tends to pass Acts (qv) of a general character and delegate to ministers the power of giving effect to these general provisions by means of specific regulations that set out the detail. The characteristic of all delegated or subordinate legislation is that power to make it must be derived from Parliament. Once validly made, however, the by-laws and regulations have statutory force and effect, e.g. the Scheme for Construction Contracts (England and Wales) Regulations 1998 (qv). Delegated legislation can be challenged in court on the ground that it is ultra vires (qv), i.e. that the person making it has acted beyond their powers. In other words, what the minister has done falls outside the powers given under the Act. Regulations and by-laws so made would be void.

Delegatus non potest delegare Literally meaning ‘a delegate cannot delegate’. As a general principle, someone to whom powers have been delegated cannot delegate those powers to someone else. The same rule applies to duties. In general, architects have no power to delegate their duties to others unless the appointment contract with their client expressly allows it.287

Delict Broadly speaking, delict is the Scottish equivalent of the English law of tort (qv). Most actions in delict are based in negligence (qv).

De minimis Minor, petty or trivial. Not worth bothering about. The term is commonly used in relation to the issue of the practical completion certificate (qv) under JCT contracts. The certificate may be issued when there are de minimis items of work still to be executed.288 In this sense, it seems sensible to interpret the phrase in the context of the particular work included in the contract. It is unlikely that the amount of work to be considered de minimis under a multimillion pound city centre development contract will be the same as that under the contract for a residential house. It must have some relation to the total work to be done, and particularly to whether the completion of such work is likely to cause the employer any inconvenience after occupation. That appears to be the inference to be drawn from the judgment in Westminster Corporation v. J Jarvis & Co Ltd.289

Derogate (derogation) To destroy, take away, evade or prejudice a right or obligation. An example would be where a landlord grants a lease and later purports to create a right of way over the leased land in favour of a third party. The basic principle is that nobody can derogate from their own grant.

Design A term denoting the commencement and developing of a scheme or plan for a product, structure or system. In the construction industry it may be applied to the work of the architect in formulating the function, structure and appearance of a building, or to a structural engineer in determining the sizes and positioning of structural members. 287

Moresk Cleaners Ltd v. Thomas Henwood Hicks (1966) 4 BLR 50. An architect, without their client’s permission, employed a contractor to design a structure. 288 H W Neville (Sunblest) Ltd v. Wm Press & Sons Ltd (1981) 20 BLR 78. 289 [1969] 1 WLR 1448 (CA) at 1458 per Salmon LJ, whose view was not expressly disapproved by the House of Lords.

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Design and build contract In general terms in regard to a traditional building contract, an architect will be responsible for the design of the building and the contractor will be responsible for the materials and workmanship in putting the design together on the site. In practice this generality is often qualified, depending upon the circumstances. The contractor may take all or some responsibility for design, e.g. under a design and build contract (qv), or in the use of the contractor’s designed portion option under the SBC, ICD or MWD. Design responsibility may be imposed upon the contractor, for example, where an architect is not engaged during the construction period.290 A contractor may also become liable for a part of the design if, in the absence of proper details, the contractor carries on construction to its own details without seeking instructions.291 Liability may be imposed on the contractor if an employer can show reliance upon the contractor rather than the architect, or where the contract makes clear that the contractor must fill any gaps in a design or specification.292 The professional designer is under a duty to exercise reasonable skill and care. ‘The test is the standard of the ordinary skilled man exercising and professing to have a special skill. A man need not possess the highest expert skill at the risk of being found negligent … it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art.’293 However, under the terms of a particular contract a designer may in effect be guaranteeing the result, and undertaking that the designed structure is reasonably fit for its intended purpose.294

Design and build contract Sometimes known as a ‘package deal contract’ (qv). In the classic form of this type of building contract the contractor takes full responsibility for the whole of the design and construction process, from initial briefing to completion. In practice, the design and build contractor is often engaged after the employer’s design team has undertaken a substantial amount of design work. The greater the amount of design carried out by the employer’s designers before tendering, the smaller the contractor’s design responsibility tends to be, but the more control the employer has over the design – and of course the reverse is also true. A number of standard forms have either been specifically drafted as design and build contracts, e.g. DB, or drafted so that they can be used as design and build contracts, e.g. NEC, CE, ACA. See also: Design.

Design and Build Contract 2005 (DB) A standard form of design and build contract produced by JCT. It replaces the previous version called the Standard Form of Building Contract With Contractor’s Design 1998 Edition. As can be seen from the main headings listed below, DB appears to follow the structure of SBC quite closely. However, the philosophy underlying the

290

Brunswick Construction Ltd v. Nowlan (1975) 21 BLR 27. C G A Brown v. Carr and Another [2006] EWCA Civ 785. Basildon District Council v. J E Lesser Properties (1987) 8 Con LR 89; Bowmer & Kirkland Ltd v. Wilson Bowden Properties (1996) 80 BLR 131. 293 Bolam v. Friern Hospital Management Committee [1957] 2 All ER 118. 294 Greaves & Co (Contractors) Ltd v. Baynham, Meikle & Partners (1975) 4 BLR 56. 291 292

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Design and Build Contract 2005 (DB) contract is completely different, and there are considerable differences in the detailed wording in a number of the clauses. The main headings are as follows: — Recitals — Articles — Contract particulars — Attestation provisions — Section 1 Definitions and interpretations — Section 2 Carrying out the Works — Section 3 Control of the Works — Section 4 Payment — Section 5 Changes — Section 6 Injury, damage and insurance — Section 7 Assignment, third party rights and collateral warranties — Section 8 Termination — Section 9 Settlement of disputes — Schedule 1 Contractor’s design submission procedure — Schedule 2 Supplemental provisions — Schedule 3 Insurance options — Schedule 4 Code of practice — Schedule 5 Third party rights — Schedule 6 Forms of bonds — Schedule 7 Fluctuation options The contract is administered by the employer or the employer’s agent authorised under article 3. It is anticipated that the employer will normally nominate a professional such as an architect or surveyor to act as their agent for the purpose of administering the contract. There is no reference within the contract to ‘architect’. The contract is administered by means of notices and statements but not certificates, because there is no independent certifier. For example, the employer or the agent is responsible for dealing with extensions of time and practical completion. Payment is very much contractor driven, rather than relying on architect’s certificates as in SBC. The contract documents comprise the Employer’s Requirements, Contractor’s Proposals and a contract sum analysis. The contractor’s design duty under this contract is the same as that of an architect – reasonable skill and care (qv) – by virtue of clause 2.17.1. If it were not for this clause, the contractor’s liability would be to ensure that the building when finished was reasonably fit for its purpose, which is the norm whenever a contractor undertakes design and build. It has been held that where a contractor, as here, undertakes to complete the design of the Works, its obligation is to check the adequacy of the preliminary design that is to be completed.295 That is certainly the case so far as the previous JCT design and build contract (WCD 98) is concerned. However, in this contract a clause has been inserted in order to avoid the effects of the Co-operative Insurance Society Ltd v. Henry Boot Scotland Ltd296 judgment. Clause 2.11 states that the contractor will not be responsible for the contents of the Employer’s Requirements, nor for verifying the adequacy of any design contained therein. See also: Fitness for purpose.

295 296

Co-operative Insurance Society Ltd v. Henry Boot Scotland Ltd (2002) 84 Con LR 164. (2002) 84 Con LR 164.

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Design development

Design development There is no contractual definition for the phrase, nor is it a term of art. It is a term that has to be viewed in context. Generally, it is used to refer to the evolution of a design or brief to a conclusion, i.e. the process undertaken by a designer to complete a design. The process of design is much misunderstood. The first and very important step is the establishment of the brief (qv), which should contain details of what the client requires from the proposed building. From this, the architect prepares the bones of the design, sometimes called a ‘sketch design’ or a ‘concept design’. The idea of this stage is that the client can see the general disposition of rooms, spaces and sizes. The next stage is to put flesh on the bones by adding more detail, including services requirements and constructional considerations. The final stage is when all the details are finalised in respect of design, specification, construction and cost. The important point about design development is that the design is developing throughout the process; it is not changing. Alteration of the design at any stage, in response to changes required by the client, is not design development; it is design change. Design development assumes that, once agreed with the client, the brief is not changed. Although that is a perfection that is not attainable in practice, the principle is important, because an architect can be expected to carry out the whole of the design development for the fee quoted and agreed. However, changes to the design will normally attract additional fees. Design development within design and build would include the development of a detailed design in line with the Contractor’s Proposals in order to meet the Employer’s Requirements. In this context design development would not cover the additional design necessary to address a change in the Employer’s Requirements. That would rank as a change (qv). Design development is also a term that is used (in a fairly narrow sense) for stage D of the RIBA Plan of Work (qv) as revised in 2007, a stage that used to be called ‘Scheme design’. In the plan of work, the description of the key tasks includes development of the concept design to include structural and building services, updated outline specifications and cost plan, completion of the brief, and application for planning permission.

Design documents (Contractor’s) A phrase used within SBC, ICD, DB and MP contracts referring to the drawings, details, levels, specification and other related documents for any materials, goods or workmanship prepared in relation to any Works the contractor is responsible for designing. The documents are submitted to the employer or architect as appropriate, in accordance with a design submission procedure (qv). Within the contracts the phrase is a defined term, although the definition within MP is couched in different wording.

Design leader A term used in the Standard Form of Agreement for the Appointment of an Architect (SFA/99) (2004) (qv) to describe services that the architect can provide if required. Such services would include directing the whole design process, coordinating the work of all consultants and specialists, deciding upon the design outputs, and being the person dealing directly with the client on all design matters. On most building Works the architect will be expected to take this role, unless the Works are predominantly referable to some other discipline, such as major mechanical engineering work. In such cases the appropriate consultant would be expected to take this role. 158

Design submission procedure The Standard Agreement for the Appointment of an Architect (S-Con-07-A) (qv) refers to ‘Lead Designer’, a name that does not convey the meaning as well as ‘design leader’ in SFA/99, but whose services are similarly described. The term is also used under the BPF System (qv) to describe the person with overall responsibility for the pre-tender design, and for sanctioning any design undertaken by the contractor. They may be an employee of the client or an independent consultant and are usually, though not necessarily, an architect or engineer. The design leader coordinates the work of all consultants, and obtains statutory approvals, etc. They provide design advice on variations of work (qv) as the project proceeds, and the limit of their authority is clearly defined within the BPF Manual. They cannot issue orders to consultants that would vary the work from the brief, or would lead to increased cost or delay, and they cannot give instructions to the contractor except in an emergency. The design leader’s duties may vary from project to project, but in essence they assume total contractual responsibility for pre-tender architectural and engineering design, for a fixed fee. See also: Lead designer.

Design submission procedure Where a contractor is responsible for the design of the Works, or specific elements of the Works, then it is necessary that a procedure exists for the submission of that design to the employer or architect prior to construction commencing. Such a procedure exists within DB, MP and SBC (if the CDP element applies). With DB and SBC the procedure is set out at Schedule 1 and at clause 12 within MP. The procedures are not identical, although they are very similar. The contractor prepares its design documents (qv) in accordance with the Employer’s Requirements or Contractor’s Proposals, as applicable. DB and SBC require two copies to be submitted in sufficient time to allow the employer or architect to comment prior to their use in the procurement and carrying out of the Works. Under MP the number of copies is to be stated within the Employer’s Requirements. The employer or architect has a specified period within which to comment, e.g. SBC 14 days. The employer or architect is to return a copy of the documents marked with either an A, B or C. The meaning of each category is as follows: — A: The contractor may proceed and carry out the Works in accordance with that document. — B: The contractor may proceed and carry out the Works in accordance with that document provided the employer’s comments are incorporated into the document and an amended copy of the document is promptly submitted to the employer or architect. — C: The contractor is to take account of the employer’s or architect’s comments and resubmit the document. No work is to be carried out in accordance with a document marked with a C. In all three contracts, if a response is not made within 14 days then the design documents are treated as being marked with an A. The comments made by the employer or architect must identify why the document is considered not to be in accordance with the contract. The employer is obliged only to pay for work undertaken in accordance with documents marked with an A or B. A procedure exists should the contractor not agree with the employer’s or architect’s comments with regard to a particular document. 159

Design team Both ICD and MWD include provision for elements of contractor design. Neither of the contracts includes detailed provisions requiring the contractor to submit design documents for comment. MWD clause 2.1.5 requires the contractor to submit two copies of drawings, etc. as are reasonably necessary to explain the contractor’s designed portion (qv). Therefore it would seem sensible to include further details on procedure in the bills of quantities, specification or work schedules as applicable. Within NEC, clause 21 covers work designed by the contractor. The provisions are brief. It would seem necessary that further detail or requirements be set out within the Works information. The contractor may submit its design either in total or in parts for the project manager’s assessment and acceptance. Until the design is accepted by the project manager the contractor cannot proceed with the relevant work. Reasons for not accepting would be noncompliance with the applicable law or the Works information. The corresponding provisions are set out in ACA at alternative 2 clauses 2.1 to 2.5. Under this provision the architect is to provide the contractor with copies of those drawings or details that it is expressly stated will be provided in the contract documents. They are to be provided on the dates shown in the time schedule (qv). All other drawings, details, etc. are to be submitted by the contractor to the architect in accordance with the dates in the time schedule. The architect within 10 working days (subject to amendment) of receipt of the documents is to return a copy to the contractor with comments, or endorsed to say there are no comments. The architect cannot comment adversely on any document that complies with the statutory requirements and the contract documents. Documents with comments are to be resubmitted, taking the comments into account. Once a document is free of comment then the contractor can proceed with the carrying out of the relevant work.

Design team A phrase generally used to refer to the designers engaged to carry out and complete the design for the Works. Under traditional procurement the team would be engaged by the employer, and could include a structural engineer, an architect and an M&E engineer. On a design and build project they would be engaged by the contractor. Within PPC ‘Design Team’ is a defined term, i.e. appendix 1. They are the partnering members named in the project partnering agreement as design team members. The lead designer (qv) and design team members are to develop the design for the project in accordance with clause 8, aiming to achieve best value for the client.

Designed portion supplement A supplement produced by the JCT for use with JCT 98 where an employer (or more likely the employer’s advisers) required the contractor to undertake an element or portion of design of the Works – e.g. pile foundations, mechanical engineering services, steelwork connections. The supplement inserted further clauses into JCT 98, and amended many of the existing clauses to take account of the contractor completing some of the design. A supplement is no longer used with SBC, and such design is covered by what is now called the contractor’s designed portion (qv) embodied within SBC, ICD and MWD. This is an approach that had previously been adopted, for example, within the ACA and NEC. 160

Determination

Details Small subordinate items. In building contracts the word is used when referring to design, and used to denote the large-scale drawings produced by an architect or consultant (qv). It may also be used to refer to schedules giving particulars, e.g. a reinforcement bar bending schedule or an ironmongery schedule. See also: Drawings.

Determination A decision, or the bringing to an end of something. An example would be the determination of a dispute or difference by a judge, arbitrator or adjudicator. The word is sometimes used in the context of building contracts to refer to the ending of the contractor’s employment (the 2005 JCT suite of contracts now use the word ‘termination’ (qv) rather than ‘determination’). Parties to a contract have a common law right to bring their obligations under that contract, and sometimes the contract itself, to an end in certain given circumstances, e.g. breach of a condition. However, most standard forms give the parties additional and express rights to determine upon the happening of specified events that would not exist under common law. Some of these rights are similar across the standard forms of contract, e.g. a failure to proceed regularly and diligently, or a failure to pay by the final date for payment. In some circumstances a notice is required, whereas in others determination may be automatic (e.g. bankruptcy). The right to and reasons for determination differ across standard contracts. For example, GC/Works/1 gives no contractual right to the contractor to determine, in contrast to the JCT contracts. GC/ Works/1 also refers to determination of the contract, whereas other contracts refer to the determination of the contractor’s employment under the contract. In practice it would seem to make little difference, since all contracts make express provision for what is to happen after determination. Although it may be argued that putting an end to a contract also removes any obligations under clauses purporting to deal with subsequent events, the courts have taken the view that a party referring to bringing the contract to an end actually means bringing the parties’ primary obligations to an end: … the well accepted principle of law, stated by the highest modern authority, that when in the context of a breach of contract one speaks of ‘termination’ what is meant is no more than that the innocent party or, in some cases, both parties are excused from further performance. Damages, in such cases, are then claimed under the contract, so what reason in principle can there be for disregarding what the contract itself says about damages, whether it ‘liquidates’ them, or limits them, or excludes them? These difficulties arise in part from uncertain or inconsistent terminology. A vast number of expressions are used to describe situations where a breach has been committed by one party of such a character as to entitle the other party to refuse further performance: discharge, rescission, termination, the contract is at an end, or dead, or displaced; clauses cannot survive or simply go. … But what can and ought to be avoided is to make use of these confusions in order to produce a concealed and unreasoned legal innovation: to pass, for example, from saying that a party, victim of a breach of contract, is entitled to refuse further performance, to saying that he may treat the contract as at an end, or as rescinded, and to draw from this the proposition, which is not analytical but one of policy, that all or (arbitrarily) some of the clauses of the contract lose, automatically, their force, regardless of intention.297 297

Photo Production Ltd v. Securicor Transport Ltd [1980] AC 827 at 833 per Lord Wilberforce.

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Development control requirements The JCT and ACA forms use ‘termination’ rather than ‘determination’, but the effect is the same. In all cases the procedure prescribed by the relevant clause should be followed precisely. A determination that is not carried out strictly in accordance with the contract provisions may amount to repudiation. However, it is possibly not repudiation if a party honestly, albeit mistakenly, relies on a determination provision.298 It is worth noting that the rights of the parties to seek arbitration (qv) or adjudication (qv) continue after determination.299

Development control requirements A phrase used within DB and defined at clause 1 as ‘any statutory provisions and any decision of a relevant authority there under which control the right to develop the site.’ In a narrow sense this is usually seen as any planning requirements. However, there are other statutory provisions that control the development of a site, e.g. fire regulations. Development control requirements are a part of statutory requirements, which is also a defined term and forms a part of the contractor’s general obligations under clause 2.1. A delay in the receipt of any permission or approval for the purposes of development control requirements is a relevant matter that could entitle a contractor to recover loss and/or expense under clause 4.19. The contractor must have taken all practical steps to avoid or reduce such delay.

Deviations Departures from the prescribed norm, e.g. the contract documents. See also: Extra work.

Difference See: Dispute. Diligently See: Regularly and diligently. Direct loss and/or expense The phrase used in SBC clause 4.23, DB clause 4.19, MP clause 27 and IC and ICD clause 4.17 to describe the reimbursement to which the contractor is entitled under the provisions of the contract in respect of a delay in the possession of the site, or because the regular progress of the Works has been materially affected. This would cover both disruption (qv) to and prolongation of the Works. ACA clause 7.1 refers to ‘damage, loss and/or expense’, and GC/Works/1 clause 46(1) refers to ‘directly incurs any expense’. It is now settled law that this phrase – or similar phrases such as ‘direct loss and/or damage’ – equates with those heads of claim that would be recoverable at common law as damages for breach of contract.300 In practice, this requires precise and exact calculation. Figures cannot be plucked out of the air, and it is up to the contractor to prove that it has in fact suffered or incurred the loss and/or expense claimed.301 Such calculation should

298

Woodar Investment Development Ltd v. Wimpey Construction UK Ltd [1980] 1 All ER 571. Heyman v. Darwins Ltd [1942] AC 356; Connex South Eastern Ltd v. MJ Building Services Group plc (2005) 100 Con LR 16 CA. 300 Wraight Ltd v. P H & T (Holdings) Ltd (1968) 13 BLR 26; F G Minter Ltd v. Welsh Health Technical Services Organisation (1980) 13 BLR 1. 301 Alfred McAlpine Homes North Ltd v. Property and Land Contractors Ltd (1995) 76 BLR 65. 299

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Directly specify each causative event, and the loss and/or expense attributed to it. The claim should not be a single global figure.302 See also: Claim; Compensation event; Consequential loss; Prolongation claim.

Direct payment clause The term was used to refer to the provision at clauses 35.13.3 to 35.13.5 in JCT 98, which provided that the employer, in given circumstances, might pay a nominated sub-contractor directly if the contractor had failed to discharge sums due on the previous certificate. The procedure was obligatory by virtue of clause 35.13.5 and clause 7.1 of the Employer/Nominated Sub-Contractor Agreement NSC/W. SBC does not include provision for the nomination of sub-contractors, and therefore there is no requirement for direct payments. The IC, ICD and DB contracts do make provision for the ‘naming’ of sub-contractors, but do not address the matter of direct payments to any sub-contractor so named. The nomination clauses in GC/Works/1 (i.e. clauses 63 and 63A) do not contain any provision that permits the employer to pay a nominated subcontractor direct. However, clause 63(2) does allow the employer to order and pay direct for any prime cost (qv) items, provided the contractor’s profit is retained by the contractor in the contract sum.

Directions (1) In law, a judge may issue a direction to a jury to clarify a point of law. A summons for direction asks the court to decide various procedural matters, e.g. the dates for exchange of particular documents. Directions are also given by arbitrators and adjudicators (qqv) for such things as the service of documents, times and dates of hearings and the like. (2) A term used in construction contracts (e.g. SBC clause 3.4), usually to mark a distinction from an ‘instruction’ (qv). Under clause 3.4 a clerk of works’ direction is of no effect unless confirmed in writing by the architect. A direction might thus be defined as a provisional instruction pending confirmation. In ordinary language, however, the distinction between a ‘direction’ and an ‘instruction’ is not clear, except that ‘instruction’ implies greater force requiring compliance. Under the JCT standard sub-contract conditions (e.g. SBC Sub/D/C clause 3.10) the contractor issues directions to the sub-contractor in regard to the sub-contract works. Under sub-contracts a clear distinction is usually drawn between an ‘instruction’ and a ‘direction’. An instruction comprises those matters about which the architect is empowered to issue an instruction under the main contract, whereas a direction is concerned with the regulation of the sub-contract works. A similar, although not identical, distinction is to be found between directions and instructions issued under JCT Management Building Contract (MC) and Management Works Contract Conditions (MCW/C).

Directly If an action is to be carried out ‘directly’, it must be done quickly or as soon as possible303 (qv). It is stricter in meaning than ‘forthwith’ (qv). See also: Immediately.

302 303

Wharf Properties Ltd v. Eric Cumine Associates (No. 2) (1991) 52 BLR 1. Duncan v. Topham (1849) 8 CB 225.

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Disburse (Disbursements)

Disburse (Disbursements) The payment or outlay of monies by a person. For example, a consultant such as an architect may pay fees or other costs on behalf of a client, e.g. the planning fee. These would then usually be recoverable from the client under the consultant’s appointment. They are often confused with, but must be differentiated from, expenses, which are sums that a consultant may recover from a client (if previously so agreed) in respect of such things as travel, overnight accommodation, or photocopying.

Discharge of contract The release of one or both parties from their contractual obligations. This may occur in a number of ways: — Performance: when both parties have fulfilled their obligations under the contract, e.g. the builder has completed the Works and the employer has paid the sum due. — Agreement: where both parties agree to treat the contract as at an end (see: Accord and satisfaction). — Frustration (qv): an event occurs that makes performance impossible, illegal, or wholly different from that which was contemplated at formation. — Breach of contract (qv): the breach by one party of a condition (qv), which allows the innocent party to treat it as repudiatory, which is then accepted by the innocent party. — Operation of law: e.g. the object of the contract becoming illegal during its currency. — Novation (qv): the replacement of one contract by another. This usually involves a change in one of the parties. A release of a party from some of its obligations under a contract may be obtained by: — waiver (qv); — estoppel (qv).

Disclaimer A refusal to accept or undertake. ‘Disclaimer’ is used colloquially to refer to notices or to contract terms that purport to limit liability for breaches of contract, etc. It is also a technical phrase referring to the power of a trustee in bankruptcy (qv) or the liquidator (qv) to renounce any kind of onerous property, including contracts. Thus s. 178 of the Insolvency Act 1986 confers this right on the liquidator in the case of unprofitable contracts (among other things), and a similar power is conferred on the trustee in bankruptcy by s. 315. See also: Unfair Contract Terms Act 1977.

Disclosure (and inspection of documents) The term ‘disclosure’ was introduced by the CPR (qv), replacing the former procedure of discovery. The CPR has altered the principles governing the production of documents. It is dealt with under Part 31. In both arbitration and litigation, disclosure of documents is the procedure under which one party provides to the other not only the documents that they will produce at the hearing but notice of all other documents bearing on the issue. Each party serves on the other a list of all documents that are or have been in their possession or control relating to the matters in dispute. All the documents listed must be made available for inspection by the other party, who 164

Discrepancies may take copies of them. This is so, no matter how prejudicial to the disclosing party’s case the documents are, e.g. internal memoranda commenting on the validity of a claim. The list is not confined to a selection. The only exception is that certain documents are privileged: these are normally documents produced in contemplation of litigation, e.g. counsel’s opinion, or correspondence with one’s own solicitor about the dispute. In arbitration an order for disclosure is usually made at the preliminary meeting, and is not subject to CPR Part 31. However, Part 31 may offer some guidance to an arbitrator when drafting such an order. Disclosure and any subsequent inspection can be a costly exercise, and orders may be restricted to save costs, or alternatively to preclude a party embarking on a ‘fishing trip’. For the purpose of CPR Part 31 a document is in the control of a party when they have possession, or the right of possession, or a right to inspect and take copies. A document has been ‘disclosed’ when a party states that it exists or has existed. The list of documents is usually prepared in a standard form, and includes three parts, as follows. — Part 1: Relevant documents, which are listed numerically in date order and which the party has in their control, and to the inspection and copying of which they have no objection: e.g. the contract documents, correspondence between the parties and invoices. — Part 2: Relevant documents that the party has in their control, but which they have an objection against producing. The form must contain a statement of the grounds on which privilege is claimed. — Part 3: Relevant documents that have been, but are no longer, in the control of the party, e.g. originals of correspondence. The party must say when the documents were last in their control, what has become of them, and who has possession of them. Inspection of documents is usually followed by the preparation of an agreed ‘bundle’ of documents that both parties are prepared to admit as evidence without the need for strict proof. See also: Arbitration; Privilege.

Discovery: see Disclosure. Discrepancies Differences or inconsistencies. Thus if a contract drawing (qv) showed timber panels in a particular situation to be maple, but the contract bills (qv) described the timber for the same situation as rosewood, there would be a discrepancy between the drawings and the bills. It is quite possible – in fact, quite common – for there to be discrepancies between the various documents making up the contract documents (qv). One drawing may not agree with the rest of the drawings, or it may be in conflict with the information in the bills or specification. Most of the standard forms make provision for the treatment of discrepancies. SBC clause 2.15 states that if the contractor finds any discrepancy in or divergence between two or more of the: — contract drawings; — contract bills; — architect’s instructions, except instructions requiring a variation; — any further drawings, etc., issued by the architect (clauses 2.9 to 2.12); — the CDP documents; 165

Discrepancies then it must notify the architect in writing, and the architect must issue an instruction to resolve the matter. A similar provision, at clause 2.17, refers to finding a ‘divergence’ between statutory requirements and the contract documents, with clause 2.16 addressing any ‘discrepancy or divergence’ within the contractor’s designed portion documents. There is some uncertainty as to the precise meaning of the word ‘if’ in these clauses, i.e. ‘If the contractor shall find…’. It is sometimes mistakenly assumed that the average contractor using normal skill and care should find discrepancies in good time so as to avoid costly mistakes, the word ‘if’ indicating that there may not be any discrepancies, not that the contractor may not find them. The alternative is that the contractor’s obligation is to report discrepancies only if they are found. This alternative view seems to be correct.304 ACA deals with ‘ambiguity or discrepancy’ at clause 1.5 more strictly. If the contractor subsequently finds a discrepancy, it must notify the architect, who shall issue an instruction. Only if the contractor, by using ‘skill, care and diligence’, could not reasonably have found the discrepancy at the date of the contract will an entitlement to additional payment exist. MW clause 2.4 and MWD clause 2.5 provide that inconsistencies shall be corrected, and that such corrections are to be treated as variations under clause 3.6, i.e. variations. The contractor is not made specifically responsible for finding inconsistencies, but, reading this clause in conjunction with clause 2.1 in MW and MWD, it seems probable that it would be. Should the contractor discover any divergence between the contract documents or an architect’s instruction and the statutory requirements, then it is to notify the architect immediately (MW clause 2.5.1 and MWD clause 2.6.1). Provided the contractor complies with that duty, it is not liable under the contract should it carry out Works in accordance with the contract documents or an architect’s instruction that does not comply with the statutory requirements. However, the contractor will still be potentially liable to the local authority for non-compliance. It would appear that, by virtue of this clause, if the contractor is obliged by the authority to rectify non-compliant work, it will be able to recover the costs involved from the employer under the contract. Under GC/Works/1, if any discrepancy exists between the supplementary conditions and the annexes prescribed in the abstract of particulars (qv) and the conditions, then the supplementary conditions and annexes prevail (clause 2.1). However, the conditions prevail over any other document forming part of the contract. The written specification, even if part of the bills of quantities (qv), prevails over any specification shown on the drawings unless the project manager instructs otherwise (clause 2.2). Clause 40(2)(b) empowers the project manager to issue an instruction addressing any discrepancy in or between the specification, drawings and bills of quantities. The contractor is to inform the project manager, when handling the documents in preparing or actually carrying out the Works, on finding any discrepancies between the drawings and specification, or between drawings, or within the different parts of the specification. The clause does not, however, resolve the question of responsibility for finding discrepancies. See also: Ambiguity; Divergence. 304

London Borough of Merton v. Stanley Hugh Leach Ltd (1985) 32 BLR 51.

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Dispute

Discretion The authority to decide something as one thinks fit, absolutely or within limits. Such discretion may be exercised in the light of what is fair and reasonable in all the circumstances or judicially. Discretionary power is vested in judges, arbitrators and adjudicators in certain instances, such as the discretion normally given to adjudicators to apportion fees and expenses between the parties. Some contracts may appear to give the architect discretionary powers, but it has been said that: The occasions when an architect’s discretion comes into play are few, even if they number more than the one which gives him a discretion to include in an interim certificate the value of any materials or goods before delivery on site … The exercise of that discretion is so circumscribed by the terms of that provision of the contract as to emasculate the element of discretion virtually to the point of extinction.305

Under current versions of the JCT contracts the architect has no discretion about the inclusion of off-site materials and goods. It is for the employer to decide at tender stage whether they are prepared to make such payments for off-site goods. If an appropriate listing of uniquely identified or non-uniquely identified goods and materials is not shown in the contract documents, no payment can be certified by the architect.

Disorder Generally this can mean confusion, tumult (angry demonstration of a crowd or mob), riotous or contrary to public order. A term included in ACA at clause 11.5 (alternative 2) as a ground for awarding an extension of time. Therefore it may be considered a serious disturbance of public order, probably involving an element of violence, rather than the lesser sorts of disorder, which can nonetheless amount to a breach of the peace. See also: Civil commotion; Civil war; Commotion; Insurrection; Riot.

Dispute Strictly, a calling into question. In the context of construction contracts it is usually associated with adjudication (qv) or arbitration (qv) when it refers to a disagreement between two parties. Usually, that will take the form of a proposition by one party that the other has rejected, although sometimes a long silence or delay in responding on the part of the other party may be considered a rejection.306 A dispute may exist for the purpose of adjudication or arbitration, even though it may be obvious which party is correct.307 Adjudication and arbitration clauses usually refer to ‘dispute or difference’, but they probably have essentially the same meaning in this context, although ‘dispute or difference’ has been held to be ‘less hard-edged’ than ‘dispute’ – a ‘difference’ being a failure to agree.308 The Arbitration Act 1996 s. 82(1) says that ‘dispute’ includes ‘difference’. No adjudication or arbitration can take place unless a dispute or difference exists.309 The meaning of ‘dispute’ is particularly important (and contentious) in adjudication because, where the Scheme for Construction Contracts (England and

305

Partington & Son (Builders) Ltd v. Tameside Metropolitan Borough Council (1985) 5 Con LR 99 per Judge Davies at 108. 306 Collins (Contractors) Limited v. Baltic Management (1994) Limited (2004) 99 Con LR 1 (CA). 307 Hayter v. Nelson [1990] 8 Lloyd’s Rep 265. 308 Amec Civil Engineering Ltd v. Secretary of State for Transport [2005] BLR 227 (CA). 309 For example, see Cruden Construction Ltd v. Commission for the New Towns (1994) 75 BLR 134.

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Dispute Wales) Regulations 1998 (qv) determines the procedure, only one dispute may be referred at any time in an adjudication unless the parties agree otherwise.310 However, it has been held, under the JCT Standard Form of Building Contract 1980 with amendments 1 to 18, that ‘any number of disparate disputes can simultaneously be the subject of one notice of adjudication’.311 This is a surprising decision, in view of the wording of clause 41A of the contract, which, so far as the dispute is concerned, is couched in the singular throughout. The courts have been very clear that the facts, arguments and documents constituting the dispute should have been put to the responding party before a dispute can be said to have been crystallised. Parties should thus be careful to ensure that what is referred to adjudication is precisely what has been referred to the other side already. It has been put thus: In my judgment, both the definitions in Shorter Oxford Dictionary and the decisions to which I have been referred in which the question of what constitutes a ‘dispute’ has been considered have the common feature that for there to be a ‘dispute’ there must have been an opportunity for the protagonists each to consider the position adopted by the other and to formulate arguments of a reasoned kind. It may be that it can be said that there is a ‘dispute’ in a case in which a party which has been afforded an opportunity to evaluate rationally the position of an opposite party has either chosen not to avail himself of that opportunity or has refused to communicate the results of his evaluation. However, where a party has had an opportunity to consider the position of the opposite party and to formulate arguments in relation to that position, what constitutes a ‘dispute’ between the parties is not only a ‘claim’ which has been rejected, if that is what the dispute is about, but the whole package of arguments advanced and facts relied upon by each side. No doubt for the purposes of a reference to adjudication under the 1996 Act or equivalent contractual provision, a party can refine its arguments and abandon points not thought to be meritorious without altering fundamentally the nature of the ‘dispute’ between them. However, what a party cannot do in my judgement, is abandon wholesale facts previously relied upon or arguments previously advanced and contend that because the ‘claim’ remains the same as that made previously, the ‘dispute’ is the same.312

Subsequently, seven propositions have been derived from the authorities on this topic: (1) (2)

(3)

(4)

The word ‘dispute’ which occurs in many arbitration clauses and also in s. 108 of the Housing Act should be given its normal meaning. It does not have some special or unusual meaning conferred upon it by lawyers. Despite the simple meaning of the word ‘dispute’, there has been much litigation over the years as to whether or not disputes existed in particular situations. This litigation has not generated any hard-edged legal rules as to what is or is not a dispute. However, the accumulating judicial decisions have produced helpful guidance. The mere fact that one party (whom I shall call ‘the claimant’) notifies the other party (whom I shall call ‘the respondent’) of the claim does not automatically and immediately give rise to a dispute. It is clear, both as a matter of language and from judicial decisions, that a dispute does not arise unless and until it emerges that the claim is not admitted. The circumstances from which it may emerge so that a claim is not admitted are Protean. For example, there may be an expressed rejection of the claim. There

310

Bothma and Another (t/a DAB Builders) v. Mayhaven Healthcare Ltd (2007) 114 Con LR 131. R Durtnell & Sons Ltd v. Kaduna Ltd (2003) 19 Const LJ T115 at paragraph 41 per Judge Seymour. 312 Edmund Nuttall Ltd v. R G Carter Ltd [2002] BLR 312 at 312 per Judge Seymour. 311

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Disruption may be discussions between the parties from which objectively it is to be inferred that the claim is not admitted. The respondent may prevaricate, thus giving rise to the inference that he does not admit the claim. The respondent may simply remain silent for a period of time, thus giving rise to the same inference. (5) The period of time for which a respondent may remain silent before a dispute is to be inferred depends heavily upon the facts of the case and the contractual structure. Where the gist of the claim is well known and it is obviously controversial, a very short period of silence may suffice to give rise to this inference. Where the claim is notified to some agent of the respondent who has a legal duty to consider the claim independently and then give a considered response, a longer period of time may be required before it can be inferred that mere silence gives rise to a dispute. (6) If the claimant imposes upon the respondent a deadline for responding to the claim, that deadline does not have the automatic effect of curtailing what would otherwise be a reasonable time for responding. On the other hand, a stated deadline and the reasons for its imposition may be relevant factors when the court comes to consider what is a reasonable time for responding. (7) If the claim as presented by the claimant is so nebulous and ill-defined that the respondent cannot sensibly respond to it, neither silence by the respondent nor even an express non-admission is likely to give rise to a dispute for the purposes of arbitration or adjudication.313

Dispute resolution procedure In general terms, a procedure for resolving disputes. Most standard form contracts include provision for addressing disputes that arise out of or under the contract. For example, section 9 within SBC identifies mediation, adjudication or arbitration. The arbitration provision would be chosen in the alternative to litigation although, unlike the position under JCT 98, litigation is the default procedure. The MP form does not offer arbitration as an option at clauses 41 to 43. Within CE ‘dispute resolution procedure’ is a defined term, referring to the procedures set out in section 11. Again, arbitration is not available, but the contract does include a requirement that senior executives from the purchaser (qv) and supplier (qv) shall negotiate directly in good faith in an attempt to resolve the dispute. See also: Adjudication; Arbitration; Mediation.

Disruption A term commonly used by contractors when making a claim for additional monies. The ordinary meaning of disruption is ‘violent destruction or dissolution’. Therefore in the context of a building contract it cannot cover minor interferences with or minor delays to progress. Progress has to be materially affected. A claim for disruption costs can be distinguished from a claim for prolongation (qv) costs, in that a disruption claim can be legitimately made even though the Works were completed in time. Typically a disruption claim is for wasted labour time incurred on site, e.g. waiting for instructions or late information. By contrast, a prolongation claim would seek to recover the contractor’s costs for being on site beyond the agreed date for completion. For example, an architect’s instruction may result in material disruption to a contractor’s programme, but by efficient reorganisation the contractor may be 313 Amec Civil Engineering v. Secretary of State for Transport [2004] EWHC 2339 (TCC) at paragraph 68 per Jackson J. These propositions were accepted by the Court of Appeal as correctly stating the law on appeal, and in Collins (Contractors) Ltd v. Baltic Quay Management (1994) Ltd (2004) 99 Con LR 1.

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Distress able to complete the contract on time. Or the time taken to carry out certain activities may be extended by an instruction, but there is no impact on the completion date, because the affected activity is not critical, and the extended activity time is absorbed in the available float (qv). Despite having completed on time, the contractor may have incurred additional costs, which it is entitled to be reimbursed over and above any value of the instruction. In all cases it is for the contractor to prove the loss and/or expense incurred as a consequence of disruption. The term is used in the ACA and GC/Works/1 (where reference is also made to prolongation) forms of contract at clauses 7.1 and 46 respectively to describe a material breakdown in the orderly progress of the Works. See also: Acceleration of work; Claim; Extensions of time; Loss and/or expense.

Distress A mode of legal self-help. The act of a person taking possession of the personal movable goods of another and then holding those goods to seek performance of a duty or the satisfaction of a debt or demand. Distress is often used by the Inland Revenue to enforce payment of income tax. The most common example of distress is the right of a landlord to distrain on the tenant’s goods for non-payment of rent.

Disturbance A word often used in connection with the regular progress (qv) of the Works. It means an interruption or disruption (qv), and usually forms grounds for a contractual claim. See also: Claim; Loss and/or expense.

Divergence Going in a different direction, or a separation. The word is found, for example, in SBC clauses 2.15 and 2.17. It is used in conjunction with the word ‘discrepancies’ (qv) in clause 2.15, and appears to add little to the meaning. In clause 2.17 it is used alone, because it better expresses the sense that the requirements of the contract documents and statutory requirements may differ. See also: Inconsistency.

Divisible contract A contract in which obligations are severable. For example, payment becomes due for a partial performance, in contrast to an entire contract (qv), where payment becomes due upon completion. Most construction contracts of any size are divisible in this sense, in that they provide for payment in instalments. Part II of the Housing Grants, Construction and Regeneration Act 1996 (qv) requires periodic payments in every construction contract (qv) expected to be of more than 45 days’ duration. However, this requirement is subject to the parties agreeing otherwise.

Documentary evidence Evidence in a recorded form. Normally, written, printed or drawn and electronic forms are considered to be documents,314 e.g. letters, drawings, contract documents (qv), deeds, wills, books and reports. Before documentary evidence is admissible in court, it must be proved to be authentic. That is not to say that the contents of the document must be proved to be correct, but that the document must be what it is purported to be. For example, a document put forward as being a report on a specific topic written by one person for the benefit of another must be shown to be about the topic, written 314

See CPR Rule 31.4, Derby & Co Ltd v. Weldon (No. 9) [1991] 1 WLR 652 (computer database records) and Alliance & Leicester Building Society v. Ghahremani [1992] 32 RVR 198 (word processing file).

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Domestic sub-contractor by that person for the benefit of another. The contents of the report may later prove to be incorrect. The burden of proving documentary evidence is removed if both parties to the dispute agree. In many disputes significant amounts of documentary evidence can be agreed in advance, leaving the balance to be decided upon by the court, arbitrator or adjudicator. See also: Admissibility of evidence.

DOM/1 A form of domestic sub-contract approved and published by the Construction Confederation (qv) for use with JCT 98. This has now been superseded by SBCSub/D/C and SBCSub/C published by the JCT for use with SBC. SBCSub/D/C includes provision for where the sub-contractor undertakes an element of design.

DOM/2 The form of domestic sub-contract approved and published by the Construction Confederation for use with WCD 98. This has now been superseded by DBSub/C published by the JCT for use with DB.

Domestic sub-contractor A term used to refer to any person or firm, other than a named or nominated sub-contractor (qv), to whom the main contractor (qv) sub-lets a part of the Works. The contractor remains responsible for the work undertaken by the domestic sub-contractor as if the work had been carried out and completed by the contractor, i.e. vicarious performance. There is no contractual link between the employer and the domestic sub-contractor, and no liability or responsibility with the employer for the shortcomings of a domestic sub-contractor. Thus, if the domestic sub-contractor’s work is defective, the employer will seek redress from the contractor. It is then for the contractor to seek redress, in turn, from the domestic sub-contractor. In these circumstances it is important that the terms of main contract and sub-contract interlock so as to step respective rights and obligations up and down the contractual chain, i.e. ‘back to back’. By contrast, an employer may take on some risk or responsibility associated with a named or nominated sub-contractor. The extent of any risk accepted by the employer would have to form part of the agreement between the employer and the contractor. For example, named sub-contractors under IC and ICD are effectively domestic sub-contractors for which the contractor has complete responsibility, except in the case of termination of the named sub-contractor’s employment under certain circumstances. Many of the standard forms seek to control which parts of the Works can be sub-let by the contractor. For example, under SBC, if the contractor wishes to sub-let the plastering work it must first obtain the architect’s written permission, e.g. clause 3.7.1. See also ACA clause 9.2. These clauses require the contractor to obtain the architect’s consent to sub-let part of the Works, and not consent for the use of a specific sub-contractor. SBC clause 3.8 enables the employer (or the architect on the employer’s behalf) to specify domestic contractors by means of a list in the contract documents, e.g. the contract bills or work schedules as applicable. The employer sets out in the contract documents work that the contractor is to price, but which in fact is to be executed by a domestic sub-contractor chosen by the contractor from a list supplied by the employer. Provided the contractor has a choice from a list of at least three persons, the chosen sub-contractor will be a domestic 171

Dominant cause (approach) sub-contractor. If the number on the list falls below three for any reason, and is not increased, the work is to be carried out by the contractor, which may sub-let it to a sub-contractor of its choice. See also Privity of contract; Sub-contractor; Vicarious performance.

Dominant cause (approach) A phrase used to describe the approach adopted to resolve which of two competing causes of delay or disruption is to be applied. That which is found to be ‘dominant’ is taken to be the cause of the delay or disruption. ‘Dominant’ has been said to have a number of meanings: ‘Ruling, prevailing, most influential…’.315 In both City Inn Limited v. Shepherd Construction Limited316 and John Doyle Construction Limited v. Laing Management (Scotland) Ltd,317 Drummond Young LJ, when talking about concurrency in respect of extensions of time and loss, supported the proposition of the ‘dominant’ or ‘proximate’ cause approach, which was said to derive from Leyland Shipping Company Limited v. Norwich Union Fire Insurance Society Limited318 and other insurance cases. See also: Concurrent delay.

Drawings Part of the design process is to record or show the design in a form that can be readily conveyed and understood, e.g. committed to paper. This is done by drawings, which show by means of lines and figures the dimensions, shape and parts of the building in a two-dimensional form. These then allow the design to be located and transferred into a three-dimensional form. Drawings are the usual and principal means of communicating information between the designer or employer and the builder. Details (qv) are usually, but not always, conveyed by means of drawings. Strictly, a drawing is not always a detail, nor is a detail always a drawing. A drawing might best be described, in this context, as a visual representation of a building or some part of a building, usually drawn to a designated scale. A detail would normally be a drawing of some small part of a building so as to show, to a large scale, the important features of construction. ‘Details’ in the plural may also mean a written description going into some depth. For example, the architect may furnish details of concrete lintels by providing the contractor with schedules giving bar lengths and diameters, lintel sizes and number, and describing the position of the bars in the lintels. Alternatively the architect may provide a detail of a concrete lintel by producing a drawing to full size or half full size. In general, when a designer or contractor refers to drawings they mean all the drawings, irrespective of size and scale. When they refer to detail or details they generally mean large-scale drawings. If reference to schedules is intended, the word ‘schedule’ is usually used. On most building contracts drawings form a part of the contract documents (qv), along with such other documents as a bill of quantities (qv) or Employer’s Requirements (qv) or specification (qv). However, it is unlikely that the con-

315

H Fairweather Ltd v. London Borough of Wandsworth (1987) 39 BLR 106 at 120 per Judge Fox-Andrews. 316 [2007] CSOH 190 at paragraph 21. 317 [2004] CS 141 (11 June 2004) at paragraph 15. 318 [1918] AC 350.

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Duty of care agreement tract drawings will be sufficient for the builder to carry out and complete the Works. It is therefore nearly always necessary for the employer to provide the contractor with further drawings and information detailing the Works to be completed. Within SBC (clause 2.12.2) and ACA (clause 2.1) reference is made to such further drawings and details being issued to the contractor. In each case, neither drawings nor details are defined. Within GC/Works/1 clause 1 ‘the Drawings’ is defined as the drawings listed in the schedule of drawings attached to the contract agreement or, if there is no such schedule, then the schedule of drawings referred to in the tender, i.e. the contract drawings. However, no reference is made to ‘details’. In practice it probably makes little difference, because the provision of drawings and details would be covered by wording such as ‘drawings … or other design information’ at clause 46(2)(a). See also: Contract drawings.

Due date The correct date by which some action should be commenced or completed. Thus the due date for completion is the date stated in the contract documents (qv) by which the Works must be complete. The date when payment is due is referred to in s. 110(1) of Part II of the Housing Grants, Construction and Regeneration Act 1996 (qv). Under the Act this is to be contrasted with the final date for payment. For example, under SBC, IC, ICD, MW and MWD the due date for payment is the date when the interim or final certificate is issued. For interim payments the final date for payment, in effect the period during which the employer may make payment, is 14 days from the date of issue of the certificate; the period is different for the final certificate under SBC, IC and ICD. The payment is not paid late unless the employer has not paid by the expiry of the 14-day period (or 28-day period for the final certificate).

Due time The correct period of time. In building contracts the due time for completion is the length of time between the date for commencement and the date for completion, i.e. the contract period. Clause 23(f) applies to delay caused by the contractor not having received instructions ‘in due time’, and the argument was that those words meant ‘in time to avoid delay’. I do not agree. In my opinion the words meant ‘in a reasonable time’ and they are therefore applicable in a case such as the present where some delay in inevitable but it has been increased by the employer’s fault.319

Duty of care See: Care, duty of. Duty of care agreement See: Collateral contract/Collateral warranty; Warranty.

319

Percy Bilton Ltd v. Greater London Council (1982) 20 BLR 1 at 13 per Lord Fraser of Tullybelton.

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E Early use (by the employer) A term used in certain of the JCT contracts (e.g. SBC clause 2.6. DB clause 2.5, IC and ICD clause 2.6), which must be distinguished from partial possession or practical completion. Under the provision an employer may use or occupy the site or the Works, or any part of them, provided they have the consent of the contractor. The consent has to be in writing. The provision states that the employer may use or occupy for the purposes of storage or otherwise. The use of ‘otherwise’ would appear to give the provision a broad possible application. Prior to the contractor giving its consent, either the employer or the contractor (depending upon which insurance option applies) must inform the insurers, and obtain confirmation that such occupation or use will not prejudice the insurance of the Works. It is important that the insurers are informed, because the employer’s intention to occupy or use the site or the Works would be a material fact that could invalidate the insurance cover. If there is an additional premium to be paid by the contractor as a consequence of the early use, then this is to be added to the contract sum (qv). Subject to the insurers giving their confirmation, the contractor’s consent should not be unreasonably delayed or withheld. An obvious reason for withholding consent would be on the grounds of health and safety. Unlike partial possession, even though the employer would be using or occupying part of the site or the Works, the contractor remains liable for liquidated damages, there is no release of retention, and the rectification period does not commence. The contractor remains in possession of the whole site and Works.320 It is likely that if such use or occupation delayed the regular progress of the Works, or delayed completion, then the contractor would be entitled to an extension of time and loss and/or expense. It is important that the parties make clear, sensibly in writing, whether occupation of the Works by the employer is under the ‘early use’ or partial possession provision, as the consequences of failing to do so could be significant. Should the parties agree that ‘use and occupation’ will be on specific terms, then again these terms should be clearly recorded in writing.

Early warning (and risk reduction meeting) A phrase used in the NEC at clause 16 and PPC at clause 3.7. Part of the philosophy behind the drafting of the NEC is that each party should give the other early warning of any problems relating to the contract. An early warning is an action that can be taken by either the contractor or the project manager, each of whom is to notify the other as soon as they become aware of any matter that could (i) increase the total of the prices, (ii) delay completion, (iii) delay meeting a key date, or (iv) impair the performance of the Works in use. In addition, the contractor may give an early warning by notifying the project manager of any matter that may increase its total costs. It is not necessary for either party to give an early warning for a matter that 320

Impresa Castelli SpA v. Cola Holdings Ltd [2002] 87 Con LR 123.

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Easements (and profits) has previously been notified as a compensation event (qv). The project manager enters the matter subject to an early warning onto the risk register (qv). As a consequence of the early warning matter, either the contractor or the project manager may ‘instruct’ the other to attend a risk reduction meeting. With the agreement of each other, they may ‘instruct’ others to attend the meeting. Those present at the meeting are to cooperate in: (i) making and considering proposals on how the registered risks can be avoided or reduced; (ii) seeking solutions that will bring advantage to those affected: (iii) deciding who is to take what action in accordance with the contract; and (iv) deciding what risks can be removed from the register, given the risk has been avoided or passed. Following any meeting, the project manager is to revise and/or update the risk register and issue it to all concerned. If a decision changes the Works information, then the project manager is to instruct the change at the same time as the revised and/or updated risk register is issued. Under clause 61.5, if the project manager considers that the contractor has failed to give an early warning of an event when an experienced contractor would have done so, the project manager is to notify the contractor. Under clause 63, which sets out how compensation events are to be assessed, subclause 63.5 makes clear that the assessment is to be made as if the contractor had given a complying and timely early warning. In PPC at clause 3.7 it states that the partnering team is to operate an early warning system. Each partnering team member is to notify the others on becoming aware of any matter that would adversely affect the project or the partnering team members’ performance. That partnering team member is to include proposals for avoiding or remedying the matter in the notice. Within five working days of the notice the client’s representative (qv) is to organise a core group meeting, unless all the core group members agree an alternative course of action. Core group meetings are governed by clause 3.5, and partnering team members are to comply with the decisions of the core group. See also: Engineering and Construction Contract; Compensation event.

Easements (and profits) An easement is a right enjoyed by one person over land belonging to another, and may exist as a legal interest (s. 1(2)(a) Law of Property Act 1925). Examples are right of way (qv), right of drainage, and right to discharge water onto neighbouring property. These are known as positive easements: the right to do something on another’s land. In contrast, the right of light (qv) and the right of support are known as negative easements: something that restricts the use by someone of their land. An easement is attached to land, and not to a person. The land that enjoys the benefit is known as the dominant tenement; the land on which the easement is exercised is known as the servient tenement. For an easement to exist, the two pieces of land must have different owners. An easement may be lost through abandonment, of which continued non-use may be evidence. A profit à prendre is the right to remove something from another’s land, e.g. timber, turf or gravel, and where several people enjoy the right communally it is known as a ‘right of common’ and must be registered under the Commons Registration Act 1965. Both easements and profits may be created by: — Act of Parliament; — express grant, normally by deed; 175

Economic duress — express reservation, when land is sold; or — prescription (qv). See also: Wayleave.

Economic duress A category of duress that does not involve actual or threats of physical harm to the person or goods. Economic duress involves illegitimate threats that would affect a person’s economic interest.321 Like all categories of duress it goes to the matter of valid consent and as such means a contract may be void or voidable. There has to be pressure that was illegitimate, and which had such a significant effect on the victim that it resulted in the victim taking the action complained of. There has to be a compulsion on or lack of choice for the victim.322 Also to be taken into account is whether practical alternatives were available, e.g. injunctive relief or adjudication.323 However, a failure to obtain injunctive relief is not fatal in establishing economic duress.324 The difficulty is defining the line between hard commercial bargaining that is legitimate, and economic duress. For there to be economic duress there has to be improper pressure applied in commercial transactions, and which may arise at the formation of a contract or during negotiation of subsequent variations to a contract. There must be: — a threat or pressure; — resulting in compulsion upon, or a lack of practical choice for, a party; — which is illegitimate; and — which is a significant cause inducing a party into contract. In determining whether there has been illegitimate pressure the court must decide: — whether there has been an actual or threatened breach of contract; — whether the person allegedly exerting pressure has acted in good or bad faith; — whether the party protested at the time; and — whether the pressured party affirmed and sought to rely on the contract.325

Economic loss (pure) Many actionable wrongs involve some damage that is financial in nature, or is compensated financially. ‘Pure’ economic loss is financial loss that is not directly attributable to property damage or personal injury. This is an area where there would appear to be a clear distinction between contract and tort. In contract the only loss suffered by a party may fall into the category of ‘pure’ economic loss, e.g. loss of profit or wasted expenditure. Provided the claimant can demonstrate a breach, and that breach resulted in

321

D & C Builders Ltd v. Rees [1965] 3 All ER 837; Universal Tankships of Monrovia v. International Transport Workers Federation [1982] 2 All ER 67; Atlas Express Ltd v. Kafco (Importers and Distributors) Ltd [1989] 1 All ER 641. 322 Carillion Construction Ltd v. Felix (UK) Ltd [2001] BLR 1. 323 Ibid. 324 (1) Adam Opel GmbH (2) Renault SA v. Mitras Automotive (UK) Ltd [2007] All ER (D) 272. 325 DSND Subsea v. Petroleum Geo-Services [2000] BLR 531; Carillion Construction Limited v. Felix (UK) Limited [2001] BLR 1; and Capital Structures plc v. Time & Tide Construction Ltd [2006] EWHC 591 (TCC).

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Eichleay formula the ‘pure’ economic loss being suffered, then it will usually be recoverable. This is not necessarily so in tort, and particularly in negligence. Pure economic loss is generally not recoverable326 unless the relationship between the claimant and respondent falls within the principle of Hedley Byrne v. Heller.327 See also: Negligence.

Efficiently It has been held that ‘efficiently’, when used in its general sense, has to be construed according to the resources and powers available to a particular person or company. So when a railway company agreed to work and repair a railway efficiently it was held that this had to be construed according to the powers and resources available to that company.328

Egan Report The short name for Rethinking Construction (qv), the report of the Construction Task Force chaired by Sir John Egan, and published by the Department of the Environment, Transport and the Regions (1998). The report contended that the UK construction industry at its best was excellent, but there was concern that the industry was under-achieving. The Task Force was convinced that radical change and improvement in quality and efficiency could be spread throughout the construction industry. Five key drivers were identified: — committed leadership; — focus on the customer; — integrated processes and teams; — a quality driven agenda; and — commitment to people. Ambitious targets and effective measurement were said to be essential for improvement. The targets included an annual 10% reduction in construction costs and time, together with a yearly reduction in defects of 20%. The industry should create an integrated project process around product development, project implementation, partnering the supply chain and the production of components. Waste was to be eliminated and customer value increased. The industry must provide decent and safe working conditions, improve management and supervisory skills, and design projects for ease of construction, making maximum use of standard components and processes. Competitive tendering must be replaced with long-term relationships. The report was criticised by some as being couched in jargon that amounted to little more than pious hopes in practice. See also: Prime contracting.

Eichleay formula A formula, which originated from the USA, for calculating the ‘head office overhead’ percentage of a contractor’s money claim for delay (i.e. the quantum aspect). It is widely used in US federal government contracts, and has also been adopted in non-government contracts, though it is not universally accepted, even in the USA.

326

Murphy v. Brentwood District Council (1990) 50 BLR 1. Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] AC 465. 328 West London Railway v. London and NW Railway (1853) 11 CB 327. 327

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Ejusdem generis This formula has sometimes been adopted in the United Kingdom as an alternative to either the Hudson or Emden formulae (qqv). The Eichleay formula is a three-step calculation: Step 1: contract billings total head office overhead × = allocable overhead total contractor billings for contract period for contract periiod Step 2: allocable overhead = daily contract head office overhead days of performance Step 3: daily contract head days of compensable × = amount of recovery office overhead delay The formula can be subjected to a number of criticisms, and at best can give only a rough approximation that excludes profit. In particular, the formula does not require the contractor to prove its actual increased overhead costs as a direct consequence of the delay, an essential requirement in English law, and the formula is little used now. Moreover, using Eichleay there is the possibility of double recovery, and therefore it would be necessary to adjust for any head office overhead recovery allowed under the normal valuation rules in respect of a variation or change order. However, it is first necessary for the contractor to prove in principle that there was an increase in overhead costs directly attributable to the delay complained of. More usually, the contractor will try to establish that it has lost the opportunity to earn the overhead percentage by being delayed after the original date for completion (qv). In order to do this it will have to demonstrate that it had to turn work away during the period when the project overran. There will normally be a better way of establishing the loss than the use of a formula, and any use will normally be acceptable only where a tribunal is satisfied the contractor has incurred a loss, and there is no better evidence to quantify that loss. If better evidence is therefore available it should be produced, or the use of a formula may fail.329 See also: Emden formula; Hudson formula; Overheads.

Ejusdem generis Of the same kind or nature. A rule used in the construction and interpretation of contracts (qv), to the effect that where there are words of a particular class followed by general words, then the general words must be treated as referring to matters of the same class or nature as those listed. It is important to note that the rule applies only where the specific is followed by the general, and not where the general is followed by the specific. For example, in Wells v. Army & Navy Co-operative Society Ltd330 an extension of time clause 329 330

Tate & Lyle v. GLC [1982] 1 WLR 149. (1902) 86 LT 764.

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Electronic communications in a building contract allowed the architect to grant an extension of time to the contractor if the Works were ‘delayed by reason of any alteration or addition … or in case of combination of workmen, or strikes, or by default of subcontractors … or other causes beyond the contractor’s control’. The ‘other causes’ were held to be limited to those ejusdem generis with the specific causes listed, and therefore did not include the employer’s own default in failing to give the contractor possession of the site. IC and ICD clause 2.30 refers to ‘defects, shrinkages or other faults’. The phrase ‘other faults’ is likely to be interpreted ejusdem generis to mean faults of the same class as defects and shrinkages. The modern tendency of the courts is to restrict the operation of the rule.331 The rule will not apply if the parties establish that the words used are to be given an unrestricted meaning. In any event, while the rule is ordinarily applied in the case of deeds (qv), wills and statutes (qv), ‘it is of less force when one is dealing with a commercial contract.’332

Electronic communications Some standard forms of contract have provision for electronic data interchange, or the interchange of information between the parties by email. For example, SBC clause 1.8 makes such a provision, but the parties are to identify or set out in the contract particulars (qv) which communications can be made electronically, and the format to be followed. This provision deals with exchanges between the parties, i.e. the employer and contractor, and not exchanges between one of the parties and the architect. In addition, it is also subject to the specific provisions of clause 1.7, which addresses the giving or service of notices under the contract: these must be given in accordance with clause 1.7 unless a clause expressly states otherwise. Clauses 1.7 and 1.8, when read together, are not entirely clear. The default position under SBC is that all communications are to be in writing unless subsequently otherwise agreed by the parties. However, it is clear that there is nothing to prevent the parties agreeing that all certificates may be issued electronically. So the architect, subject to the agreement of the parties, may issue financial certificates and the certificate of practical completion by email in appropriate cases. Therefore the issue of an architect’s instruction could become instantaneous. DB, IC and ICD (both also at clause 1.8) have similar provision to SBC, as does MP at clause 5, except that notices in respect of third party rights and termination are to be given by actual, special or recorded delivery. MW, MWD and ACA have no provision specifically addressing electronic communications, although there is nothing preventing the parties from agreeing that such exchanges would be acceptable. PPC at clause 3.2 permits communication by email, provided the partnering team have signed an appropriate procedural agreement. Under CE, if email is intended to be an acceptable means of serving a notice, then footnote 33 states that an appropriate supplementary condition should be added in Part 9. The NEC addresses communications at clause 13, and does not expressly mention electronic communications. Communications

331

Henry Boot Construction Ltd v. Central Lancashire New Town Development Corporation Ltd (1980) 15 BLR 1. 332 Chandris v. Isbrandtsen-Moller Co Inc [1951] 2 All ER 613.

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Elemental bills of quantities are to be in a form that can be read, copied and recorded – which does not exclude electronic means.

Elemental bills of quantities A system of classifying the content of a bill of quantities (qv) into elements instead of the more usual trade or construction section divisions. In practice, it means that the list of work and materials is grouped under headings that reflect the parts of a building or structure, e.g. floors, roofs, windows, staircases, rather than carpentry, joinery, finishes, etc. The logic of the layout makes it easier for those not directly involved in its preparation to follow and use the bill of quantities. A significant benefit of an elemental bill comes when having to provide an accurate cost analysis of the various parts of a building or structure. Those using this method will, in time, produce a useful set of data to aid the estimating process.

Emden formula One of a number of formulae sometimes used to calculate the quantum element when a contractor is seeking to recover overheads and profit as part of a prolongation claim. Unlike the Hudson formula (qv) this formula uses a percentage for the contractor’s overall overheads and profit (i.e. on costs and profit expressed as a percentage of annual turnover). The formula is so called because it appeared in Emden’s Building Contracts & Practice, 8th edition, volume 2, at page N/46 as follows. When it is desired to claim extra head-office overheads for a period of delay a calculation is adopted as follows. h c × × pd 100 cp where h = the head-office percentage, c = the contract sum, cp = the contract period and pd = the period of delay (cp and pd should be calculated in the same units, e.g. days or weeks). The head office percentage is normally arrived at by dividing the total overhead cost and profit of the organisation as whole by the turnover … The formula … notionally ascribes to the contract in question an amount in respect of overheads and profit proportional to the relation which the value of the contract in question bears to the total turnover of the organisation.

Although this approach is more realistic than that of some other formulae, it is of limited value in practice, and is simply a rough approximation of any amounts that may be due. It is first necessary for the contractor to prove in principle that there was an increase in overhead costs directly attributable to the delay complained of. More usually, the contractor will try to establish that it has lost the opportunity to earn the overhead percentage by being delayed after the original date for completion (qv). In order to do this it will have to demonstrate that it had to turn work away during the period when the project overran. There will normally be a better way of establishing the loss than the use of a formula, and any use will normally be acceptable only where a tribunal is satisfied the contractor has incurred a loss, and there is no better evidence to quantify that loss. If better evidence is therefore available it should be produced, or the use of a formula may fail.333 The Emden formula was, however, 333

Tate & Lyle v. GLC [1982] 1 WLR 149.

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Employer’s final account and final statement applied (although wrongly referred to as the Hudson formula) somewhat uncritically and apparently without argument in J F Finnegan & Son Ltd v. Sheffield City Council,334 but this should not be taken as judicial approval of this or any other formula. See also: Eichleay formula; Hudson formula; Overheads.

Emergency powers Those powers that may be invoked by the government in cases of emergency, national danger or other wholly exceptional circumstances, and now derived almost entirely from Acts of Parliament, e.g. the Emergency Powers Acts 1920 and 1964, which give the government a permanent reserve of power for use in peacetime emergencies, such as during a major strike. They are seldom invoked in practice. Many building contracts provide for what is to happen if the emergency powers are implemented. For example, SBC clause 2.29.12 allows ‘the exercise after the Base Date by the United Kingdom Government of any statutory power which directly affects the execution of the Works’ (e.g. restricting the availability or use of labour) as a ground for an extension of time. The exercise of such powers by a government might well fall within the meaning of force majeure (qv). See also: Base date; Government action.

Employer In construction contracts, the word does not hold the legal ‘master and servant’ meaning of that word when used in connection with employment law. It is used to refer to the building owner, the person or body that commissions building or construction work, and who enters into a contract with the contractor to undertake that work. The SBC, IC, ICD, MW, MWD, DB, ACA, NEC and GC/Works/1 contracts use the word ‘employer’ throughout in this sense. The CE contract has moved away from this terminology, and uses the word ‘purchaser’ in place of ‘employer’. It also uses the word ‘supplier’ in place of ‘contractor’. PPC uses the words ‘client’ rather than ‘employer’ and ‘constructor’ rather than ‘contractor’. See also: Master; JCT Constructing Excellence Contract.

Employer’s agent In general terms, a person authorised to act on behalf of the employer. The extent of that authority would have to be determined in each case. The term is used within DB. Although only mentioned twice in the conditions (clauses 2.7.3 and 3.1), article 3 provides that the employer’s agent is to act for the employer in receiving or issuing applications, consents, instructions, notices, requests or statements, or in otherwise acting for the employer under any condition. If the employer wishes some other arrangement to apply, and to retain some powers, then the employer must give appropriate written notice to the contractor. The employer’s agent does not act for the employer in other than this limited capacity, but is bound by the normal rules of agency. See also: Agency; Employer’s representative.

Employer’s final account and final statement The phrase is used with DB, and defined at clause 1.1 as the final account and final statement prepared by the employer pursuant to clause 4.12.5. 334

(1989) 43 BLR 124.

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Employer’s person Under clause 4.12 the contractor is to submit its final account and final statement within three months of practical completion. The final account is to set out the adjustments to the contract sum (qv) in accordance with clause 4.2, and the final statement is to show the adjusted contract sum, the sum already paid by the employer to the contractor, and the balance due to either the contractor or the employer. If the contractor fails to submit a final account and final statement within the three-month period, the employer may give notice that, should the contractor fail to submit within a further two-month period commencing from the notice, the employer may prepare or have prepared a final account and final statement. The employer’s final account and final statement are to show the same information as that required for the contractor’s final account and final statement. The employer’s final account and final statement will become conclusive as to the balance due to either the employer or the contractor following the expiry of one month from the latter of the: — expiry of the rectification period (qv); — date named in the notice of completion of making good; or — date of submission of the employer’s final account and final statement to the contractor by the employer. The final account and final statement will not be conclusive to the extent that the contractor disputes anything within the final account and final statement prior to the expiry of the one-month period. This provision and the lack of a further provision to re-establish conclusiveness could cause problems. The effect of the final account and final statement is set out at clause 1.9. See also: Conclusive evidence; Final account and final statement.

Employer’s person This phrase is used in a number of JCT contracts (e.g. SBC, IC, ICD and DB), and it is a defined term. It includes all persons employed, engaged or authorised by the employer, but excluding the contractor, contractor’s persons (qv) (also a defined term) and statutory undertakers (qv) (also a defined term). It also includes third parties as referred to in clause 3.23, where provision is made in the contract for the architect to issue instructions in regard to examination, excavation or removal of antiquities. The phrase is used within the extension of time-relevant events (e.g. IC and ICD clause 2.20.6) and loss and/or expense listed matters (e.g. IC and ICD clause 4.18.5).

Employer’s representative A person identified to represent an employer. There is no inherent authority in the title of ‘representative’, and in each case it would be necessary to determine what authority the individual holds. The term is used in SBC at clause 3.3. Under this provision the employer may appoint an individual to act as a representative. The employer must notify the contractor of the identity of the representative, and of the powers that the representative may exercise. Those powers may be all those held by the employer under the contract, or may be limited to those specified in the written notice. Footnote 38 in the contract recommends, so as to avoid confusion, that the role be kept distinct from that of the architect/contract administrator and quantity surveyor. In other words, a different person should be appointed to 182

Endeavour undertake the role of representative. There is no similar provision within IC or MW. MP requires under clause 21 that the employer has, at all times, a representative appointed to exercise all the powers and functions of the employer under the contract. The appointment and removal of the representative take effect on notification to the contractor by the employer. This role is in effect the same as the employer’s agent under DB. The function of the employer’s representative under MP needs to be distinguished from advisers whom the employer may appoint but who have no authority to act on the employer’s behalf, e.g. under clause 21.2. See also: Agency; Client’s representative.

Employer’s Requirements The term is used to refer to the parameters that literally establish the Employer’s Requirements in terms of a building, structure or part thereof. These parameters are normally set out in written form, and that document is generally referred to as the ‘Employer’s Requirements’. The intention is that the employer, probably with professional advice, produces this document and sends it to the contractor or contractors invited to submit a tender. The document may range from little more than a description of the accommodation required to a full scheme design. The term is usually used in relation to design and build contracts, or those elements of work a contractor is to design, e.g. DB or the contractor’s designed portion under SBC, ICD or MWD. It is essential from the employer’s perspective that the requirements are comprehensively detailed. If the employer wishes to keep a very tight control on the contractor, a full and detailed performance specification should be produced. Despite what may sometimes be thought, the preparation of a proper performance specification is a skilful and time-consuming task. Before the contract is executed, the Employer’s Requirements and the Contractor’s Proposals must be made to correspond. The Contractor’s Proposals are the contractor’s response to the Employer’s Requirements. Matching of documents certainly needs to be done when using DB, as there is no express provision in the contract to deal with any discrepancies between the two documents, although discrepancies within the Employer’s Requirements are dealt with in clause 2.14. A footnote to the third recital recognises the problem, but simply advises that where the employer accepts a divergence from the Employer’s Requirements in the Contractor’s Proposals, the divergence should be removed by deletion or substitution in the Employer’s Requirements. The wording implies that if a divergence has not been removed in the Employer’s Requirements, it has not been accepted by the employer.

Encroachment An unauthorised extension onto another’s land; intruding gradually or by stealth onto another’s land. Minor encroachments in neighbouring property may occur when fences are erected or rebuilt, and boundaries can be varied in this way. See also: Adverse possession.

Endeavour To try to do; or to strive after; or to attempt to do. Under SBC clause 2.28.2 the architect, when the period from receipt of a notice or information from the contractor to the completion date is less than 12 weeks, is to endeavour 183

Engineering and Construction Contract (NEC) to notify a decision regarding the contractor’s entitlement to an extension of time prior to the completion date. See also DB clause 2.25.2. See also: Best endeavours; Reasonable endeavours.

Engineering and Construction Contract (NEC) The original version of this contract was called the New Engineering Contract, and received a warm recommendation in the Latham Report (qv). At the time, it introduced a number of new concepts into the construction contract arena. The contract is now in its third edition, which was published in June 2005 (NEC 3). There is a suite of contracts, which include the: — Professional Services Contract; — Engineering and Construction Short Contract; — Engineering and Construction Sub-Contract; — Engineering and Construction Short Sub-Contract; — Term Services Contract; — Framework Contract; and — Adjudicator’s Contract. The NEC 3 is endorsed by the Office of Government Commerce, and is said to comply fully with the Achieving Excellence in Construction principles. The contract itself has nine core clauses, which are headed: (1) General (2) The contractor’s main responsibilities (3) Time (4) Testing and defects (5) Payment (6) Compensation events (7) Title (8) Risk and insurance (9) Termination Then added to the core clauses is one of the six main option clauses, and these are: A. Priced contract with activity schedule B. Priced contract with bills of quantities C. Target contract with activity schedule D. Target contract with bill of quantities E. Cost reimbursable contract F. Management contract The main option clause adds specific amendments to the core clauses for the particular variant chosen to suit the relevant procurement requirements. Additionally there are a number of optional clauses that can be added. The first is the dispute resolution provision, which can be chosen from either Option W1 or Option W2. The principle difference between these is that Option W2 is drafted to comply with the Housing Grants, Construction and Regeneration Act 1996, whereas the timescales within Option 1 would not comply. Further are what are called the secondary option clauses, of which there are 15, e.g. Option X5 sectional completion, X7 delay damages. As many of these secondary option clauses can be chosen as are applicable to the project. Then there are two further options that apply specifically to the United Kingdom. These are Option Y(UK)2 (The Housing Grants, Construction and Regeneration Act 1996) and Option Y(UK)3 (The Contracts (Rights of Third Parties) Act 1999). 184

Entire completion The reference Y(UK)1 is not used, along with X8 to X11 and X19. Any specifically drafted clauses are to be included under Option Z. The project-specific details are inserted into what is called the contract data (qv), for which there are two parts. Part one includes the data provided by the employer, and part two is the data provided by the contractor. Part two will usually be returned as part of the contractor’s tender. The contract is administered by a project manager, who is required to issue certificates, e.g. clause 30.2 completion certificate. The project manager, when certifying, is obliged to act impartially.335 The contract is drafted to be used in many fields, and not just building. This is illustrated by secondary option X17 ‘Low performance damages’. This would be included so as to enable an employer to recover damages if equipment does not function in accordance with a specified performance level. It is likely to be included when the NEC is used for the installation of plant and equipment, e.g. a chemical process plant. Further, the contract is drafted with international construction in mind, as evidenced by the secondary option addressing multiple currencies (Option X3) and the fact that Y(UK)2 and 3 are optional. The document is seen by the authors very much as a management tool, e.g. clause 16 early warning. Almost the whole of the contract is written in the present tense. The use of the present tense makes it difficult to interpret whether actions are powers or duties. ‘Shall’ is used once at clause 10.1, i.e. ‘shall act as stated in this contract and in a spirit of mutual trust and cooperation’. In conjunction with this there is the adoption of simple and non-legalist language that aims to make the document easier to understand, but in fact probably has the opposite effect, simply creating uncertainty. The absence of words or phrases that have been considered and interpreted by the courts means precedents established from case law may have little value in relation to this contract, e.g. the use of ‘Compensation Events’ in clause 60. See also: Contract data.

Ensure Effectively, to guarantee that something will be done. It involves more than simply using best endeavours (qv). The obligation to ‘ensure’ or ‘secure’ the doing of something imparts an absolute liability to perform the duty set out.336 Professional terms of appointment, if drafted ad hoc, sometimes require the professional to ensure proper performance of the Works. Professionals may gain some comfort from a past decision that makes the requirement to ensure dependent upon other clauses and surrounding circumstances before it can be given its full effect.337 It is best for consultants to avoid any obligation that requires them to ensure achieving something, and to adhere to the usual obligation of using reasonable skill and care.

Entire agreement See: Complete agreement clause. Entire completion See: Performance. 335

(1) Costain Ltd (2) O’Rourke Civil Engineering Limited (3) Bachey Soletanche Limited Emcor Drake & Scull Group Plc v. (1) Bechtel Limited (2) Mr Fady Bassily [2005] EWHC 1018 (TCC). 336 John Mowlem & Co v. Eagle Star and Others (1995) 44 Con LR 134. 337 Department of National Heritage v. Steenson Varming Mucahy (1998) 60 Con LR 33.

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Entire contract

Entire contract A contract in which ‘complete performance’ by one party is a condition precedent (see: Judicial precedent) to the liability of the other party,338 e.g. where completion of work by one party is necessary before payment by the other party becomes due.339 Whether or not a contract is an entire contract is a matter of interpretation of the contract, and it depends on what the parties agreed. A lump sum contract (qv) is not necessarily an entire contract. The test for complete performance is in fact ‘substantial performance’ (qv). It has been said that: In considering whether there was substantial performance … it is relevant to take into account both the nature of the defects and the proportion between the cost of rectifying them and the contract price.340

The doctrine of an entire contract can apply equally to agreements for payments by stages. In Close Invoice Finance Ltd v. Belmont Bleaching and Dyeing Company Ltd341 an agreement provided for payments to be made in stages. It was held that payment for each stage was due when the stage was complete.

Environment Used in PPC and defined at appendix 1 as ‘all and any land, water and air including air within any natural or man-made structure above or below ground’. Under clause 16.4 partnering team members are to use reasonable skill and care appropriate to their roles, expertise and responsibilities (as stated in the partnering documents) to implement measures stated in the partnering documents to eliminate or render negligible the risk of harm to the environment, or to allow the movement or transfer of hazardous substances on or from the site. Hazardous substances are defined at appendix 1 as any natural or artificial substance intrinsically capable of causing harm to man or any living organism supported by the environment, or damaging the environment or public health.

Environmental laws Used in PPC and defined at appendix 1 as any law or statutory instrument in the country within which the site is located or a notice or requirement issued by a competent authority concerning the protection of human health and the environment (qv). It also covers laws addressing the generation, transportation, storage, use, treatment or disposal of hazardous substances. Under clause 16.4 each partnering team member is to use reasonable skill and care appropriate to their role, expertise and responsibilities (as stated in the partnering documents) not to: — transport, generate, store, use, treat, dispose of or install at site any hazardous substances; or — allow the release of hazardous substances into, or the contamination of, the environment (qv); except in accordance with environmental laws applicable to the project.

Environmental risk insurance A defined term within PPC at appendix 1 as any insurance covering the consequences of environmental risks arising from the project. Insurance cover is to be obtained in accordance with clause 19.5, which 338

Cutter v. Powell (1795) 6 Term Rep 320. Sumpter v. Hedges [1898] 1 QB 673. 340 Bolton v. Mahadeva [1972] 1 WLR 1009 at 1013. 341 [2003] All ER (D) 304. 339

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Equity requires the project team member named in the commencement agreement (qv) to take out the insurance in the amounts, covering the risks and for the period so stated.

Equal and approved Contract documents often reserve a right to the principal (e.g. an employer) or their agent (e.g. architect) to approve alternative materials or supplier. Approval of alternative materials would not normally constitute a change or variation under the contract. Alternatively, an insistence by the principal or their agent to use the specified materials, or a refusal to approve an alternative, would not constitute a variation. In Leedsford Ltd. v. City of Bradford342 a specification provided: ‘Artificial stone … the following to be obtained from Empire Stone Company Limited … or other approved firm’. The contractor claimed to be entitled to nominate other firms for approval. The Court of Appeal343 held that the architect was entitled to insist on the named firm without giving reasons. The contractor could also insist on the named firm without giving reasons. This can be contrasted with the decision in Crosby & Sons Ltd v. Portland UDC,344 where the court had to look at a specification which provided that ‘the pipes will be manufactured by either Stanton or Staveley’. The engineer required ‘Stanton’, whereas the contractor wished to supply ‘Staveley’. It was held that the contractor had an option to choose the pipe it preferred, so that the engineer’s instruction constituted a variation. Where contracts are subject to EEC public works restrictions, article 30, which deals with trade in construction materials, changes the position in that a specification must be framed so as to allow the contractor choice. Reference to a proprietary product may be made only if that is the only practicable way of specifying what is required. In such circumstances a specification like the one in the Leedsford case would be interpreted to allow the contractor to supply any artificial stone of the same quality. Indeed, it would have to include words to the effect that an equivalent product would be acceptable.345 See also: Approval and satisfaction.

Equipment A word used within NEC and defined at clause 11.2 as ‘items provided by the Contractor and used by him to Provide the Works and which the Works Information does not require him to include in the Works’. Basically any plant and other equipment used by the contractor to carry out and complete the Works. However, within NEC ‘plant’ (qv) is defined to cover items that are intended to be included in and/or form a part of the Works.

Equities The right to invoke equitable remedies in actions alleging fraud or mistake. Equities are the lowest kind of interest in property.

Equity Fairness or natural justice. A body of rules developed and administered by the Chancery Court to supplement the common law. In time, the principles became embodied within a system, and equity supplemented and sometimes prevailed over common law. Equity must not be confused with ethical or moral 342

(1956) 24 BLR 45. Applying the House of Lords’ decision in Tredegar v. Harwood [1929] AC 72. 344 (1967) 5 BLR 121. 345 Case C-359/93 Commission v. Netherlands [1996] 1 CMLR 477. 343

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Error concepts. Originally there was a moral aspect to equity, but the modern attitude is summed up by the following statement, made in dismissing a claim against a company director guilty of sharp practice: ‘if we were sitting in a court of honour, our decision might be different …’346 Towards the end of the nineteenth century legislation fused the administration of law and equity, and so both legal and equitable rules and remedies are now applied throughout the legal system. It is expressly laid down that whenever there is any conflict between common law (qv) and equity, the latter is to prevail.347 Such cases of conflict are now rare.

Error A mistake (qv). In the context of construction contracts, errors are usually made in regard to either fact or law. Errors of fact may be sufficient to allow one party to apply to the court to have the contract set aside. Errors of law can also have the effect of bringing the contract to an end.348 Most forms of contract make some provision for the correction of errors. For example, within SBC: — clause 2.14.1 refers to the correction of errors in the contract bills; — clause 2.10 to errors arising from the contractor’s inaccurate setting out; — clause 4.2 to the acceptance of errors in the computation of the contract sum (qv); and — clause 1.10.1.2 addresses the accidental inclusion or exclusion of any work, materials, goods or figures in any computation or an arithmetical error included within the adjusted contract sum and upon which the final certificate is premised. ACA addresses the correction of errors in the contract bills at clause 1.4, and mistakes, inaccuracies, discrepancies and omissions in drawings for which the contractor is responsible at clause 3.1. A similar provision exists within GC/ Works/1 at clause 3(3) for the correction of errors in the bills of quantities. All such references to errors are intended to prevent the contract being vitiated by providing an agreed mechanism for dealing with them. Errors in pricing the bills of quantities found during the tendering procedure are often dealt with by a stated procedure. See JCT Practice Note 6 (Series 2) Main Contract Tendering, paragraphs 47 to 50, and the Code of Practice for the Selection of Main Contractors (qv), paragraphs 4.7 and 4.8. Obvious clerical errors in a contract will tend to be read as corrected by the courts or the tribunal when interpreting a contract. This does not apply to mistakes made by a contractor within its tender prices and rates. Such mistakes are binding upon the contractor unless, before the tender is accepted, the employer or the architect discovers the error, when the position may well be different.349 Where valuation of additional quantities is necessary, and the contract rates or prices include an error (they may be either too high or too low), then the rates or prices are not corrected, but are used as the basis for the valuation of the additional work.350 346

Re Cawley & Co Ltd (1889) 42 Ch D 209 at 212 per Fry LJ. The Judicature Act 1925 ss. 36–44. Kleinwort Benson Ltd v. Lincoln City Council [1999] 2 AC 349. 349 Webster v. Cecil (1861) 30 Beav 60. 350 Dudley Corporation v. Parsons & Morrin Ltd, 8 April 1959, unreported CA; Henry Boot Construction Ltd v. Alstom Combined Cycles Ltd [1999] BLR 123. 347 348

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Essential

ESA/1 The collateral agreement produced for use with IFC 98. It was prepared by the Royal Institute of British Architects (qv) and the Committee of Association of Specialist Engineering Contractors. Its purpose was to create a contractual relationship between a person named as a sub-contractor (qv) and the employer. Principally this was to give the employer a route of redress against the sub-contractor should it have carried out design work. There are also other clauses dealing with the sub-contractor’s liability to the employer if the sub-contractor fails to provide information on time, and provisions covering advance ordering of work and materials. It has been replaced by the JCT Intermediate Named Sub-Contractor/Employer Agreement (ICSub/NAM/E) for use with IC and ICD.

Escrow A written legal undertaking that something is delivered (e.g. a sum of money) to a third party, which is later released to a specified party only after a stipulated condition has been fulfilled.

Essence of the contract A term or stipulation fundamental to the contract, without which the contract would be valueless, or nearly so, to one party. The term goes to the heart of the contract. Without that provision a party would not have entered into the contract. A breach of such a term would give the injured party the right to rescind, i.e. the injured party may elect to terminate the contract and sue for damages. The phrase is often used in connection with time. If a party unreasonably delays its performance, time may be made ‘of the essence’ if the other party serves a notice on the party in default, setting a new and reasonable date for completion.351 This is possible in the case of mercantile contracts; however, construction contracts would rarely fall into this category. Within construction contracts time is not normally of the essence unless expressly stated to be so. This is because such contracts tend to make express provision to cater for delays, i.e. extension of time (qv) and liquidated damages clauses. In a mercantile contract a buyer who has not received the goods after the agreed time can simply state that they do not want the goods – they remain with the seller to dispose of as they see fit. In construction contracts the position is not so straightforward. A contractor undertakes Works that are on and probably fixed to the employer’s land, and cannot readily take back the completed work and materials. See also: Delay; Fundamental breach; Repudiation.

Essential Indispensable. The word occurred within JCT 98 at clauses 25.4.9, 25.4.10.1 and 25.4.10.2, referring to such labour, goods or materials or fuel or energy as are ‘essential’ to the proper carrying out of the Works. Before the architect could consider any of the circumstances as a relevant event (qv), they had to be certain that the labour, goods, materials, etc. really were indispensable. It was not enough that they would have been useful or helpful, or quite important. ‘Essential’ is not a word that lends itself to half measures, and it seems that a strict interpretation is intended. However, these clauses and the use of ‘essential’ are not repeated within SBC. 351

Behzadi v. Shaftsbury Hotels Ltd [1992] Ch 1.

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Establishment charges

Establishment charges Sometimes called ‘establishment costs’ or preliminaries (qv), and are the cost to the contractor of its site administration. They include such things as supervisory or administrative staff, site accommodation, water, lighting, heating, electricity, canteen and welfare. A successful tenderer should be asked to identify these costs separately from the costs of undertaking the actual Works. It is sensible that the costs be broken down in some detail to show separately the time-related (e.g. supervisory staff), work-related (e.g. plant) and value-related (e.g. insurance) items. Certain items, such as accommodation, may be broken down further into set-up costs and removal costs, with the balance identified as time related over a specified duration. The breakdown will be invaluable when preparing interim payments, and possibly when valuing variations or changes, though this will depend upon the specific provisions within the contract. These costs are likely to form a head of claim for a contractor when framing a claim for loss and/or expense or for additional costs. The aforementioned breakdown of costs will be of no use when ascertaining the amount of the contractor’s actual loss and/or expense, but will provide an insight into how the contractor was intending to manage the Works at tender stage. See also: Claim; Direct loss and/or expense.

Estate A term of art used in connection with the ownership of land, or the use of land for a period of time. It describes the extent of the proprietor’s interest in the land, e.g. a freehold or leasehold estate.352 In common parlance it also refers to the land itself, e.g. ‘the Whiteacre Estate’. The same term is also used as meaning property, e.g. the estate of a deceased person.

Estimate A term widely used in the construction industry. It generally means a ‘probable cost’ or a judged amount, approximate rather than precise. However, depending on the circumstances, it may amount to a precise cost or amount constituting a firm offer that, if accepted by the person to whom it is submitted, would result in a binding contract.353 This is likely to be when the person preparing and submitting the estimate is in a position to carry out Works or provide a service. Architects and quantity surveyors are frequently required to provide an estimate to a client of the cost of the proposed Works so that the client may decide whether or not to proceed. In such circumstances it is usually self-evident that the architect or quantity surveyor is not offering to carry out the Works for that price; the position may be different if the estimate relates to professional services fees. Such estimates, by their nature, are generally not precise, and therefore the architect or quantity surveyor should inform the client of a possible margin of error. Other factors should be stated, such as whether inflation has been taken into account, or whether VAT is included or excluded. Estimates produced by an architect or quantity surveyor just prior to the submission of tenders should be more accurate than ones produced at feasibility stage. This is simply because of the increased level of detail available. Clients 352 353

The Law of Property Act 1925 s. 1. Crowshaw v. Pritchard and Renwick (1899) 16 TLR 45.

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Evidence tend to expect accuracy, and therefore architects and quantity surveyors often err on the high side in order to avoid unpleasant surprises when tenders are opened. However, it is certainly a mistake to pitch an estimate too low simply to ‘sell’ a scheme. A subsequent failure to achieve that figure may result in a client claiming at least the return of the fees354 and possibly more, such as the additional overspend. If the word ‘estimate’ is used, it should have some foundation in calculation and fact. It might be appropriate to qualify any figure offered as a ‘rough estimate’ or an ‘approximate estimate’ so as to avoid any possible suggestion that the figure carries a greater degree of accuracy than was intended. See also: Budget price; Offer; Quotation; Target cost; Tender.

Estoppel A principle that precludes a person from denying the truth of a statement made by them, or from alleging that a fact is otherwise than it appeared from the circumstances. Several kinds of estoppel exist, as follows. — Estoppel by deed: a statement of fact in a deed (qv) cannot be disputed by either party to it. Thus a party to a deed cannot deny the truth of the recitals (qv) it contains. — Proprietary estoppel: where a party has done acts in reliance that it will acquire rights over another’s land. — Promissory estoppel: a promise that strict legal rights will not be enforced. — Estoppel by record: where a party is barred from pursuing a cause of action (sometimes referred to as ‘action estoppel’) or raising an issue (sometimes referred to as ‘issue estoppel’) that has already been the subject of judgment in the courts. — Estoppel by representation: where a party expressly or impliedly by conduct has made a factual statement or conducted itself so as to mislead another party, the first party cannot afterwards go back on the representation:355 for example, allowing another party to appear to be one’s agent or to have an authority wider than in fact it had. — Estoppel by convention: where parties to a contract acted on the assumption, mutually agreed, that certain facts can be regarded as being true for the purposes of that contract. The parties are thus precluded from denying the truth of those assumed facts. Estoppel can be used only as a defence. It cannot be used as the basis of an action. See also: Agency; Waiver.

Evasion See: Avoidance. Evidence Information that goes to prove or disprove facts, the truth of which is in dispute and is to be decided by a tribunal. Evidence is the buttress of a party’s case, and in litigation there are rules of evidence, which must be observed, as to what evidence may be produced. In civil cases the burden of proof lies with the person asserting the facts, and the standard of proof is the balance of prob354

Nye Saunders & Partners v. Alan E Bristow (1987) 17 Con LR 73. Maymac Environmental Services Limited v. Faraday Building Services Limited [2000] 75 Con LR 101 is an example where a party was estopped by representation and convention. 355

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Ex contractu ability: i.e. the probability that it is more likely to be as the person asserting states than otherwise. The primary means of proving a fact remains oral evidence. In construction disputes for many years it has been customary to disclose oral evidence in chief by way of witness statements, which saves a lot of time and hence money. Indeed, CPR now discourages oral evidence in chief. In arbitration the rules governing the ability of a party to produce evidence are not so strict.356 Examples of evidence are documents, drawings, site diary, photographs, and first-hand accounts by individuals. See also: Admissibility of evidence; Expert witness; Hearsay; Parol evidence.

Ex contractu Arising out of contract. The term is used to refer to claims that arise out of the express provisions of a particular contract. For example, SBC clause 4.23 confers on the contractor a right to seek the recovery of loss and/ or expense caused by relevant matters materially affecting the regular progress of the Works. Similar ex contractu claims may arise under ACA clause 7 (employer’s liability) and GC/Works/1 clause 46 (prolongation and disruption expenses). The contract administrator normally has the power under the terms of the appointment with the employer to quantify or ascertain ex contractu claims in accordance with the terms of the contract, but not other types of claim. Most, though not all,357 of the current standard forms retain the contractor’s right to make additional or alternative claims (other than in accordance with the express provisions of the contract) for breach of contract based on the same facts, e.g. SBC clause 4.26. Not all the ‘Relevant Matters’ listed under SBC clause 4.24 amount to a breach of contract by an employer, e.g. variations. However, a claim for breach of contract by a contractor may avoid some of the restrictions under a particular clause. For example, if the contractor has neglected to make a timely application in accordance with SBC clause 4.23, it is possible that a late claim may be rejected by the architect. There is nothing to prevent a contractor making the same claim at common law for breach of contract. That said, a contractor can only recover its loss once.

Ex gratia claim (or payment) A claim met or a payment made ‘as a matter of grace’. It is sometimes called a ‘sympathetic’ claim or payment. The essential point is that the party paying is under no legal obligation to make payment. Ex gratia payments are sometimes made to settle or compromise a claim rather than go to the expense of litigation or arbitration. Under most standard form contracts the architect or contract administrator has no authority to settle such claims, or to authorise ex gratia payments. They must be given express authority by the employer if they are to settle such a claim, and none of the standard contracts endows the architect or contract administrator with that authority. See also: Claim.

Ex officio By virtue of one’s office.

356 357

Arbitration Act 1996 s. 34. See NEC clause 12.4.

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Examination of site

Examination-in-chief A general rule in both civil and criminal cases is that any fact that needs to be proved by the evidence of a witness is to be proved by the giving of oral evidence. Examination-in-chief is the first stage in the examination of a witness (qv) in judicial or arbitral proceedings. It is carried out by the party calling the witness, generally through counsel or a solicitor. They will aim to elicit oral evidence which supports their party’s version of the facts in issue. There are a number of rules which must be observed during examination-inchief e.g. leading questions may not be asked. A leading question is one which suggests its own answer e.g. ‘Did the site agent tell you that he could not care less?’ However, a witness may be led through the introductory part of their testimony which is likely not to be contested e.g. ‘Are you the project architect?’ Examination-in-chief is now discouraged under the Civil Procedure Rules (CPR)358 (qv) where generally it is replaced by a written witness statement. The statement is confirmed by the witness as being their statement. A witness is normally given an opportunity to correct the content of the statement should they so wish. See also: Cross-examination; Re-examination.

Examination of site Under the general law, the employer does not warrant the suitability of the site for the Works.359 Therefore site conditions, including ground conditions, are a matter for the contractor unless they significantly affect the design of the Works. The precise conditions of contract may emphasise this position, or they may amend it so that the contractor is entitled to additional payment if the ground conditions are not as represented. It is quite common for a clause to be inserted in the bills of quantities (qv) requiring the contractor to satisfy itself regarding all matters in connection with the site. This may raise questions about the priority between the bills of quantities and the contract conditions. Generally, standard forms tend to take the risk away from the contractor. GC/Works/1 clause 7(1) requires the contractor to satisfy itself in respect of matters affecting the site. Clause 7(2) goes on to state that the provision does not apply to any information given or referred to in bills of quantities required to be given in accordance with the applicable method of measurement. Thus, if the bills have been prepared in accordance with the Standard Method of Measurement (SMM) (qv), the contractor may well have a claim if the ground conditions encountered are not as described.360 Clause 7(5) also gives the contractor a right to claim for unforeseeable ground conditions (qv) in specified circumstances, although this is subject to notice under clause 7(3). Clause 2.13.1 within SBC states that the bills have been prepared in accordance with the SMM, and therefore, if the contractor encounters conditions different from those described in the contract bills, it may well recover any additional costs under clauses 2.14.1 and 2.14.3. ACA offers alternatives at clause 2: alternatives 1 and 2. Under alternative 2 at clause 2.1 the contractor is responsible for the provision of those drawings, details, etc. not provided by the architect. Within clause 2.6 of this alternative 358

CPR Rule 32.5(2). Appleby v. Myers (1867) LR 2 CP 651. 360 C Bryant & Son Ltd v. Birmingham Hospital Saturday Fund [1938] 1 All ER 503. 359

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Excepted risks is a further optional clause that addresses ground conditions. If the clause applies, then if contractor encounters ‘adverse ground conditions or artificial obstructions’ not identified in the pre-construction information (qv), the architect should be notified, including the measures to be adopted by the contractor to overcome the conditions or obstruction. The architect is then to issue an instruction setting out the manner in which the ground conditions or obstruction are to be addressed. This instruction is to be valued as a variation under clause 8.2, unless the ground conditions or obstructions should have been foreseen by the contractor in accordance with clause 1.2 (i.e. by a properly qualified and competent contractor), or an adjustment should be made to the contract sum (qv) under clause 1.4, which deals with errors or mistakes in the bills of quantities. Subject to anything agreed to the contrary, an architect will normally have a duty to inspect the site before undertaking any design work.361 Where an independent structural engineer is appointed to investigate the subsoil conditions, the architect is probably entitled to rely on the structural engineer’s advice. In any event, the architect may be protected if the terms of engagement include an appropriate clause.362 See also: Misrepresentation.

Excepted risks A term used in the JCT contracts (e.g. SBC and DB clause 6.8 and MW clause 1.1) to describe those risks that may affect the execution of the Works although they are outside the contractor’s control and are carried by the employer. Excepted risks are usually an exception to those risks commonly found in ‘all risks’ policies of insurance. The definition covers: ionising radiations or contamination by radioactivity from any nuclear fuel or nuclear waste from the combustion of nuclear fuel; radioactive, toxic, explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof; and pressure waves caused by aircraft or other aerial devices travelling at sonic or supersonic speeds. See also: Accepted risks.

Exceptionally adverse weather See: Adverse weather conditions. Excluded costs A term used within the target cost option in CE. The purchaser (qv) may, acting reasonably, object to any actual costs incurred by the supplier (qv) on the basis that the costs constitute excluded costs. Excluded costs are defined at clause 1.1 as those costs that the purchaser does not have to reimburse the supplier for because they: — have not been properly incurred in the performance of the services (qv); or — are not substantiated by the supplier’s records; or — fall within the supplier’s margin. 361

Eames London Estates Ltd v. North Hertfordshire District Council (1980) 18 BLR 50. Investors in Industry Commercial Properties v. Bedfordshire District Council (1985) 5 Con LR 1, referring to clauses 1.20, 1.22 and 1.23 of the RIBA Conditions of Engagement. These terms were changed in the 1982 ‘Architect’s Appointment’, which the judge at first instance held to reflect ‘in clearer terms’ the position under the earlier terms. SFA/99 (2004) clause 3.11 and S-Con-07-A clause A3.6 are to much the same effect. 362

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Expert determination

Execute A word with several meanings in a legal context. The act of completing or carrying out something, e.g. works or services. It may also mean the carrying out of the terms of a contract. ‘To execute a contract’ means to render it effective by signing or by completing it as a deed (qv), i.e. sign and deliver. Execution is also the process by which judgments of the court may be enforced, and hence ‘writ of execution’ or ‘warrant of execution’, which directs the sheriff (or county court bailiff) to seize the judgment debtor’s personal property to satisfy the judgment, costs and interest.

Exemption (exception or exclusion) clause A clause in a contract that attempts to exclude or limit the liability of one of the parties in some way. Such clauses tend to be interpreted strictly, and clear wording is required to exclude liability for negligence. In principle it is acceptable for a party to exclude liability for its own wrong, provided the wording in the clause is sufficiently clear to include the relevant wrong.363 See also: Unfair Contract Terms Act 1977.

Expense A term used in GC/Works/1 at clause 46 referring to a contractor’s claims for disruption and prolongation. It is narrowly defined in clause 46(6) as meaning ‘money expended by the contractor, [and does] not include any sum expended, or loss incurred, by him by way of interest or finance charges however described’.

Expert Someone with a special skill, knowledge or qualification. Clause 31(5) of GC/Works/1 refers to testing by an ‘independent expert’. See also: Expert witness.

Expert determination A form of dispute resolution. This involves a third party acting not as an arbitrator or adjudicator, but as an expert. This procedure will apply only if the parties agree, and it is becoming more common for clauses to be included within contracts covering the use of experts to resolve disputes. Therefore the procedure followed by the expert is generally set out within the contract. Unless the contract states otherwise: — the expert is not obliged to receive evidence or submissions from the parties; — there is no requirement for the expert to hold a hearing; — the expert is entitled to arrive at a decision based upon the expert’s own knowledge, expertise and investigations; — the decision of the expert is final and binding, with only limited rights of appeal, e.g. fraud or collusion, or the expert has exceeded the terms of reference;364

363

Decoma UK Ltd (formerly known as Conix UK Ltd) v. Haden Drysys International Limited [2005] 103 Con LR 1 TCC. 364 Owen Pell Ltd v. Bindi (London) Ltd [2008] EWHC 1420 (TCC). See also: Douglas Harper v. Interchange Group Ltd [2007] EWHC 1834; Halifax Life Limited v. The Equitable Life Assurance Society [2007] EWHC 503; and Sunrock Aircraft Corporation v. Scandinavian Airlines Systems Denmark-NorwaySweden [2007] EWHC Civ 882.

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Expert witness —

the expert’s decision will be final and binding even though plainly wrong, provided the expert has complied with the terms of reference, i.e. answered the issues set out in the terms of reference; — the provisions of the Arbitration Act 1996 and Housing Grants, Construction and Regeneration Act 1996 are not applicable; and — an expert may be liable for damages sustained by a party through negligence of the expert, even though an arbitrator or adjudicator is immune from an action for negligence.365 See also: Adjudication; Arbitration.

Expert witness A witness who submits evidence to a court or tribunal based upon their expert knowledge or skill on some facet of the case. The duty of the expert witness is to assist the court or tribunal and not to prosecute their client’s position, although many clients do not appreciate this. An expert witness may and usually does give an opinion. Expert evidence is given by a person with the requisite skill and experience about the opinion held on the basis of facts related to and/or perceived by the expert. Other witnesses may only give evidence as to facts, i.e. what they saw or heard. Thus, in a building case, evidence as to what a labourer saw before a brick wall collapsed – cracking, leaning, i.e. facts – is quite acceptable. The labourer would not be asked for an opinion about what caused the collapse. An experienced engineer, architect or surveyor, however, may be asked to give an expert opinion on the cause of the collapse. All that is required is for the expert witnesses to hold the necessary expertise regarding the issues in dispute. Thus a bricklayer would be entirely suitable, if properly experienced, to give an opinion on, say, standards of brickwork. Part 35 of the Civil Procedure Rules (qv) has considerably tightened the rules concerning expert witnesses and evidence. Such evidence must be restricted to what is reasonably required to resolve the issue subject to the proceedings. Rule 35.3 makes clear that the expert’s duty is owed to the court, and it overrides any duty to the party who commissioned the report. The court now has power to direct that there be only one expert witness whom the court may choose in the event of a failure to agree by the parties. In such cases both parties would give instructions to the expert. The practice direction supplementing Part 36 helpfully says what an expert’s report must contain. Briefly it is as follows: — the expert’s qualifications; — the written material relied upon in making the report; — the identity of, and qualifications of, the person carrying out tests, and whether the person was under the supervision of the expert; — summary of the range of opinion and reasons for the expert’s opinion; — a summary of conclusions; — a statement that the expert understands and has complied with the expert’s duty to the court; — the substance of all relevant instructions; — a statement of truth. Generally, an expert witness is chosen to appear for one party or the other because the expert’s opinion regarding the issues is favourable to that party.

365

S. 29 Arbitration Act 1996 and the Housing Grant, Construction and Regeneration Act 1996 s. 108(4).

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Express term The expert’s views, however, must be sincerely held. The expert’s principal duty is to assist the tribunal to get at the truth, and the expert must not attempt to conceal something that would benefit the other party. The duties of an expert witness have been set out366 broadly as follows. — The expert’s evidence should not be influenced by the pressures of the proceedings. — The expert should be unbiased, and should never act as advocate for a party. — Facts and assumptions supporting, and detracting from, the expert’s opinion should be stated. — The expert should make clear what matters fall outside the scope of their expertise. — If the opinion is not adequately researched, or if it is provisional, then the expert should make this clear. The expert should also make it clear if they are unable to say that the opinion contains the truth, the whole truth and nothing but the truth. — The expert must inform the opposing side and the tribunal immediately if the expert’s opinion changes following the exchange of reports.367 — All the documents referred to must be provided to the opposing side when reports are exchanged. To act as an expert witness may be a thankless task. Experts are often subjected to very searching cross-examination (qv), during which their professional reputations may be affected.368 See also: Arbitration; Evidence.

Express (or expressly) Definitely stated, or directly discoverable by word or mouth. To say that a contract expressly provides for payment to be made on the 25th of each month means that a term to that effect is written in the contract or, in the case of an oral contract, that the parties have clearly stated the same. This is in contrast to saying that such a term is implied, which means that it is not written down or clearly stated, but that it would be imported into a contract by the court, either because it is a term that goes without saying, or because it is necessary to make the contract work. See also: Express term; Implied term.

Express term Express terms are terms that are actually recorded in a written contract, or which are expressed and agreed openly (i.e. orally) at the time the contract is made. Thus SBC clause 3.2 clearly states that the contractor ‘shall ensure that at all times he has on the site a competent person-in-charge’. This provision leaves no room for doubt, as far as it goes. An express term will prevail over any term that would otherwise be implied on the same subject matter.

366 National Justice Compania Naviera SA v. Prudential Assurance Company Ltd (Ikarian Reefer) [1993] 2 Lloyd’s Rep 68. 367 Following the decision in Alan Jackson v. Marley Davenport Ltd [2004] EWCA Civ 1225 it seems that an expert is not under an obligation to disclose changes in opinion or preliminary drafts prior to the issue of the final report upon which a party relies. 368 The Royal Brompton Hospital National Health Service Trust v. Frederick Alexander Hammond and Others (No. 7) (2001) 76 Con LR 148 is an example of where a judge commented critically on the approach and conduct of the experts.

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Extension of preliminaries It is the function of the court to determine what the terms of the contract are, and to evaluate their comparative importance and effect. Traditionally, contract terms are either conditions (qv) or warranties (qv), the former being major terms and the latter subsidiary or less significant terms. Breach of a condition would entitle the injured party to treat their obligations as at an end, should they so wish. Breach of a warranty, in contrast, merely entitles a party to claim damages (qv). Since the decision of the Court of Appeal in Hong Kong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha Ltd369 it has been recognised that this basic classification is not exhaustive. Between conditions and warranties there is an intermediate class of ‘innominate terms’, the effect of whose breach depends not on classification of the term but upon the seriousness of the breach and its effects. See also: Implied terms; Interpretation of contracts.

Extension of preliminaries The term refers to a technique of adjusting the preliminaries price in specific circumstances when preparing a valuation for an interim payment. The preliminaries section of the priced document (e.g. bills of quantities (qv)) should be priced by the contractor at tender stage. It may choose to do this in various ways. For example, it may price every item individually, having regard to its actual costs, or it may simply allow a percentage against preliminaries, dependent upon the cost of the measured Works. Alternatively, and not unheard of, the contractor may simply pluck a figure from the air to serve as a total for all the preliminaries. In preparing an interim valuation for inclusion within an interim certificate (qv), a sum should be allowed to represent a reasonable proportion of the contractor’s preliminaries price. If the contractor has priced individual items (erecting offices, insurance, etc.), then this can be based upon each individually priced item. If the preliminaries figure is simply a lump sum, the approach may be merely to divide the sum by the expected number of monthly valuations to arrive at a figure. When it seems likely that the contract period will be extended, but the contractor has no additional financial entitlement, often the monthly preliminaries amount will be reduced so as to extend the preliminaries price over the longer contract period, i.e. extension of preliminaries. If adopted, this approach should address only the time-related element of the preliminaries items. The process is also known as ‘adjustment of preliminaries’. If the contractor has a financial entitlement in connection with the delay, then the process is rather more complex. The process will depend upon the terms of the building contract, but the monthly preliminary figure should not be reduced, and if the contractor’s entitlement is valid then a ‘calculation’ must be carried out to reflect the loss and/or expense suffered. However, the ‘calculation’ should not be by way of extending the usual monthly figure for preliminaries over the prolonged period. In each and every case the contractor must prove or the certifier ascertain the actual loss, preferably by reference to records and reimbursement being based on actual cost and/or loss. See also: Claim; Loss and/or expense.

369

[1962] 1 All ER 474.

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Extensions of time

Extensions of time A clause within a contract that authorises a prescribed person to amend the date for completion of the Works or a section of the Works for a specified reason. Such clauses normally identify an administrative process, events for which time can be extended, and a person (e.g. architect, engineer or employer) responsible for deciding whether an entitlement to further time exists and if so how long. An architect – or for that matter any other person – would have no power to extend time unless the contract so provides. All the standard forms of contract contain provision for the insertion of a completion date (qv) (or a method for calculating a completion date), and for the employer to deduct or receive liquidated damages (qv) in the event of late completion. However, an employer would forfeit the right to liquidated damages if the employer were wholly or partly the cause of the delay.370 Extension of time provisions are included in contracts to maintain a specific completion date and thereby protect an employer’s right to deduct or withhold liquidated damages. Time for completion may be extended for a variety of reasons, which can be divided into two groups: — those for which the employer or the employer’s agents (including employees, etc.) is responsible; and — those for which neither the employer nor the contractor is responsible, and which are outside the control of either party, i.e. neutral events. Obviously a contractor would not normally be granted additional time if it or one of its agents or sub-contractors were responsible for the delay. The first group is important so far as an employer is concerned. In the absence of an express provision to extend time due to an employer’s default (qv), time would become ‘at large’ (qv).371 This means the contractor would then have no obligation in respect of the specified completion date, which would be replaced by an obligation to complete within a reasonable time. As there is no longer a precise date for completion, the employer would lose the right to liquidated and ascertained damages, as there would be no specific date from which to apply such damages. An employer would then have to try to prove actual loss by means of unliquidated damages, which may not be straightforward. It is also possible for time to become at large should the authorised person (e.g. an architect) fail to exercise any power under the contact to extend time because of the employer’s default,372 or if the architect failed to exercise the power properly and at the right time. It is often said that the extensions of time clauses in the standard forms are there for the benefit of the employer. This is correct as far as they concern the employer’s default. However, it should not be overlooked that many of the grounds (i.e. those that provide for extensions of time due to events outside the control of both parties) benefit the contractor. Without them, the contractor would be obliged to stand the burden of liquidated and ascertained damages. An employer may, of course, benefit indirectly by obtaining a lower tender figure than would otherwise be the case if such provision were not included. See also: Concurrent delay.

370 371 372

Holme v. Guppy (1838) 150 ER 1195. Astilleros Canarios SA v. Cape Hatteras Shipping (1981) Unreported. Peak Construction (Liverpool) Ltd v. McKinney Foundations Ltd (1970) 1 BLR 111.

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Extra work

Extra work Often simply referred to as ‘extras’. Work that is required by the employer to be carried out by the contractor, and which is additional to the Works described in the contract documents (qv). It is usually contained in an instruction (qv) (e.g. of the architect) and treated as a variation (qv) or change under the contract to be valued (e.g. by the quantity surveyor) according to the rules set out in the contract. There is no automatic right for the contractor to be paid under the contract simply because it has carried out extra work. There must be a provision in the contract that permits extra work to be instructed and an instruction issued. Extra work carried out without an instruction may amount to a breach of contract by the contractor, but in any event the contractor would not be entitled to payment. The position may be different where the contractor carries out work in reliance on an oral instruction where the contract provides only for written instructions.373

Extrinsic evidence See: Parol evidence.

373

Bowmer & Kirkland Ltd v. Wilson Bowden Properties Ltd (1996) 80 BLR 131.

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F Facilities management The management of building, physical plant and services. This may include such things as the upkeep and maintenance of all the heating, lighting, cleaning and catering facilities over a given period of time for an agreed fee. Some construction companies may offer the service as an add-on to the construction package, or it may be purchased separately. There is scarcely any limit to the kinds of services that may be offered. It is possible to employ a facilities management firm to deal with everything necessary to make a building work, even to the extent of monitoring and arranging insurance cover, reception services, and the purchase of consumables. The British Institute of Facilities Management (BIFM), which was founded in 1993, provides information, education and training for over 10,000 members. BIFM has adopted the definition of facilities management provided by CEN (the European Committee for Standardisation) and ratified by BSI (the British Standards Institution), which is: Facilities management is the integration of processes within an organisation to maintain and develop the agreed services which support and improve the effectiveness of its primary activities.

Factual matrix A term used to describe the background circumstances of the formation of a contract. The term ‘matrix of fact’ was first coined by Wilberforce LJ in Prenn v. Simmonds,374 where he said: The time has long since passed when agreements, even those under seal, were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic consideration … We must … inquire beyond the language and see what the circumstances were with reference to which the words were used, and the object appearing from those circumstances, which the person using them had in view.

Subsequently, it has been said: No contracts are made in a vacuum; there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to is usually described as ‘the surrounding circumstances’ but this phrase is imprecise: it can be illustrated but hardly defined. In a commercial contract it is certainly right that a court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating … What the court must do must be to place itself in thought in the same factual matrix in which the parties were.375

When construing any written agreement the court is entitled to look at evidence of the objective factual background known to the parties at and before the time the agreement was executed. This would include objectively looking at the aim of the transaction. This is not the same as looking to the subjective

374

[1971] 1 WLR 1381. Reardon Smith Line Ltd v. Yngvar Hansen-Tangen [1976] WLR 989 at 995 per Lord Wilberforce. See also the speech of Lord Hoffmann in Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 All ER 98. 375

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Fair valuation intentions of the parties. What will not be included as part of the factual matrix is conduct subsequent to the execution of the contract, evidence of the parties’ subjective intentions, and evidence of prior negotiations, except in exceptional circumstances.

Fair valuation The SBC and GC/Works/1 forms of contract set out rules for the valuation (qv) of variation instructions (clauses 5 and 42 respectively). SBC allows the quantity surveyor to value work at ‘fair rates and prices’ if the work is not of similar character to, or not executed under similar conditions to, the work set out in the contract bills (qv). GC/Works/1 allows valuation at fair rates and prices if it is not possible to value by measurement and valuation at rates and prices deduced or extrapolated from the bills of quantities (qv) (clause 42(5)(6)). MW and MWD clause 3.6 allows valuation on a fair and reasonable basis, using the relevant prices in the priced specification, work schedules or schedule of rates, for all variations. The ACA 3 clause 17.5 does not use ‘fair valuation’, but does use the phrase ‘a fair and reasonable adjustment to the Contract Sum’ based on the schedule of rates where applicable. What is ‘fair’ will depend on the whole of the contractor’s pricing, and it should not be forgotten that it is a question of fairness to both parties. It has been suggested that if a contractor has priced keenly – or for that matter if a contractor has priced profitably – for the contract as a whole, a fair valuation should take account of that fact. Some contractors, however, adopt a pricing strategy by which some items are keenly priced while others show a handsome profit margin. Although a fair valuation is solely the responsibility of the quantity surveyor under the standard forms, regard must still be had to the general tenor of pricing as revealed by the bill or schedule rates. The contractor’s remedy, if aggrieved, is to go to adjudication or arbitration or litigation, as applicable. Much has been written about the meaning of the word ‘similar’ in the context of valuations. The ordinary meaning of ‘similar’ would be ‘almost but not precisely the same’ or ‘identical save for some minor particular’. When dealing with variations it is probably going too far to consider ‘similar’ as meaning ‘identical’. However, even a minor difference in the description of an item in the bills of quantities may cause the contractor to amend its prices considerably, and the valuation rules in standard contracts should be read in that context. The conditions under which work is carried out are those set out in the express provisions of the contract. The background information and facts against which the contract was made cannot be taken into account.376

Fee(s) Generally, a fee is a payment given or due to any professional person, public office, or a charge to enter a museum, art gallery and the like. It is referred to in many building contracts (e.g. MP clause 9.2) as a sum payable to a statutory or local authority. In terms of an appointment it is the remuneration given in exchange for professional services, e.g. the RIBA appointments SFA/99 and S-Con-07-A clause 5. ‘Fee’ also refers to the quality of inherited land. The highest category is fee simple, which is, to all intent and purposes, unfettered ownership clear of condition, limitation or restriction to particular heirs, i.e. a freehold right in land. 376

Wates Construction (South) Ltd v. Bredero Fleet Ltd (1993) 63 BLR 128.

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Final account

Fiduciary Where someone is in a position of trust in relation to another, that person is bound to exercise any rights and powers in good faith for the benefit of the other person. The trustee cannot make a profit or take advantage from the relationship without full disclosure. A person in a fiduciary position must not be in a position where that person’s duty and personal interest conflict. Fiduciary relationships include trustee and beneficiary, and solicitor and client. A number of building contracts (e.g. SBC clause 4.18.1) provide that the employer’s interest in the retention monies ‘is fiduciary as trustee for the Contractor’. The clauses tend to state, contrary to the general law of trusts, that the employer has no obligation to invest the retention money retained. The legal effect of this wording is doubtful, because the Trustee Act 1925 and the Trustee Investments Act 1961 oblige a trustee to invest trust monies in prescribed investments. It is certain that an employer under SBC or IC terms has an obligation to segregate the retention fund in a separate and identifiable bank account.377 See also: Retention fund/retention monies.

Final account A phrase used to describe the calculation of the overall amount due to a contractor for Works carried out under and in accordance with the contract. The calculation is usually governed by the express terms of the contract. A final statement or certificate is normally produced showing the final account figure less the aggregate of any interim payments previously made. Not all the standard forms of contract make use of the phrase ‘final account’, but it is in common use nevertheless. The ACA form at clause 19.1 provides that the contractor shall submit a final account for the Works within 60 working days of the expiry of the maintenance period (qv). This is to be a detailed summary of the effects upon the contract sum (qv), i.e. all additions, deductions and alterations. GC/Works/1 also refers to a final account at clause 49(2), but in this instance it is to be prepared by the quantity surveyor. The quantity surveyor must prepare the final account within six months of certified completion of the Works. The contractor has three months from receipt of the final account to notify its disagreement. Clause 49(4) provides that if, at the end of the maintenance period, the project manager has certified that the Works are satisfactory and the final sum (qv) has been agreed, or is to be treated as agreed under clause 49(3) (i.e. because the contractor has failed to notify its disagreement with the final account), the balance between the final sum and the amounts previously paid to the contractor will be paid by the employer to the contractor, or vice versa, as appropriate. SBC, IC, ICD, MW and MWD contracts do not expressly use the term ‘final account’. However, SBC clause 4.5.1 provides that the contractor must provide the architect with all documents necessary for adjustment of the contract sum no later than six months following practical completion. Not later than three months after receipt, under clause 4.5.2 the architect or the quantity surveyor must ascertain any loss and/or expense, unless this has already been done, and the quantity surveyor must prepare a statement of any adjustments. Generally, the products of this process are commonly referred to as the ‘final account’. 377

Wates Construction (London) Ltd v. Franthom Property Ltd (1991) 53 BLR 23. See also Bodill & Sons (Contractors) Ltd v. Harmail Singh Mattu [2007] EWHC 2950 (TCC).

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Final account and final statement The architect must forthwith send the results to the contractor.378 There is usually no requirement that the contractor must have agreed the final account. The six-month period following practical completion is intended for the contractor to bring any last minute matters to the attention of the quantity surveyor, who should by that time have developed the ‘final account’ during a gradual process from the start of the Works on site. Under DB, express reference is made to the final account, and it is a defined term in conjunction with the final statement. Clause 4.12 requires the contractor to produce its final account and final statement within three months of practical completion, and this is to be submitted to the employer. The account is to be produced in accordance with clause 4.2. Should the contractor fail to submit its final account within the three-month period then the employer may give a notice under clause 4.12.5 that if the contractor fails to submit an account within two months of the notice then the employer will prepare a final account. Again, this would need to be prepared in accordance with clause 4.2. See also: Bill of variations; Conclusive evidence.

Final account and final statement A defined term within DB at clause 1.1, which simply refers to clauses 1.9 and 4.12. Clause 4.12 sets out the administrative procedure for the preparation and submission of the final account and final statement by the contractor. Within three months of practical completion the contractor is obliged to submit its final account and final statement to the employer for agreement. The employer is entitled to request such supporting information as may reasonably be required to assist the employer to understand the contractor’s final account and final statement. The final account is to show the adjusted contract sum (qv) in accordance with clause 4.2, and the final statement is to show the adjusted contract sum, the sum already paid by the employer to the contractor, and the balance due to either the contractor or the employer. The final account and final statement will become conclusive as to the balance due to either the employer or the contractor, as applicable, following the expiry of one month from the latest of the: — expiry of the rectification period (qv); — date named in the notice of completion of making good; or — date of submission of the final account and final statement to the employer by the contractor. The final account and final statement will not be conclusive to the extent that the employer disputes anything within the final account and final statement prior to the expiry of the one-month period. This provision, and the lack of a further provision to re-establish conclusiveness, could cause problems. The effect of the final account and final statement is set out at clause 1.9. See also: Conclusive evidence; Employer’s final account and final statement.

Final certificate The last certificate issued in connection with a contract. The effect of a final certificate varies according to the form of contract. Figure 6 shows an example of a final certificate. 378

It would seem that the architect is not entitled to delay the issue of the final certificate simply because the ‘final account’ has not been sent to the contractor. Penwith District Council v. V P Developments Ltd [1999] EWHC Technology 231 (21 May).

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Final certificate

Figure 6 Final certificate. This form is part of a suite of contract administration forms published by RIBA Publishing, and available from ribabookshops.com.

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Final certificate SBC clause 4.15 stipulates that the final certificate shall be issued no later than two months from the latest of the following events: — the end of the rectification period (qv); — the date of issue of the certificate of making good; — the date the architect sent to the contractor a copy of the statement of the adjustments to the contract sum and the ascertainment of loss and/ or expense. A failure to issue the final certificate in due time may amount to a breach of contract by the employer.379 This would depend upon the employer being aware that the certificate had not been issued at the proper time and failing to take steps to remedy the situation. A contractor may seek to have the final certificate issued during the earliest two-month period, i.e. from the end of the rectification period. Given that it is uncommon for there to be no defects during the rectification period, the earliest possible period will be that arising following the issue of the certificate of making good defects. In practice the period is often triggered by the sending of the ‘final account’ to the contractor. There is, however, no excuse for undue delay in the issue of a final certificate, and if it can be accomplished towards the beginning rather than the end of the two-month period, so much the better for all concerned. Note that architects have traditionally delayed issuing a final certificate until the last possible moment for fear of the effects noted below. The final certificate should state: — the contract sum (qv), adjusted as provided in the contract (clause 4.3); — the total amounts already stated as due (note: not paid ) in interim certificates (qv) plus any advance payments (qv); — what the amount relates to, and the basis of calculation of the statement; and — the difference between the above two sums, shown as a balance due to the contractor from the employer or vice versa. The balance is a debt from one to the other as appropriate, and the final date for payment is 28 days following the date of issue of the final certificate. The conclusiveness of the final certificate under the predecessors to SBC has been the subject of much debate. The current position is that the final certificate is conclusive evidence (qv) (except in the case of fraud or for proceedings commenced as specified in clause 1.10), in any adjudication, arbitration or litigation arising out of the contract, that: — where any particular qualities of any materials or goods or the standard of workmanship is/are expressly stated in the contract drawings, the contract bills, the numbered documents (qv) or any instruction or other drawings to be to the approval of the architect, then that particular quality or standard is to the architect’s reasonable satisfaction. The certificate is not conclusive that any materials, goods or workmanship comply with the contract. The contractor still retains its obligation to have carried out the Works in accordance with the contract documents (qv), and the final certificate is not conclusive in any broad sense; — the contract sum has been adjusted as necessary in accordance with the contract provisions, save in the case of an accidental inclusion or exclu379

Rees & Kirby Ltd v. Swansea City Council (1983) 25 BLR 129.

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Final certificate sion of any work, or an arithmetical error, but the certificate shall be conclusive as far as all other computations are concerned; — all the due extensions of time, if any, have been given; and — all the contractor’s claims relating to matters under clause 26.2 in respect of breach of contract, duty of care, statutory duty or otherwise have been fully and finally settled. There are complex provisions dealing with the situation where one of the parties has commenced adjudication, arbitration or litigation proceedings before the final certificate becomes conclusive. The current position under SBC, IC and ICD in respect of materials, goods or workmanship is what was generally considered to be the position from around 1976 (then in relation to the JCT 63 form of contract). This was that the final certificate was conclusive only about precise things that the architect had expressly stated in the contract documents were to be to the architect’s satisfaction or approval. For example, if the architect stated that all brickwork was to be to the architect’s satisfaction, then the final certificate was conclusive that the architect was satisfied with all brickwork, even if the architect had not inspected the brickwork. That understanding was not accepted by the High Court and the Court of Appeal in 1994.380 They held that the effect of the final certificate should be viewed in a broad manner signifying the architect’s satisfaction with the quality and standards of all materials and all workmanship. This was not quite the same as saying that the contractor had constructed the Works in accordance with the contract, but it effectively prevented an employer from recovering against the contractor for latent defects that occurred during the statutory limitation period. This potentially exposed an architect to an action by an employer seeking to recover losses that had arisen from latent defects found after a final certificate had become conclusive. Architects were understandably concerned, and the RIBA (qv) issued guidance, together with a form of declaration to be shown on the final certificate, and which was of doubtful value. Many architects reverted to withholding the final certificate in favour of issuing an interim certificate from which a nominal sum was retained. This action could have placed an employer in breach of contract. The idea was that if the final certificate was not issued, it could not become conclusive, and provided the contractor received all the money to which it was entitled, less perhaps £5, it would not press for the final certificate. It became clear that the courts took a dim view of such an approach, especially where an employer was in fact seeking to take advantage of its own breach.381 In effect, a court might have treated the situation as if the final certificate had been issued on the proper date. The effect of the final certificate within IC and ICD is for all practical purposes the same as for SBC, but this is not the case for MW and MWD. See below. The ACA form, clause 19, stipulates that the final certificate must be issued within 30 working days of the contractor having fulfilled all its obligations under the contract. The final certificate must state: — the final contract sum; — the total amount already paid under clause 16.3; and 380

Colbart v. H Kumar (1992) 59 BLR 89 and Crown Estates Commissioners v. John Mowlem & Co (1994) 70 BLR 1 dealing with IFC 84 and JCT 80 respectively. 381 Matthew Hall Ortech Ltd v. Tarmac Roadstone Ltd (1997) 87 BLR 96.

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Final certificate —

the difference between the above two sums, shown as a balance due to the contractor from the employer or vice versa. The final date for payment is the tenth working day following the issue of the final certificate, at which point the sum due becomes a debt. The fact that it is the amount already paid that has to be stated immediately raises the question: What is the position if the last interim certificate issued by the architect has not been honoured by the employer at the time the architect issues the final certificate? In theory the situation should not have arisen, as the contractor should have taken steps to ensure the certified amount was paid, including – as a final resort – invoking its right to termination under clause 20.2. If the contractor has not invoked its power to terminate, the architect will be obliged to certify only those sums already paid. The danger of the architect overcertifying in such a situation may be avoided by clause 19.5, which empowers the architect to delete, correct or modify any sum previously certified. The issue of the final certificate is expressly stated not to affect the contractor’s liabilities arising out of or in connection with the contract (clause 19.5), and therefore under the ACA form the final certificate is not to be regarded as conclusive. Under clauses 7.5 and 17.6 the final certificate is the only time when the architect is empowered to adjust the contract sum in regard to matters under clauses 7.2 (claims) and 17.1 (valuation of instructions) if the contractor has failed to comply with the appropriate provisions. GC/Works/1 deals with the final account in clause 49, and with certification in clause 50. There is no express reference to a final certificate, simply to the certification of payments. Therefore the final certificate to be issued is not conclusive, and it can be opened up and revised by an adjudicator or arbitrator. It is by no means clear from clause 49 that there is to be a final certificate in the traditional sense. A strict reading of the clause appears to place the onus for payment on the employer or the contractor, as the case may be, following the agreement of the final sum, but without the need for a certificate. MW and MWD clause 4.8.1 lays down a timescale for the issue of the final certificate: — the contractor has three months (this is the default period, but an alternative period could be inserted into the contract particulars (qv)) from the date of practical completion (qv) to supply the architect with all documentation reasonably required for the computation of the final amount to be certified; and — the architect has 28 days from the receipt of the documentation to issue the final certificate, provided that a clause 2.12 certificate has been issued confirming that the contractor’s obligations have been discharged (clause 2.11). The wording does not indicate that, if the architect is not in a position to issue a clause 2.12 certificate by the date of expiry of the 28 days, the 28-day period begins to run from the issue of the clause 2.12 certificate. In such circumstances it would seem that the architect would simply hold the final certificate until the contractor had fulfilled its obligations under clause 2.11, and then issue the two certificates (the clause 2.12 certificate and the final certificate), e.g. on consecutive days. MW and MWD make no mention of the information to be contained in the final certificate, other than that it must certify the sum remaining due either to the contractor or to the employer. A simple and clear calculation showing how the sum is derived would seem advisable. The sum certified becomes a debt 208

Finance charges from one party to the other 14 days after the date of issue of the final certificate. The final certificate under this form is not stated to be conclusive on any matter. See also: Certificates; Conclusive evidence; Due date; Final account; Interim certificate; Limitation Act 1980; Payment.

Final sum The amount that represents the final or overall sum due, calculated in accordance with the contract and taking into account all additions, deductions and alterations to the Works under the contract. It is the total sum payable to the contractor, inclusive of sums already paid. Under GC/Works/1 the ‘Final Sum’ is a term defined in clause 1(1) as the amount payable under the contract by the employer for the full and entire execution and completion of the Works. It is referred to in clause 49.

Finance Act (No. 2) 1975 This measure introduced the construction industry tax deduction scheme, which came into operation on 6 April 1977. From that date the position was that all payments under a contract for what the Inland Revenue defines as ‘construction operations’ and made by ‘contractors’ to ‘subcontractors’ are subject to a deduction by the payer on account of the payee’s tax liability. Minor amendments to the scheme were made by the Finance Act 1980. The scheme has been replaced by the Construction Industry Scheme (CIS) (qv), which was extensively revised in April 2007 under the Income and Corporation Taxes Act 1998. Because of the complexities of the legislation, a number of standard form contracts introduced special clauses to deal with the requirements of the Act and the Scheme, but the JCT 2005 suite of contracts omits most of these provisions, on the grounds that the industry is familiar with the procedures.

Finance charges The financial burden (e.g. interest charges) to a contractor who receives payment later than it should have been received under the terms of the contract. It is settled that such charges are a separate head of claim of ‘direct loss and/or expense’ (qv) under JCT contracts.382 Financing charges may also be recoverable as a head of special damages (qv) in appropriate cases.383 GC/Works/1 specifically addresses finance charges at clause 47. Sub-clause 47(l) sets out the circumstances when an employer will be liable to the contractor for finance charges. Sub-clauses 47(2) to (4) set out how the quantity surveyor is to go about calculating such charges, and makes clear that the quantity surveyor is to take any previous overpayment into account when making a calculation. Sub-clause 47(5) sets out when the contractor will not be entitled to finance charges: these include a failure by the contractor to provide the quantity surveyor with any ‘relevant information’, or any ‘disagreement’ concerning the final account. Sub-clause 47(6) seeks to limit the contractor’s rights to interest or finance charges to those circumstances set out at clause 47(1), although clause 47(7) makes it clear that the clause does not seek to derogate from any powers to award interest that an adjudicator or arbitrator may have.

382

F G Minter v. Welsh Health Technical Services Organisation (1980) 13 BLR 1; Rees & Kirby Ltd v. Swansea City Council (1985) 5 Con LR 34 (CA). 383 Holbeach Plant Hire Ltd v. Anglian Water Authority (1988) 14 Con LR 101.

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Firm price contract Within DB, supplementary provisions 4 (Valuation of change instructions) and 5 (Direct loss and/or expense) reference is made to ‘financing charges’. If these supplementary provisions apply, and if the contractor does not follow the procedures detailed in each of the provisions, then any adjustment to the contract sum is not to be included within interim payments; it is to be included in the final account and final statement. The contractor is not entitled to finance charges for the period between when the amounts should have been included within an interim payment and the date of issue of the final account and final statement. See also: Expense; Direct loss and/or expense; Interest.

Firm price contract A contract in which the prices of labour, plant and materials are not subject to fluctuations. Such a contract provides for a price that is not subject to adjustment simply on the basis of the contractor’s cost experience in carrying out the required Works. The contractor carries maximum risk and responsibility for all costs and the resulting profit or loss associated with the required Works. This would not include additional costs for any employer changes to the required Works. See also: Fixed price contract; Lump sum contract.

Fit and ready A term used within the ACA at clause 12.1 in conjunction with ‘taking-over’ (qv). Although not defined in the contract, it seems clear that it is not the same as ‘practical completion’ (qv) under the JCT forms. Clause 12.1 gives the architect the absolute discretion of issuing a certificate (‘taking-over certificate’) that the Works are fit and ready for taking-over provided that the contractor gives a written assurance to complete with all due diligence items of outstanding work shown on either an architect’s or the contractor’s list. This work must be undertaken immediately. The architect may wait until the items of work are completed before issuing a certificate.

Fitness for purpose An obligation to produce something fit for a known purpose is absolute in that it is independent of negligence. In these circumstances the obligation must be achieved. Either the object built or installed is fit for the purpose or it is not. Such an obligation is onerous, and thus the phrase is usually qualified by the word ‘reasonable’. The phrase can be looked at from two perspectives. The first relates to goods and materials. A contractor, subject to the express terms of the contract, has an obligation to provide goods that are of good quality, and reasonably fit for the purpose for which they will be used. These two warranties equate to those under the Sale of Goods Act 1979 s. 14, where there is an implied condition that goods (qv) are reasonably fit for the purpose required, if this has been made known to the seller, expressly or by implication.384 In business dealings – as opposed to consumer transactions – it is possible to contract out of this to a limited extent, provided the exemption clause (qv) is ‘fair and reasonable’.

384

J Murphy & Sons Ltd v. Johnston Precast Ltd (Formerly Johnston Pipes Ltd) [2008] EWHC 3024 is an example of a case where the court refused to imply a fitness for the purpose obligation. Murphy could not establish that, when the contract had been made, it had made known that the pipe was to be surrounded by foam concrete, and also that it had relied upon the skill and judgement of Johnston.

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Fixtures and fittings S. 14 would apply to goods supplied to a contractor by a merchant, and the seller is liable, even if it has taken every care or did not know of the defect. The second relates to the finished Works. A similar term of reasonable fitness for purpose will be implied at common law where a contractor undertakes to carry out and complete both the design and the construction of a completed structure, in the absence of an express term to the contrary.385 The law seems to look to the finished product, not the separate processes involved in achieving that product. It has been said: … in the absence of a clear, contractual indication to the contrary, I see no reason why [a contractor] who in the course of his business contracts to design, supply and erect a television mast is not under an obligation to ensure that it is reasonably fit for the purpose for which he knows it is intended to be used. The Court of Appeal held that this was the contractual obligation in this case and I agree with them. The critical question of fact is whether he for whom the mast was designed relied upon the skill of the supplier … to design and supply a mast fit for the known purpose for which it was required.386

This obligation is in contrast to a person simply producing a design (i.e. a service), where the liability is the lower one of reasonable skill and care. Many of the standard forms, such as DB or the contractor’s designed portion in SBC, expressly reduce the contractor’s liability from fitness for the purpose to that of reasonable skill and care, e.g. SBC clause 2.19. Professional indemnity insurance is not readily available for a fitness for purpose obligation, and if it is available it is not at reasonable premiums within the insurance market. See also: Supply of Goods and Services Act 1982.

Fixed price contract This phrase is often used to refer to a contract in which the price for labour, plant and materials is not subject to change for the execution of the required Works. However, the phrase is also used to cover contracts such as SBC/Q and SBC/XQ. The contractor undertakes to carry out the Works for a price, although that price may be subject to adjustment in accordance with the provisions in the contract. For example, an adjustment to the contract sum can be made for errors in the quantity of work measured in the contract bills used with SBC/Q. See also: Firm price contract; Lump sum contract.

Fixtures and fittings Fixtures are goods that have become so fixed to the land that they become, in law, a part of that land. They can be contrasted with fittings, which are goods that retain their character as personal property (qv). The general rule is that fixtures installed by a tenant become the property of the landlord, and may not be removed by the tenant when the tenancy comes to an end. However, three groups of ‘tenant’s fixtures’ can be removed: — ornamental and domestic fixtures, which can be removed, provided that no serious damage is caused to the fabric of the premises by the removal; — trade fixtures, e.g. fittings of a public house, including the beer pumps; and — agricultural fixtures. 385

Viking Grain Storage Ltd v. T H White Installations Ltd (1985) 13 BLR 103. Independent Broadcasting Authority v. EMI Electronics Ltd and BICC Construction Ltd (1980) 14 BLR 1 at 47 per Scarman LJ. 386

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Float It is often difficult to decide whether something is a fixture or fitting. The word ‘fixture’ implies something fixed to the soil, or attached in a substantial way. The tests applied by the courts look at the degree of annexation to the land, and the purpose for such annexation.387 A useful example is the distinction between a stock of stone (a chattel) and the same stones constructed as a dry stone wall (a fixture).388 Whether an item is a fixture is a mixed question of law and fact, to be determined taking account of all the circumstances.389 The rule relating to fixtures is important in building contracts, in that once the contractor has affixed materials to the building, the property in them passes from the contractor to the employer. Materials worked by one into the property of another become part of that property. This is equally true whether it be fixed or movable property. Bricks built into a wall become part of the house, thread stitched into a coat which is under repair, or planks and nails and pitch worked into a ship … become part of the coat or the ship.390

See also: Retention of title; Vesting clause.

Float A term used in programming, particularly in connection with network analysis and precedence diagrams. It is the difference between the time required to perform a task and the time available in which to do it. If there is three days’ float to a particular activity, it means that the activity can be delayed by up to three days before it becomes critical and affects the date for completion of other activities, or possibly the whole project. This was put in similar terms in Mirant Asia-Pacific Construction (Hong Kong) Ltd v. (1) Ove Arup and Partners International Limited (2) Ove Arup and Partners Hong Kong Limited, where the court said: Float in a programming sense means the length of time between when an activity is due to start and when it must start if it is to avoid being on the critical path. Float can also be used to refer to the additional time needed/allowed to complete an activity over and above the shortest time that is reasonably required.391

In very general terms, float can be either a contingency or time built into ‘non-critical activities’ to allow the efficient allocation of resources – a contingency allowance built into the programme by a contractor in order to allow for unforeseen eventualities. Within programming, the analysis of float has led to terminology such as ‘free float’, ‘total float’, ‘activity float’ and even ‘negative or positive float’, the latter indicating whether an activity is ahead or behind the programmed dates. It is common for contractors to claim that they ‘own’ the float in their programmes, so that they are entitled to an extension of time even if a non-critical activity is delayed. It is necessary to look at the wording in each contract to determine whether this is correct. Under the JCT forms of contract it was thought that no one owned float,392 and that float was for the benefit of either 387

Elitestone Ltd v. Morris [1997] 1 WLR 687 at 692–693 per Lord Lloyd of Berwick. Holland v. Hodgson (1872) LR 7 CP 328 at 335 per Blackburn J approved in Elitestone ibid. 389 Holland v. Hodgson (1872) LR 7 CP 328. 390 Appleby v. Myers (1867) LR 2 CP 651 at 660 per Blackburn J. 391 [2007] EWHC 918 TCC at paragraph 573.9 per Judge Toulmin. 392 How Engineering Services v. Lindner Ceilings Partitions (the first judgment) 17 May 1995, Unreported; Ascon Contracting Ltd v. Alfred McAlpine Construction Isle of Man Ltd (1999) 16 Const LJ 316. 388

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Fluctuations party on a ‘first come first served’ basis. However, following the decision in Royal Brompton Hospital NHS Trust v. Hammond this position has been clouded, given that the judge in that case, Judge H Lloyd QC, clearly refers, though obiter dicta, to the float under a version of the JCT contract as belonging to the contractor: The architect should in such circumstances inform the contractor that, if thereafter events occur for which an extension of time cannot be granted, and if, as a result, the contractor would be liable for liquidated damages then an appropriate extension of time, not exceeding the float, would be given. In that way the purposes of the clause can be met: the date for completion is always known; the position on liquidated damages is clear; yet the contractor is not deprived permanently of ‘its’ float.393

The argument is often extended to say that if a contractor programmes to complete an eight-week contract in seven weeks then the extra week is its float, and if the project is delayed at all, the contractor is entitled to an extension of time, even though it will still finish before the completion date. That contention has no basis, certainly not under the JCT forms of contract.394 Under the NEC the position appears to be that the contractor ‘owns’ float. Under clause 31.2 the contractor is to show, within its programme, allowances for float and time risk allowances. Float is seen as spare time after time risk allowances have been included. Time risk allowances are the contingency attributable to specific activities, or are parts of the Works, and are ‘owned’ by the contractor and therefore retained by the contractor under any assessment following a compensation event. In addition, any float between planned completion and the completion date is also not available to absorb or mitigate the effect of compensation events. Under clause 63.3 any delay due to a compensation event to the planned completion date results in that period being given as an extension of time. See also: Obiter dictum.

Fluctuating price contract A contract in which adjustment is allowed for changes (i.e. fluctuations) in the prices of labour, materials, etc. The scope of the changes allowed varies under the provisions across the range of standard forms, and individual forms may offer a choice in approach, e.g. SBC clause 4.21. The extent to which fluctuations are allowed will have a significant effect upon the contractor’s tender figure. See also: Firm price contract; Fixed price contract; Fluctuations.

Fluctuations The cost to the contractor of labour and materials etc. used in the Works will alter during the contract period. It may fall but, more usually, it will rise. In the absence of any provision in the contract, the contractor would carry this risk. In order to cover itself, a contractor would probably make an estimate of the likely rise in costs, and allow for this within its tender (qv); higher tender figures may well result. It is often thought to be an advantage to an employer, as well as giving the contractor some guarantee of recovering its costs, to insert a clause in the contract allowing the recovery of some or all of

393 394

Royal Brompton Hospital NHS Trust v. Hammond and Others [2002] 88 Con LR 1 at para 246. Glenlion Construction Ltd v. The Guinness Trust (1987) 39 BLR 89.

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Force majeure the increases if and when they occur. In this way an employer does not pay for a risk that does not materialise. Most standard forms allow for this to be done by providing clauses that may be included or deleted as the parties agree. For example, SBC has three options under clause 4.21 at Schedule 7: — Option A, which allows contribution, levy and tax fluctuations; a basic provision to take account of statutory adjustment to items such as National Insurance contributions; — Option B, which allows labour, materials cost and tax fluctuations. The contractor can recover full fluctuations on the construction work, but not its preliminaries. This is calculated by reference to awards by the National Joint Council for the Building Industry, in the case of labour costs, and to the contractor’s basic prices in respect of materials. — Option C, which allows fluctuations in accordance with price adjustment formulae rules published by the Joint Contracts Tribunal. Details of price changes are issued in monthly bulletins. There is usually provision for making part of the contract sum not subject to this formula (the non-adjustable element). Although most contracts include provision for addressing fluctuations, these differ. For example, even across SBC, IC, ICD, MW and MWD there is significant difference in the provisions dealing with fluctuations. Within NEC, secondary option clause X1 deals with price adjustment for inflation across Main Options A, B, C and D.

Force majeure A French term, found in many standard contracts as a ground for granting an extension of time (qv). It is used ‘with reference to all circumstances independent of the will of man, and which it is not in his power to control’.395 It is wider in its meaning than act of God (qv) or vis major (qv), but in building contracts it generally has a limited and restricted meaning, because such matters as war (qv), strikes (qv), fire and weather are dealt with expressly in the contract provisions. A strike, a breakdown of machinery, supply shortages as a consequence of war, refusal of an export licence and fire caused by lightning have all been held to be within the definition of force majeure in varying types of contract, but not delay due to bad weather, football matches or a funeral.396 Force majeure is referred to, for example, within SBC clauses 2.29.13 and 8.11.1.1, IC and ICD clauses 2.20.13 and 8.11.1.1, MP clause 18.1.1, and ACA 3 clauses 11.5(a) and 21(a). It is not referred to in GC/Works/1 and NEC. However, clause 60.1.19 within the NEC would probably encompass circumstances that would fall within the definition of force majeure.

Forecast tender price This is the term used in the BPF System (qv) to describe the forecast by the design leader (qv) and agreed by the client’s representative (qv) of the likely cost of constructing a project. It forms part of the master cost plan (qv).

Foreseeability ‘Reasonable foreseeability’ is the standard generally used to determine whether a defendant is liable for its actions in tort (qv), and a somewhat 395 396

Lebaupin v. Crispin [1920] 2 KB 714 at 718 per McCardie J. Matsoukis v. Priestman & Co [1915] 1 KB 681.

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Formal contract similar test is applied in respect of remoteness of damage (qv) in contract.397 The classic wording is: You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour … persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.398

It is this principle on which the tort of negligence (qv) is based, but the rule is not, it seems, without qualification, e.g. in tort a person takes a victim as found. So if a person injures another, who subsequently dies owing to reacting abnormally to the injury, the person will be liable for the death.399 In general, however, the defendant is liable only for the consequences of an act that a reasonable man could have foreseen. In claims for breach of contract, or for loss and/or expense, under the standard contract forms (e.g. SBC clause 4.23), the damages or amount recoverable are subject to the test of foreseeability as set out in Hadley v. Baxendale400 and as explained in Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd401 and in The Heron II.402 That is, damages are recoverable in respect of losses that the contracting parties might reasonably contemplate at the time the contract was made, as a likely consequence of the breach or event relied upon. See also: Injury; Negligence; Remoteness of damage.

Forfeiture The loss of some right or property as a result of specified conduct. In building contracts it usually refers to the employer’s right to determine or terminate the contractor’s employment, or seize plant and materials, etc. under the contract. See also: Forfeiture clause.

Forfeiture clause A commonly used term to refer to a clause in a building contract that gives one party, usually the employer, the right to terminate or determine the contractor’s employment, or to have the contractor removed off site. In standard forms it is usually referred to as ‘determination or termination of employment’ or ‘termination’. In this sense SBC clause 8.4, ACA 3 clause 21 and GC/Works/1 clause 56 are forfeiture clauses. Forfeiture clauses are strictly interpreted by the courts, and any prescribed procedure must be followed. Wrongful forfeiture or termination will normally amount to a repudiation of the contract. However, it has been held not to amount to repudiation if a party honestly, albeit mistakenly, relies on a contract provision.403 See also: Determination; Termination.

Formal contract An alternative description of a contract made by deed or specialty (qv). Sometimes the expression is used in a general sense to describe 397

Hadley v. Baxendale (1854) 9 Ex 341. Donoghue v. Stevenson [1932] AC 562 at 580 per Lord Atkin. 399 Smith v. Leech Brain & Co Ltd [1961] 3 All ER 1159. 400 (1854) 9 Ex 341. 401 [1949] 1 All ER 997. 402 Koufos v. C Czarnikow Ltd (The Heron II) [1969] 1 AC 350. 403 Woodar Investment Development Ltd v. Wimpey Construction UK Ltd [1980] 1 All ER 571. 398

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Formalities of contract simple contracts (qv) that are entered into in a formal way, e.g. in a standard printed form, duly signed by the parties.

Formalities of contract In general there are no formalities attached to the making of a contract. A contract (qv) may be made orally, in writing, or even implied from conduct. In some cases, however, the law requires the presence of additional formalities before a contract can be enforced. Some contracts must be made by deed (qv), while others must be in writing, and in a few cases there must be written evidence of the contract. If these formalities are not complied with, the contract is unenforceable by legal action. An assignment of copyright (qv) must be in writing, as must a bill of exchange e.g. a cheque, otherwise they would be void. Contracts of guarantee (qv) must also be in writing whereas, in contrast, contracts of indemnity are not required to be in writing. Hire-purchase contracts must also be in writing. If Part II of the Housing Grants, Construction and Regeneration Act 1996 (qv) is to apply to a construction contract (qv), there must be an ‘agreement in writing’ under s. 107. S. 107(6) makes it clear that references to anything being written or in writing include ‘it being recorded by any means’. The Act seeks to give the widest possible meaning to ‘in writing’. However, the courts in a number of decisions have interpreted this section to mean that all the express terms of the agreement have to be recorded in writing, and not simply be a part or evidence of the agreement.404 Even oral variations going to the substance of the agreement have to be evidenced in writing to satisfy the section.405 See also: Indemnity contract.

Formula In its general sense means a fixed form of words as a definition or enunciation of a principle or a rule or statement in the form of symbols. However, when making an application to recover the head office overheads (qv) element of loss and/or expense, contractors often base their applications upon a formula-based calculation. The courts have never given blanket approval to the use of formulae in this way, although they have accepted the use of formulae in certain cases that generally were decided on their own facts.406 Indeed, the courts have tended to disapprove of the use of formulae unless it was a final resort or the parties had agreed its use.407 Actual costs, rather than an approximation by formula, are normally required. It should not be forgotten that the use of formulae cannot determine whether in principle a party has a right to recover such a contribution to overheads and profit; it is simply a method of quantification that, if adopted, is a means for valuing a loss the courts are satisfied the claimant has suffered in principle. Claims for head office overheads using a formula approach are essentially claims for a lost opportunity through delay in completion of a project. The theory is that a contractor is deprived of an opportunity to take on other work and thereby make a contribution to its overhead costs. The use of a formula 404

RJT Consulting Engineers Ltd v. DM Engineering (Northern Ireland) Limited [2002] BLR 217. Carillion Construction Limited v. Devonport Royal Dockyard [2003] BLR 79. The bill currently going before Parliament is likely to amend the requirement so that Part II of the Act will apply even to contracts that are wholly oral. 406 Beechwood Developments Company v. Stuart Mitchell [2001] SCLR 725. 407 Alfred McAlpine Homes North Ltd v. Property and Land Contractors Ltd (1995) 76 BLR 65. 405

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Fossils assumes a healthy construction market and a contractor with finite resources, with the result that if a contractor is delayed on one project, it will be deprived of the chance to undertake other work. Where market conditions are sluggish, or where the contractor is so large that turning away work just does not arise, the contractor will face difficult problems in demonstrating the lost opportunity.408 There are several formulae in common use. See also: Eichleay formula; Emden formula; Hudson formula; Overheads.

Formula price adjustment See: Fluctuations. Forthwith As soon as is reasonable409 or ‘without delay or loss of time’.410 The word is used in most forms of building contract to convey the fact that the action required must not be delayed. For example, SBC clause 3.10: ‘The Contractor shall forthwith comply with all instructions …’; ACA 3 clause 20.1, ‘the Employer may by further notice … forthwith terminate …’; and MW clause 3.4 ‘the Contractor shall forthwith carry out …’. The word is also often used by adjudicators and arbitrators in their decisions and award when ordering the payment of money. Referring to the adjudicator’s duty under the Standard Scottish Building Contract with Contractor’s Design (1999), a court said: In terms of current commercial understanding and procedure, and modern methods of communication, there would appear to be little doubt that the term ‘forthwith’ should mean that the decision is to be sent immediately or as quickly as possible by what is currently regarded as conventional and universally available methods of business communication.411

This seems to suggest that ‘forthwith’ does not have a fixed interpretation, but that it will be interpreted with varying degrees of urgency depending on the circumstances.

Fossils ‘Thing preserved in strata of earth and recognisable as remains or vestiges of plant or animal of past (usu. Prehistoric) ages (fossil bones, shells, ivory …)’.412 In the absence of an express provision to the contrary in the building contract, an employer is entitled to fossils found under or fixed in any way to the land, provided they ‘own’ the land. However, the legal position is unclear as to who has the right to fossils found lying on the surface. Many standard forms contain an express clause covering the possible discovery of fossils and the like. SBC clause 3.22 provides that ‘All fossils, antiquities and other objects of interest or value’ found on the site or during excavation become the property of the employer. The contractor must try not to disturb the object, ceasing work if necessary, and must inform the architect or clerk of works. The contractor may claim any direct loss and/or expense (qv) incurred in complying with this provision, and may also be entitled to an extension of time (qv). 408

AMEC Building Contracts Ltd v. Cadmus Investments Co Ltd (1997) 13 Const LJ 50. London Borough of Hillingdon v. Cutler [1967] 2 All ER 361. Roberts v. Brett (1865) 11 HLC 337. 411 St Andrews Bay Development Ltd v. HBG Management Ltd and Mrs Janey Milligan [2003] Scot CS 103 at paragraph 17 per Lord Wheatley. 412 Sykes, JB, The Concise Oxford Dictionary, 6th edn, Clarendon Press (1979). 409

410

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Foundations GC/Works/1 clause 32(3) provides for a similar effect, and any instruction issued by the project manager under clause 32(4) could give rise to similar claims. See also ACA clause 14. See also: Antiquities.

Foundations Broadly, anything that supports something else. In construction work the term is generally used to describe the lowest artificial works placed in contact with the natural ground to support a structure, e.g. piles, concrete rafts, concrete strip footings. More rarely, it is applied to the ground itself. In Worlock v. SAWS & Rushmoor Borough Council413 the question whether a floor slab that supported internal partition walls of a building was a foundation for the purposes of the then current Building Regulations was considered. The court held that it was: ‘A foundation is an object which is placed in position on or in the ground in the course of constructing a building, or for the purposes of a building which is to be constructed, the function of which is to provide support for that building so that in fact it transmits load to the material beneath …’. This definition has been approved in several subsequent cases. GC/Works/1 clause 16 stipulates that the contractor must not lay foundations until the project manager has examined and approved the excavations. This clause simply clarifies what is normal practice on most construction projects.

Fraud Fraud is deliberate deception by word or conduct, and is a category of tort known as deceit: a false statement of existing fact, made with knowledge that it is false, and with the intention that a person is to act upon it and does so act to their detriment. It is one of the torts affecting business relationships. It involves dishonesty, even if not necessarily for personal gain. The motive behind the fraud, whether dishonest or not, is irrelevant. The test for damages is not one of foreseeability but of directness – liability for all damage directly flowing from the false statement. Someone who is induced to act by a fraudulent representation may repudiate their obligations under the contract and also recover damages (qv). Alternatively, they can affirm the contract, and still recover damages for deceit. It is not possible to contract out of liability for a fraudulent representation.414 Section 32 of the Limitation Act 1980 (formerly Limitation Act 1939, s. 26), which is concerned with ‘deliberate concealment’ of, inter alia, defective construction work so as to postpone the start of the limitation period, does not require fraud in the sense of moral turpitude. All that the claimant needs to show is that the contractor has knowingly completed non-compliant or defective work that is not of a trivial kind and which it has covered up, so that it is not likely to be detected.415 The period of limitation does not commence until the fraud or concealment is discovered. See also: Fraudulent misrepresentation; Rescission.

Fraudulent misrepresentation In this sense a representation is a statement of fact or belief, expectation or present intention made by one party to another

413

(1981) 20 BLR 94 at 112 per Woolf J (the first instance decision upheld on this point). S Pearson & Son Ltd v. Dublin Corporation [1907] AC 351. 415 Kijowski v. New Capital Properties Ltd (1989) 15 Con LR 1. 414

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Freezing injunction at the time of or before the contract is entered into, on a matter concerning that contract. A misrepresentation is a representation that is untrue. A fraudulent misrepresentation has been defined as a ‘false statement, or one which (the maker) did not believe to be true, or was recklessly careless whether what he stated was true or false’.416 The absence of ‘honest belief’ is essential. If a fraudulent misrepresentation induces one party to enter into a contract, then on discovering the fraud it can void the contract and treat it as at an end. The fraudulent misrepresentation must, of course, have affected the party’s initial decision to enter into the contract.417 Alternatively, it can affirm the contract and carry out its obligations. In either case it can recover damages for the tort of deceit. A statement may be fraudulent even though it was made without a bad motive and an intention to cause loss. It will be fraudulent provided there was an intention to deceive, even though there was no intention to defraud. A contracting party cannot escape liability for fraudulent statements made by it or on its behalf by putting an exclusion clause in the contract.418 See also: Fraud; Misrepresentation.

Freedom of Information Act 2000 An Act of Parliament comprising 88 clauses and eight schedules. The Act gives individuals the right to ask any public body for all the information they have on any subject. Unless the organisation can demonstrate a good reason why they should not provide the information, they must provide it within a month (20 working days). Scotland has an Act that is very similar to the England, Wales and Northern Ireland Act. If the public authority to whom a request is to be made operates only in Scotland, then the request will fall under the Scottish Act. Any information may be sought, but some information might be withheld to protect various interests that are permitted under the Act. If this is case, the public authority must tell you why they have withheld information. Further, although the information is free (subject to possible photocopying costs), if the public body thinks that it will cost them more than £450 (or £600 for a request to central government) to find the information and prepare it for release, then they can turn down a request. They can also ask that the request be made more specific in respect to the information sought. Public bodies include government departments and local assemblies, local authorities and councils, health trusts, hospitals and doctors’ surgeries, schools, colleges and universities, publicly funded museums, the police, and various other bodies. The Act also provides a right of appeal against decisions made in respect of requests.

Freezing injunction Commonly referred to as a freezing order,419 and previously called a Mareva injunction.420 In effect, it prevents a defendant from disposing of its property and assets, pending the resolution of legal proceedings. The 416

Derry v. Peek (1889) 14 App Cas 337. Convent Hospital Ltd v. Eberlin & Partners (1988) 14 Con LR 1. S Pearson & Son v. Dublin Corporation [1907] AC 351. 419 CPR Rule 25.1(1)(f). 420 So named after the case Mareva Compania Naviera SA v. International Bulkcarriers SA (1975) 2 Lloyd’s Rep 509 417 418

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Frontager order can affect assets both in and outside421 England and Wales. The aim is to ensure that a defendant is prevented from taking action in respect of specified assets (e.g. a bank account) designed to frustrate subsequent orders of the court in favour of a claimant. Such an order will be granted if a claimant can show there will be a substantial risk that any judgment obtained against the defendant will be worthless, because the defendant will dissipate its assets to avoid paying. See also: Injunction.

Frontager Someone who owns or occupies land that abuts a highway (qv), river or seashore. The Highways Act 1980 contains procedures whereby private streets, as defined in the Act, can be made up at the expense of the frontagers and formally adopted by the highway authority so that for the future the highway becomes maintainable at the public expense. See also: Boundaries.

Frost damage Protection of the Works from damage, including damage caused by frost, is normally the responsibility of the contractor, though not expressly stated as such within most standard forms. It would fall under a general obligation to produce the Works complete, and in accordance with the contract documents. This responsibility would cease upon practical completion, or the taking-over (qv) of the Works by the employer. JCT 98 clause 17.5 expressly stated that the contractor is not required to make good damage occasioned by frost occurring after practical completion (qv) unless the architect certifies that the injury took place before practical completion. SBC 05 has no similar provision.

Frustration The release of the parties from their contractual obligations, which, as a result of events completely outside their control, are rendered impossible, illegal or fundamentally different from those contemplated by the parties at the time the contract was made. It is not sufficient that the contract has turned out more difficult, or expensive, or both to perform.422 There are very few cases in which a building contract has been held to be frustrated, although it is sometimes forwarded as an excuse for non-completion. The position was aptly summarised as follows: Frustration occurs whenever 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.423

This is a question of law that must depend not only on the event relied upon but also on the precise terms of the contract. In Wong Lai Ying v. Chinachem Investment Co Ltd424 a massive landslip caused the demolition of a 13-storey block of flats, and the resultant debris, together with many tonnes of earth, landed on a building site. The landslip was held to be a frustrating event, as it made further performance uncertain. The 421

Derby v. Weldon (No. 2) [1989] 1 All ER 1002. Davis Contractors Ltd v. Fareham UDC [1956] AC 696. 423 Ibid. at 729 per Lord Radcliffe. 424 (1979) 13 BLR 81. 422

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Functus officio character and duration of any further performance would be radically different from that contemplated by the original contract. The landslip was an unforeseen natural disaster, and a clause in the contract referring in general terms to what was to happen ‘should any unforeseen circumstances beyond the vendor’s control arise’ could not be interpreted so as to cover the landslip. A building contract may be frustrated if a government order prohibits or restricts the work,425 and the total destruction of premises by fire has also been held to frustrate an installation contract.426 Extreme delay through circumstances outside the control of the parties may frustrate a building contract, but only if the delay is of a character entirely different from anything contemplated by the contract. Where a contract is discharged by frustration, both parties are excused from further performance, and the position is governed by the Law Reform (Frustrated Contracts) Act 1943. Money paid under the contract is recoverable, but if the party to whom sums were paid or are payable has incurred expenses, or one party has acquired a valuable benefit, the court has a discretion as to what should be paid or be recoverable. The various standard contracts often make provision for what is to happen should certain events occur, and in principle those express provisions would prevail. SBC clause 8.11 entitles either party to terminate the contractor’s employment under the contract for certain specified matters, and some of these would be capable of being frustrating events. However, the Works must be suspended for a minimum of the period stated in the contract. ACA clause 2.1 is similar in its objective of addressing termination resulting from causes outside the control of either party, and covers events such as force majeure and war. See also: Discharge of contract; Illness.

Functus officio A Latin phrase meaning that the person, body or tribunal has performed their office. Literally, they have discharged their duty or performed the function, and having done so they are not empowered to take any further action. The term is used of architects who have discharged their duties under building contracts and exhausted their authority. In H Fairweather Ltd v. Asden Securities Ltd427 it was held, under JCT 63 terms, that once the architect had issued the final certificate (qv) under the contract then, if no notice of arbitration had been given under the contract conditions, the architect was thereupon functus officio. The result was that the architect could not thereafter issue any valid certificate under the contract. An architect who attempted to issue a certificate of non-completion after the issue of the final certificate was held to have no power to do so.428 The phrase is also used in connection with adjudicators and arbitrators who have published a valid decision or award. Their authority as adjudicator or arbitrator then comes to an end (i.e. their powers and duties), with the exception of being able to correct slips in their awards.429 See also: Arbitrator; Certificates. 425

Metropolitan Water Board v. Dick, Kerr & Co Ltd [1918] AC 119. Appleby v. Myers (1867) LR 2 CP 651. 427 (1979) 12 BLR 40. 428 A Bell & Son (Paddington) Ltd v. CBF Residential Care and Housing Association (1990) 46 BLR 102. 429 S. 57 Arbitration Act 1996. 426

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Fundamental breach

Fundamental breach An expression about which there has been considerable debate. It is now settled that it has just one meaning: a breach of contract so serious (i.e. a breach of a condition) that the other party may treat its future obligations under the contract as at an end, i.e. there has been a repudiation (qv) of the contract.430 It used to be thought that there was a principle of law that some breaches of contract are so destructive of the parties’ obligations that liability for such a breach cannot be limited by an exemption clause (qv). However, it is now established that there is no such principle of law whereby an exemption clause is rendered ineffective by a ‘fundamental breach’ of contract. It is merely a rule of interpretation, based on the presumed intention of the contracting parties.431 Although the expression ‘fundamental term’ is commonly used, the law recognises only two categories of terms: conditions (qv) and warranties (qv). Only conditions can be said to be fundamental, in the sense that breach of such terms will generally entitle the innocent party to cease performance of obligations under the contract. Both the expressions ‘fundamental breach’ and ‘fundamental term’ are best avoided. See also: Express term; Implied term.

430

Photo Production Ltd v. Securicor Transport Ltd [1980] AC 827. UGS Finance Ltd v. National Mortgage Bank of Greece [1964] 1 Lloyd’s Rep 438; Suisse Atlantique Société d’Armement Maritime SA v. NV Rotterdamsche Kolen Centrale [1966] 2 All ER 61. 431

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G Garnishee (Garnishee order) A garnishee is a person who has been warned not to pay a debt to anyone other than a third party who has obtained a judgment against the debtor’s own creditor. A garnishee order is a method of enforcing a judgment debt (qv), which currently must be in excess of £50. It is usual to make a garnishee order in respect of a credit balance at the judgment debtor’s bank.432 For example, X has obtained a judgment in the sum of £10,000 against Y. Y will not pay, although Y has £20,000 credit at the bank. A garnishee order could be obtained from the court requiring the bank to pay £10,000 from Y’s account directly to X. As an alternative, a garnishee order could be made that required any third party owing £10,000 to Y to pay that sum directly to X. A garnishee order cannot be made unless there is a legal debt currently owing to the judgment debtor. Under the JCT and most other standard forms of building contract payments to the contractor are not existing debts until the architect’s certificate has been issued (e.g. SBC 4.9.1). It has been held that a garnishee order made before the issue of the architect’s certificate was invalid, because there was no debt to be garnished.433 See also: Certificates.

GC/Works contracts Although GC/Works contracts have been in use for government projects for many years, the current suite of contracts was prepared by the Property Advisers to the Civil Estate (PACE) in response to the recommendations of the Latham Report (qv). The following contracts are available: — Building and Civil Engineering Major Works (GC/Works/1) • With Quantities • Without Quantities • Single Stage Design & Build • Two Stage Design & Build • With Quantities Construction Management Trade Contract • Without Quantities Construction Management Trade Contract — Building and Civil Engineering Minor Works (GC/Works/2) — Mechanical and Electrical Works (GC/Works/3) — Building and Civil Engineering, Mechanical and Electrical Small Works (GC/Works/4) — Appointment of Consultants (GC/Works/5) — Appointment of Consultants Framework Agreement (GC/Works/5) — Dayworks Term Contract (GC/Works/6) — Measured Term Contract (GC/Works/7) — Specialist Term Contract for Maintenance of Equipment (GC/Works/8) — Operation, Repair and Maintenance and Electrical Plant, Equipment and Installations (GC/Works/9) — Facilities Management Contract (GC/Works /10)

432 433

Rogers v. Whitely [1892] AC 118. Dunlop & Ranken Ltd v. Hendall Steel Structures Ltd (1957) 3 All ER 344.

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GC/Works/1 Contract Model form documents collateral to the contracts are available for: — insurance documents; — performance bond; — parent company performance guarantee; — retention payment bond; — mobilisation payment bond; — sub-contractor’s collateral warranty; — parent company guarantee of sub-contractor’s collateral warranty; — adjudicator’s appointment. Model form administrative documents are available for: — notice of delegation; — notice of possession; — certificate of completion; — maintenance certificate; — project manager’s instruction; — interim payment certificate; — final payment certificate; — notice of intention to withhold payment; — notice of non-compliance with instruction; — employer’s warning notice; — employer’s notice of intention to refer to adjudication; — employer’s notice of referral to adjudication. Stage payment chart, etc.: — example stage payment chart; — chart banding calculation sheet. One amendment has been published to the above contracts, i.e. Amendment 1 to GC/Works/1, which introduces variants in support of ‘Achieving Excellence’. It appears that no further amendments have been issued to address, for example, the CDM Regulations 2007. Therefore great care should be exercised when deciding whether to use these forms of contract, to ensure that they are updated.

GC/Works/1 Contract The full title is the General Conditions of Contract for Building and Civil Engineering Major Works. It is used by many government departments for the procurement of construction work, and the last edition was published in 1998. It is available in six versions: — With Quantities — Without Quantities — Single Stage Design & Build — Two Stage Design & Build — With Quantities Construction Management Trade Contract — Without Quantities Construction Management Trade Contract An important feature is the abstract of particulars (qv), which is similar in function to the contract particulars (qv) in JCT contracts (qv). The conditions are as follows: Contract documentation, information and staff (1) Definitions etc. (1A) Fair dealing and team working (2) Contract documents (3) Bills of quantities 224

GC/Works/1 Contract (4) Delegations and representatives (5) Contractor’s agent (6) Contractor’s employees General obligations (7) Conditions affecting Works (8) Insurance (8A) Professional indemnity insurance for design (9) Setting out (10) Design (11) Statutory notices and CDM Regulations (12) Intellectual property rights (13) Protection of Works (14) Nuisance and pollution (15) Returns (16) Foundations (17) Covering work (18) Measurement (19) Loss or damage (20) (Not used) (21) Defects in maintenance periods (22) Occupier’s rules and regulations (23) Discrimination (24) Corruption (25) Records Security (26) Site admittance (27) Passes (28) Photographs (29) Official secrets and confidentiality Materials and workmanship (30) Vesting (31) Quality (32) Excavations Commencement, programme, delays and completion (33) Programme (34) Commencement and completion (35) Progress meetings (36) Extensions of time (37) Early possession (38) Acceleration and cost savings (38A) Bonuses (39) Certifying completion Instructions and payment (40) PM’s instructions (41) Valuation of instructions – principles (42) Valuation of variation instructions (43) Valuation of other instructions (44) (Not used) (45) VAT (46) Prolongation and disruption 225

General damages (47) Finance charges (48) Advances on account (48A) Retention payment bond (48B) Mobilisation payment (48C) Payment for things off-site (49) Final account (50) Certifying payments (50A) Withholding payment (51) Recovery of sums Particular powers and remedies (52) Suspension for non-payment (53) Non-compliance with instructions (54) Emergency work (55) Liquidated damages (56) Determination by employer (57) Consequences of determination by employer (58) Determination by contractor (58A) Determination following suspension of Works (59) Adjudication (60) Arbitration and choice of law Assignment, sub-letting, sub-contracting, suppliers and other works (61) Assignment (62) Sub-letting (63) Nomination (63A) Insolvency of nominated sub-contractors or suppliers (64) Provisional sums (65) Other works Performance bond, parent company guarantee and collateral warranties (66) Performance bond (67) Parent company guarantee (68) Collateral warranties An amendment was issued to the contract in 2000 introducing variants in support of ‘Achieving Excellence’. No further amendments appear to have been made and, therefore, potential users of this form of contract must check carefully that it is up to date and carry out the necessary amendments. Unlike JCT and ICE forms of contract, GC/Works/1 is not a negotiated document and it would be considered to be the employer’s written standard terms of business (qv) for the purposes of the Unfair Contract Terms Act 1977 (qv). Although the Act does not apply to the Crown, this contract is often used by others to whom it will apply. Ambiguities may be construed contra proferentem (qv) the employer in such cases. See also: GC/Works contracts.

General damages This is the kind of damage that the courts will presume to have followed from a breach of contract. Such damages are often said to arise naturally from the breach, and the court has discretion in awarding the amount. It must be proved that damage has occurred, even if it is not possible to quantify the damage.434 434

Sunley & Co Ltd v. Cunard White Star Ltd [1940] 1 KB 740.

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Global claim The long-established general principle is that an injured party must be put in the same position as if the contract had been properly performed, so far as money can achieve this.435 Although such damages may be impossible to quantify with any precision, the court will do its best to reach an assessment that does justice to the particular situation.436 This is the case even where the court has to take into account that many unknown factors, including chance, may be involved. General damages must be distinguished from special damages (qv). The law does not assume that such damages have been incurred, and requires proof. See also: Damages; Liquidated damages; Nominal.

Gift The voluntary transfer of property without consideration (qv). Therefore a gift inter vivos is the transfer of property between two people, both of whom are living. The significance of a gift in relation to the construction industry is whether it is given corruptly. Many building contracts include a clause dealing with the problem. For example, SBC, IC, ICD and DB clause 8.6 and MW and MWD clause 6.6 make provision for the termination of the contractor’s employment by notice if the contractor or any person acting on the contractor’s behalf commits an offence under the Prevention of Corruption Acts 1889 to 1916 or, if the employer is a local authority, if the contractor has given any fee or reward contrary to s. 117(2) of the Local Government Act 1972. The entitlement to terminate is stated to be exercisable by the employer under the contract or any other contract with that contractor. In the former JCT 1998 suite of contracts express reference was made to ‘gifts’. The wording of the current contracts is shorter, but to the same effect. GC/Works/1 deals with corruption in clause 24. Express reference is made, among other things, to ‘any gift’ in clause 24(1). The employer is given power to determine the contract if the contractor is in breach of the provision. See also: Bribery and corruption.

Giving notice The giving of notice (which is equivalent to service) is prescribed by standard form building contracts,437 by statute, and implied by law in various circumstances. For example, the payment and termination provisions in building contracts require notice, as do ss. 110 and 111 of the Housing Grants, Construction and Regeneration Act 1996. Where it is intended to claim from the contractor the cost of remedying defects, it is first necessary to give notice.438 See also: Notices; Service of notices or other documents.

Global claim This term refers to a ‘rolled up’ or ‘total cost’ claim where a contractor submits a loss and/or expense claim that comprises the whole of its costs of carrying out the Works, and then simply deducts the contract sum. The difference between the two sums is claimed as a consequence of all the delaying and disruptive events that occurred on site. Such a claim has no basis, and

435

Robinson v. Harman (1848) 1 Ex 850. Tai Hing Cotton Mill Ltd v. Kamsing Knitting Factory [1978] 1 All ER 515. 437 For example SBC clauses 1.7, 2.27 and 4.13.3. 438 London and South Western Railway v. Cyril Flower (1875–76) 1 CPD 77. 436

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Good faith presumes that all costs resulted from the events on site for which the employer is responsible, and that the contractor was blameless. The advantage of such claims to those putting them forward are that they are easy, quick and inexpensive to prepare, but they require an analysis and response by those to whom they are submitted. The result is that often such claims are the subject of a negotiated settlement. The disadvantage is that if it can be shown that any event or variation did not cause cost or expense, or that other events that are not relied upon caused costs to be incurred, then the claim will fail in its entirety.439 Traditionally the courts have been resistant to global claims. Indeed, the delay and disruption protocol published by the (UK) Society of Construction Law states: ‘The not uncommon practice of contractors making composite or global claims without substantiating cause and effect is discouraged by the Protocol and rarely accepted by the courts.’ The accepted position was that such claims are really permissible only when it is impossible or impractical to plead a connection between the cause and the effect or cost,440 and where there is no material event for which the defendant is not responsible.441 An increasingly relaxed approach to global claims has now been endorsed by the courts in London Underground Limited v. Citylink Telecommunications Limited.442 In this case the judge stated that he would apply the ‘proper approach to global claims’ in assessing whether there was a serious irregularity in the award of a 48-week extension of time, and went on to accept the approach to global claims as set out in the John Doyle case.443 In the John Doyle case it was held that the logic of a global claim was that all the events that contribute to causing global loss must be the liability of the party that caused the delay. If there were events for which that party had no liability, the effect of upholding the global claim would be to impose a liability that, in part, was not justified, and the global claim would then fail. However, it was also held that, while the global claim as such might fail, it did not follow that no claim would succeed. There may be in the evidence a sufficient basis to make some connection, and to make a rational apportionment of part of the global loss to the causes for which the delaying party was responsible. The case raises some unease: for example, the practicality of carrying out an ‘apportionment’ exercise on a failed global claim in which by definition it is impracticable or impossible to allocate cost to particular causes. Any apportionment can only be rough and ready, as was acknowledged in the John Doyle case. A global claim should be the last resort.

Good faith A person acts in good faith if acting honestly, even if that person is acting negligently. It has been said that acting in good faith does not simply mean that a party should not deceive another, but that ‘its effect is most aptly conveyed by such metaphorical colloquialisms as ‘playing fair’, ‘coming clean’ or ‘putting one’s cards face upwards on the table’. It is in essence a principle of fair open dealing. English law has, characteristically, committed itself to no 439

John Holland Construction & Engineering Pty Ltd v. Kvaerner RJ Brown Pty Ltd (1996) 82 BLR 81. Crosby & Sons Ltd v. Portland UDC (1967) 5 BLR 121. 441 John Doyle Construction Limited v. Laing Management (Scotland) Limited (2002) 85 Con LR 98. 442 [2007] EWHC 1749 (TCC). 443 John Doyle Construction Limited v. Laing Management (Scotland) Limited (2002) 85 Con LR 98. 440

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Government action such overriding principle but has developed piecemeal solutions in response to demonstrated problems of unfairness.444 Although the English courts are shy of a general implication of good faith into all contracts, there are several specific circumstances where good faith will be implied. A duty of good faith will readily be implied into employment contracts, contracts of insurance, partnership agreements, and professional appointments such as those of architects, accountants, solicitors and their clients. Many such contracts will fall into the category of uberrimae fidei (qv) (of the utmost good faith). The Housing Grants, Construction and Regeneration Act 1996 stipulates in s. 108 that every construction contract (qv) shall provide that the adjudicator (qv) is not liable for anything done or omitted in carrying out the functions of the adjudicator unless the adjudicator acts in bad faith, which is a negative way of imposing the duty on the adjudicator. Clause 10.1 in NEC reads: ‘The Employer, the Contractor, the Project Manager and the Supervisor shall act as stated in this contract and in a spirit of mutual trust and cooperation …’ Clause 1.3 in PPC states that the ‘Partnering Team members shall work together and individually in the spirit of trust, fairness and mutual cooperation for the benefit of the Project’. The CE form has an overriding principle at clause 2.1, which includes ‘in a cooperative and collaborative manner in good faith and in a spirit of mutual trust and respect’. The difficulty with such provisions is deciding what they mean in the context of each individual contract, and in which circumstances they apply. See also: Confidentiality; Misrepresentation; Uberrimae fidei.

Goods Personal tangible property, but not land. The term is employed in a number of standard building contracts, for example in SBC clause 2.3.1, where ‘All materials and goods for the Works … shall … be of the kinds and standards described’. Although there is no distinction in law between goods and materials (qv), the terms are generally used to describe two rather different things. Materials are the substances from which goods are made. Therefore, when the word ‘goods’ is used, one expects to see something that has had work done to it, e.g. a concrete paving slab rather than a pile of sand or cement. All items that are incorporated into the Works will be classified as ‘goods’ for the purposes of the Sale of Goods Act 1979 (qv) and the Supply of Goods and Services Act 1982 (qv).

Government action The exercise of any power by the United Kingdom government. It is an express ground for extension of time under several forms of contract: for example SBC clause 2.29.12, which refers to the exercise after the base date (qv) of any statutory power that directly affects the execution of the Works. IC, ICD clause 2.20.12 and DB clause 2.26.11 are to similar effect. These contractual provisions do not give the contractor an opportunity for an extension of time on each occasion on which the government exercises its powers. The exercise of such powers must occur after the base date (qv), it must be a power that the government has by virtue of statute, and it must directly affect the execution of the Works. Therefore the exercise of a government

444

Interfoto Picture Library Ltd v. Stilletto Visual Programmes Ltd [1989] 1 QB 433 at 439 per Bingham LJ.

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Government contracts power that is not enshrined in legislation will not qualify. Nor will it qualify if it was already being exercised before the base date. The stipulation that the power must directly affect the execution of the Works is important. Government action that affects the delivery of materials probably does not fall under these clauses. If not referred to expressly in the building contract, government action probably falls under force majeure (qv).

Government contracts See: GC/Works/Contracts. Gross valuation A term used predominantly in the JCT forms of contract when referring to the total amount due to a contractor, in accordance with the contract, for purposes of calculating an interim payment, but prior to the deduction of retention, advance or previous payments. It may include sums in respect of: — all work properly executed, including, where appropriate, that of named sub-contractors, and work that results from properly authorised variations. This may be calculated on the basis of the work done or by reference to estimates of the value of work done, e.g. stage payments or a ‘priced activity schedule’ (qv), the total value of all unincorporated materials and goods (qv) that are adequately protected against eventualities and properly, not prematurely, brought to site; — the total value of any materials or items as have been prefabricated but delivered off-site, provided the items have been agreed by the employer at time of contracting and that the contractor has satisfied the relevant conditions (e.g. JCT ‘listed items’); — any amounts due in respect of loss and expense; — any amounts due to the contractor in respect of additional insurance premiums, fees or charges and testing of work found to be in accordance with the contract; — any amounts due as a result of repair and restoration that is to be treated as a variation; and — any amounts payable under the fluctuations provisions. Examples of such clauses are SBC 4.16 or DB clauses 4.13 and 4.14. ACA clause 16 adopts a similar approach, but does not use the term ‘gross valuation’.

Ground investigation An examination to determine the type and character of the ground, including matters such as its bearing capacity, the presence of old mine workings, underground obstructions, services, and any existing contamination. The investigation is typically carried out by visual inspection at first, then by means of trial pits, boreholes, soil sampling and analysis and testing. Often a mixture of several of these methods is used, depending upon the type of ground and what is known about its history (for example, the likelihood that structures with extensive underground works occupied the site). Under traditional procurement the employer is responsible for design, and it is likely that the employer will need to have a site investigation undertaken. Knowledge of the site will be necessary for completing the design, e.g. the foundations. It would not be practical for the contractor to undertake the site investigation following appointment, given that this would be likely to extend the project completion date, and create cost uncertainty surrounding those ele230

Groundwater ments of design dependent upon a knowledge of the ground conditions. If the contract documents include bills of quantities it is common for the bills to identify the type and nature of the site, i.e. ground conditions. A contractor requires knowledge of the materials to be excavated and taken off site when pricing. Therefore a site investigation report may well form part of the bills. For example, see the Standard Method of Measurement of Building Works (SMM) 7th edition (qv), section D20, which requires details of any trial pits or boreholes to be given including their location. There seems to be little doubt that a contractor may be able to found a claim against the employer for misrepresentations about ground conditions made at tender stage. For example, in an Australian case, the contractor claimed that basic information provided at pre-tender stage regarding the soil and its contents was false, inaccurate and misleading. In deciding a preliminary issue the court held: The basic information in the site document … was information which the plaintiffs had neither the time nor the opportunity to obtain for themselves. … But it was indispensable information if a judgment were to be formed as to the extent of the work to be done.445

In an appropriate case, therefore, an action would lie in respect of misleading statements about ground conditions.446 It seems that an employer cannot escape liability for an inaccurate statement by the addition of a warning to the effect that the information may not be accurate.447 Under design and build contracts the position may well be different, with a contractor being responsible for undertaking its own site investigation. The work involved in carrying out site investigations is beyond the expertise of most architects or engineers, but architects and engineers have a responsibility to advise clients about the need to undertake site investigation.448 Obligations will also arise under the Construction (Design and Management) Regulations 2007 (qv). When engaged in the preparation of pre-construction information (qv) required in connection with regulation 10(2) and regulation 15, it is necessary for the client to be aware of site conditions.

Groundwater Water present in the ground. The level of groundwater may vary depending upon many factors, for example the amount of rainfall and the speed with which the water can be removed through drains, streams and rivers, the effect of tides, and particular types of ground, e.g. clay or sand. The presence of trees with deep roots can have a very marked effect upon water levels. The level of groundwater is one of the important matters that are measured when boreholes are taken. The presence of a very high water level (usually termed a ‘water table’) can cause severe difficulties in carrying out building and civil engineering works, and it is common to find measures to counteract the problems specified in the contract documents. The most usual method of dealing with the problem is to install pumps, and perhaps sumps, to lower the water table to allow a particular 445 Morrison-Knudson International Co Inc v. Commonwealth of Australia (1972) 13 BLR 114 at 121 per Barwick CJ. 446 Holland, Hannen & Cubitt (Northern) Ltd v. Welsh Health Technical Organisation (1981) 18 BLR 80. 447 Cremdean Properties Ltd v. Nash (1977) 244 EG 547 (CA). 448 District of Surrey v. Carroll-Hatch and Associates Ltd (1979) 10 DLR (3d) 218.

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Group operation to take place. Where underground spaces are to be constructed, it is essential to install land drains at suitable levels to lower the water table and, therefore, the water pressure. Where bills of quantities (qv) are to be employed, the Standard Method of Measurement of Building Works (SMM) 7th edition (qv) describes, in section D20, how water levels are to be dealt with. The bills of quantities must state the groundwater level and the date when it was established. That is defined as the pre-contract water level. Every time excavation is carried out, the groundwater level must be re-established. These re-establishments are defined as post-contract water levels. In addition, where it is known that the groundwater levels are subject to periodic changes due to tidal or similar effects, the information must be recorded, giving the mean high and low water levels. The changes in the pre- and post-contract water levels are usually treated as variations under the contract.

Group This word is used in GC/Works/1, and is defined as follows: Group means and includes a company and every holding company of that company for the time being, and every subsidiary for the time being of every such holding company, and the terms ‘Employer’s Group’ and ‘Contractor’s Group’ shall be interpreted accordingly; but while the Employer is a Minister of the Crown, a government department or other Crown agency or authority, the term ‘Employer’s Group’ shall also include all other Ministers of the Crown, government departments and Crown agencies and authorities.

The term occurs in clause 51, which purports to permit the employer to deduct sums of money which may be due to the employer or to any member of the employer’s group under other contracts and/or from any other member of the contractor’s group. See also: Unfair Contract Terms Act 1977.

Guarantee A guarantee is a form of security against the failure or default of another. The words ‘warranty’ (qv) and ‘guarantee’ are commonly used interchangeably when referring to a new product warranty. A contract of guarantee is a pledge to answer for the default or failure of a third party,449 and should be distinguished from a bond or an indemnity.450 To be enforceable such contracts need to be in writing or evidenced in writing.451 The party offering the guarantee is termed the ‘guarantor’, and in construction is commonly a parent or holding company, though it could be another third party. A guarantor may give a guarantee to an employer for the performance of a company that has contracted with an employer to undertake Works. The company undertaking the Works holds the primary or principal obligation to the employer to carry out and complete the Works, while the guarantor holds a secondary obligation to the employer in the event of a failure by the company. The presence of the guarantor’s secondary obligation does not affect the company’s principal obligation. The guarantor’s guarantee will be called upon only should there be a default or failure on the part of the company. Guarantees are

449

Lakeman v. Mountstephen (1874) LR 7 HL 17. See General Surety and Guarantee Co Ltd v. Francis Parker Ltd (1977) 6 BLR 16 at 21 per Donaldson J for a comparison of guarantees and indemnities. 451 S. 4 of the Statute of Frauds 1677. 450

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Guaranteed maximum price contract (GMP) also sometimes sought and provided against an employer’s obligation to make payment under a construction contract. It is not uncommon for the contract for the Works to include as a requirement the provision of a guarantee. Normally a guarantor is entitled to be indemnified, by the company on whose behalf it offers the guarantee, if it has to discharge a debt or an obligation. See also: Bond; Indemnity clauses.

Guaranteed cost contract A contract that is not to be confused with a guaranteed maximum price contract (qv). In this instance it is the contractor’s costs that are guaranteed. The procedure is that the employer undertakes to pay the contractor its costs of labour, plant and materials, together with an additional sum of money for overheads and profit, which may be calculated in various ways. The JCT Prime Cost Building Contract (PCC) 2005 is an example of this type of contract. Its key provision allows the employer to pay the prime cost of executing the Works (which often amounts to the cost of sub-contractors) plus a fixed fee or a fee calculated on a percentage basis, with sometimes quite sophisticated conditions. The employer must be able to audit or check the prime cost. The management contract (qv) is another example of the kind of contract. See also: Cost reimbursement contract.

Guaranteed maximum cost Within the CE form this is a defined term meaning ‘the maximum payment (excluding the amount of the Supplier’s Margin) for the performance of the Services that the Supplier shall be entitled to receive under this Contract’. Within part 1 of the contract particulars (qv) against the cross-reference to part 7 there are two options: a target cost option, and a contract sum option. One of these options is chosen by deleting the option which is not to apply. The guaranteed maximum cost provision is for use with the target cost option, but even then it is optional. Against part 7 of the contract particulars there is provision for stating the guaranteed maximum cost, and the relevant provisions are 7.11 to 7.15 within part 7. The guaranteed maximum cost, if chosen, works in conjunction with the target cost to offer a risk mechanism for the supplier (qv) and purchaser (qv) to share the extent of any actual cost falling between the target cost and guaranteed maximum cost. These are shared in the proportion set out within the contract particulars. However, under clause 7.13 the supplier bears the full burden of the amount by which the actual costs exceed the guaranteed maximum cost. Adjustments can be made to both the target cost and the guaranteed maximum cost figures in accordance with clauses 7.14 and 7.15 for changes or variations to the brief, or as a consequence of relief from the specified events. See also: Guaranteed maximum price contract.

Guaranteed maximum price contract (GMP) Notwithstanding the title, the price under such contracts is neither guaranteed nor maximum. There is no true GMP standard form of contract, and many are drafted on an ad hoc basis. GMP contracts aim to secure greater certainty about the maximum final cost of the project for the employer in a similar way to design and build contracts, such as DB. The intention under this type of contract is to place all the risk 233

Guaranteed maximum price contract (GMP) with the contractor except for employer changes or variations, or employer’s acts of prevention that result in loss and/or expense. The contractor is expected to carry the risks associated with matters such as ground condition, services, weather and changes in legislation. Contractors are sometimes required to take responsibility for all information supplied, even if produced by the employer, including its accuracy, and in this case take on board a significant risk.452 Certain standard forms such as PPC (i.e. ‘Agreed Maximum Price’) have adopted a variant of this approach, aimed at involving the contractor in achieving solutions that save costs and encourage a value engineering (qv) approach to constructing the Works. The contractor’s entitlement to payment is capped at a guaranteed maximum price and subject to adjustment for, usually limited, specified matters, which may go beyond employer changes or employer acts of prevention. They provide for the sharing in an agreed ratio of any savings achieved as a result of the contractor’s endeavours. The contractor bears the costs that exceed the guaranteed maximum price. However, after all the provisos and exceptions have been applied, such costs are unlikely to be great. This kind of contract can be a very effective method of keeping costs within a specified limit, but the disadvantages have to be accepted. Employers are often under the impression that the contractor is giving an unconditional guarantee that under no circumstances will the guaranteed maximum price be exceeded. Employers may be excused for so thinking, because the name and often the selling of such contracts tend to be misleading. The reality is that the contracts are usually on a design and build basis, which places a great deal of responsibility on the contractor in any event. If the employer is responsible for extra costs, such as variations, they will usually fall outside the GMP or, alternatively the GMP will be adjusted accordingly. See also: Guaranteed maximum cost.

452

Mowlem plc (formerly John Mowlem and Co plc) v. Newton Street Ltd [2003] 89 Con LR 153.

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H Handover A term commonly used within the building industry to indicate the stage at which the Works are complete. The contractor hands over to the employer the keys and any useful documentation, and the employer takes over the building. In the standard forms the stage is variously described as ‘practical completion’, ‘substantial completion’, ‘taking-over’ and ‘completion’. ‘Handover’ is slightly misleading, suggesting that the contractor hands over the building when it considers that it is ready. The term continues in popular use, probably because it is easier to refer to a ‘handover meeting’ than to a ‘meeting to carry out an inspection prior to the issue of a certificate of practical completion’. See also: Completion; Practical completion; Taking-over.

Have due regard The phrase ‘having due regard’ is used in SBC at clause 3.18.4. In this context ‘having due regard’ means paying proper or adequate heed or care or attention to the content of the schedule in the context of the given circumstances when deciding whether to issue any further instructions under clause 3.18.4. Clause 3.18.4 addresses the architect’s powers to instruct the opening up for inspection or testing of such other works so as to determine the likelihood or extent of any further similar non-compliant works. The operation of this provision can only arise following the discovery of non-compliant works elsewhere, and the architect’s power or authority is subject to the constraint as is ‘reasonable in all the circumstances’. Should the instructed tests or inspections discover further non-compliant works, then the architect was justified in issuing the instruction, and the consequential effects on time and cost fall with the contractor. If the inspections or tests reveal no further non-compliant works, then the contractor would be entitled to an extension of time (clauses 2.28 and 2.29.2.2), but there would be no adjustment to the contract sum. In making a decision on whether to instruct further inspections or tests the architect is to ‘have due regard’ to the code of practice included at Schedule 4 which sets out matters to be considered by the architect when deciding whether to issue an instruction.

Hazardous substances Hazardous waste is seen by DEFRA as waste that contains properties that may render it harmful to human health or the environment. The European Commission issued a Directive on the controlled management of such waste, i.e. 91/689/EEC. The Directive is transposed into English law by the Hazardous Waste (England and Wales) Regulations 2005 and the List of Waste (England) Regulations. The disposal of such waste is subject to strict licences and controls. Within PPC it is defined at appendix 1 as: any natural or artificial substances (whether in solid or liquid form or in the form of a gas or vapour and whether alone or in combination with any substance) intrinsically capable of causing harm to man or any living organism supported by the environment or of damaging the environment or public health and including but not limited to any controlled, hazardous, toxic or dangerous waste.

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Head contract Each partnering team (qv) member, under clause 16.4, is to implement the measures stated in the partnering documents (qv) to ‘eliminate or render negligible’ the risk of harm to the environment or the migration of hazardous substances onto or from the site. In addition, such substances are not to be taken to or generated on or installed at the site, or be caused to be released into the environment except in accordance with applicable law. Both the environment (qv) and environmental laws (qv) are defined terms within PPC.

Head contract A term that is often used for the highest in a chain of contracts. For example, it might be between a developer and a facilitator, the facilitator entering into a contract with the contractor (often called the main contract (qv)). If the main contract is the highest in the chain, it will be the head contract also. The contractor then enters into sub-contracts for various elements of the Works (qv). These sub-contracts will then be let either on terms of a standard form specifically designed for use in conjunction with the head contract, e.g. SBCSub/C, DBSub/C (qqv) standard forms for use with SBC and DB contracts, or they will be on specially drafted terms. Below this, there may be an endless chain of sub-sub-contracts, each one, in theory, back to back with the one above it.

Health and safety file The term for information required by the Construction (Design and Management) (CDM) Regulations 2007 (qv) and collected together in a file to be given to the employer on completion of the construction phase of the project. The file is intended to help persons who may later be involved in carrying out work to the project or structure, and those using it. The file is defined at regulation 2 as the record referred to in regulation 20(2)(e), and includes any such file previously prepared under the CDM Regulations 1994. The responsibility for producing the information in the file is shared by the designer, the main contractor and any sub-contractors, the principal contractor (if different from the main contractor) and the CDM coordinator. Final responsibility lies with the CDM coordinator under regulation 20(2)(e) to ensure, where no file exists, that one is prepared for the project. The file must contain information for each structure, which must identify any potential health and safety risks in the project, the structure, the materials, etc. which may or are likely to affect anyone who may be exposed to those risks during subsequent construction operations. It must also contain details of any other matter that it is reasonably foreseeable may pose a potential risk. Regulation 17(1) imposes a number of obligations upon the client in respect of the health and safety file. For example, the client is to ensure that the CDM coordinator is provided with all information likely to be needed for inclusion within a health and safety file. In addition, where the file relates to more than one project, site or structure, the client is to ensure that the information relating to each project, site or structure is readily identifiable. Further, the client is to ensure that, following completion of the construction phase, the file is kept available to anyone who may need it to comply with any statutory provisions, and that it is kept up to date. When a client sells their interest in a structure they are to deliver the file to the person who acquires the interest, and ensure they are aware of the nature and purpose of the file. A health and safety file may typically include: 236

Hearsay — as-built details and drawings; — information about emergency procedures necessary in connection with the use or operation of the structure; — information about the methods of construction; — information about the types of materials; — information about any specific maintenance requirements for any part of the building, together with testing, commissioning or maintenance manuals about specialist plant or equipment; and — details of the type and location of mains and other services. Under regulation 18(2) a designer is to take all reasonable steps to provide the CDM coordinator with sufficient information about aspects of the design of the structure or its construction or maintenance so as to assist the CDM coordinator to comply with their duties under the regulations including preparation of the health and safety file. Similarly, under regulation 22(1)(j) the principal contractor is to identify to each contractor the information likely to be required by the CDM coordinator for inclusion within the health and safety file.

Hearing A general term referring to an occasion on which a person or persons may produce arguments or evidence (qv) to a court, arbitrator (qv), adjudicator (qv) or other tribunal. Certain hearings have specific names, such as trial or appeal. Dependent on whether the hearing is to be as part of litigation (qv) or arbitration (qv), the rules will vary. In the case of adjudication (qv), the adjudicator has very wide powers to organise the hearing in the best way to enable the right decision to be reached.453 In arbitration, unless the parties expressly agree otherwise, whether there should be a hearing at all is something that the arbitrator will decide.454 The form and length of the hearing may also be agreed by the parties. Alternatively, the arbitrator may decide. Under the Civil Procedure Rules (qv) it is the court’s responsibility to manage the process. This may include determining the form the hearing is to take, or dictating the time available to the parties.455 See also: Appeal; Natural justice; Reference.

Hearsay Hearsay is something that a witness (qv) has heard others say, e.g. ‘Alice Brown told me that …’. As a general rule, hearsay evidence is not admissible. Hearsay is not confined to oral statements, but can extend to documents. The general position is that evidence of a statement made to a witness by a person who is not himself called as a witness may or may not be hearsay. It is hearsay and inadmissible when the object of the evidence is to establish the truth of what is contained in the statement. It is not hearsay when it is proposed to establish, by the evidence, not the truth of the statement but the fact that it was made.456 453

For example, see paragraph 13 of the Scheme for Construction Contracts (England and Wales) Regulations 1996 (qv). 454 s. 34(1)(h) Arbitration Act 1996. 455 For example: CPR Rule 28.6(1)(b) (fast track trial timetable); Rule 29.8(c)(i) (multi-track trial timetable); Rule 32.1 (court power to restrict evidence and cross-examination (qqv). 456 Subraniam v. Public Prosecutor [1956] 1 WLR 965.

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Highway If party X gave evidence that party Y had told him that party Z was in London on a particular day, all the evidence regarding Z would be hearsay and inadmissible. Only evidence about Y would be admissible, for example that Y had spoken to X on a particular day. For example: ‘David told me he was feverish.’ This statement cannot be used to prove David was feverish (the truth of the matter asserted), but could be used to prove David was capable of speaking. As a general rule, hearsay evidence is not admissible in civil proceedings, but there are exceptions.457 Under the Civil Evidence Act 1995 the position is that hearsay evidence will not be excluded simply because it is hearsay, but the weight the court will attach to such evidence will depend upon all the circumstances. In civil litigation hearsay evidence is covered by CPR Part 33, and a party must give notice of its intention to rely on hearsay evidence and, where appropriate, supply a copy of the relevant document. In arbitration proceedings the strict rules of evidence need not necessarily apply. See also: Admissibility of evidence.

Highway A public right of way for vehicular or other traffic, including an exclusive way for pedestrians. A very comprehensive definition is contained in the Highways Act 1980, which is a consolidating Act drawing together earlier enactments. Local authorities have wide powers and duties in relation to highways, and in London special provisions apply. Highways can be subdivided into carriageways, footpaths and bridle paths according to the type of traffic each is entitled to carry. For example, a bridle path or bridleway may carry pedestrians and riders on horseback. At common law, the owner of property adjoining a highway is entitled to access to it at any point, but there are many statutory modifications of this right: for example, the formation or setting out a means of access to a highway is development for which planning permission is required.

Hindrance or prevention At common law it is an implied term of every building contract that the employer will not, including through employees or agents, hinder or prevent the contractor from performing the contract. The contractor will be under a similar obligation under building sub-contracts.458 If there are acts of hindrance or prevention that cause delay, and no express contractual provisions for an extension of time (qv) in such circumstances, the employer cannot enforce a liquidated damages (qv) provision, and the contractor may have a claim for damages against the employer.459 Where the employer’s actions are extreme, the contractor may treat the contract as having been repudiated.460 Generally, standard form contracts allow acts of hindrance and prevention by the employer or others for whom the employer is responsible as grounds for a contractor to seek both an extension of time and additional payment (e.g. SBC clauses 2.29.1 to 6 and clauses 4.24.1 to 5), but those provisions are not necessarily always exhaustive. That said, a number of standard forms include a general sweep-up provision in an attempt to ensure that any event for which the employer is liable would be covered, e.g. 457

s. 1 Civil Evidence Act 1995. Jardine Engineering v. Shiizu (High Court of Hong Kong) (1992) 63 BLR 98. 459 Lawson v. Wallsey Local Board (1883) 48 LT 507. 460 Holme v. Guppy [1838] 150 ER 1195. 458

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Hoarding SBC clause 4.24.5 and IC and ICD clause 4.18.5. ACA 3 clause 7.1 is also broad enough to serve the same purpose. See also: Claim.

Hire A type of bailment (qv) whereby an agreement is made under which a person, called the hirer, obtains the use of goods for a specified or indeterminate period in return for payment. It is a type of contract, and the rights and liabilities of the parties will be governed by the express and implied terms of the contract. Legislation now affects the position, e.g. the Unfair Contract Terms Act 1977 (qv) and the Supply of Goods and Services Act 1982 (qv). Because most construction industry plant is hired in, there are important implications should the contractor’s employment under the building contract be terminated by the employer, who will then have no rights in the hired plant, whatever the contract conditions between the employer and the contractor may provide. Most plant in the construction industry is let on standard terms. The Construction Plant Hire Association produces model terms and conditions for the hiring of plant. They modify the common law position in several respects. Hiring plant with an operator may pose particular problems.461

Hire purchase A hire purchase agreement is one ‘under which an owner lets chattels (qv) of any description out on hire and further agrees that the hirer may either return the goods and terminate the hiring or elect to purchase the goods when the payments for hire have reached a sum equal to the amount of the purchase price stated in the agreement or upon payment of a stated sum’.462 It is, in effect, a means of buying goods on long-term credit, which is today largely regulated by complex legislation designed to protect private individuals, i.e. consumers. Goods that are subject to a hire purchase agreement do not belong to the purchaser (hirer) until the right to purchase has been exercised. If the hire purchase agreement involves a private individual (a consumer), it may be subject to the Consumer Credit Act 1974. The Act does not regulate all hire purchase situations, and it is necessary to look at other Acts and regulations in addition to the considerable body of case law that has accumulated on this topic. There are serious implications where a building contract contains, for example, a vesting clause (qv) or forfeiture clause (qv). Such clauses are ineffective as regards third parties, including the owner of the goods let on hire-purchase. See also: Bailment.

Hoarding A (usually) wooden fence erected for the purpose of separating a building, or demolition site or other potentially dangerous situation, from an area likely to be used by pedestrians or vehicles. Hoardings are most commonly seen at the back of a footpath or bordering a highway or footpath and separating them from a site where construction operations are being carried out. Such hoardings are governed by the Highways Act 1980. Among other things, the appropriate local authority will generally require: — a close-boarded fence to its satisfaction; — a convenient covered platform and handrail outside the hoarding for the benefit of pedestrians; 461 462

McConkey v. AMEC plc (1990) 27 Con LR 88. Chitty on Contracts, 30th edn Sweet & Maxwell (2008) at 38–286.

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Holding company — sufficient lighting; — maintenance; — removal when directed. The erection of suitable hoardings is the contractor’s responsibility. It is covered under most forms of contract that require the contractor to comply with statutory requirements. Therefore, if the contractor fails to erect a compliant hoarding, this will be a breach of contract as well as a breach of statutory requirements. Any such failure by the contractor may make the employer liable to prosecution.

Holding company In effect, a company that owns and/or controls another company. This term is defined within GC/Works/1 (1998) as having the same meaning as given within section 736 of the Companies Act 1985 as substituted by s. 144 of the Companies Act 1989. These provisions have since been replaced by s. 1159 of the Companies Act 2006, which provides at s. 1159(1): A company is a ‘subsidiary’ of another company, its ‘holding company’, if that other company: (a) holds a majority of the voting rights in it, or (b) is a member of it and has the right to appoint or remove a majority of its board of directors, or (c) is a member of it and controls alone, pursuant to an agreement with other shareholders or members, a majority of the voting rights in it, or if it is a subsidiary of a company which is itself a subsidiary of that other company.

Hostilities A state of armed conflict between two or more states during which a declaration of war (qv) may or may not have been declared. JCT contracts no longer refer to hostilities, and it may well be that the situation is sufficiently covered by the provision for force majeure (qv). ACA clause 11.5, alternative 2, refers to hostilities as a ground for an extension of time and, in clause 21(c), as a ground for termination of the contractor’s employment by either party. See also: Alien enemy; Frustration; Vis major.

Housing Grants, Construction and Regeneration Act 1996 An Act of Parliament that has been of crucial importance to the construction industry, and which has led to major changes in practice. The Act is in five parts, of which Part II is probably of most importance. — Part I provides for the application for and payment of grants in respect of housing in the private sector. — Part II provides for the introduction of specific provisions in construction contracts. — Part III provides for the constitution of the Architects’ Registration Board (qv) and registration matters. This part of the Act has been repealed by the Architect’s Act 1997 (qv). — Part IV provides for grants etc. for the purpose of regeneration, development and relocation. — Part V provides for general matters in connection with housing grants, energy efficiency schemes, and the dissolution of urban development corporations, housing action trusts and commissions. 240

Housing Grants, Construction and Regeneration Act 1996 The part of the Act that has had the most important effect on the construction industry is Part II. In Northern Ireland legislation to the same effect, and with near-identical wording, is the Construction Contracts (Northern Ireland) Order 1997. The content of Part II is discussed below. Importantly, the Act does not apply if one of the parties intends to reside in the subject (i.e. a domestic dwelling) of the construction operations (s. 106). ‘Construction operations’ are defined in considerable detail in s. 105. In general terms, they are the construction, alteration, repair, etc. of buildings, structures, roadworks, docks and harbours, power lines, sewers and similar things. They include the installation of equipment such as heating, electrical or air conditioning, cleaning (both external and internal) carried out as part of construction and site clearance, tunnelling, foundations and other preparatory work, and painting or decorating. Such things as drilling for natural gas, mineral extraction, and manufacture of certain components, construction or demolition of plant where the primary activity is nuclear processing, effluent treatment or chemicals, construction of artistic works, sign writing and other peripheral installations are excluded. S. 107 makes clear that the provisions of the Act apply only to ‘agreements in writing’, and there are detailed provisions in that regard. This section covers situations where there is no signature, where the parties agree orally by reference to terms that are in writing, and where the agreement is evidenced in writing by being recorded by a third party with the parties’ authority. There is now a substantial body of case law on the topic.463 The Act requires that all construction contracts include certain important provisions: — Adjudication: Either party must have the right to refer a dispute to adjudication (qv), with the object of obtaining a decision from the adjudicator within 28 days of the date of referral. The notice of intention to refer may be given at any time, and the referral must take place within seven days of the date of the notice. The 28-day deadline may be extended by up to 14 days if the adjudicator requests and the referring party agrees, or for a longer period if both parties agree. The adjudicator has the power to take the initiative in ascertaining facts and law. The adjudicator’s decision is binding until the dispute is decided by litigation (qv), by arbitration (qv) or by agreement. However, the parties may agree to accept the adjudicator’s decision as final if they wish. The adjudicator is not liable for acts or omissions unless acting in bad faith. — Stage payments: A party is entitled to be paid in stages if the duration of the project is 45 days or longer. The parties may agree payment intervals and the amounts. — Date for payment: There must be a method by which the amount due and the date on which it is due can be calculated, and a final date for payment must be stated. — Notice of payment: There must be provision for the giving of a written notice no later than five days after the date payment is due. The notice must state the amount proposed to be paid, and the basis of calculation. — Set-off: Payment may not be withheld unless written notice has been given stating the amount to be withheld and the grounds for withholding. The notice must be given no later than the agreed period before final payment. 463 Allen Wilson Shopfitters v. Anthony Buckingham (2005) 102 Con LR 154; Trustees of the Stratfield Saye Estate v. AHL Construction Ltd [2004] EWHC 3286 (TCC).

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Hudson formula —

Suspension of performance of obligations: If the amount properly due has not been paid by the final date for payment, and if no effective notice withholding payment has been given, the party expecting payment has the right, on a minimum of seven days’ written notice, to suspend performance of all obligations under the contract until payment has been made in full. — Pay when paid : Except in cases of insolvency, a clause making payment dependent upon receipt of money from a third party is ineffective. The clause is not effective if the third party is insolvent. If a construction contract does not include these provisions, the Scheme for Construction Contracts (England and Wales) Regulations 1998 comes into effect to imply the missing clauses into the contract. It is not always realised that the Act applies to the terms of professional contracts as well as Works contracts and sub-contracts. S. 104 of the Act expressly refers to agreements to do architectural, design or surveying work, or to provide advice on building, engineering, interior or exterior decoration, or on the laying out of landscape. Most standard form construction contracts and all the professional terms of engagement comply with the Act, and therefore the Scheme is not relevant where such terms are used. For example, SBC clauses 4.3, 4.5, 4.9, 4.10, 4.11, 4.13, 4.14, 4.15, 4.16 and 9.2 comply with the Act. Since the introduction of the Act there has been a great deal of litigation. It is now established that the courts are unlikely to interfere with an adjudicator’s decision unless the adjudicator is in breach of the rules of natural justice, or is lacking jurisdiction.464 Adjudicators do not have jurisdiction to decide their own jurisdiction.465 Effectively, the courts recognise adjudication as being quick, but somewhat rough, justice, and in such circumstances adjudicators will sometimes give a wrong decision. The dispute an adjudicator has jurisdiction to decide is the one set out in the notice of adjudication. This dispute is the only issue the adjudicator may consider. Because the notice of adjudication is always given by the referring party, this has the effect of preventing the responding party from bringing any kind of counterclaim in the same adjudication. The responding party must start a separate adjudication should they wish to raise a ‘counterclaim’ matter. However, there is nothing to prevent the first referring party from agreeing to merge the two adjudications. A bill to revise the Act is currently proceeding through Parliament, and it is likely that some of the provisions will be amended. The Act has been generally accepted as successful, but there is broad agreement that certain provisions would benefit from being strengthened. See also: Notices; Scheme for Construction Contracts; Withholding notice.

Hudson formula A method of calculating the ‘head office overheads and profit’ quantum element in a contractor’s claim for direct loss and/or expense arising under a standard contract, e.g. SBC clause 4.23. The formula does not and cannot determine in principle whether a contractor has an entitlement to recover such loss and/or expense (refer below). The formula is based on the percentage to cover profit and head office on-costs as built into the tender (qv). 464 465

Bouygues (UK) Ltd v. Dahl-Jensen (UK) Ltd (2000) 73 Con LR 135. Homer Burgess Ltd v. Chinx (Annan) Ltd [2000] BLR 124.

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Hudson formula It takes the allowance made by the contractor for profit and head office overheads in its original tender, divides it by the original contract period, and multiplies the result by the period of contract overrun. Therefore at best the formula can offer only an approximate estimate of any such losses. As put forward in the 11th edition of Hudson, the formula was expressed as: Period of delay Head office profit percentage Contract sum × × 100 Contract period ( in weeks ) ( in weeks ) The formula was first so called because it appeared in Hudson’s Building and Engineering Contracts.466 It is a very simple but, many would say, flawed concept. The formula does not appear to have received ‘judicial’ approval in any reported case in this country. There will normally be a better way of establishing the loss than the use of a formula, and any use will usually be acceptable only where a tribunal is satisfied the contractor has incurred a loss, and there is no better evidence to quantify that loss. If better evidence is therefore available it should be produced, or the use of a formula may fail.467 The formula can be subjected to several specific criticisms: — It is based upon the contractor’s allowances in its tender, which may have been little more than a guess that was never achievable. — At best it requires adjustment to be made for the various factors for which recovery is not permitted, e.g. the contractor’s own inefficiency, or extensions of time on grounds that do not also permit recovery of loss and/or expense. — It ignores the contractor’s duty to make realistic attempts to deploy its resources elsewhere during any period of delay.468 — The value of the final account may well exceed the contract sum, and any proper valuation for variations is likely to have included an element of reimbursement for overheads and profit. — The use of the formula as it stands results in profit being added to the profit already in the contract sum, so that, at the very least, the formula as printed should read ‘Contract sum less overheads and profit’ rather than just ‘Contract sum’. — The formula can also produce under-recovery for the contractor where inflation during the period of delay increases the overhead costs envisaged at the time of tender. It is sometimes alleged that Hudson’s formula has been judicially approved in several cases, but this is not correct. The case usually quoted is J F Finnegan Ltd v. Sheffield City Council,469 where the judge referred to the Hudson formula with approval, but proceeded to apply the Emden formula (qv) without taking any argument as to its validity. Whittal Builders Co Ltd v. Chester-le-Street District Council470 is another case where mistaken attribution of the Hudson formula has taken place. 466

The latest edition is Hudson’s Building and Engineering Contracts, 11th edition (1995), Sweet & Maxwell: see p. 1076. 467 Tate & Lyle v. GLC [1982] 1 WLR 149. 468 Peak Construction (Liverpool) Ltd v. McKinney Foundations Ltd (1970) 1 BLR 111. 469 (1989) 43 BLR 124. 470 (1987) 11 Con LR 40.

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Human Rights Act 1998 The formula approach to contract claims should be avoided if possible, because ex contractu (qv) claims for direct loss and/or expense or its equivalent must be equated with claims for damages for breach of contract at common law, where a formula approach is not an acceptable method of quantifying damages. The formula approach also ignores the fact that overheads will not be recoverable at all unless the contractor can show that it had to turn down the chance to take on other work that would have contributed to overhead recovery during the period of overrun. Recovery of overheads is not based on the contractor’s loss of overheads, but rather on its lost opportunity to earn a contribution to overheads. Other formulae sometimes used by contractors include the Emden formula, already mentioned, and which is based on a percentage taken from the contractor’s organisation as a whole, and more recently the Eichleay formula (qv), which is of transatlantic origin.

Human Rights Act 1998 An Act of Parliament that gave effect to the European Convention on Human Rights 1950. It came into force on 2 October 2000. It is quite complicated. The purpose of the legislation is to provide statutory safeguards for existing human rights, including freedom of speech, thought, conscience and religion. Under the provisions of the Act complaints may be made to the European Commission on Human Rights and the European Court of Human Rights in Strasbourg. When first passed, the Act was thought to have relevance to the construction industry, and especially to dispute resolution. It was thought to add to the principles of natural justice and impartiality that already exist to provide fairness in the system of dispute resolution. Attention was drawn to Article 6(1), which deals with the right to a fair trial, and states, in part: In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing …

In considering adjudication (qv) and, in some instances, arbitration (qv), this part of the Act provoked some concerns that certain practices were contrary to the Act: — ‘Ambush’ occurs in adjudication proceedings, and a party could be disadvantaged. — Sometimes the parties have little or no opportunity to comment on evidence. — Reasons for the decision are not always required. — There are no public hearings in adjudication or arbitration. The Act refers to the public hearing ‘within a reasonable time’, and adjudication – and perhaps arbitration – cannot be said to provide that. Reference to ‘an independent and impartial tribunal established by law’ is not necessarily satisfied by adjudication or arbitration. Naming an adjudicator in a contract may contravene this principle. The requirement of the Act that ‘Judgment shall be pronounced publicly’ will not be satisfied by arbitration and adjudication, which are essentially private. Nevertheless, it has been held that an adjudicator exercising their functions under the HGCR Act 1996 is not a public authority, and the Human Rights Act does not apply to the adjudication process.471 471 Austin Hall Building Limited v. Buckland Securities Limited (2001) 17 Const LJ 325. See also Elanay Contracts Limited v. The Vestry [2001] BLR 33.

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I Illegal contract A contract in which either the consideration or the intention of the contract contravenes statute or common law. It may be illegal when made, or it may become illegal because of a change in the law. For example, a building contract that had as its primary objective the contravention of planning law would be an illegal contract. Such a case might arise if the parties made an agreement to build in a green belt area. An illegal contract is void (qv), and a party to such a contract will not succeed in any action it may bring in the courts based upon the contract. Thus a party paid money on the basis of an illegal contract who then refuses to carry out an obligation under that contract cannot as a general rule be made to refund the money. The general rule is that money paid under an illegal contract is irrecoverable.472 Money can be recovered only if a party can show that some fraud or duress was used to induce it to enter into the contract. A party discovering that the other party has an illegal intention must refuse further performance of the contract. The innocent party may bring an action to recover a reasonable sum for any work done.473 Strictly, an action (qv) cannot be brought under an illegal contract, but it may be possible to bring an action for fraud.474 The courts sometimes extend the concept to embrace contracts that are considered to be against public policy, e.g. a contract in restraint of trade. A contract may be illegal in its formation, or a change in the law may make further performance illegal, in which case it is discharged by frustration. See also: Contract; Frustration; Public policy.

Illness Illness may result in frustration of a contract for personal services, e.g. contract of employment.475 A great many factors have to be taken into account, including the terms of the contract, the nature of the employment, the nature and duration of the illness, and the prospects of recovery. Where a contract is ‘personal’ in character (e.g. a sculptor producing a work of art), then a grave and lengthy illness may also frustrate the contract. As the personality of an architect can be of vital importance to the employer, the same principle would apply. That is probably the position even where the architect in question is an employee of the commissioned firm, provided such an employee is named in the appointment document. Conceivably, if a builder is an individual whose personality is of importance to the completed work, serious illness could also result in frustration, but there appear to be no reported cases. See also: Frustration.

Immediately Where a building contract stipulates that action must be taken immediately, then the action normally must be performed with all reasonable speed. Whether or not the speed taken has or has not been ‘reasonable’ will

472

Parkinson v. College of Ambulance Ltd [1925] 2 KB 1. Mohamed v. Alaga & Co [1999] 3 All ER 699. 474 Saunders v. Edwards [1987] 1 WLR 1116. 475 Marshall v. Harland & Wolff Ltd [1972] ICR 101. 473

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Impartial depend upon the particular circumstances surrounding the action concerned. However, it is clear that where a contract requires something to be done ‘immediately’ it is not sufficient if it is done simply within a reasonable time.476 See also: As soon as possible; Directly; Forthwith.

Impartial An obligation not to be partial or biased, and to treat all equally. A tribunal that gives rulings should be unprejudiced, and not show favouritism. It is particularly relevant in adjudication, where section 108(2)(e) of the Housing Grants, Construction and Regeneration Act 1996 requires construction contracts to impose a duty on an adjudicator to act impartially. The Scheme for Construction Contracts (England and Wales) Regulations and the equivalent Scottish and Northern Ireland schemes expressly require adjudicators to carry out their duties impartially. The same obligation is placed on an arbitrator by section 33(i) of the Arbitration Act 1996. In fact that section goes further, and makes it clear that an arbitrator must act fairly and impartially, and give each party a reasonable opportunity of putting their case and dealing with that of the other side. A person such as an architect, contract administrator or project manager who undertakes duties in respect of matters of certification and assessment under a contract is likely to have a duty to act impartially.477 See also: Bias.

Impediment A disability or obstruction that prevents an individual from entering into a legal relationship, e.g. a contract. Alternatively, an obstruction or obstacle that hinders or prevents a party from fulfilling an obligation under a contract. The word is used within the extension of time (qv) and loss and/or expense (qv) provisions within certain of the JCT contracts. For example, SBC clause 2.29.6 refers to ‘any impediment, prevention or default’ on the part of the employer or others as a relevant event (qv) and similar wording is used at ‘relevant matter’ (qv) in clause 4.24.5. See also: Default; Prevention.

Implied contract A contract may be implied from the conduct of the parties, e.g. by the contractor starting work upon receipt of an order.478 The term does not refer to the effect of the contract, but merely to the way in which it came about. An express contract is in words, whereas an implied contract has either no words or insufficient words alone to establish a contract. See also: Contract; Implied promise; Simple contract.

Implied promise A term usually used to describe the common situation where variations under a contract should be instructed in writing, but where an employer orally orders work to be carried out that the employer is aware will cause extra cost. In such circumstances it may be found there was an implied promise ‘to pay’, particularly where otherwise the only other conclusion would

476

Alexiadi v. Robinson (1861) 2 F&F 679. (1) Costain Limited (2) O’Rourke Civil Engineering Limited (3) Bachy Soletanche Limited (4) Emcor Drake & Scull Group Plc v. (1) Bechtel Limited (2) Mr Fady Bassily [2005] EWHC 1018 (TCC). 478 A Davies & Co (Shopfitters) Ltd v. William Old Ltd (1969) 67 LGR 695. 477

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Implied term be fraud. It may be described as a waiver, in that the conduct leads the contractor to believe the employer’s strict legal rights will not be relied on.479 See also: Implied contract; Quasi-contract.

Implied term A term that is not written down in a contract, nor orally expressed at the time the contract is made (i.e. not expressly stated), but which the law implies. In summary the following must be satisfied for a term to be implied: (i) it must be reasonable and equitable; (ii) it must be necessary to give business efficacy to the contract; (iii) it must be so obvious it goes without saying; (iv) it must be of clear expression; and (v) it must not contradict an express term of the contract.480 Although often stated, it is quite incorrect that a term will be implied merely because the court thinks it would have been reasonable to insert it into the contract. It has been said that there are three types of implied term.481 In fact many more different types can be distinguished. The expression is used in different senses, and implied terms may be included: — By local custom.482 — By usage in a particular trade, profession or business where it has invariably been a long-standing practice, e.g. ‘reduced brickwork’ means brickwork nine inches thick.483 The usage or practice must be well known in that trade, profession or business. It must have certainty, and it must be such that fair-minded people would adopt it. — By usage of the parties’ ‘own dictionary’ – where both have agreed on using language with a meaning different from the common meaning.484 — By statute, e.g. under the Supply of Goods and Services Act 1982 and Sale of Goods Act 1979, the Defective Premises Act 1972 and, of course, the Housing Grants, Construction and Regeneration Act 1996, all of which provide for the implication of terms in different types of contract. The Housing Grants, Construction and Regeneration Act 1996 expressly states that the Scheme for Construction Contracts (England and Wales) Regulations 1998 applies as a default if the provisions agreed by the parties do not comply with the Act. The provisions in the scheme have effect as implied terms (s. 114(4)). — At common law, and often called implied warranties. For example, a contractor will supply good and proper materials,485 and will provide completed work that is constructed in a good and workmanlike manner, of materials that are of good quality and reasonably fit for their intended purpose.486 There are also implied terms that apply to employers, e.g. not to prevent completion, and to do that which is necessary to bring about completion of the contract.487 479

Rickards v. Oppenheim [1950] 1 KB 616. BP Refinery (Westernport) v. Shire of Hastings [1979] ALJR 20. 481 Luxor (Eastbourne) Ltd v. Cooper [1941] 1 All ER 33. 482 Brown v. IRC [1964] 3 All ER 119. 483 Symonds v. Lloyd (1859) 141 ER 622. 484 Partenreederei MS Karen Oltmann v. Scarsdale Shipping Co (The Karen Oltmann) [1976] 2 Lloyds Rep 708. 485 Young & Marten Ltd v. McManus Childs Ltd (1969) 9 BLR 77. 486 Test Valley Borough Council v. Greater London Council (1979) 13 BLR 63; Hancock v. B W Brazier (Anerley) Ltd [1966] 2 All ER 901. 487 Cory Ltd v. City of London Corporation [1951] 2 All ER 85. 480

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To give a contract commercial effectiveness. Commonly referred to as ‘business efficacy’. The courts will often be prepared to imply a term where the contract is otherwise complete, but needs the term in question in order to work.488 — If a term can be said to be the presumed intention of the parties, the courts will apply what is quaintly known as the ‘officious bystander test’. If, when the parties were agreeing their terms, an officious bystander had been asked if they were including the term in question, they would have testily said ‘Oh, of course.’ It is sometimes referred to as being a term so obvious that it goes without saying.489 — Where there is a previous course of dealing (qv) between the parties. There can never be an implied term to give business efficacy to a contract if there is an express term dealing with the same matter.490 This principle does not apply to those terms that are to be implied by law, i.e. under statute or at common law. Contractors’ claims (qv) may be based on breach of some implied term, e.g. on the part of the employer. See also: Express term.

Impossibility A contract that is impossible to perform is void (qv), and cannot be enforced. A contract that is possible at the time it is made, but subsequently becomes impossible because of some intervening event, is said to be frustrated. It was originally valid, but may be declared void. In cases of impossibility of performance from the outset, the parties are left to bear their own losses unless one of them can show that they were induced to enter into the contract by fraud (qv) or misrepresentation (qv). Where a party has created a situation that makes the contract impossible to perform, the other party may be advised to also treat it as a renunciation (qv), because this is easier to prove than factual impossibility. Although impossibility is considered primarily from a standpoint of physical impossibility (e.g. it is impossible to carry out a contract to paint a building that has been destroyed by fire), the courts have been prepared to accept commercial impossibility as a sound reason for failure to perform and to so interpret physical impossibility.491 It has been said: ‘In matters of business, a thing is said to be impossible when it is not practicable; and a thing is impracticable when it can only be done at excessive or unreasonable cost.’492 See also: Frustration.

Improper materials Materials that are not in accordance with the contract. The architect may instruct that such materials are to be removed from site, e.g. SBC clause 3.18.1, IC and ICD clause 3.15.1, and ACA 8.1(a).

In connection with A phrase commonly used in standard arbitration clauses, thought to broaden the jurisdiction of the arbitrator and increase the nature of

488

The Moorcock (1889) 14 PD 64; Liverpool City Council v. Irwin [1977] AC 239. Shirlaw v. Southern Foundries (1926) Ltd [1939] 2 KB 206. 490 Les Affréteurs Réunis v. Leopold Walford [1919] AC 801. 491 Turriff v. Welsh National Water Development Authority (1979) 1994 Con LYB 122. 492 Moss v. Smith (1977) 76 LGR 284 at 293 per Maule J. 489

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Incorporation disputes that may be referred, e.g. ‘disputes arising under or in connection with’. ‘In connection with’ was thought to include claims for rectification for mistake or misrepresentation, or negligent misstatement. This was seen as broader in scope than the phrase ‘arising under’ (qv). However, the House of Lords, adopting a commercial approach when interpreting an arbitration clause in certain charter parties before them, made clear that the interpretation of the meaning of ‘disputes arising under a contract’ would include those ‘disputes arising in connection with the contract’.493 The court concluded that rational businessmen are likely to have intended all disputes arising out of their relationship to be referred to the same tribunal. It was held that such clauses should be construed in accordance with this presumption unless the language makes clear that certain matters were not to be referred to the tribunal. It was thought that the jurisdiction of adjudicators under the Housing Grants, Construction and Regeneration Act 1996 s. 108(i) was limited, given that only those disputes ‘arising under’ the contract can be referred. The decision of the House of Lords creates uncertainty, as it is not clear whether it applies to statutory adjudication, though there would seem to be no obvious reason other than on policy grounds why it should not.

Inconsistency Provisions are inconsistent if they cannot sensibly be read together (i.e. they are discordant or incompatible); usually found in the sense of a conflict when used in building contracts. It generally refers to an inconsistency (or conflict) between various documents, such as the printed contract, drawings, specifications and bills of quantities. The term is used in MW and MWD clauses 2.4 and 2.5 respectively, but in other JCT contracts the term ‘discrepancy’ (qv) is used instead. It is important for a contract to have a term of this type, given that the contract will be composed of a collation of different documents. The person assembling the documents may not be in a position to know the detailed content of each document, and it is possible that some of the documents will contain conflicting provisions. The term addressing inconsistencies will state what is to be done when an inconsistency is found. Usually, a contractor who finds an inconsistency must notify the architect, who must then issue an instruction. However, unless expressly stated otherwise, the contractor has no obligation to look for or find inconsistencies, and if they are not found until built, it is the employer who will usually have to bear the cost of making good.494 The word is also used in the NEC at clause 17.1: ‘an ambiguity or inconsistency’. Should either the project manager or contractor become aware of any inconsistency, then they are to notify the other. The matter is to be resolved by the project manager, and set out in an instruction. See also: Divergence.

Incorporation A word with several meanings in law. It may refer to the process by which a corporation (qv) is constituted, i.e. the formation of an organisation with a separate personality in law. It is also used when referring to the inclusion of specific contract terms or conditions in a contract. A further use of the word is found in many building contracts with reference to the passing of property 493 Premium Nafta Products Limited and Others v. Fili Shipping Company Limited and Others [2007] 4 All ER 951. 494 London Borough of Merton v. Stanley Hugh Leach Ltd (1985) 32 BLR 51.

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Incorporation of documents or risk. The general rule is that when materials are actually built into a structure, they become part of that structure. The maxim of the law is ‘whatever is affixed to the soil becomes part of the soil’, and this basic principle will defeat any retention of title (qv) clause. It is a question of fact when goods and materials become fully, finally and properly incorporated into the Works (qv). Clause 6.7.1 of the Standard Building Sub-Contract SBC/Sub/C places responsibility on the sub-contractor for loss or damage to sub-contract ‘site materials’. ‘Site materials’ is defined in clause 1.1 as being unfixed materials and goods on or adjacent to the main contract Works that are intended for incorporation. Once incorporated, they are no longer ‘site materials’. Whether or not it can be said that a particular material has been incorporated will depend upon all the circumstances, including the degree of incorporation usual for the material in question. Thus it would be expected that electrical sockets are firmly screwed into position, and doors hung with the specified number of hinges and screws. The JCT standard forms say nothing expressly about where the risk lies once the goods are incorporated. Incorporated goods tend to be at the contractor’s risk until practical completion or similar. See also: Incorporation of terms; Passing of risk.

Incorporation of documents Extrinsic evidence of the intentions of the parties is not usually admissible to assist a court or an arbitrator in the case of a dispute. Therefore it is crucial that all documents (e.g. drawings, bills of quantities, specification, schedules) are incorporated in, and become part of, the contract documents (qv). In most standard form contracts this is achieved by inserting a reference to the documents in the printed conditions, and clearly identifying each document to which reference is made (e.g. ACA article C and DB contract particulars). For example, each document may bear the written inscription ‘This is one of the contract documents referred to in the agreement dated…’ signed and dated by the parties. By way of example, the JCT contracts generally make provision for such incorporation by listing the types of document in the recitals and/or contract particulars (qv) and providing for reference to documents not used to be deleted. Generally, the contract documents are defined in clause 1.1 of JCT contracts. The RIBA Standard Agreement for the Appointment of an Architect (S-Con-07-A) (qv) consists of a memorandum of agreement in which there is space to list the documents attached to the agreement. The intention is presumably that such documents are incorporated in the agreement. Alternatively, the agreement may be formed by use of a model letter, which has provision for incorporating the relevant documents rather more effectively. It is possible to incorporate a standard form of contract by an unambiguous reference to it in an exchange of letters between the parties. For example, if a contractor tenders on the basis of the SBC, then an unqualified acceptance of the tender would incorporate the SBC terms in the resulting agreement. This would have the same effect as if the parties had executed a formal document in those terms, assuming, of course, that neither party attempts to impose conflicting terms.495 It would also depend on all the relevant details necessary 495

Killby & Gayford Ltd v. Selincourt Ltd (1973) 3 BLR 106.

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Incorporation of terms to complete the recitals, articles and contract particulars (or equivalent) having being clearly set out in the invitation to tender, or in the tender form, and on the documents being combined without conflict. See also: Admissibility of evidence.

Incorporation of terms A contract entered into between two parties does not necessarily contain all the relevant terms governing the contract in a single document. It is quite possible, indeed common practice, for terms to be incorporated in an otherwise short document simply by inserting a reference in that document to those terms. This is often done where the contract is formed by an exchange of letters. A contracting party wishing to rely on such incorporation must show that the standard terms were properly incorporated. In order to do this it must be shown that the parties intended the terms in question to form part of the contract. This can be demonstrated by proving either that the party alleged to be bound by the terms signed the document containing the reference to such terms, or that the party entered into the contract having been given notice of the terms, or was fully aware that such terms were to be treated as being incorporated into the contract. It is essential that the terms in question be brought to the attention of the contracting party before entering into the contract.496 However, having signed the document, in principle a party will be bound by its terms whether or not they have been read or understood. An exception to this general rule may arise if the person putting forward the document misrepresents its contents.497 Whether there was sufficient notification is sometimes difficult to establish, but guidance can be obtained from the decisions of the courts.498 A reference in a contractual document to the contract being subject to general conditions ‘available on request’ is sufficient to incorporate into the contract the current edition of those conditions.499 Having been given notice, it matters not whether the party requests a copy of the conditions. This principle is of importance in the construction industry, where, for example, an invitation to tender (qv) may easily refer to the contract conditions ‘being available for inspection at the architect’s office’, which is not usually a good practice. It is surprising that few tenderers are likely to take advantage of such an invitation, and less surprising that problems do often result. The incorporation of terms by reference was addressed by the Court of Appeal in Modern Buildings (Wales) Ltd v. Limmer & Trinidad Co Ltd.500 The words ‘in accordance with the appropriate form for nominated sub-contractors’ were used in an exchange of correspondence between a main contractor and a nominated sub-contractor (qv). This was held to be sufficient to incorporate the terms of the then current FASS/NFBTE form of nominated sub-contract.

496

Olley v. Marlborough Court Ltd [1949] 1 All ER 127. Curtis v. Chemical Cleaning Co Ltd [1951] 1 All ER 837. 498 See Co-operative Insurance Society Ltd v. Henry Boot Scotland Ltd (2002) 84 Con LR 164 for an illustration of when the courts held a ground investigation report not to be incorporated into the contract. 499 Smith v. South Wales Switchgear Ltd (1978) 8 BLR 1. 500 [1975] 2 All ER 549. 497

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Incorporeal hereditament Terms will not necessarily be incorporated simply because parties have contracted on similar terms on previous occasions; but terms may be treated as being incorporated in a contract between parties if it can be shown that there has been a course of dealing (qv) between the same parties. There must be evidence of each party leading the other to believe that they intended to contract on the basis of terms that had been consistently used by them in the past. It has also been held that terms can be implied by a common understanding of the parties of the usual conditions applying to the work in question.501 A practice that appears to be less common now is the incorporation of terms of a main contract in a sub-contract by the simple expedient of referring to them mutatis mutandis (with necessary changes). It was often used by contractors (and even sub-contractors to sub-sub-contractors) to save the trouble and expense of having specific sub-contract forms drafted. In theory, it allows the stepping down of obligations from one party to another, but generally the obligations owed by, say, the contractor to the employer under, say, a JCT contract are vastly different from those owed by a sub-contractor to the contractor on the same project. Many of the clauses will be irrelevant: the necessary substitution of ‘Contractor’ for ‘Employer’ and ‘Sub-contractor’ for ‘Contractor’ is fraught with difficulty, and the courts have struggled to give them sensible meaning.502 The incorporation of arbitration agreements deserves special attention, given their special status. It is possible to incorporate an arbitration agreement from one contract in another simply by making reference to the incorporation of such terms. However, if the incorporation is to have proper effect, the form of words used must be unambiguous, and it must be quite clear that the parties’ intention is to agree that arbitration is to be the final dispute resolution procedure. The courts will carefully examine the words used in order to establish whether there has been a clear intention by the parties to incorporate those particular arbitration provisions from another contract.503 Thus where a main contractor purports to incorporate the standard terms of a main contract into a sub-contract, definitive, clear evidence of an intention to incorporate the arbitration clause will be required – more than a simple incorporation of the standard terms.504 See also: Arbitration agreement; Misrepresentation; Unfair Contract Terms Act 1977.

Incorporeal hereditament An interest in land that has no physical existence, i.e. is intangible. An example would be a right over land, such as a right of way or a right to light. See also: Chattels; Goods.

Indemnity clauses An indemnity clause is a clause in which one party undertakes to make good a loss suffered by another party. Most standard form building contracts contain indemnity clauses under which one party, usually the contractor, promises to indemnify the other party, usually the employer, against 501

British Crane Hire Corporation Ltd v. Ipswich Plant Hire Ltd [1974] 1 All ER 1059. Brightside Kilpatrick Engineering Services v. Mitchell Construction (1973) Ltd (1975) 1 BLR 64. 503 Aughton Ltd v. M F Kent Services Ltd (1991) 57 BLR 1. 504 Roche Products Ltd v. Freeman Process Systems (1996) 80 BLR 102. 502

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Independent contractor specified liabilities: e.g. SBC, DB, IC and ICD clauses 6.1 and 6.2, ACA clause 6.3, and GC/Works clause 19. Indemnity clauses are not favoured by the courts, and are construed strictly against the person seeking to rely on them. This is particularly the case where a party seeks to rely upon an indemnity as a defence following its own negligence: If a person obtains an indemnity against the consequences of certain acts, the indemnity is not to be construed so as to include the consequences of his own negligence unless those consequences are covered either expressly or by necessary implication.505

There may be significant consequences under the Limitation Act 1980 for a party governed by an indemnity clause. For the purposes of the Act, time does not begin to run under an indemnity clause until the indemnified party suffers a loss. The usual rule is that this will occur when judgment has been entered against that party, or an arbitration award or a binding settlement,506 and this effectively extends the period of liability. The rule is not invariable, and depends upon the precise wording of the indemnity clause. In extreme cases time may not start to run until payment has been made by the indemnified party. It is particularly important where sub-contractors or consultants are concerned. Most professional indemnity insurers will not accept indemnity clauses in terms of engagement. See also: Contra proferentem; Insurance; Limitation of actions.

Indemnity contract A contract that creates an independent obligation to save harmless (qv) against some specified loss. The person giving the indemnity is required to make good the loss suffered by the party to whom the indemnity is given. In its widest sense a contract of indemnity includes contracts of guarantee and insurance, but in a narrow sense it is used in contrast to a guarantee contract. Indemnities are usually evidenced in writing, but strictly an indemnity need not be evidenced in writing. Indemnity contracts are similar to guarantee contracts. However, they are not identical. In a guarantee contract the surety takes on a secondary liability in respect of a debtor who has the primary liability, for example, to perform a contract. In an indemnity contract the surety takes on primary liability. Guarantee contracts must be evidenced in writing. A performance guarantee or performance bond is a very stringent example of a guarantee contract. See also: Bond; Guarantee; Indemnity clauses.

Independent contractor A person (qv) who works under a contract for services, as opposed to one who works under a contract of service, i.e. an employee. In practice it is often difficult to distinguish between the two situations. The distinction may be important for a number of purposes, such as deciding whether a person should be paying National Insurance contributions, or the extent and type of taxation of income. The most realistic test is that there will be a contract for services ‘if the work, although done for the business is not integrated into it, but is only accessory to it,’507 e.g. the normal architect–client relationship. 505

Walters v. Whessoe Ltd and Shell Refining Co Ltd (1996) 6 BLR 23 at 34 per Lord Devlin. County & District Properties Ltd v. C Jenner & Son Ltd (1976) 3 BLR 41. 507 Stevenson Jordan & Harrison v. Macdonald & Evans (1952) 1 TLR 101 at 111 per Denning LJ. 506

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Industrial property The contractor under the normal building contract is an independent contractor. In general, a person is not liable for the negligence of independent contractors or agents to the same extent as for the negligence of the person’s employees. It is principally for this reason that the distinction between employees and independent contractors is important, although in many instances under building contracts the architect will be acting as the agent of the employer so as to make the employer vicariously responsible. In Rees & Kirby Ltd v. Swansea City Council the general position was aptly summarised at first instance as follows: An architect is usually and for the most part a specialist exercising his special skills independently of his employer. If he is in breach of his professional duties he may be sued personally. There may, however, be instances where the exercise of his professional duties is sufficiently linked to the conduct and attitude of the employers so as to make them liable for his default.508

It is likely that the liability will not arise until the employer is aware of the need to remind the architect of their obligations.509 See also: Agency; Master.

Industrial property A generic term applied to the category of property rights of an intangible nature that are valuable in industry, e.g. patents (qv), trademarks and industrial ‘know-how’. See also: Copyright.

Inevitable accident An accident ‘not avoidable by any such precautions as a reasonable man, doing such an act then and there, could be expected to take’:510 e.g. a fire caused by lightning. Inevitable accident is sometimes said to be a defence to certain kinds of actions in tort (qv), but it has been said that the concept of inevitable accident no longer has any useful function, and it is doubtful whether there is much or any advantage gained by using the phrase. If statute or common law imposes strict liability, such as the rule in Rylands v. Fletcher,511 the inevitability or otherwise of the event will not in any event be a defence. Where damage is caused by fire, the Fires Prevention (Metropolis) Act 1774, which applies to the whole country, provides that no action is maintainable against anyone on whose land a fire begins ‘accidentally’.512 Note that the Act gives no protection in cases where the fire has begun accidentally but the owner has been negligent in letting it spread.513 However, the burden of proving negligence is on the claimant: the defendant does not have to prove that the fire was accidental.

Information In the context of building contracts it refers to such documents as drawings (qv), schedules and instructions (qv) that are reasonably necessary to 508

(1983) 25 BLR 129 at 147 per Kilner Brown J. Penwith District Council v. VP Developments Ltd [1999] EWHC Technology 231 (21 May) and Cantrell and Another v. Wright & Fuller Ltd (2003) 91 Con LR 97. 510 Sir Frederick Pollock. 511 Rylands v. Fletcher (1868) LR 1 Exch 256. 512 Collingwood v. Home & Colonial Stores Ltd [1936] 3 All ER 200. 513 Goldman v. Hargrave [1967] 2 All ER 989. 509

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Information enable the contractor to carry out and complete the Works in accordance with the contract. All contracts require the architect or employer to provide the contractor with copies of the contract documents, which will include drawings, schedules, specifications, bills of quantities and the like, when the contract is executed. Under traditional contracts, where the architect carries out all the design, the architect is responsible for the provision of further information to the contractor. For SBC, IC and ICD the construction information to be provided by the architect is contained in clauses 2.9 to 2.12 and clauses 2.9 to 2.11 respectively. Each of these contracts provides for an information release schedule (qv). There is no such provision in MW. Experience suggests that such schedules are little used in practice. If an information release schedule is not provided, or to the extent that the schedule does not refer to particular drawings, the architect is required to provide the contractor from time to time with further drawings, details and information to enable it to carry out and complete the Works by the date for completion. If the architect fails to provide this information at the correct time, it is a breach of contract, for which the employer may become liable to the contractor in damages. However, under SBC and IC the contractor has an obligation to advise the architect, so far as it is reasonably practicable to do so, sufficiently in advance of the date by which the information is required if it has reason to believe that the architect is unaware when the information is needed. The architect is entitled to ‘have regard’ to the progress of the Works unless practical completion is likely to be achieved before the date for completion in the contract, in which case the architect should ‘have regard’ to the completion date.514 The effect is that if the contractor is delayed so that it will not achieve practical completion by the completion date, the architect can delay the issue of information accordingly, but that if the contractor is likely to finish early, the architect need not speed up the provision of information to enable the contractor to do so, but may issue the information so as to allow the contractor to complete by the date for completion. Delaying the provision of information, even where the contractor is in delay, may not always be prudent. In deciding what amounts to a reasonable time for the contractor to receive information, account must be taken of the time reasonably required for the architect to prepare the information.515 The contracts provide remedies in the form of extensions of time and loss and/or expense for the contractor if the architect fails to comply with the provisions: SBC clauses 2.29.6 and 4.24.5 and IC and ICD clauses 2.20.6 and 4.18.5. The ACA contract provides, at clause 2.1 alternative 1, for information to be provided by the architect in accordance with the time schedule (qv) or, if not there stated, as and when reasonably necessary. GC/Works/1 deals with the matter very briefly. Clause 40(1) empowers the PM to issue further drawings, details, instructions, directions and explanations ‘from time to time’. Terms requiring the timing of issue of such information to be reasonable in relation to the Works programme and/or progress doubtless would be implied.

514 515

Glenlion Construction Ltd v. The Guiness Trust (1987) 39 BLR 89. Neodox Ltd v. Borough of Swinton & Pendlebury (1958) 5 BLR 34.

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Information release schedule Where DB is employed or where, under SBC or ICD, the employer wishes to pass some design responsibility to the contractor, the contractor will also acquire responsibility for the provision of information about the contractor’s designed portion (CDP). This is dealt with in DB clause 2.8, SBC clauses 2.9.2 and 2.9.3, and ICD clauses 2.10.2 and 2.10.3. The contractor is simply required to provide information reasonably necessary to explain the Contractor’s Proposals as and when necessary from time to time. There is a proviso in each case that the contractor must not commence any work shown on the information until the submission procedure has been complied with. DB and SBC both have a detailed design submission procedure (qv) in Schedule 1, but the parties are free to agree this or some other procedure if they so wish. There is no such detailed procedure in ICD, and therefore appropriate wording should be included within the bills of quantities or specification to set out a suitable procedure. When the contractor undertakes design under ACA, provision exists for the submission of contractor’s information at clause 2.1 and clause 2.2 alternative 2. The contractor is to submit the information as reasonably necessary from time to time to explain and amplify the contract documents. A simple procedure for submission is set out in clauses 2.3 to 2.5. GC/Works/1 provides for contractor design at clause 10. Clause 10(1) stipulates that the contractor must submit two copies of design information to the project manager. No specific requirement about the timing of the submission is laid down, but the contractor is prohibited from commencing work until the design has been approved in writing by the project manager. Reference to ‘information’ is also made in SBC, IC and ICD clause 2.7 and DB clause 2.6. These clauses, which are virtually identical, deal with work that is not part of the contract. There are two situations described, the first where the employer has included information within the relevant contract documents, and the second where such information is not included. If the information is included, the contractor must allow the work to be carried out by persons engaged directly by the employer. If there is no such information, the work may be carried out only with the contractor’s permission. See also: Employer’s persons.

Information release schedule A list of dates on which information, reasonably necessary to enable a contractor to carry out and complete the contract Works, will be released to the contractor. It must be distinguished from the ad hoc lists of ‘information required’ that are often produced by a contractor, and which state the dates on which the contractor wishes to receive particular information. Provision is made for an information release schedule in SBC clause 2.11 and IC and ICD clause 2.10. It is a matter for the employer and architect to decide whether or not to issue an information release schedule. If the schedule is not to be provided, the relevant recital must be deleted. Where an information release schedule is provided, the architect’s obligation is to provide the information set out at the times stated. Prevention (qv) by some act or default of the contractor or of any contractor’s persons (qv) will excuse the architect from compliance, but it is difficult to envisage how such an act of prevention could take place and, more to the point, why the contractor should wish to prevent such release. However, the employer and the contractor may agree to vary the time when the information is to be issued. 256

Injunction The provision of an information release schedule does not appear to be common. That is probably because it is difficult to see how the system would work in practice, and also it commits the architect to a specific timetable. It is a well-established principle that the contractor is entitled to organise the work in whatever way it chooses, and to decide, within reasonable limits, when information and details should be provided.516 In order that the contractor can plan its work properly, it must know at the time of tender what information is to be provided to enable the work to be carried out. However, if the architect decides to issue an information release schedule, it involves the architect being able to guess the way in which each separate tenderer intends to tackle the project. That is clearly unworkable. It is possible for the architect to issue the schedule with the invitation to tender, thus indicating to the tenderers the earliest dates when various parts of the Works can be carried out. However, this could severely limit the contractor’s right to organise the work in its own way. The information release schedule is not included in the list of contract documents, and it appears to occupy an indeterminate space between the contract documents and other documents generated by the contract, such as the master programme (qv). The architect must comply with the schedule, although the contractor need not comply with its programme. Moreover, as noted above, in order to be workable, the schedule must be available for the contractor to take into account at tender stage. It is possible for the parties to agree a schedule after the contract has been let, but that is more or less what happens in practice. The time schedule in ACA includes a part that is similar to the JCT information release schedule, but more extensive in scope. It lists the information to be provided under clause 2, whether by the architect or contractor. It is a contract document, but that does not seem to overcome all the difficulties noted above.

Injunction An equitable remedy whereby a court may grant an order restraining a person from acting, or requiring the person to act. The courts will not issue an injunction if the matter can be dealt with by the payment of damages. However, there are some situations where damages would not deal with the problem.517 The danger that an historic building will be demolished might well warrant an injunction, because a subsequent award of damages would not enable the building to be restored to its original position. The same, or indeed a stronger, case could be made for an injunction to restrain the cutting down of an ancient oak tree. Breaches of restrictive covenants will usually be dealt with by mandatory injunctions to remove the breach. Before issuing an injunction a court need not be satisfied that there is a prima facie (qv) case in favour of the claimant. It is enough if the claimant can show that there is a serious issue to be tried.518 A party who seeks and gains an injunction preventing another from doing some act, but who subsequently does not succeed in court, may be liable in damages to the other for any resultant delay. Thus an injunction to stop building work will be granted only in exceptional circumstances, because the resultant delays will be costly.

516

Wells v. Army & Navy Co-operative Society Ltd (1902) 86 LT 764. For example see Bath & North East Somerset District Council v. Mowlem plc (2004) 100 Con LR 1. 518 American Cyanamid Co v. Ethicon Ltd [1975] AC 396. 517

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Injury There are various categories of injunction, and a number of different names are used. Among the most common are: — Prohibitory: Where the court issues an order to stop some future action, for example a likely breach of contract. — Mandatory: Where the court issues an order restraining a particular action, or requiring that a particular action shall be carried out. Injunctions are generally considered as merely preventive, but a mandatory injunction can be used to make sure that an important contractual duty is carried out. — Interim: Where a temporary order is issued to maintain the current position for a finite period, usually to allow various legal steps to be taken.519 — Temporary: Where an order is made to last for only a specified period of time. — Permanent: Where the order has no specified end date, and it is intended to last indefinitely. See also: Issue; Specific performance.

Injury Harm done to persons or property. Injury need not be physical; it may be purely an economic loss. It is generally actionable in contract (qv) or in tort (qv). However, actions to recover pure economic loss (qv) in negligence have been restricted, following the decision in Murphy v. Brentwood District Council.520 See also: Action; Damage; Damages; Insurance.

Innocent misrepresentation An untrue statement of fact made innocently. It does not give rise to an action for damages unless made in the course of contractual negotiations and it is one of the causes that induced the other party to enter into the contract. It is to be contrasted with fraudulent misrepresentation (qv) and negligent misrepresentation (qv). The test is whether the statement would have affected the judgement of a reasonable man in deciding whether to enter into the contract. An innocent misrepresentation may entitle the innocent party to rescind the contract, provided action is taken promptly. The misrepresentation will be the basis of a claim for damages if it can be interpreted as a contractual promise. Damages can be granted at the discretion of the court in lieu of rescission for innocent misrepresentation, but they cannot be claimed as a right under s. 2(2) of the Misrepresentation Act 1967. Under the Act the innocent party can get rescission or damages, but not both. See also: Misrepresentation; Rescission.

Innominate term See: Express term. Insolvency The state of being unable to meet one’s debts as they fall due, and a creditor is pressing for payment. In such a situation an individual may become or be made bankrupt, or may try to avoid bankruptcy by making a composition (qv) or a voluntary arrangement with creditors. So far as a company registered under the Companies Acts is concerned, the position is more complex, and there are several options. The company may: 519

A Scottish case, Quality Street Properties (Trading) Limited v. Elmwood (Glasgow) Limited (2002) CILL 1922 is an example of when an interim injunction may be sought. 520 (1990) 50 BLR 1.

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Inspection of the site —

opt to or be forced to commence winding-up proceedings, known as liquidation (qv); — have an administrator appointed; — have an administrative receiver appointed; — propose a voluntary arrangement; — enter into a scheme of arrangement. Insolvency is not, in itself, a breach of contract, although it may lead to a breach of contract if the contractor becomes unable to comply with its obligations. Insolvency is a ground for termination of the contractor’s employment under most forms of contract. Sometimes the termination is automatic. Insolvency is usefully defined in SBC, IC, ICD and DB clause 8.1, MW and MWD clause 6.1 in broadly the same terms as above. Where the contractor becomes insolvent, termination is not automatic, but the employer may terminate without any period of prior notice. Moreover, certain consequences follow from the date the contractor becomes insolvent, whether or not the employer has terminated. For example, provisions requiring further payment cease to apply, and the contractor’s obligations to carry out the Works are suspended. If the employer becomes insolvent, then the contractor may also terminate by notice without the need for any prior warning. ACA clause 20.3 provides that either party upon the insolvency of the other party may terminate the contractor’s employment by notice to the other. The insolvency events are similar, but not identical, to those set out in JCT contracts. Under NEC clause 9 either party may terminate the contractor’s obligation to provide the Works for any of the specified reasons. Clause 91.1 sets out the insolvency grounds for such termination. See also PPC clause 26.2 and GC/Works/1 clause 56(6)(c) and (d). See also: Bankruptcy.

Inspection of documents Where the parties are engaged in arbitration or litigation, there may be provision for disclosure and inspection of the documents held by each side relevant to the dispute. This usually involves a visit for the purposes of inspection to the offices of the other party, and the provision of photocopies of particular documents as requested and paid for by the requesting party. A clause in the tender documents, e.g. bills of quantities (qv) sent out with an invitation to tender, may refer to drawings not included in the set sent to the contractor but available for inspection at the office of, say, the architect. Depending upon the precise wording, such a clause may be sufficient to incorporate the documents in any subsequent contract. The clause usually provides that the contractor will be deemed to have inspected the documents, whether or not, as a matter of fact, it has actually done so. See also: Disclosure; Incorporation of documents.

Inspection of the site The Standard Agreement for the Appointment of an Architect (SFA/99) and the Conditions of Engagement (CE/99) refer to the architect visiting the site during the Appraisal stage of the RIBA Plan of Work (qv). The 2007 appointment documents appear to contain no such requirement. However, unless the agreement in question expressly provides to the contrary, a term will always be implied that the architect must inspect the site at an early 259

Inspection of the Works stage, preferably before the design is commenced.521 The architect must do this personally, and cannot simply rely on information obtained from third parties. In an era of increasing specialisation the architect may often fulfil the duty to inspect by advising the client that specialist investigation is required, including detailed ground investigation. It is now common for the initial survey to be undertaken by specialist surveyors or engineers rather than the architect. Whether the architect carries out the survey or advises that expert assistance is required is a matter for the professional judgement of the architect. Although it is common for some architects to insert a note on drawings to the effect that all foundations must be in accordance with local authority building control requirements, an architect cannot pass on responsibility in this way.522 Inspection of the site embraces more than just a visual inspection, and will be likely to include enquiries about easements and planning restrictions. Whether the architect or some other professional is responsible for all these enquiries will depend on the particular circumstances. See also: Ground investigation; Inspection of the Works.

Inspection of the Works Where constant inspection of the Works is required, a clerk of works should be appointed as inspector (qv). An architect is not required to make constant inspections. The RIBA Standard Form of Agreement for the Appointment of an Architect (SFA/99 (2004)) (qv) and Conditions of Engagement for the Appointment of an Architect (CE/99(2004)) contain a ‘Services supplement for a fully designed project’, which requires the architect, if the appropriate box is ticked, to make visits to the Works. The visits are rather inelegantly said to be ‘in connection with’ four criteria. The criteria are: — the inspection generally of progress and quality of work; — approval of any elements reserved for the architect’s approval; — obtaining information necessary for issuing any notice, certificate or instruction; and — the visits to be at the frequency that the architect, at the date of the agreement, reasonably expected to be necessary. The list of work stages includes under stage K the phrase ‘Make visits to the construction Works’. Although rather general, these requirements are likely to be construed by the courts in accordance with the large body of case law on this topic, which is discussed below. Neither agreement expressly requires the architect to advise the client about the engagement of a clerk of works, although no doubt such a term would be implied. The closest reference is at clause 3.10 (in SFA/99 and CE/99), which states: ‘Where it is agreed that Site Inspectors are to be appointed…’. The RIBA published some revised architect appointment documents in 2007: the Standard Agreement (S-Con-07-A) and the Concise Agreement (C-Con-07-A). These complex sets of documents, which are not easy to interpret or to understand, are scheduled to be replaced in 2009. It appears that the architect’s duty to inspect occurs only when appointed as designer or lead designer, and it is based on a document entitled ‘Schedule of Design Services’ (SS-DS-07), which requires the architect to make visits to the Works as ‘Designer’. A footnote refers to the ‘Schedule of Role Specifications’ (SS-RS521 522

Columbus v. Clowes [1903] 1 KB 244. Eames London Estates Ltd v. North Hertfordshire District Council (1980) 18 BLR 50.

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Inspection of the Works 07) for a definition. There, one eventually finds much the same generalised requirements as in SFA/99 and CE/99. The architect has a duty to advise the client regarding the engagement of a clerk of works under clause A2.2.4 of S-Con-07-A and clause 1.2.2 of C-Con-07-A. The leading case about an architect’s duty to inspect is the House of Lords judgment in East Ham Borough Council v. Bernard Sunley & Sons Ltd.523 However, there has been a plethora of later judgments, each illustrating some key factor. One of the most recent of such cases is McGlinn v. Waltham Contractors Ltd and Others (No. 3),524 which examined previous decisions and summarised them broadly as follows: — The frequency and duration should be tailored to the nature of the work being carried out from time to time. It is not sufficient to inspect only at the time of regular site meetings that are not related to the stage of the Works and when the contractor knows it is safe from inspection at other times. — The architect can instruct the contractor to leave work uncovered until inspected. Therefore it is no defence that the work to be inspected was covered. — An element of work that is to be repeated must be inspected at an early stage so that the architect can form a view as to the contractor’s ability to carry out the task. — The architect is not expected to find all defective work. The architect does not guarantee that the inspection will reveal all defective work, and it is not appropriate to judge an architect’s performance on the result achieved. Other cases have decided: — An architect is not entitled to rely on a contractor’s assurances that all is well.525 — A complex or difficult detail will require more or even constant inspection.526 — The contractor’s inexperience is a factor that the architect should bear in mind while carrying out the duty to inspect.527 — The architect’s liability in damages for negligent inspection may be reduced if the client employs the clerk of works directly and thereby becomes vicariously liable for their actions.528 The position of building control officers, and through them the local authority, with regard to inspections has exercised several judicial minds. It is now established that the duty of a local authority to take care in securing compliance with the Building Regulations and building by-laws extends only to a duty to take reasonable care to avoid injury to persons or property other than the defective building itself.529 See also: Architect’s appointment; Conditions of Engagement. 523

[1965] 3 All ER 619. (2007) 111 Con LR 1. 525 McKenzie v. Potts and Dobson Chapman (1995) 50 Con LR 40. 526 George Fischer Holdings Ltd v. Multi Design Consultants Ltd and Davis Langdon & Everest (1998) 61 Con LR 85. 527 Brown and Brown v. Gilbert Scott and Payne (1992) 35 Con LR 120. 528 Kensington, Chelsea and Westminster Area Health Authority v. Wettern Composites Ltd and Others (1984) 31 BLR 57. 529 Murphy v. Brentwood District Council (1990) 50 BLR 1. 524

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Inspector

Inspector Someone who inspects, examines and checks. Many organisations have inspectors to ensure that work or duties are being carried out correctly. In the context of building contracts the architect, supervisor, resident engineer or clerk of works (qv) has the role of inspector to varying degrees. SBC clause 3.4, IC and ICD clause 3.3 define the role of the clerk of works as solely that of inspector on behalf of the employer, under the direction of the architect. The architect’s inspection role is laid down in broad terms in RIBA SFA/99, CE/99 and the 2007 terms S-Con-07-A and C-Con-07-A. Other consultants often carry out an inspection role on site, although the main standard forms do not expressly authorise them to do so. However, SBC, IC and ICD clause 3.1 permit the architect to access the site and, significantly, allow anyone authorised by the architect to do so. Where possible, it is good practice for the architect to notify the contractor in writing of such authorisation before the Works start on site. Under the NEC the supervisor has significantly greater authority under clause 4 than a clerk of works under the SBC or IC contracts. In effect the supervisor is responsible for nearly all matters dealing with workmanship, materials, tests, and the rectification of defects, including responsibility for issuing the defects certificate (qv) under clause 43.3. GC/Works/1 clause 4(2) allows for the appointment of a clerk of works and a resident engineer. These have the same powers as the project manager under clause 31 (quality), which expressly refers to the project manager undertaking inspections. Other types of inspector who have relevance to the construction industry are inspectors appointed under the provisions of the Health and Safety at Work Act 1974. Other examples of such inspectors are CDM coordinators under the CDM Regulations 2007 and local authority building control officers. For a fuller discussion of the duties involved in inspection and supervision, and the position of the local authority with regard to the Building Regulations see: Inspection of the Works; Supervision of Works.

Instructions A term often employed to mean either directions (qv) or orders, usually given to the contractor by the architect but may be given by the contractor to a sub-contractor (usually called ‘directions’ in that instance), or by a client to an architect or other professional. A person’s authority to issue instructions derives from the express provisions within a contract, and a person need only act on an instruction if given by an authorised person in accordance with the express provisions in the contract. Thus an employer usually has no right to give instructions to a sub-contractor. For that matter an employer (and most other consultants, e.g. mechanical or electrical engineers) has no authority to give instructions to a contractor under certain standard form contracts, e.g. SBC, unless named as the contract administrator. An instruction may or may not have a financial implication. For example, if an architect instructs a contractor to use more concrete in a foundation than specified in the contract documents (qv), or measured in the bill of quantities (qv), the employer will have to pay more than the contract sum (qv). If the architect instructs that less concrete should be used, the employer will pay less than the contract sum. However, if the architect simply issues an instruction to place the same amount of concrete in a different distribution, or instructs that a colour scheme must be green instead of brown, and if such instructions are given in good time, it is likely that there will be no change to the contract sum. Further, an instruction 262

Instructions to remove defective work would not normally carry a financial implication for the employer. Instructions can be categorised as follows: — additions to the Works; — omissions from the Works; — substitutions to the Works; — procedural or clarifying instructions, or instructions providing information; — changes in standards; — changes in the method, timing or sequence of working; — requiring the removal or rectification of work that is not in accordance with the contract. Note that certain categories of instruction, e.g. variations under SBC, cannot be issued following practical completion.530 The JCT 2005 suite of contracts deals with instructions in much the same way as their 1998 predecessors. SBC clause 3.10, IC and ICD clause 3.8 and MW and MWD clause 3.4 deal with the contract administrator’s power to issue instructions. All these contracts require the contractor to comply with instructions forthwith (qv), except for some express provisions for reasonable objection. SBC, IC and ICD stipulate that the instructions must be those for which the architect is expressly empowered under the contract. Although MW and MWD make no such stipulation, it cannot be assumed that the architect is thereby entitled to issue instructions about any matter. Architects must act within their scope of authority, and the instruction must relate to the Works. General clauses such as this are often construed narrowly by the courts so as to constrict the wording to only those instructions that are reasonably necessary.531 SBC clause 3.11, IC and ICD clause 3.8 and MW and MWD clause 3.5 apply if the contractor does not comply with an instruction. It permits the architect to issue a non-compliance notice, giving the contractor seven days to comply, failing which, the employer may engage others to carry out the instruction, and all additional costs will be deducted from the contract sum (qv). The employer is entitled to deduct the extra costs and not simply the money paid to the third party engaged to do the work. Thus architect’s and quantity surveyor’s fees in connection with the additional work resulting from the contractor’s default are recoverable. The employer would be wise to obtain competitive tenders for the work of others, if time permits, so that the contractor cannot claim that the employer could have had the work carried out for less. In the case of SBC (clause 3.13), IC and ICD (clause 3.10) the contractor is entitled to request the architect to furnish details of the clause that empowers the issue of the particular instruction. The contractor may then: — comply with the instruction, and if it does so the instruction will be deemed to be an instruction empowered by the provision specified by the architect, and the contractor may not then refer the question to adjudication or arbitration (whether or not the architect is, in fact, correct); or — seek immediate adjudication or arbitration. 530

New Islington and Hackney Housing Association Ltd v. Pollard Thomas and Edwards Ltd [2001] BLR 74. In Treasure & Son Ltd v. Martin Dawes [2007] EWHC 2420 (TCC) it was suggested, obiter and unconvincingly, that under the JCT Prime Cost Contract variation instructions could be issued after practical completion, and the contractor would have to comply. 531 Blue Circle Industries Plc v. Holland Dredging Company (UK) (1987) 37 BLR 40.

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Instructions This power is particularly useful to the contractor, because if the contractor carried out an instruction that was not empowered by the contract, the contractor would have no entitlement to payment under the contract. However, once the architect has stated the empowering clause, even if incorrectly, and the contractor does not object, the contractor may carry out the instruction in the knowledge that it will be paid. That is because the instruction will then be deemed (qv) duly given under that clause. The majority of contracts require instructions to be in writing. MW and MWD state that oral instructions must be confirmed in writing within two days, but SBC is exceptional in setting out such a complex set of rules if an instruction is given orally. This is a necessary provision, and recognises the common situation where the architect visits the site and gives an oral instruction. If the architect confirms it, the instruction takes effect from the date of the confirmation. The contractor may confirm, and it will take effect after the expiry of seven days if the architect does not dissent. If neither architect nor contractor confirms, the architect may confirm the instruction at any time prior to the issue of the final certificate (qv), and the instruction takes effect retrospectively from the date when it was originally given. IC and ICD make no provision for oral instructions, and the contractor is entitled to disregard them. If the contractor confirms an oral instruction under these contracts, it may be estopped from contending that the instruction was not properly issued.532 However, if it is the employer who habitually issues oral instructions, it is probable that the employer would be estopped from contending that the contractor is not entitled to payment.533 Empowering clauses for SBC, IC, ICD, MW, MWD and DB contracts are listed in Table 2. The ACA form of contract gives the architect wide powers to issue instructions. Clause 1.1 of the ACA states that the contractor must comply with and adhere strictly to those architect’s instructions issued under the agreement. A full list of the matters on which the architect is empowered to issue instructions, and the procedures for doing so, are contained within clause 8 (see Table 2). Clause 8.1 gives the architect authority to issue instructions at any time up to the date of taking-over (qv) of the Works. The matters covered by instructions can include: — the removal from site of any defective work; — dismissal from the Works of incompetent people; — opening up of work for inspection and testing; and — altering obligations or restrictions as regards working hours, space, site access or use at any time during the maintenance period (qv) or within 10 working days of its expiry. All instructions must be given in writing (clause 23.1), except in the case of an emergency (clause 8.3), when the architect may give an oral instruction and confirm it in writing within five working days. Since the contractor must immediately comply with an oral instruction under clause 8.3, it may find itself in a difficult position if the architect forgets to, or will not, later confirm such an instruction. There seems to be no good reason why an architect cannot issue a written instruction on site or, if the oral instruction is given by telephone, the

532 533

Bowmer & Kirkland Ltd v. Wilson Bowden Properties Ltd (1996) 80 BLR 131. Ministry of Defence v. Scott Wilson Kirkpatrick and Dean & Dyball Construction [2000] BLR 20.

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Instructions written instruction could be sent by fax or post on the same day. If the contractor neglects to carry out instructions, the employer’s remedy is to employ someone else to carry out the work (clause 12.4) and/or to invoke the right of termination (clause 20.1(d)). Clause 8.4 expressly states that the contractor is not to accept instructions from anyone other than the architect. Such instructions are to be reported to the architect and acted upon only if confirmed by the architect. GC/Works/1 refers to instructions in clauses 40 and 56. Clause 40(2) lists the instructions that the project manager is empowered to issue (see Table 2). Instructions must be issued in writing, with four stated exceptions: — discrepancies in specification, drawings and bills of quantities; — removal and re-execution of any work; — suspension of the carrying out of any part of the Works; — emergency work in clause 54. These instructions may be given orally and confirmed in writing within seven days of the issue of the oral instruction, although they are effective immediately. The contractor must forthwith comply with all instructions. Under clause 53 the project manager may issue the contractor with a notice requiring compliance with an instruction within a specified period. If the contractor does not comply, the employer may engage others to carry out the work, and recover additional costs and expenses from the contractor. Table 2

Empowering clauses for SBC, IC, ICD, MW, MWD and DB contracts.

Instructions empowered by SBC (includes instructions noted in the schedules) Clause

Instruction

2.2.2 2.10

Requiring integration of contractor’s designed portion work. Issuing setting-out information, and that setting-out errors not to be amended. Issuing information in accordance with the information release schedule. Issuing further drawings or details. Regarding discrepancies. Regarding discrepancies in CDP documents. Regarding divergences from statutory requirements. Regarding schedule of defects. Regarding making good at any time. Defects not to be made good. Confirming clerk of works’ directions. General power. Requiring variations. Postponing work. Requiring expenditure of provisional sums. Requiring opening up or testing. If work not in accordance with the contract. If workmanship not in accordance with the contract. To exclude persons from site. Following the finding of antiquities. That the contractor takes out an insurance policy against employer’s liability.

2.11 2.12 2.15 2.16.1 2.17.1 2.38.1 2.38.2 2.38 3.4 3.10 3.14 3.15 3.16 3.17 3.18 3.19 3.21 3.23 6.5.1

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Table 2

(Continued )

Instructions empowered by IC and ICD (includes instructions noted in the schedules) Clause

Instruction

2.1.2

Direct the integration of the CDP with the rest of the design (ICD only). That setting out errors are not to be amended. As are necessary to enable the contractor to carry out and complete the Works in accordance with the contract (including instructions regarding the expenditure of provisional sums). Correcting any departure, error or omission in the contract bills. Correcting a description in the contract bills to provide information relevant to provisional sums for defined work. Correcting any error in description or quantity, any omission or inconsistency in or between the contract documents, instructions or further issued drawings, etc. and (in the case of ICD) CDP documents. In regard to divergence with statutory requirements. That defective work is not to be made good. General power. Requiring a variation. Postponing work. Regarding opening up and testing. Regarding opening up and testing following failure of work. Modify clause 3.15.1 instruction. In regard to removal of work or materials not in accordance with the contract. Which are reasonably necessary if work not carried out in a proper and workmanlike manner. Excluding from site any person employed thereon. Take out insurance against employer’s liabilities. In regard to named sub-contractors: .1 to change particulars to remove impediment. .2 to omit work. .3 to omit work and substitute a provisional sum. That work is to be carried out by person other than named in the contract documents. As necessary after termination of employment of named sub-contractor: .1 to name another sub-contractor. .2 to require the contractor to make its own arrangements. .3 to omit the work.

2.9 2.11

2.13.1

2.15.2 2.30 3.8 3.11 3.12 3.14 3.15.1 3.15.2 3.16.1 3.16.2 3.17 6.5.1 Schedule 2 para 2 Schedule 2 para 4 Schedule 2 para 7

Instructions empowered by MW and MWD Clause

Instruction

3.4 3.6 3.7 3.8 5.4B.2

General power. Requiring variations. Regarding the expenditure of provisional sums. Requiring the exclusion from the Works of any person. For the reinstatement and making good of loss and damage after insurance loss.

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Instructions Table 2

(Continued )

Employer’s instructions empowered under DB (includes instructions noted in the schedules) Clause

Instruction

2.10.1

In regard to discrepancy between Employer’s Requirements and definition of site boundary. After amendment to Employer’s Requirements to which clause 2.1.2 refers becomes necessary to comply with statutory requirements. Schedule of defects. Requiring defects, etc., to be made good. Employer’s instructions in general. Effecting a change in the Employer’s Requirements. Postponing work. Expenditure of provisional sums. To open up for inspection or carry out testing. Removal from site of work, materials or goods. Reasonably necessary change after defective work. Reasonably necessary change to establish likelihood of further non-compliance. Reasonably necessary change after failure to comply with clause 2.1. Regarding antiquities, including excavation, examination or removal by third parties. Omitting named sub-contract work and regarding the execution of that work. Compliance with instruction.

2.15.2.3 2.35.1 2.35.2 3.5 3.9.1 3.10 3.11 3.12 3.13.1 3.13.2 3.13.3 3.14 3.16 Schedule 2, para 2.2.2 Schedule 2, para 4.5.1

Instructions empowered by ACA Clause

Instruction

8.1(a)

Regarding removal from the site of any work, materials or goods that are not in accordance with the contract or with CDM Regulations. Regarding the dismissal from the Works of any person employed on them if, in the opinion of the architect, such person misconducts themselves or is incompetent or negligent in the performance of duties. For opening up for inspection of any work covered up, or the carrying out of any tests of any materials or goods or of any executed work. Requiring variations of obligations or restrictions. Requiring variations. In regard to any matter connected to the Works. In accordance with the following clauses: Resolution of discrepancies. Not to give notices and pay fees. (Where this clause applies) Regarding the way in which adverse ground conditions are to be overcome. Requiring samples. To name a sub-contractor from list. Requiring access to the Works for others. Acceleration or postponement. For repairs, replacements or remedial work. If fossils, antiquities or the like are discovered.

8.1(b) 8.1(c) 8.1(d) 8.1(e) 8.1(f) 8.1(g) 1.5 1.7 2.6 3.5 9.4 10.2 11.8 12.2 14

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Instructions Table 2

(Continued )

Instructions empowered by clause 40 of GC/Works/1 With Quantities Clause

Instruction

40(1) 40(2)(a) 40(2)(b) 40(2)(c) 40(2)(d) 40(2)(e) 40(2)(f) 40(2)(g) 40(2)(h) 40(2)(i) 40(2)(j) 40(2)(k) 40(2)(l) 40(2)(m) 40(2)(n) 40(2)(o) 40(2)(p) 40(2)(q)

General power. Requiring variations. Resolving discrepancies. Removal of things for incorporation and their substitution. Requiring removal and re-execution of work. The order and execution of the Works or any part. Hours of working, overtime and night working. Suspension of execution of the Works. Replacement of any person. Requiring opening up. Making good of defects. Regarding cost savings. Execution of emergency work. Use or disposal of material from excavations etc. Following discovery of fossils, antiquities or the like. To avoid nuisance or pollution. Regarding quality control accreditation of the contractor. Any other matter that the project manager considers necessary or expedient.

In order to qualify as a written instruction, there must be evidence in writing together with an unmistakable intention to instruct something. An instruction may be implied from what is written down, but it is safer from the contractor’s point of view to ensure that the words clearly instruct. An instruction need not be written on a specially printed form headed ‘Architect’s Instruction’, although such forms are useful for administration purposes and for making them instantly recognisable. Even when special instruction forms are used, a careful look through the project files will often unearth instructions buried within a letter. A letter is quite acceptable as an instruction, as is a handwritten instruction given on site, provided it is signed and dated, and instructs the contractor to do something in accordance with the contract. Site instructions written on pieces of plywood or roofing tile used to be quite common. Instructions contained in site-meeting minutes are valid if the architect produces the minutes and at a subsequent meeting they are recorded as agreed. However, there would be an appreciable time lapse before such an instruction could be considered effective. Under the NEC the contractor is to obey any instruction given by the project manager or supervisor in accordance with the contract (clause 27.3). Clause 13.1 requires all communications, which includes instructions, to be communicated in a form that can be read, copied and recorded. Confusingly it also says that writing is said to be the language of the contract, when writing is not a language. Under clause 14.3 the project manager may give instructions that change the Works information or a key date (qv). The project manager can 268

Insurance also give instructions covering matters such as requiring the contractor to submit a quotation to accelerate the Works (clause 36), to stop or not start the Works (clause 34.1), or to submit a revised programme (clause 32.1). In addition, the supervisor has authority to give instructions under clause 42 for the contractor to search for defects. Under PPC instructions are addressed at clause 5, and the client’s representative is authorised to issue instructions (clause 5.3) to the constructor. Such instructions are said to be without prejudice to the collaborative spirit of the partnering agreement. The client’s representative may issue such instructions as are consistent with the partnering documents, which includes opening up for tests or rectification of work not in accordance with the partnering documents. The constructor has a reasonable right of objection if the instruction is contrary to the partnering documents, or is not in the best interests of the project (clause 5.4). Subject to clause 5.4 the constructor is to carry out instructions promptly, and should it not do so there is a procedure for the client to engage others and recover the costs from the contractor. The position with regard to drawings is less certain. A drawing issued with a letter telling the contractor to carry out the work shown on it is certainly an instruction, but a drawing issued with a compliments slip may be an instruction, or it may be simply sent for comment. A contractor should seek clarification prior to carrying out work shown on a drawing. If an architect simply sends the contractor a copy of the employer’s letter requesting that something be done, under cover of a compliments slip, it is not an instruction but merely an invitation to the contractor to carry out the work at its own cost. Figure 7 is an example of an instruction. See also: Estoppel.

Instrument A word with several meanings, but for the purpose of this book an instrument is a formal legal document, e.g. a statutory instrument (qv) or deed of conveyance. The word is also used in a legal context to indicate an important factor, someone or something made use of. Thus a person may be instrumental in achieving something; a person’s evidence may be an instrument in winning a case.

Insurance The manner in which payment can be secured in the event of injury, death, loss or damage to property or goods. Contracts of insurance are a specialised field, and the advice of a broker should always be sought. The majority of standard building contracts contain insurance clauses of varying degrees of complexity. Some are relatively prescriptive, such as SBC, in contrast to MP, where it is very much left to the parties to complete the detail. SBC clause 6.4 deals with insurance of the contractor’s liability for injury or death to persons, and damage to property other than the Works or materials on site. Clause 6.5 is optional insurance, which the architect may instruct the contractor to take out in joint names against expense, liability, loss, claim or proceedings that may be incurred by the employer by reason of injury or damage to property other than the Works caused by collapse, subsidence, heave, vibration, weakening or removal of support, or lowering of groundwater arising out of or in the course of or by reason of the carrying out of the Works, subject to various exclusions. Insurance of the Works is found in Schedule 3, 269

Insurance

Figure 7 Architect’s instruction. This form is part of a suite of contract administration forms published by RIBA Publishing, and available from ribabookshops.com.

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Insurance and it is divided into three options: option A for new work insured by the contractor; option B for new work if the employer is to insure; and option C where the work involves an existing building. In this instance the employer always insures. Where the Works themselves are concerned, the type of insurance to be taken out is all risks (qv). Existing buildings and contents are to be insured only against specified perils (qv), a restricted set of risks. Under clause 6.11 professional indemnity insurance is required to be taken out by the contractor to cover the contractor’s designed portion. Clause 6.10 deals with the situation if terrorism cover (qv) becomes unavailable. IC, ICD and DB contain very similar provisions under clause 6 (referred to for some reason as ‘section’ 6 in the contracts) in each case. MW and MWD have very much less detailed provisions in clause 5 covering somewhat the same topics. However, there is: (i) no equivalent provision to clause 6.5 optional insurance against the employer’s liability; (ii) no provision for the cessation of terrorism cover; and (iii) nothing for professional indemnity cover, although the MWD contract does contain provision for contractor design. Where work is to be carried out to an existing building the employer has the option of insuring under clause 5.4B: a joint names policy for all risks insurance for the Works, and a joint names policy for specified perils insurance for the existing building and contents. If the employer cannot get joint names insurance, the contractor can insure the Works under clause 5.4A, and the employer insures the existing building and contents in the employer’s own name only against specified perils (clause 5.4C). ACA deals with insurance against injury to persons and property in clause 6.3, and there are alternative provisions for insurance of the Works in clause 6.4. Clause 6.5 is roughly the equivalent of SBC clause 6.5, and clause 6.6 deals with design indemnity insurance, i.e. professional indemnity insurance. GC/Works/1 provides for insurance under clause 8. There are three alternatives: — Alternative A requires the contractor to insure the Works against all risks in joint names, and to insure against injury or damage to persons and property. — Alternative B requires the contractor to take out insurance in accordance with the summary of essential insurance requirements attached to the abstract of particulars. — Alternative C deals with the situation if the employer is or is not a minister of the Crown. The employer bears the risk of what under JCT contracts would be referred to as specified perils for existing structures and contents. The abstract of particulars must state whether clause 8A is applicable. It requires the contractor to take out professional indemnity insurance, and it will be applicable only if the contractor is to be given any design responsibility under clause 10. Within MP, insurance is addressed at clauses 33 and 34. Clause 34 addresses professional indemnity insurance, which is to be taken out in the amount stated in the contract particulars. Clause 33 addresses all other categories of insurance, e.g. the Works, public liability. The provisions include no detail concerning the nature of the insurance to be taken out. These are to be set out in the documents (a specific insurance policy) annexed to the contract. Within the contract particulars, details for each type of insurance require the following to be stated: 271

Insurrection — — —

the type of insurance, e.g. public liability; who is to take out the insurance policy, e.g. the contractor; the reference number of the policy or document annexed to the contract, e.g. public liability policy reference xyz dated September 2008; and — the amount of any excess, e.g. £5,000. The excess is to be borne by the party responsible for taking out the insurance. This appears to be the only standard form that expressly addresses the matter of any excess. In NEC, insurance is addressed at clause 84. The contractor is to take out the insurances set out in the table (clause 84.2) unless stated otherwise in the contract data (qv) that the employer is to provide that insurance. The table covers insurance of the Works, plant, material, equipment, death or injury or damage to other property. The amount of any cover is to be stated in the contract data. Any further insurances that are required to be provided by the contractor are to be stated in the contract data, e.g. professional indemnity insurance. Insurance cover is to be in joint names (qv) and run from the commencement date until the issue of the defects certificate (qv) or termination certificate. Under PPC the insurance requirements are addressed at clause 19. The project and site insurance is to be taken out by the partnering team member identified within the commencement agreement for the risk stated in section 1 of appendix 4. Professional indemnity insurance (clause 19.4) is to be taken out by those partnering team members identified within the project partnering agreement. This may well include the contractor as well as consultants. If so stated in the commencement agreement, latent damages insurance (clause 19.6) and environmental risk insurance (clause 19.5) are to be taken out. Few architects, quantity surveyors or project managers have any real expertise in insurance matters. Although most contracts require the project manager or contract administrator to receive insurance documents from the contractor, details of the contractor’s policy must not be passed to the employer without comment. If the project manager does not have the expertise to advise his client as to the adequacy of the insurance arrangements proposed by the contractor, he has a choice. He may obtain expert advice from an insurance broker or lawyer … Alternatively, he may inform the client that expert advice is required, and seek to persuade the client to obtain it. What he cannot do is simply act as a ‘post box’ and send the evidence of the proposed arrangements to the client without comment.534

See also: Joint names policy; Uberrimae fidei.

Insurrection A term meaning an uprising against State authority, rather less in ramification than outright revolution. It is expressly referred to in ACA clause 11.5, alternative 2, as a ground for awarding an extension of time (qv). It is a ground for extending time in other forms of contract, usually under the head of force majeure (qv). See also: Civil commotion; Civil war; Commotion; Disorder; Riot.

534

Pozzolanic Lytag v. Bryan Hobson Associates (1999) 15 Const LJ 135 at 139 per Dyson J.

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Interest (on money)

Intellectual property rights An all-embracing term covering rights in copyright (qv), patents, trademarks, and the like. The term describes those rights that protect the work of the human hand or brain against unauthorised use or exploitation. Such rights are usually protected by statute, and generally require registration. The term is defined at appendix 1 of PPC as ‘all intellectual property rights (including without limitation, patents, trademarks, designs, design rights, copyright, inventions, trade secrets, know how and confidential information) and all applications for protection of the same’. Clause 9 deals with intellectual property rights. Under this provision each partnering team member warrants that any document or design prepared by them will not breach any intellectual property rights. The member gives an indemnification to the other members in respect of any infringement (clause 9.1). A licence is given to use the intellectual property rights in all design and documents produced for the project. See also: Moral rights.

Interest (on money) The law relating to interest payments still retains some of the medieval abhorrence of usury, strangely out of touch with today’s commercial environment. Interest is not payable as general damages (qv) on outstanding debts.535 This rule, although much criticised, has been reaffirmed by the House of Lords.536 The rule applies only to claims for interest by way of general damages, although statute has substantially amended the situation. A claim for interest may be made by way of special damage (qv). That is to say: If a plaintiff pleads and can prove that he has suffered special damage as a result of the defendant’s failure to perform his obligation under a contract, and such damage is not too remote, on the principle of Hadley v. Baxendale it is recoverable.537

The general position, when considering the position of a contractor who is trying to recover interest, is that the recovery may fall into one or more of a number of categories: — Where an express term of the contract provides for interest in certain circumstances. The contract itself may provide for the payment of interest on amounts overdue, and this is common in contracts for the sale of goods by means of an express term. This category is generally unmistakable. So far as the rate of interest is concerned, if the contract documents do not provide a rate, it is suggested that the correct thing to do is to take the rate at which contractors in general could borrow, disregarding the special circumstances of the particular claimant.538 The JCT standard forms and the ICE (clause 60.7) include provision under which an employer must pay interest at a stated rate on overdue payments: e.g. MP clause 30, PPC clause 20.9 and NEC clause 51.2.

535

London, Chatham & Dover Railway Co v. South Eastern Railway Co (1893) AC 429. President of India v. La Pintada Compania Navegacion SA [1984] 2 All ER 773. 537 Wadsworth v. Lydall [1981] 2 All ER 401 (CA); Holbeach Plant Hire Ltd v. Anglian Water Authority (1989) 14 Con LR 101. 538 Tate & Lyle Food Distribution Ltd v. Greater London Council [1982] 1 WLR 149. 536

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Interest (on money) Where a court has awarded interest on judgment for a debt. An important condition is that there must be an actual debt (something more than a mere assertion that money is due) before judgment will be given and interest awarded. The court is empowered to award interest provided the money was outstanding at the time proceedings were commenced, although it may have been paid subsequently.539 Arbitrators have a similar power: (1) The parties are free to agree on the powers of the tribunal as regards the award of interest. (2) Unless otherwise agreed by the parties the following provisions apply. (3) The tribunal may award simple or compound interest from such dates and with such rests as it considers meets the justice of the case – (a) on the whole or part of any amount awarded by the tribunal, in respect of any period up to the date of the award; (b) on the whole or part of any amount claimed in the arbitration and outstanding at the commencement of the arbitral proceedings but paid before the award was made, in respect of any period up to the date of payment. (4) The tribunal may award simple or compound interest from the date of the award (or any later date) until payment, at such rates and with such rests as it considers meets the justice of the case, on the outstanding amount of any award (including the award of interest under subsection (3) and any award as to costs). (5) References in this section to an amount awarded by the tribunal include an amount payable in consequence of a declaratory award by the tribunal. (6) The above provisions do not affect any other power of the tribunal to award interest.540 Normal practice is that interest will be awarded from the date on which payment should have been made, but in some instances interest will be awarded for a shorter period. An example might be if there is some culpability, such as unreasonable delay, on the part of the claimant. Both judgment debts and sums directed to be paid by an arbitrator’s award carry interest at the prescribed statutory rate as from the date of judgment or the award. — Where an adjudicator is empowered to include interest in the decision. The Scheme for Construction Contracts (England and Wales) Regulations 1998 provide in paragraph 20(c) that the adjudicator may ‘having regard to any term of the contract relating to the payment of interest decide the circumstances in which, and the rates at which, and the periods for which simple or compound rates of interest shall be paid’. Paragraph 20 has been considered by the Court of Appeal, which concluded that, under the Scheme, the adjudicator may decide questions as to interest

—

539

See section 15 of the Administration of Justice Act 1982 (amending section 35A of the Supreme Court Act 1981). 540 S. 49 of the Arbitration Act 1996.

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Interest (on money) if, but only if, (i) those questions are ‘matters in dispute’ which have been properly referred to him or (ii) those are questions which the parties to the dispute have agreed should be within the scope of the adjudication or (iii) are questions which the adjudicator considers to be ‘necessarily connected with the dispute’. Questions which do not fall within one or other of those categories are not within the scope of paragraph 20(c) of the Scheme. There is no free-standing power to award interest.541 — If the contract can be construed as giving a contractual right to interest payment. Interest and financing charges as part of direct loss and/or expense fall into this category. Following the decision of the Court of Appeal in FG Minter Ltd v. Welsh Health Technical Services Organisation542 it is beyond doubt that, under the direct loss and/or expense (qv) provisions of the JCT contracts (i.e. SBC clause 4.23, IC and ICD clause 4.17 and DB clause 4.19), interest or financing charges must be included by the architect or quantity surveyor in an ascertainment of loss and/or expense. The same principle applies to similar wording in other standard form contracts: e.g. in ACA at clause 7.1 the phrase used is ‘damage, loss and/or expense’. ACA clause 7.5 (dealing with the contractor’s failure to submit estimates) refers specifically to interest or financing charges, and debars the contractor from recovering them between the date of the contractor’s failure to submit the estimates required by clause 7 and the date of the final certificate. A similar bar is included in the supplemental provisions 4 and 5 at Schedule 2 included within DB. In general, interest is to be calculated from the date when the loss etc. was incurred, subject to the actual wording of the clause. The wording in SBC clause 4.23, for example, requires that the ascertainment must relate to loss and/or expense incurred or likely to be incurred, and thus covers future losses. — Where there are special circumstances. This is a useful category. If creditors are able to establish that they have suffered special damage, for example by having to pay interest on an overdraft as a result of a debtor’s late payment of a debt, creditors are entitled to claim special damages, provided that it can be brought within the second part of the rule in Hadley v. Baxendale.543 It has been held that a contractor may be entitled to interest or financing charges if it pleads and proves them as special damage.544 — By operation of statute. The position under statute is as follows: • Section 3 of the Law Reform (Miscellaneous Provisions) Act 1934 as amended allows interest to be included in the sum for which judgment is given or an arbitration award is made. The interest is to run from the date of the judgment or award. 541 Carillion Construction Ltd v. Devonport Royal Dockyard Ltd (2005) 104 Con LR 1 (CA) at 37 per Chadwick LJ. 542 (1980) 13 BLR 1. 543 (1854) 9 Ex 341. 544 Holbeach Plant Hire Ltd v. Anglian Water Authority (1988) 14 Con LR 101. The court was applying the proposition laid down in President of India v. Lips Maritime Corporation [1987] 3 All ER 110 at 116 per Lord Brandon.

275

Interested parties

•

Section 35A of the Supreme Court Act 1981 (inserted by the Administration of Justice Act 1982) empowers a court or arbitrator to award interest where payment is made of an agreed debt after commencement of proceedings, but before judgment or award. The Late Payment of Commercial Debts (Interest) Act 1998 (qv) deals • only with commercial debts; consumers (qv) are excluded. See also: Claim; Scheme for Construction Contracts.

Interested parties A phrase used and defined within PPC at appendix 1 as ‘any one or more organisations or groups of individuals, as referred to in clause 3.9 of the Partnering Terms, who are not Partnering Team members and who have an interest relating to the Project’. Under clause 3.9 the partnering team members are to work collectively and individually in accordance with the partnering document to establish the maximum practical involvement of interested parties. The interested parties are listed in the project partnering agreement, which may be added to by agreement. Clause 3.9 is subject to clause 22.4 (third party rights), which seeks to exclude or limit third party rights. The interested parties may attend meetings, or be copied with appropriate documents. The interested parties could include the funder, a future owner, tenants of or neighbours to the project.

Interference There is an implied term (qv) in all building contracts that the employer will not interfere with or prevent the carrying out of the Works.545 If the employer is guilty of interference, the contractor may be able to treat it as repudiation and/or to claim damages at common law, depending upon the circumstances. The employer will also be liable for the interference of third parties for whom the employer is responsible (referred to in the JCT contracts as ‘Employer’s Persons’ (qv)) unless provision is made in the contract. Express provision is made for third party contractors in SBC, IC and ICD clause 2.7 and DB clause 2.6, and elsewhere for the clerk of works. These clauses allow the employer in certain circumstances to do what would otherwise be classed as interference. Any problems that the contractor may encounter as a result can be dealt with by extension of time and/or by financial recompense. The employer will not be liable if the wrongful interference is caused by a third person for whom the employer is not responsible in law, e.g. an adjoining owner.546 SBC, IC and ICD clause 8.9.1.2 and MW and MWD clause 6.8.1.2 expressly state that if the employer interferes with or obstructs the issue of any certificate (not only financial certificates), the contractor has grounds to terminate its own employment under the contract. Proving that the employer has interfered may not be easy. A letter from the employer to the architect instructing that a certificate is not to be issued would be good evidence. Dictating the order in which the contractor is to carry out the Works would also normally amount to interference, but SBC, IC and ICD clause 5.1.2 and MW and MWD clause 3.6.1 allow the architect to vary such requirements, albeit with financial and temporal implications.

545 546

Cory Ltd v. City of London Corporation [1951] 2 All ER 85. Porter v. Tottenham Urban District Council [1915] 1 KB 776.

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Interference Other contracts make similar provision. ACA clause 20.2(b) allows the contractor to terminate its own employment if the employer obstructs the issue of any certificate. Clause 10 permits the employer to engage others as provided in the contract documents to carry out work on site, and there is provision (clause 10.4) for the contractor to be paid damages, loss and/or expense if such other persons cause disruption (qv) to the regular progress of the Works. The architect may issue instructions amending limitation of working space, working hours, access to the site or use of any part of the site (clause 8.1(d)). Under GC/Works/1 express provision for the contractor to determine its employment because of the interference of the employer in the issue of a payment certificate is given under clause 58(3)(b). By clause 65(1), the employer is permitted to carry out other works on the site, and if any damage is done to the contractor’s Works as a result, the employer must take financial responsibility. Under the NEC clause 9 there is no express provision for termination should the employer interfere with the issue of any certificate by the project manager. Clause 25 requires the contractor to work with others as stated in the Works information; the contractor is to cooperate with the others and share the working areas. The provisions in the various standard forms are intended to avoid the danger that the contractor may seek to accept as repudiation what may be considered to be a fairly normal occurrence, e.g. the employer bringing specialists onto the site to carry out certain works and thereby causing the contractor some delay or loss. Contractual provisions for the contractor to terminate its own employment in the event of certain specified kinds of interference are in addition to the contractor’s normal rights at common law to treat the occurrence as a repudiatory breach. Many employers do not appreciate the legal position, and it is something that architects should be most careful to clarify at the beginning of the contract. A somewhat different situation often occurs when a client interferes with a construction professional in the carrying out of contractual duties. This seems to occur most often when clients interfere with an architect’s duties under the building contract. Both client and contractor, in executing the contract, have agreed that a named architect or other contract administrator will administer the terms of the contract. Among these terms are such potentially sensitive issues as extensions of time, loss and/or expense, and the issuing of certificates of various kinds. The client has entered into a contract with the architect by which the architect, among other things, undertakes to carry out the contract administration duties for a fee. A client should not instruct the architect to withhold the issue of a certificate (e.g. of practical completion) or to issue it early, or to change the amount on an interim payment certificate. A client who tries to prevent the architect from issuing an extension of time may be in repudiatory breach of the architect’s contract.547 It is likely that general interference by the client to the extent that an architect is unable to carry out the role of contract administrator adequately would also amount to repudiation. See also: Hindrance or prevention.

547

Argyropoulos & Pappa v. Chain Compania Naviera SA (1990) 7-CLD-05-01.

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Interim certificates

Interim certificates A term found in most standard forms of building contract, referring to the periodic certification of money due to the contractor. All the JCT traditional forms of contract contain provision for the architect to certify amounts due to the contractor, as does the NEC. In the absence of any notices, properly issued by the employer in accordance with the terms of the contract, stating the amount proposed to be paid or the amount to be withheld, the amount that must be paid is the amount certified.548 SBC clause 4.9.1 requires the architect to issue interim certificates stating the amount due to the contractor from the employer. The amount is to be calculated broadly as follows: — Subject to retention: • the value of properly executed work, including work for which a Schedule 2 quotation (qv) has been accepted; • value of variations excluding restoration, replacement or repair of insurance loss or damage; • fluctuations due under Option C; • value of materials and goods properly delivered to or adjacent to the Works; • value of any listed items, stored off site. — Not subject to retention: • payments or costs incurred by the contractor related to insurance for early use, statutory charges, royalties, opening up and testing, insurance under clause 6.5.3, terrorism cover, and default by the employer in taking out Works insurance where required; • loss and/or expense or amounts ascertained in respect of any restoration, replacement or repair of insurance loss or damage; • fluctuations Option A or B. Less errors in setting out not amended, defects not made good, non-compliance with instructions, non-conforming work retained, retention, reimbursement of any advance payment, and previous amounts certified. The final date for payment is 14 days after the date of issue of the interim certificate. Clause 4.9.2 stipulates that certificates are to be issued on the dates in the contract particulars until practical completion (qv). After that, they may be issued: — as and when further amounts are ascertained (qv) as payable; — after the end of the rectification period (qv), or when the certificate of making good is issued, or the last such certificate if there are sections, whichever is the later. The architect cannot be required to issue a certificate within one calendar month (qv) of a previous interim certificate. The provisions of IC and ICD are somewhat shorter, but very similar to those of SBC with one significant difference, in that following the issue of the interim certificate (clause 4.9) within 14 days of practical completion the next payment would be against the final certificate. ACA clause 16 sets out the procedure for the issue of interim certificates under that contract. The procedure varies, depending on whether payment is to be in accordance with monthly valuations or stage payments. If monthly valuations are used, on the last working day (qv) of each calendar month the 548

Rupert Morgan Building Services (LLC) Ltd v. David Jervis and Harriett Jervis [2004] BLR 18.

278

Interim certificates contractor must present to the architect an interim application stating the total amount due in accordance with clause 16.1, together with supporting documentation. Within 10 working days of receipt, the architect must issue an interim certificate stating the amount due to the contractor. Clause 16.2A and clause 18 (if used) state what must be included and what may be deducted in calculating the amount. Where stage payment is used, the stages are to be set out in the stage payment schedule. On completion of each stage the contractor must present an application stating the total amount due in accordance with clause 16.2B, supported as before with relevant documents. Within 10 working days of receipt the architect must issue an interim certificate stating the amount due to the contractor. The contractor is entitled to payment on the tenth working day after the date of each interim certificate. The question to be asked is: What happens if the contractor fails to make an application? Under SBC the contract administrator has still to issue a certificate. Under this provision issue of the certificate seems to be dependent upon a contractor’s application. Under GC/Works/1 provision is made for what it terms ‘Advances on Account’ (qv) under clause 48. The contractor is entitled to be paid advances on the contract consisting of 95% of one of three schemes: — Alternative A (Stage payment chart); — Alternative B (Milestone payment chart); — Alternative C (Valuation); together with 100% of other amounts such as bonuses, variations, and prolongation and disruption. Certification of these payments is by the project manager in accordance with clause 50, but no certificate is expressed to be conclusive that the work or things to which it relates are in accordance with the contract (clause 50(7)). MW and MWD provide for ‘progress payments’ under clause 4.3. The architect must certify the payments at intervals of not less than four weeks, and the certification does not depend upon any application or request by the contractor as is often erroneously thought. The certification dates are calculated from the date of commencement, which is entered in the contract particulars. The clause specifies what must be included and what must be deducted from the certificate. Under the NEC the project manager issues payment certificates within one week of each assessment date. Unlike most standard forms the provision at clause 51.1 permits payment from the contractor to the employer as well as from the employer to the contractor. The amount due in a certificate is calculated based upon the ‘price for work done to date’, and the basis of how this would be calculated is dependent upon which main option clause applies, i.e. A, B, C, D, E or F. Certificates are issued on each assessment date, as identified in the contract data, until four weeks following the issue of the defects certificate. Each certified amount is to be paid within three weeks of the assessment date, or such other period as stated in the contract data. The NEC is drafted for international application, and so when it is used in the United Kingdom option Y(UK)2 (The Housing Grants, Construction and Regeneration Act 1996) should be chosen. This amendment inserts further provisions to ensure compliance with the Act. Under Y2.2 payment becomes due seven days following the assessment date, and the final date for payment is 14 days later, unless a different period is stated in the contract data. The project manager’s certificate is to be taken as the employer’s payment notice specifying the amount of the proposed payment and the basis upon how it was 279

Interim payment calculated. Clause Y2.3 addresses the issue of a withholding notice, which must be no later than seven days before the final date for payment. The reference to payment notices covers both parties and not simply the employer. The amounts included in interim certificates under all the above-mentioned forms are subject to revision in the next certificate. This means that if the amount certified is either too high or too low, then an adjustment can be made in the next certificate as appropriate. The process is usually simple, because the valuation of work done is cumulative. This does not mean that the architect should not take great care in certifying interim certificates,549 since there is always the danger that the contractor may go into liquidation (qv), or may otherwise leave the site before completion (qv). In Townsend v. Stone Toms & Partners550 it was held to be a clear breach of contractual duty for the architect to certify work that was known not to have been done properly. In the event that serious defects are discovered immediately following payment of a certificate, it is conceivable that the valuation of the Works before the next certificate will be less than previously certified. This will result in a negative certificate. There is no express provision in the majority of the standard forms (an exception being the NEC) for dealing with a negative certificate, except in the case of the final certificate, where the final sum may be certified as due to the contractor or to the employer. In such cases it appears that the contractor is not immediately obliged to reimburse the employer the ‘negative amount’. See also: Certificates; Final certificate; Interim payment.

Interim payment A phrase referring to payments made periodically during the progress of a building contract; in contrast to the situation where payment is not made until the whole of the work has been completed, i.e. an entire contract (qv). JCT contracts tend to refer to an interim certificate, rather than interim payment, but in DB ‘interim payment’ is used in clause 4, because there are no certificates. Clause 4.7 provides that interim payments are to be made by the employer to the contractor in accordance with whichever of alternatives A or B applies. Alternative A provides for the contractor to make application for payment on completion of a predetermined set of stages. Alternative B provides for an application to be made on the dates set out in the contract particulars. Generally, alternative B applications are made at monthly intervals. Although ACA has provision for architect’s certificates, it still makes reference to interim payment in clause 16. Clause 16.1 provides for interim payment to be made by the employer in accordance with alternative A (monthly valuations) or alternative B (stage payments). Clause 28 within the MP form refers to an ‘interim payment advice’, which is issued by the employer. No later than seven days before the date for issue of an interim payment advice, the contractor is to submit a detailed application for payment. The interim payments for advice notice are issued on the dates stated in the contract particulars. After practical completion the notices are to be issued at periods not shorter than one month, provided the amount is not less than the cap stated in the contract particulars. The amount becomes due upon receipt of a VAT invoice in the amount identified in the payment notice. The final date for payment is 14 days after the due date. 549 550

Sutcliffe v. Thackrah [1974] 1 All ER 319. (1988) 27 BLR 26.

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Interlocutory Payment of the various parties involved in construction contracts was significantly changed by the Housing Grants, Construction and Regeneration Act 1996 (qv), Part II of which required any written construction contract (qv) as defined by the Act to include specified contractual provisions, several of which dealt expressly with payment. All standard form contracts now reflect this legislation. If a contract does not comply with the Act, the relevant provisions of the Scheme for Construction Contracts (England and Wales) Regulations 1998 come into effect as implied terms of the contract. Under section 109 of the Act a party to a construction contract is entitled to payment by instalments, stage or periodic payments. That is, unless the contract is specified or estimated to be less than 45 days’ duration. This will tend to reduce the likelihood of an entire contract occurring in the construction industry. Section 110(1) stipulates that every construction contract must provide an adequate mechanism for calculating what payments become due and when, and the period between the date when a payment becomes due and the final date for that payment. The Act provides detailed provisions about the giving of notices in connection with payment. S. 110(2) states that all construction contracts must have provision for the giving of a notice by a party not later than five days after payment becomes due from that party. S. 111(1) stipulates that a party to a construction contract must not withhold payment of a sum due under a contract unless that party has given an effective notice to withhold payment. S. 111(2) explains that an effective notice must state the amount it is proposed to withhold, and the ground for withholding, and if there is more than one ground, each ground must be stated together with the relevant amounts. The notice must not be given later than whatever period is stipulated in the contract before the final date for payment. This is commonly five days, but it is sometimes changed to one day. S. 112 of the Act provides a party to whom a payment is owed, after the final date for payment and where there is no effective withholding notice, with the right to suspend performance of all obligations after giving at least seven days’ written notice to the debtor. The suspension, which does not affect the party’s other rights, must cease when the party is paid in full. The period of suspension is discounted when calculating any period during which the party must perform its obligations under the contract. The JCT contracts expressly address this matter (e.g. SBC clause 4.14), but not so in ACA, although it is likely to fall under ‘any act, instruction, default or omission of the employer’, i.e. clause 11.5(e) Alternative 2. The fact that the right is not expressly addressed does not of course mean that the contractor cannot exercise that right. The contractor could exercise its right under s. 112 of the Act. S. 113 states that clauses in contracts that make payment conditional on receiving payment from a third party are ineffective unless the third party becomes insolvent. ‘Insolvent’ is defined. These are usually referred to as ‘pay when paid’ (qv) clauses, or sometimes – and perhaps more accurately – as ‘pay if paid’ clauses. See also Sum due; Suspension.

Interlocutory A word that was formerly (and still is occasionally) used to describe the various applications, hearings etc. that are stages in litigation or arbitration. An interlocutory judgment is one that is not final, or which disposes of only part of the matter at issue. 281

Intermediate Building Contract (IC and ICD)

Intermediate Building Contract (IC and ICD) Produced by the Joint Contracts Tribunal in 1984 (and referred to as IFC 84) in response to a general demand for a form that was less complex than the JCT 80 Form and more comprehensive than MW 80. The contract underwent substantial amendments (12 in all) until 1998, when it was revised to incorporate all the previous amendments and some other corrections (then predictably referred to as IFC 98). In 2005 it was again revised, this time more comprehensively, when the other contracts in the JCT range were also revised. The current forms are very similar to the other contracts in the range so far as general structure is concerned, and also in the revised wording of some of the clauses. The most noticeable change is that the Intermediate Building Contract is now available in two versions: — Intermediate Building Contract (IC); — Intermediate Building Contract with Contractor’s Design (ICD). The IC is a contract for use under a traditional procurement route, i.e. employer design; however, the ICD does includes provision for the contractor to carry out specified parts of the design. This facility has not previously been available with IFC 98, not even as a supplement, and it is a welcome addition. Other notable changes are as follows: — Provision for carrying out the work in sections is incorporated into the body of the contract, and removes the need to use a supplement that was always complex and necessitated myriads of changes to the original text. — The Appendix is moved to the front of the contract and incorporated into the contract particulars (qv). — Detailed provisions for named sub-contractors and for insurance of the Works are moved to the schedules at the rear of the contract. The form may be used with drawings and bills of quantities (qv), or specifications (qv), or work schedules. It is a lump sum contract (qv) with provision for interim payments (qv). The structure is as follows: — Recitals. — Articles of agreement. — Contract particulars. — Attestation. — Conditions: (1) Definitions and interpretation. (2) Carrying out the Works. (3) Control of the Works. (4) Payment. (5) Variations. (6) Injury, damage and insurance. (7) Assignment and collateral warranties. (8) Termination. (9) Settlement of disputes. — Schedules: (1) Insurance options. (2) Named sub-contractors. (3) Forms of bonds. (4) Fluctuations option. The JCT publishes a guide (IC/G) to the forms. The forms are suitable for and are intended to be used where the proposed Works: 282

Interpretation of contracts — are of simple content, involving the normally recognised basic trades and skills of the industry; — are without any building service installations of a complex nature, or other complex specialist work; — are to be designed on behalf of the employer, and the employer is to provide the contractor with drawings and bills of quantities, or specification, or work schedules to adequately define the work; — require contract provisions that are less detailed than SBC, but more detailed than MW or MWD, and which will be administered by an architect or other contract administrator and a quantity surveyor. No specific advice is given about the maximum contract period or contract sum, and much will depend upon the simplicity or otherwise of the building. However, it may be useful to consider IC and ICD for projects between £100,000 and £450,000 (at 2007 prices) with a contract period not exceeding one year. Things that would preclude the use of the form include: uncertainty about the work to be done; the complexity of the work; the requirement for nominating subcontractors and suppliers; and the wish to make the contractor responsible for the whole of the design as well as construction. Users are sometimes attracted to IC and ICD because they are perceived as much simpler to understand and use than SBC. This approach can lead to inappropriate use of the forms. Both IC and ICD are quite complex forms, and time should be taken to understand their subtleties. The forms are written for use in England and Wales, but they can be used in Northern Ireland if amended by the incorporation of the Adaptation Schedule published by the Royal Society of Ulster Architects. The JCT produce a number of forms for use with IC and ICD: — Intermediate Sub-Contract Agreement (ICSub/A); — Intermediate Sub-Contract Conditions (ICSub/C); — Intermediate Sub-Contract with Sub-Contractor’s Design Agreement (ICSub/D/A); — Intermediate Sub-Contract with Sub-Contractor’s Design Conditions (ICSub/D/C); — Intermediate Named Sub-Contract Tender and Agreement (ICSub/ NAM); — Intermediate Named Sub-Contract Conditions (ICSub/NAM/C); — Intermediate Named Sub-Contractor/Employer Agreement (ICSub/ NAM/E).

Interpretation clauses To assist in the interpretation of the intentions of the parties, many standard forms include a clause defining particular words and phrases used in the contract, and setting out the way in which the contract is to be read, e.g. that singular words are to include the plural and vice versa. Examples of interpretation clauses are SBC, IC, ICD, MW, MWD and DB clause 1 and GC/Works/1 clause 1 and 2. ACA contains brief interpretation provisions in clause 1.3, 1.4 and 23, and NEC clause 11 and 12. See also: Defined terms; Interpretation of contracts.

Interpretation of contracts Technically, the process of interpreting the meaning of the words used in a written contract is referred to as ‘construing the contract’. 283

Interpretation of contracts It is the expressed intention of the parties that is important, and this is to be found by ascertaining the meaning of the words actually used. Extrinsic or ‘parol’ (qv) evidence is not normally admissible, although there are well-defined exceptions to this rule. The first source of reference to discover the meaning of a word is a dictionary, but the courts, arbitrators and adjudicators must give effect to any special, technical, trade or customary meaning that the parties intended the word to bear. Many contracts contain a definitions clause that establishes the meaning the parties have agreed is to be given to specific words or phrases in a particular contract. JCT contracts SBC, IC, ICD, MW, MWD and DB each have a list of definitions in clause 1.1. See also appendix 1 within the PPC. The main basic rule of interpretation is that the contract must be read as a whole: a particular clause must be seen in context, and cannot be read in isolation. ‘The contract must be construed as a whole, effect being given, so far as practicable, to each of its provisions.’551 This point is often overlooked by those without formal legal training, who will seize on a particular word or phrase out of context. In the construction industry the definition of the ‘contract documents’ (qv) is important. All well-drafted contracts should give a clear definition of them. For example, SBC clause 1.1 and ACA recital C give a comprehensive definition and, in interpreting the contract, it is to these documents that one looks. The wording of the contract may also attempt to introduce interpretive rules of its own. One of the most notorious is SBC, IC, ICD and DB clause 1.3, MW and MWD clause 1.2, which has the effect of making the printed conditions prevail over typed or handwritten documents where there is a conflict between them. This reverses the normal and logical rule that handwritten and typescript documents prevail over print.552 The validity of this provision has been upheld time and time again,553 and the printed conditions in these contracts will prevail over any typed provisions in the bills of quantities or specifications. The bills of quantities etc. may be used not in the interpretation of the contract, ‘but in order to follow exactly what is going on’554 and presumably as part of the surrounding circumstances. ACA overcomes this difficulty at clause 1.3 by making provision for listing a priority of documents and provisions. The court will disregard completely meaningless words and phrases. But the judicial task is to interpret the intentions of the parties, and not to write a contract for them. Apparent inconsistencies between contract clauses will be reconciled if it is possible to do so, otherwise the court will give effect to the clause that, in its view, expresses the true intention of the parties. The courts used to apply these rules rigidly. However, in recent years the courts have tended to consider the rules as guidelines, and contracts are usually interpreted in a common-sense way more akin to normal business or other practice.555 See also: Construction. 551

Brodie v. Cardiff Corporation [1919] AC 337 at 355 per Lord Atkinson; Glynn v. Margetson [1893] AC 351. 552 Homburg Houtimport BV v. Argrosin Ltd [2003] 2 WLR 711. 553 Gleeson v. Hillingdon London Borough (1970) 215 EG 165. 554 English Industrial Estates Corporation v. George Wimpey & Co Ltd (1973) 7 BLR 122 at 133 per Edmund Davies LJ. 555 Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 All ER 98.

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Issue

Intervening cause A happening or event that breaks the chain of causation (qv): that is, the connection between a breach of contract or act of negligence and the loss incurred.

Invalidate To put an end to the validity of something so as to stop it having any legal force. See also: Vitiate.

Invitation to tender A preliminary procedure to the formation of a building contract. The architect or project manager (the client’s representative in the BPF System (qv)) is normally responsible for inviting tenders from interested contractors, although in practice it is often left to the quantity surveyor. An invitation to tender does not amount to an offer (qv) in contractual terms. It is merely an invitation to the contractor to make an offer – in legal terms an invitation to treat. Nevertheless, the submission of a tender by an interested contractor can amount to a contract on the terms set out in the invitation – for example, that the employer will give proper consideration to the tender. This could have serious consequences for an employer who fails to keep to the rules set out in the invitation to tender. Where tenders are to be invited for the procurement of public works contracts care must be taken to ensure compliance with all of the requirements and procedures of EEC Directives concerning the coordination of procedures for the award of public works contracts,556 and with the relevant UK legislation.557 See also: Code of Practice for the Selection of Main Contractors; Tender.

Invitation to treat An invitation by one party to another to make an offer (qv) that, if accepted, becomes the basis of a binding contract (qv). The most common example is the display of goods in a shop window. Even if price tags are attached to the goods, it is not an offer by the shop owner but an invitation to treat, i.e. an invitation to the passer-by to go into the shop and offer to buy the goods at the price shown (or indeed at any price). The shop may refuse to accept the offer, and no contract results in that case. See also: Contract; Invitation to tender.

Invitee A person who is invited onto an occupier’s premises with the occupier’s consent, express or implied, and to whom a common duty of care is owed under the Occupier’s Liability Act 1957, which defines the occupier’s duty towards ‘visitors’. Everyday examples of an invitee are the milkman, postman and person delivering newspapers, as well as guests and tradespeople. See also: Occupier’s liability.

Issue A word having various meanings. In a contract or legal context it refers to: (i) a disputed point of law or question of fact set out in the pleadings (qv) that is alleged by one party and denied by the other, e.g. a court may refer to the issues that must be decided, or which must be settled; or (ii) the act of sending something out or putting it forth, as in the issue of a certificate. 556

For example, Directive 2004/18/EC of 31 March 2004. For example, The Public Contracts Regulations 2006 (SI 2006 No. 54) or, for utilities, the Utilities Contracts Regulations 2006. 557

285

Issue Certain building contracts refer to the issue of certificates (qv), e.g. SBC clause 1.9. The date of issue of a certificate is very important. IC and ICD clause 1.9 stipulates that a copy of every certificate issued to the employer must be sent to the contractor ‘immediately upon issue’. SBC clause 4.9.2 states that interim certificates must be issued on the dates stated in the contract particulars (qv). SBC clause 4.13.1 states that the final date for payment of an interim certificate is 14 days from the date of issue. The date of issue of a certificate is the date on which it was sent out by the certifier. It is not issued if it is merely signed.558 The issue of a certificate is not the same as the serving of a certificate on, or the receipt by, another.559 Issue and receipt may be, and often are, achieved on different dates, and it is significant that it is the date of issue, not receipt, that is important in JCT and other contracts. The ACA contract refers to the issue of certificates in clause 16. Elsewhere in the clause the final date for payment is linked to the date of the certificate. It is thought that such date must be the date of issue, which will normally be the date stated on the certificate. If the certificate was actually sent out from the architect on a later date than the date on the certificate, it is probable that it would be the date of sending out (the date of issue) that would be relevant.560 In the law governing the transfer or distribution of property, issue means a child, children, and all individuals who descend from a common ancestor or descendants of any degree. See also: Immediately.

558 559 560

London Borough of Camden v. Thomas McInerney & Sons Ltd (1986) 9 Con LR 99. Glen v. The Church Wardens & Overseers of the Parish of Fulham (1884) 14 QBD 328. Cantrell and Another v. Wright & Fuller Ltd (2003) 91 Con LR 97.

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J JCLI Form for Landscape Works A form of contract produced by the Joint Council for Landscape Industries and suitable for landscape works. Modelled generally on the MW but including a number of other useful provisions, some – although not all – of which are of particular relevance to landscaping, and include: — partial possession; — plant failures; — malicious damage and theft. A very useful free download is available from www.landscapeinstitute.org showing the differences between JCTMW and JCLILWC 2008. Since it was first published the form has undergone numerous thorough revisions. The previous edition was published in 1999, drafted to take account of the various obligations arising from the introduction of the Construction (Design and Management) (CDM) Regulations 1994 (qv) and the Housing Grants, Construction and Regeneration Act 1996 (qv). Under the latter, landscaping contracts are specifically stated to be ‘construction contracts’ (qv) within the meaning of that Act. The current edition, JCLI Landscaping Works Contract 2008 (JCLILWC 2008), was published in May 2008. JCLI Practice Note 8 contains much useful information. It refers to the Health and Safety Executive as stating that although earthworks, hard landscaping, installation of piping, demolition and preparation of the site for such work fall under the definition of ‘construction work’ in the CDM Regulations 2007, tree planting and general horticultural work do not fall under the definition. Amendments have been made to the contract accordingly. Despite the additional provisions described above, the JCLI contract remains closely comparable to the MW (qv), albeit that the term ‘landscape architect’, which is a designation not protected by the Architects Registration Acts, is used in place of the term ‘architect’. There is a version of the contract (JCLI Landscape Works Contract with Contractor’s Design (JCLILWCD 2008)) that is suitable where the contractor is required to design certain elements, but not if the contractor is required to design the whole project. These contracts are suggested for contracts not exceeding £200,000 in value. For other circumstances one of the JCT, ICE or BEC contracts is suggested. There is also a JCLI Landscape Maintenance Works Contract (JCLILMWC) available. See also: Architects Registration Board.

JCT/CIMAR Arbitration Rules 2005 These procedural rules for the conduct of arbitrations were first issued on 18 July 1988, and were incorporated into all the JCT forms by an amendment issued on the same day. The rules were based on the Arbitration Act 1950. This Act has been superseded by the Arbitration Act 1996, and the rules have been extensively revised accordingly. The latest edition of the rules was issued in 2005 as the JCT/CIMAR Construction Industry Model Arbitration Rules. They are incorporated into the 2005 series of JCT contracts. SBC, IC, ICD and DB clause 9.3 and MW and MWD Schedule 1 provide that any arbitration under the relevant 287

JCT Constructing Excellence Contract (CE) contract will be conducted in accordance with the edition of these rules current at the base date (qv) of the particular contract. The contracts provide that if any amendments to the rules have been issued by the JCT after the base date, the parties may, by giving a joint notice to the arbitrator, state that they wish the arbitration to be conducted in accordance with the amended rules. The JCT edition of the rules includes the JCT Supplementary and Advisory Procedures, of which part A is mandatory and part B is advisory. Part A addresses the procedures under rule 6, which covers the form of procedure and directions. It introduces into rule 6.2 a timescale of 14 days from the arbitrator’s acceptance of appointment for the parties to provide each other and the arbitrator with a submission note addressing (i) the nature of the dispute and amount, (ii) a view on the need for a hearing and its length, and (iii) proposals as to the form of procedure. Under rule 6.3 it introduces a further timescale of 21 days for the convening of the procedural meeting unless it has previously been decided that a meeting is not necessary. And, finally, it introduces a default that rule 8 (documents only) is to apply unless the parties agree otherwise, or the arbitrator expressly directs that rule 9 is to apply. Part B introduces further detail into each of the procedures under rule 7, rule 8 and rule 9. There are some excellent notes to the rules, which, like the rules, were prepared by the Society of Construction Arbitrators. These notes were updated in January 2002. The rules usefully contain extracts from the current Arbitration Act. See also: Arbitration; Construction Industry Model Arbitration Rules.

JCT Constructing Excellence Contract (CE) A contract published in December 2006 and drafted on the basis of collaborative working and the formation of integrated teams. It is supported by a project team agreement (qv) and guide. It is said to seek to: — encourage collaborative working; — promote the importance and use of risk management; — be flexible in use; and — be used throughout the supply chain. The documentation is based upon the Be Collaborative contract, and is appropriate for: — the procurement of construction works and services (e.g. an appointment document for consultants); — use throughout the supply chain, e.g. a sub-contract; — use where the participants wish to engender collaborative and integrated working; and — use in partnering. It can be used whether or not the supplier (qv) is to undertake design, the Works are to be carried out in sections, and has the option of a lump sum or target cost pricing option. The contract envisages engaging the contractor early in the process to work as part of the project team (qv). Unlike PPC (qv), the CE form is a bilateral contract, although the project team agreement if executed, given that it is optional, would be a multi-party agreement. The CE form is brief, and uses different terminology from that used in other JCT forms, e.g. SBC. There is the ‘supplier’ (qv) and ‘purchaser’ (qv), and the supplier provides ‘services’ in accordance with the ‘brief’. These rather 288

JCT Constructing Excellence Contract (CE) neutral terms, it would seem, have been chosen to allow the contract to be used throughout the supply chain. The traditionally used words such as ‘employer’ and the ‘Works’ would not necessarily be appropriate when the form is used as a sub-contract or a consultant appointment document. The contract is dependent upon detailed supporting documentation, which would be included under the heading of ‘brief’. A number of the contract clauses are highlighted, e.g. rectification period (clause 4.3.2) and liquidated damages (clause 7.27). These clauses would not apply if the contract is used as an appointment document for a consultant; by completing the appropriate entry within the contract particulars (qv) at clause 1.1 the clauses are stated not to apply. The contract particulars are extensive, and comprise: — Part 1: Details relevant to the conditions e.g. start and completion dates — Part 2: Brief — Part 3: Services — Part 4: Supplier’s key personnel, key members of the supply chain and the project team — Part 5: Risk allocation schedule — Part 6: Key performance indicators — Part 7: Payment terms — Part 8: Third party rights and collateral warranties — Part 9: Details of any supplementary conditions The conditions are drafted in simple and brief terms, with the contract being ‘administered’ by the purchaser’s representative. The only certificate to be issued under the contract by the purchaser’s representative is the certificate certifying completion, i.e. clause 3.7, with the remainder of the documents used being statements or notices. The conditions are: — Section 1: Definitions and interpretation. — Section 2: Working together. Clause 2.1 sets out what is referred to as the overriding principle. The project participants are to work in a cooperative and collaborative manner, in good faith and in a spirit of mutual trust and respect. This principle is intended as the backdrop against which all other provisions are interpreted. — Section 3: Primary obligations of the purchaser. — Section 4: Primary obligations of the supplier. — Section 5: Allocation of risks. This section addresses the risk register (qv) and risk allocation schedule (qv). These documents are an integral part of the parties’ attempt to identify and manage risk. It will show how the risks have been allocated between the parties should they occur – that is, in terms both of time and of money. In addition, under this provision what are termed relief events are addressed. — Section 6: Measurement of performance. — Section 7: Payment. There are two options available under this clause. The first is the target cost option, which is based on the contractor’s actual costs, audited on an open book basis. These are compared against a target cost. The saving or excess expenditure against the target cost is shared between the parties on a pre-agreed basis, identified in the contract particulars. Secondly there is also the option within the target cost for a guaranteed maximum price, and if costs exceed this figure then the supplier bears those costs in excess of the guaranteed maximum figure. 289

JCT contracts — — — —

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Section 8: Insurance. The clause does not set out any standard insurance provisions (e.g. SBC clause 6.7 options A, B or C): therefore detail regarding insurance will have to be included within the brief. Section 9: Assignment, subletting, third party rights and collateral warranties. Section 10: Termination. Section 11: Dispute resolution. The clause includes a new tier of dispute resolution, i.e. negotiation between senior executives. Two senior persons, one from each party, are identified within the contract particulars, and these individuals are to try to resolve any dispute prior to referring to another forum. Section 12: Supplementary conditions. The guide provides helpful examples of how the payment options work, and how risk is addressed under the allocation schedule.

JCT contracts The first form of building contract agreed between architects and builders was published in 1903. By 1931, after several editions of the form, the body known as the Joint Contracts Tribunal (qv) was set up to keep the form under constant review. Revised editions were published in 1939, 1963, 1980, 1998 and 2005, when the whole suite of contracts and associated documents was completely revised and updated. An advantage claimed for the JCT contracts is that they are negotiated documents that have been agreed by all sides of the construction industry. Thus a JCT form is not an employer’s ‘standard form of contract’ for the purposes of s. 3 of the Unfair Contract Terms Act 1977 (qv), and any ambiguities will not be construed contra proferentem (qv) by the courts. This comment is true only in respect of the latest editions of the forms. Employers who use earlier editions of the forms may find themselves caught by the provisions of the Act, given that they are no longer agreed by all sides and JCT has withdrawn its sanction. The Act may also bite where JCT forms are subject to amendment, other than the official amendments published by the JCT, e.g. Revision 1. The range of contracts is being increased constantly. At the time of writing, they are: — Standard Building Contract (SBC) • With Quantities (SBC/Q) • With Approximate Quantities (SBC/AQ) • Without Quantities (SBC/XQ) — Intermediate Building Contract (IC) — Intermediate Building Contract with Contractor’s Design (ICD) — Minor Works Building Contract (MW) — Minor Works Building Contract with Contractor’s Design (MWD) — Design and Build Contract (DB) — Major Project Construction Contract (MP) — Construction Management Trade Contract (CM/TC) — Construction Management Agreement (CM/A) — Management Building Contract (MC) — Prime Cost Building Contract (PCC) — Measured Term Contract (MTC) — Repair and Maintenance Contract (Commercial) (RM) — Framework Agreement (FA) 290

JCT contracts — Pre-Construction Services Agreement (PCSA and PCSA/SP) — Consultancy Agreement (Public Sector) (CA) — JCT – Constructing Excellence Contract (CE) — JCT – Constructing Excellence Contract Project Team Agreement(CE/P) A large number of sub-contracts, agreements and other documents have been produced for use with these contracts as follows: — Standard Building Sub-Contract with Sub-Contractor’s Design Agreement (SBCSub/D/A) — Standard Building Sub-Contract with Sub-Contractor’s Design Conditions (SBCSub/D/C) — Standard Building Sub-Contract Agreement (SBCSub/A) — Standard Building Sub-Contract Conditions (SBCSub/C) — Intermediate Sub-Contract Agreement (ICSub/A) — Intermediate Sub-Contract Conditions (ICSub/C) — Intermediate Sub-Contract with Sub-Contractor’s Design Agreement (ICSub/D/A) — Intermediate Sub-Contract with Sub-Contractor’s Design Conditions (ICSub/D/C) — Intermediate Named Sub-Contract Tender and Agreement (ICSub/ NAM) — Intermediate Named Sub-Contract Conditions (ICSub/NAM/C) — Intermediate Named Sub-Contractor/Employer Agreement (ICSub/ NAM/E) — Design and Build Sub-Contract Agreement (DBSub/A) — Design and Build Sub-Contract Conditions (DBSub/C) — Major Project Sub-Contract (MPSub) — Construction Management Tender (CM) — Construction Management Trade Contractor Collateral Warranty for a Funder (CMWa/F) — Construction Management Trade Contractor Collateral Warranty for a Purchaser or Tenant (CMWa/P&T) — Management Works Contract Tender and Agreement (MCWK) — Management Works Contract Conditions (MCWK/C) — Management Works Contractor/Employer Agreement (MCWK/E) — Management Contractor Collateral Warranty for a Funder (MCWa/F) — Management Contractor Collateral Warranty for a Purchaser or Tenant (MCWa/P&T) — Works Contractor Collateral Warranty for a Funder (WCWa/F) — Works Contractor Collateral Warranty for a Purchaser or Tenant (WCWa/P&T) — Short Form of Sub-Contract (ShortSub) — Sub-Sub-Contract (SubSub) — Contractor Collateral Warranty for a Funder (CWa/F) — Contractor Collateral Warranty for a Purchaser or Tenant (CWa/P&T) — Sub-Contractor Collateral Warranty for a Funder (SCWa/F) — Sub-Contractor Collateral Warranty for a Purchaser or Tenant (SCWa/P&T) — Sub-Contractor Collateral Warranty for Employer (SCWa/E) — Formula Rules (FR) — Partnering Charter (PC/N) 291

JCT Practice Note 6 — — —

Adjudication Agreement (Adj) Adjudication Agreement (Named Adjudicator) (Adj/N) Building Contract and Consultancy Agreement for a Home Owner/ Occupier (HO/C) — Building Contract for a Home Owner/Occupier Who Has Not Appointed a Consultant to Oversee the Work (HO/B) — Home Repairs and Maintenance Contract (HO/RM) Separate guidance is available for most of the contract forms. Standard contract administration forms and guidance for their use are also available from RIBA Publishing. Certain documents can be downloaded from the JCT website: www.jctltd.co.uk. The main differences between the 2005 series of JCT contracts and their predecessors may be summarised as follows. — The contract structure has a standard approach. — Private and local authority editions of SBC have been combined. — The contractor’s designed portion has been incorporated in SBC and in ‘with contractor’s design’ versions of IC and MW. — Sectional possession and completion have been incorporated in SBC, IC, ICD and DB. — There are no longer nominated sub-contractors or suppliers in SBC, although provision remains for naming within IC and ICD. — There is no provision for performance specified work in SBC. — The contractor’s price statement has been omitted. — Insurance provision for loss of liquidated damages has been omitted. — There are no CIS provisions. — There are no detailed VAT provisions. — Third party rights are introduced in some contracts. — Collateral warranties are provided for in some contracts. — Reference to mediation has been introduced. — If no choice is made, the default is to legal proceedings rather than arbitration. — Most clauses are reworded and simplified to some extent. The JCT Standard Forms are currently published by Sweet & Maxwell Limited, but copyright vests in the Joint Contracts Tribunal Limited. If it is intended to use the JCT contracts in Northern Ireland, then appropriate adaptation schedules have been produced for the commonly used forms. They are available from the Royal Society of Ulster Architects. Previously, special supplements were available from the Scottish Building Contracts Committee Limited (qv), which amended the relevant contract and made it suitable for use in Scotland. However, the Scottish Building Contracts Tribunal Committee Limited, in conjunction with the Joint Contracts Tribunal Limited, now publishes a specific version of certain of the contracts for use in Scotland, e.g. SBC/Q/Scot, MW/Scot. There is no equivalent version of the IC and ICD for use in Scotland. Details can be found at www.sbcconline.com. See also: ACA Form of Building Agreement; Engineering and Construction Contract (NEC); GC/Works contracts.

JCT Practice Note 6 Published in 2002 as part of the ‘Series 2’ practice notes issued in support of JCT 98. The practice note is titled Main Contract Tendering and primarily offers guidance on the single-stage tendering process. It includes 292

Joining agreement notes on two-stage tendering. In addition, it includes a number of model forms, e.g. invitation letter and a form of tender. The note sets out guidance through the various stages of obtaining tenders: — The preliminary enquiry: • the documents; • the project information; • the basis of assessment and the questionnaire; • timing. — The invitation to tender: • documents to be issued; • completing the forms. — The tender: • tender submission; • tender compliance; • qualified tenders; • withdrawal and lapse of tenders; • assessment on criteria other than price; • notification to tenderers; • examination of priced documents and errors; • the alternative provisions; • recommendations. In addition there are notes on the two-stage tendering process. The model forms are: — Appendix A: • JCT model form of preliminary enquiry letter for main contractor – enquiry letter; • project information schedule; • questionnaire. — Appendix B: • JCT model form of invitation to tender for main contractor. — Appendix C: • JCT model form of tender for main contract works. See also: Code of Procedure for Single-Stage Selective Tendering 1996; Code of Procedure for Two-Stage Selective Tendering 1996; Code of Practice for the Selection of Main Contractors.

Joining agreement A supplementary agreement referred to in PPC. A template agreement is included at appendix 2 to the contract, and is defined at appendix 1 as ‘an agreement entered into pursuant to clause 10.2 or clause 26.10 of the Partnering Terms, based on the form set out in Appendix 2’. Clause 10.2 addresses specialists, who are again defined at appendix 1 as ‘any party, including if so agreed a former consultant, providing to the Constructor (or, under clause 10.11, to the Client) works or services or supplies of goods, materials or equipment forming part of the Project’. If identified within the project partnering agreement, or where the partnering team members agree that a specialist can offer sufficient design or other beneficial contribution to the project, then the constructor shall arrange for that specialist to execute a joining agreement, thereby becoming a partnering team member, assuming all the rights and obligations of a member, given the terms of the joining agreement and the intended specialist contract. 293

Joining party Where a consultant’s appointment is terminated by the client (or the consultant), then the client can appoint a replacement under clause 26.10. The proposed replacement is subject to the approval of the constructor, following consultation with the core group. This appointment is by means of a joining agreement, and again the person becomes a partnering team member. See also: Joining party.

Joining party A term used in PPC to define (i.e. defined at appendix 1) a consultant or specialist who enters into a joining agreement (qv) with the other partnering team members. The joining party becomes a member of the partnering team (qv).

Joint and several liability This refers to a debt or liability in which two or more parties are responsible for the entire amount of the debt or liability. Parties to adjudication and arbitration are commonly jointly and severally liable to the tribunal, so that if the losing party goes out of business then the tribunal can recover all the fees from the other party. Paragraph 25 of the Scheme for Construction Contracts (England and Wales) Regulations 1996 makes both parties jointly and severally liable for the adjudicator’s fees and expenses, and there are similar provisions in the schemes used in Scotland and Northern Ireland. Under section 28 of the Arbitration Act 1996 the parties are ‘jointly and severally liable to pay’ the arbitrator’s reasonable fees and expenses. One of the disadvantages of partnership is that partners are jointly and severally liable for wrongs committed by the partnership. Thus a partner may become liable for the full amount of a claim for damages, albeit with little direct knowledge of the matter if the partner responsible becomes personally bankrupt or is otherwise unavailable for payment. See also: Joint liability.

Joint Contracts Tribunal Limited (JCT) The JCT (which was not strictly a tribunal but rather a committee) was formed in 1931. It is now a limited company, incorporated on 30 March 1998. The members of the company are: — Royal Institute of British Architects; — Royal Institution of Chartered Surveyors; — Local Government Association; — Construction Confederation — National Specialist Contractors Council — British Property Federation; — Scottish Building Contract Committee. Each of these nominates a director. The company is divided into ‘colleges’ for working purposes, with appropriate groupings representing: employers, clients and local authorities; consultants; specialists and sub-contractors; and the Scottish building industry. There are working parties formed for specific purposes, and a drafting sub-committee. The terms of reference under which the tribunal functions are stated briefly as being: to review and update the standard forms of building contract; to produce, approve and update as necessary other ancillary forms and agreements; to issue practice notes; and to liaise with other bodies. Any of the constituent bodies used to be able to veto the wording of the contracts. This power ensured that all JCT publications were published with the agreement of all members. With its incorporation, the JCT has reorganised its procedures. 294

Joint Fire Code

Joint Fire Code This is a code of practice first published in May 1992 and intended to provide guidance for the proper protection of new construction, demolition, alteration, repair and renovation works from risk of accidental or malicious fire during the construction process. It is updated on a regular basis and the current version is the 6th edition, published in January 2006. Its full name 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 published by the Construction Confederation and the Fire Protection Association, supported by the Association of British Insurers, the Chief and Assistant Chief Fire Officers’ Association, and the London Fire Brigade. Although the code is not part of legislation, insurers tend to require compliance with the code. Should compliance be required, then it will be a requirement of either or both of the insurance contract or construction contract. A stated objective of the code is that it is for use on projects with a value of £2.5 million and over; a large project is described as one with a value of over £20 million. For contracts of lesser value it could be stated to apply, depending on the inherent fire risks for that particular project. Non-compliance with the code, should it apply, could lead to insurance cover being withdrawn by the insurers. The code deals with permanent works, temporary works and materials, and covers such things as: — the design and construction phases; — emergency procedures; — fire protection measures; — security against arson and malicious fire damage; — temporary accommodation; — storage of materials generally, and of flammable liquids and gas etc., in particular safeguards against fire from electricity or gas services, from hot works; — waste; and — on-site smoking. Large projects are addressed under paragraph 6.3, and for certain projects the code could require the appointment of a part-time or full-time site fire marshal. The code is dealt with in SBC and DB clauses 6.13 to 6.16, and in IC and ICD clauses 6.11 to 6.14. For obvious reasons the code is not usually applicable to projects using MW and MWD. If the insurer of the Works requires compliance with the code, the contract particulars (qv) should reflect this at the relevant entry. Special requirements will apply if the insurer categorises the Works as a ‘large project’, and the contract particulars must be completed appropriately. Where insurance option A applies, the contractor would be responsible for providing this information. SBC and DB clause 6.14 and IC and ICD clause 6.12 require both the employer and the contractor and anyone employed by them or anyone on the Works to comply with the code. If there is a breach of the code, and the insurer gives notice requiring remedial measures, the contractor must ensure that the measures are carried out by the date specified in the notice, and in accordance with any architect’s instructions. The contractor has seven days from receipt of the notice to carry out the instructions. If it fails to do so, or fails to proceed regularly and diligently, the employer may employ and pay others to do the 295

Joint liability work. In that case an appropriate deduction is to be made from the contract sum. The contracts also provide that if the code is amended after the base date (qv), then any additional costs are to be borne by either the employer or contractor as stated in the contract particulars (qv). If it is stated to be the employer, then should the contractor incur additional cost as a result, such costs are added to the contract sum (qv). Not all of the standard forms make express reference to the code, e.g. PPC and ACA. This does not necessarily mean that the code would not or should not apply. It may be a requirement of the insurance cover that the code is to apply. If this is the case, then reference should be made to the code and its application within one of the contract documents, e.g. the specification or bills of quantities. It may be that the insurance policy or document is to be annexed to the executed contract, or incorporated by reference, thereby forming a part of the contract. The MP form requires the insurance policy to be annexed to the executed contract, although reference is made to the code at clause 33 within the contract. See also: Insurance.

Joint liability In some instances liability for a tort may be shared jointly between two or more defendants, e.g. in the law of employment where an employer is vicariously liable for the torts of employees, or under the rules of agency (qv). Under the Civil Liability (Contribution) Act 1978 the courts may apportion liability. Section 1(1) of the Act provides that ‘any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)’. In other words, in the case of joint liability where only one wrongdoer is sued, that wrongdoer may bring in a co-defendant who is jointly liable, or issue subsequent proceedings under the Act to recover a contribution. The amount of such contribution is to be such as the court finds ‘just and equitable having regard to the extent of that person’s liability for the damage in question’. There is no restriction to parties committing a tort (qv), and it is possible to take contribution proceedings even if the claim is for a breach of contract.561 The court will look at the types of damage and the extent to which each party caused the damage. It often happens in the construction industry that damage is of various types and due to more than one cause. The task of apportioning liability can be difficult, and the court may be expected to take a fairly broad approach.562 Where two or more parties are liable, one of the parties may suffer unreasonably. That can occur if the other parties become insolvent, or unavailable, or for some other reason cannot be made to pay. In such cases the remaining party may have to pay 100% of any damages awarded, although perhaps only 10% liable for the wrong. It is for this reason that the net contribution clause (qv), which seeks to apportion the liability justly, is to be found in most professional terms of engagement and some collateral warranties. See also: Contributory negligence; Joint and several liability; Vicarious liability.

561 562

S. 6(1) of the Act. Equitable Debenture Assets Corporation Ltd v. William Moss Group Ltd and Others (1984) 2 Con LR 1.

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Joint names policy

Joint names policy A policy that has two or more parties named as the insured. It is defined in SBC clause 6.8. It is an insurance that names both employer and contractor as insured. Under this type of policy the insurers have no rights against any persons so named, or who are recognised as insured under clause 6.9. Clause 6.9 deals with the position of sub-contractors, and seeks to provide that they are recognised as insured under the relevant joint names policy or, alternatively, that a waiver of subrogation (qv) is included. Other JCT contracts have similar provisions. If the insurances were to be taken out in the name of one of the parties, and damage occurred because of one of the insured risks, the insurer would normally pay out to the named insured party. However, the insurer would then be able to ‘stand in the shoes’ of the named insured party and take action against the party responsible for the damage in order to recover the amount paid out. In addition, it has been held that the parties named on a joint names policy may have no liability to each other, including under the Civil Liability (Contribution) Act 1978.563 There has been a succession of cases through the courts dealing with the situation where the contractor causes damage to property insured in joint names by the employer under a JCT form. Although the courts are by no means unanimous, it seems to be reasonably established that, even where the damage is caused by the contractor’s negligence, the claim for the cost of repairing the damage lies through the insurance policy, and the insurer is precluded from claiming against the contractor.564 However, this will depend upon the nature of the event resulting in the damage and the wording of the insurance provision. Employers requiring work to be carried out to residential property often have difficulty in obtaining joint names insurance cover. Alternatively, difficulty may arise when an employer does not own the building but has a leasehold interest, the existing building being insured by the landlord. Many landlords are reluctant to name the contractor on their policy. A common reason is that it may adversely affect their claims record. Where the contract requires joint names insurance, but the employer nevertheless fails to take it out, the employer will be in breach of contract. There will be no recourse against the contractor, even for damage caused by the contractor’s negligence.565 An interesting conundrum is posed where an employer, obliged by the contract to insure existing property in joint names, insures, but not in joint names. This is a common situation. If the contractor damages the property through its negligence, presumably the employer will be entitled to claim the cost of repair from the insurers. Having paid out, the insurers can then exercise their right to stand in the shoes of the employer and claim the cost from the wrongdoer. However, the contractor would be entitled to claim damages for the breach of contract from the employer for failing to ensure the policy was in joint names. Such damages would amount to whatever the insurers were claiming. 563 Co-operative Retail Limited and Others v. Taylor Young Partnership and Others [2002] 1 All ER (Comm). Although this was a decision under the JCT 1980 private with quantities standard form, it may have wider implications. 564 British Telecommunications plc v. James Thompson & Sons (Engineers) Ltd (1998) 61 Con LR 1; G D Construction (St Albans) Ltd v. Scottish & Newcastle plc [2003] BLR 131; John F Hunt Demolition Ltd v. ASME Engineering Ltd (2007) 114 Con LR 105. 565 Tyco Fire & Integrated Solutions (UK) Ltd v. Rolls-Royce Motor Cars Ltd [2007] EWHC 3159 (TCC).

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Joint tortfeasor SBC and DB clause 6.5 and Schedule 3, IC and ICD clause 6.5 and Schedule 1 and MW and MWD clauses 5.4A and 5.4C provide for insurances to be taken out in the joint names of the employer and the contractor. In addition, the ACA (clause 6.4) requires joint names insurance of the Works, as does the NEC (clause 84.2) and PPC (clause 19.1).

Joint tortfeasor A joint wrongdoer. Certain torts may be committed jointly, and the tortfeasors are jointly liable, e.g. directors of a limited liability company. See also: Joint liability.

Joint venture contracting A form of contracting where two or more companies form a joint company for a particular purpose or contract. The joint venture normally comprises firms with differing forms of expertise to provide one company who cover all areas of knowledge required. Each of the parties is normally supported by a guarantee (qv) given by a parent or holding company. It avoids a conflict of interest between the two, but can limit competition.

Judgment The decision of a court in legal proceedings that determines the rights of the parties. It is also the reasons of the judge in arriving at the decision. This may be reported and cited as an authority. The judgment is based on: — the judge’s decision as to what are the important and relevant facts of the case; and — statements of the applicable rules of law. The judgment prevents the parties from reopening the dispute, except that they may have the right of appeal (qv) to a higher court. The decision of an arbitrator is referred to as an award (qv) and subject to restricted grounds of appeal. The decision of an adjudicator (qv) is referred to as a decision. It may be subject to challenge, but not to appeal.566 A party dissatisfied with the decision of an adjudicator may refer the original dispute or difference to either arbitration or legal proceedings, depending on what the particular contract prescribes. This is effectively a new consideration of the dispute or difference, as if the adjudicator’s decision did not exist. See also: Appeal; Courts; Judicial precedent; Law reports; Obiter dictum; Ratio decidendi.

Judgment debt The sum of money that a judgment debtor has been ordered to pay as a result of court proceedings. A judgment debt bears interest (qv) at a variable statutory rate from the date of judgment. Unless the judgment debtor has obtained from the court a stay of execution, pending an appeal or trial of a counterclaim (qv), the judgment creditor may proceed to enforce the judgment. See also: Garnishee.

Judicial immunity A judge has complete immunity from action for any acts carried out within their judicial capacity. This immunity apparently extends to magistrates.567 An adjudicator (qv) has a limited immunity under the contract,

566 567

Ss. 67, 68 and 69 Arbitration Act 1996. Law v. Llewellyn [1906] 1 KB 487.

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Jurisdiction unless acting in bad faith.568 An arbitrator has immunity under s. 29 of the Arbitration Act 1996, subject to not having acted in bad faith.

Judicial notice Facts that are a matter of such common knowledge that it would be absurd to require proof. They are automatically recognised by the courts: e.g. that the streets of London are full of traffic.569 A court will take judicial notice of all Acts of Parliament unless the Act in question expressly provides to the contrary.

Judicial precedent The doctrine of judicial precedent is an important feature of the common law system. In general terms, a judge in a lower or the same court is bound to follow the decision of a previous judge in similar circumstances. Not all of a judgment is of binding force in subsequent cases, but only the legal principle that is necessary for the actual decision. This is known as ratio decidendi (the reason for decision). It is the legal principle upon which the decision rests. Judges often make general statements about the principles involved that are not germane to the facts before them. Such remarks are called obiter dicta and are not binding on another court, although they may be of persuasive authority in a subsequent case. There may be several rationes decidendi in a judgment, in which case all are binding unless they are inconsistent with each other. Judges have limited power to distinguish cases they do not wish to follow. Sometimes they exercise considerable ingenuity in so doing. By distinguishing a case a judge finds, for example, that the facts of the earlier case are not sufficiently similar to those before them for the ratio decidendi to be applied. The general rule is that every court in the judicial hierarchy binds all lower courts by its decisions; some courts bind themselves as well. A decision of the House of Lords is binding on all other courts. The Court of Appeal binds itself and the courts below it. In general, the decisions of the House of Lords are binding upon the House itself but, in rare cases, the House of Lords is free to depart from its own decisions if there is sufficient reason. A higher court has power to overrule an earlier decision of a lower court, and thus declare that it does not in fact represent the law. The rules about judicial precedent are very complex, and too rigid an adherence to precedent may lead to injustice in a particular case, and sometimes restrict the proper development of the law. However, judicial precedent provides some degree of certainty and a basis for the orderly development of legal rules. See also: Courts; Law reports; Obiter dictum; Ratio decidendi; Stare decisis.

Jurisdiction The power or authority of a court or tribunal to take cognisance of and to decide matters put before it. In the United Kingdom the jurisdiction of the High Court derives from the Crown, in whose name and by whose authority the judges exercise jurisdiction. The jurisdiction of the courts is relatively seldom challenged, except when dealing with matters that have an international dimension. Jurisdiction is an important consideration where a dispute is referred

568 569

S. 108(4) Housing Grants, Construction and Regeneration Act 1996. Dennis v. White & Co [1917] AC 479.

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Jurisdiction to arbitration (qv) or adjudication (qv). Lack of jurisdiction is a common challenge to the decision of an adjudicator (qv). As far as arbitration is concerned, under section 30 of the Arbitration Act 1996 (unless otherwise agreed) a tribunal may rule on its own substantive jurisdiction as to (a) whether there is a valid arbitration agreement, (b) whether the tribunal is properly constituted, and (c) what matters have been submitted to arbitration in accordance with the arbitration agreement. Any ruling may be challenged by any available arbitral process of appeal or review. In contrast, an adjudicator has no power to determine their jurisdiction unless the parties expressly give that power. The adjudicator’s jurisdiction is derived from the contract. There must be a dispute, and it must not have been adjudicated on an earlier occasion. The adjudicator must be properly nominated under the terms of the contract. In particular, the adjudicator’s jurisdiction extends only to dealing with the dispute set out in the notice of adjudication,570 or as extended by agreement of or waiver by the parties.571 Under the Scheme for Construction Contracts (England and Wales) Regulations 1998 only one dispute can be adjudicated unless the parties agree otherwise. It is open to a party to contest the adjudicator’s jurisdiction, and to continue to take part in the adjudication without prejudice to that contention. The matter of an adjudicator’s jurisdiction is not concerned with whether the adjudicator comes to the correct conclusion about the matter in dispute, but merely with whether the adjudicator has addressed the dispute that has been referred and no other.572 It has been said that ‘if he has answered the right question in the wrong way, his decision will nevertheless be binding. If he has answered the wrong question, his decision will be a nullity.’573 A second meaning covers the territorial limits within which the judgments or orders of a court etc. can be enforced.

570

McAlpine PPS Pipeline Systems Joint Venture v. Transco (2004) 96 Con LR 69. Cowlin Construction Limited v. CFW Architects (a firm) [2003] BLR 241. 572 William Verry Limited v. North West London Communal Mikvah [2004] EWHC 1300 (TCC). 573 Nikko Hotels (UK) Ltd v. MEPC plc [1991] 2 EGLR 103: referred to with approval, as applicable to an adjudicator, by the Court of Appeal in Bouygues (UK) Ltd v. Dahl-Jensen (UK) Ltd (2000) 73 Con LR 135 (CA). 571

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K Key date A phrase used within the NEC. It is defined at clause 11.2(9) as ‘the date by which work is to meet the Condition stated. The Key Date is the key date stated in the Contract Data and the Condition is the condition stated in the Contract Data unless later changed in accordance with this Contract.’ Key dates should not be confused with the completion date for the Works or individual sections, should sections apply under secondary Option X5: Sectional Completion. Delay damages (secondary Option X7: Delay Damages) would not apply should the contractor fail to meet a key date. However, the contractor is under an obligation to ensure that the condition stated in the contract data is achieved by the key date (clause 30.3). The key dates are to be shown on the contractor’s programme submitted for acceptance under clause 31.2, and the contractor is to identify the date when the contractor plans to meet the condition stated for each key date. This would include any revised programme submitted under clause 32. Should the contractor be instructed to submit a quotation for an acceleration to achieve completion before the completion date, then the revised programme submitted is to show any changes to the key dates, and the date when the condition stated in the contract data is likely to be achieved. The contractor is to notify the project manager of any compensation event should it be likely to affect the prices, completion or a key date. Should a contractor fail to notify the project manager within eight weeks of becoming aware of the event, then the contractor may lose its right to an adjustment of the prices, completion date or key dates. The effect of a compensation event on a key date is assessed in accordance with clause 63. Within the guidance notes it states that the key dates provision can be used when more than one contractor may be on site at the same time, e.g. one contractor building the structure and another fitting out or installing plant. Within the contract data it would be stated that the slab to the plant room had to be complete by week 35 (i.e. a key date) so as to allow the installation and positioning of plant. Another example concerns completion of an aspect of design (e.g. by 30 September 2009) so that it can be passed on to another party in order that they may complete their design for a different part of the project. A key date may be changed by the project manager, but this in itself could amount to a compensation event (qv) (clause 60.1(4)). Key dates are subject to the early warning (qv) procedure under clause 16.

Key performance indicators (KPI) It is now common within collaborative or partnering-type contracts for performance to be monitored or benchmarked against appropriate criteria on a regular basis during the project. It is important to evaluate the costs involved in undertaking such an exercise, to ensure that any benefits are not outweighed by prohibitively high costs of monitoring. This will very much depend upon the size of the project. The criterion used is commonly referred to as a key performance indicator. Two contracts that include key performance indicators are PPC and CE. The indicators used should address inputs as well as outputs, and should be addressed in a structured manner covering not only the contractor and key sub-contractors, but also 301

Key performance indicators (KPI) consultants. It should be clear to those concerned whether performance is in any way linked to a financial benefit or loss. Within PPC appendix 1 the key performance indicators are defined as the ‘indicators set out in Appendix 8 or otherwise agreed between the Partnering Team members for measurement of their performance in relation to the Project in accordance with clauses 4.2, 13.3 and 23 of the Partnering Terms’. Clause 4.1 sets out the partnering objectives, and at clause 4.2 the partnering team members undertake to pursue the targets listed against the key performance indicators set out in the clause, e.g. reduced accidents, reduced defects and zero defects. Should payment, either additional or reduced, be linked to performance, such as the date for completion or any of the targets stated against the indicators, then this is addressed at clause 13.3. It is the client’s representative who is responsible for determining any adjustments. Under clause 23 the performance of each partnering team member is to be subject to regular review by reference to the indicators and targets. The partnering team members are to exercise reasonable skill and care to achieve their targets in accordance with the partnering documents. In order to facilitate the monitoring of progress each team member is to provide the client’s representative with such information, on an open book basis, as is necessary. The core group are to consider any shortcomings, and the measures necessary for continuous improvement. The partnering team are to work together and individually to maximise the improvements for the project, to provide the best value for the client and continually refine and improve both the design and the construction process for the benefit of the project and future projects. The partnering team members may submit proposals for consideration so as to improve performance. At completion of the project all partnering team members are to review the completed project and their individual performance, and consider scope for improvement for future projects. Within CE the relevant provision is clause 6. Key performance indicators are also defined within CE clause 1.1 as ‘appropriate to the context, the Key Performance Indicators of the Supplier’s performance and the Key Performance Indicators of the Purchaser’s performance as set out or referred to in Part 6 of the Contract Particulars’. It must be shown within the contract particulars whether performance is to be measured against the key performance indicators, i.e. whether it applies or not. Should the provision apply, then the indicators are to be listed at part 6 to the contract particulars. Section 6 within the conditions refers back to part 6 of the contract particulars. Condition 6 is relatively brief, with the following key points: — Throughout the project the performance of the supplier is to be monitored by the purchaser and the purchaser’s performance by the supplier. This is to be undertaken against the key performance indicators set out at part 6 of the contract particulars. — Reviews are to be undertaken regularly, e.g. monthly. — Collective reviews can be undertaken by the project team, should the project team agreement apply. Within the project team agreement one of the functions of the team is ‘reviewing the performance of individual Project Team members against their respective Key Performance Indicators set out in their individual Contracts’. A footnote states that the monitoring may most effectively be carried out by the project team collectively. 302

Knowledge —

The supplier shall keep written records of the performance monitoring carried out, and supply the purchaser with copies. It may well be that condition 6 is amplified within the brief setting out the procedures and administration in greater detail. Key performance indicators could include the following: — a reduced capital cost; — reduced timescales; — a reduced whole-life cost; — reduced defects; — increased productivity; — reduced accidents; — increased profit; — increased usable floor area; — improved quality; — elimination of waste. Against each of these headings, where possible, targets would be shown so that performance can be objectively measured or monitored.

King’s enemies See: Queen’s enemies. Knowledge Something known. The extent of a person’s knowledge may be important when assessing liability. It is also important where that person may be acting as part of a tribunal. Knowledge is basically of two kinds: actual and imputed. Actual knowledge is when a person knows something, because that person has seen, read or experienced some fact at first hand. Therefore, if an architect has seen some defective work on site, or read a statement in a letter from a contractor, or smelt and felt the present of dry rot in a building, that architect has actual knowledge of these things. A person who is told a fact does not have actual knowledge of that fact but, depending upon circumstances, may have imputed knowledge. Imputed knowledge is when it is assumed or deemed that a person knows something even if, in fact, that is not true. Therefore a contractor executing a contract is deemed to have read the document and knows what it is signing, even if no one in the contractor’s office has taken the time to read it. Often, invitations to tender (qv) will refer the contractor to full details of the contract, or to a full set of drawings available for inspection at a designated place. If the contractor submits a tender that is accepted, the contractor will be deemed to have knowledge of the documents. The preliminaries (qv) section of the bills of quantities (qv) will often contain a clause that states that the contractor is deemed to have inspected the site and to have full knowledge of any and all relevant matters. Damages for breach of contract depend upon the actual or imputed knowledge of the party in breach at the time the contract was made. Thus there is knowledge that the party would be expected to have or ought to have had at the date of the contract, e.g. that the contract is to build a factory extension, and the employer would lose business if the Works were delayed.574 The actual

574

Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd [1949] 1 All ER 997.

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Knowledge knowledge (often called ‘special knowledge’ in this context) of a contractor at the date of the contract may well make it liable for additional damages:575 e.g. that the employer had a very profitable manufacturing contract, the success of which depended upon the successful and timely completion of the extension. The Latent Damage Act 1986 (qv) introduced into the Limitation Act 1980 (qv) the concept of knowledge in relation to the date from which the limitation period would run for actions in the tort of negligence. The basic period is six years from the date on which the cause of action accrued. There is an alternative method of calculating the period if this alternative would result in the period ending after the date established using the basic approach. In broad terms, the alternative date is calculated as three years from the earliest date on which the injured party had the right to bring an action, and the knowledge of four things: — the material facts; — that the damage was attributable to the act or omission alleged to be negligent; — the identity of the defendant; — the identity of any other person alleged to be responsible, and the facts supporting an action against the defendant. S. 14A(10) states that for the purposes of this section a person’s knowledge includes: knowledge which he might reasonably be expected to acquire (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek; but a person shall not be taken … to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.

A tribunal may have, through one or more of its members, specialist knowledge relating to the issue being debated. The general rule is that the person or persons concerned may make use of their specialist experience or knowledge, but if as a result they reach a conclusion that conflicts with the other evidence, they must give the parties to the dispute the chance to address or comment on the special knowledge before finalising their conclusion.576 A member of any tribunal is expected to make use of their local knowledge of notorious (qv) facts. See also: Damages; Inspection of documents; Judicial notice.

575 576

Hadley v. Baxendale (1854) 9 Ex 341. Dugdale v. Kraft Foods [1976] 1 WLR 1288.

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L Labour In the context of building contracts, the word is given its ordinary meaning: workpeople or operatives, skilled or unskilled. JCT 98 had a relevant event, and IFC 98 had an optional event, which made the contractor’s inability to secure essential labour to carry out the Works properly a ground for extension of time. This was provided the inability was outside the control of the contractor. The JCT 2005 contracts have dispensed with this ground for an extension of time, possibly because in practice it was often deleted.

Laches Negligence or unreasonable delay in asserting or enforcing a right to the prejudice of the other party, or where it would be unjust for the remedy to be granted. The word is sometimes used to refer to acquiescence (qv). In rare cases it may be pleaded as a defence (qv), but only where there is no statutory timebar. In the case of performance bonds (qv), conduct of the employer that prejudices the surety’s position may discharge the obligation,577 and this is another type of laches. It has been said that: If an argument against relief which would otherwise be just, is founded on mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of the defence must be tried upon principles substantially equitable. Two circumstances always important in such cases are the length of the delay and the nature of the acts done during the interval. These might affect either party causing an imbalance of justice or injustice in taking the one course or the other, so far as relates to the remedy.578

For example, if an adjoining owner (A) waited until building work was almost complete before seeking an injunction to prevent the contractor (B) from gaining access over part of A’s land, B might be able to plead laches successfully on the grounds that A had delayed unreasonably and was acting with malice.

Landfill tax A tax that applies to all waste that is disposed of by landfill at a licensed landfill site on or after 1 October 1996 unless the waste in question is specifically exempt. The purpose of the tax is to encourage people who produce waste to reduce the amount, and to recover more value from it by means of recycling or composting. The tax may have a substantial effect on the cost of disposal of excavated materials, and therefore on tender costs, depending on the likely composition of the ground. There are two rates of tax that apply, depending on the kind of material to be disposed. The tax is charged by weight at two rates. The lower rate is payable for inert or inactive waste, and the standard rate applies to all other active waste. The relevant law is contained in the Finance Act 1996,579 from which has sprung a large quantity of subsidiary legislation.

577 578 579

Kingston-upon-Hull Corporation v. Harding [1892] 2 QB 494. Lindsay Petroleum Co v. Hurd (1874) LR 5 PC 221 at 239 per Lord Selborne. Finance Act 1996 ss. 39 to 71 and Schedule 5.

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Lands Tribunal Landfill operators making or intending to make taxable disposals of waste must be registered with HM Revenue and Customs using the relevant forms LT1 and LT1A, and possibly other forms depending on the business. Unlike the position under value added tax (VAT) (qv), there is no registration threshold. VAT is chargeable on the full amount charged on waste disposal, including the landfill tax itself. Every operator is obliged to keep careful records. HM Revenue and Customs can provide a great deal of helpful information: — landfill tax bulletins and fact sheets including waste tonnage figures and rates of tax; — Register (List of Registered Landfill Site Operators); — Notice LFT1: A General Guide to Landfill Tax (May 2004); — Notice LFT2: Reclamation of Contaminated Land (April 2003). HM Revenue and Customs have a national advice service on 0845 010 9000. See also: Site Waste Management Plans Regulations 2008.

Lands Tribunal A tribunal created by the Lands Tribunal Act 1949 to deal with the following matters: — Questions relating to compensation for the compulsory acquisition of land. If the acquiring authority’s offer is unacceptable to the expropriated owner, either party may refer the case to the Lands Tribunal, the decision of which is final as to the merits of the case. — The discharge or modification of restrictive covenants (qv) affecting land. In some cases such covenants are outmoded in modern times, but this power can be exercised only on very limited grounds. — Appeals from decisions of local valuation courts relating to rating assessments. Procedure and practice before the tribunal are governed by special procedural rules. Its membership consists of a president and several nominated members, who usually sit alone. They are either lawyers or chartered surveyors. The tribunal gives a written and reasoned decision, and an appeal only on points of law (qv) lies direct to the Court of Appeal. See also: Courts; Sealed offer.

Late Payment of Commercial Debts (Interest) Act 1998 An Act that provides for simple interest on the late payment of debts arising under commercial contracts for the supply of goods or services. It came fully into force for contracts dated on or after 7 August 2002. Payment is late if made after the last day of an agreed credit period, or made after 30 days from the later of: — date goods delivered or service performed, or — the day the purchaser has notice of the amount of the debt, if there is no agreed credit period. Established practice in a long-standing relationship can determine the credit period. If no date is stipulated in the contract, or from established practice, then the operative date is the date at the end of the 30-day period. Subject to the express wording of the contract, errors in a submitted invoice do not remove the duty to pay the amount due or considered to be due under that invoice. Statutory interest would apply under the Act from the

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Latent Damage Act 1986 date the payment should have been made until the date the due amount was paid.580 Interest is at 8% over the Bank of England base rate. As a matter of justice this rate can be remitted by the courts under s. 5.581 The base rates in force on 30 June and 31 December determine the base rates to which the 8% is added for the following six-month periods. A modest lump sum is also recoverable as compensation in addition to the interest, depending on the size of the debt. See the Late Payment of Commercial Debts Regulations 2002 SI 2002 No. 1674. S. 8(1) provides that contractual terms that purport to exclude the right to statutory interest are void unless the contractual remedy is ‘substantial’. S. 9(1) states that a contractual remedy is to be regarded as substantial unless it is insufficient to compensate for or to deter late payment, and it would be unfair or unreasonable in all the circumstances to allow it to oust the right to statutory interest. It is common for a paying party to resist the inclusion of reference to the Act in a contract. Often, an attempt will be made to reduce the level of interest. It is worth remembering that a party that intends to pay its debts on time will have no great concern about interest, whatever the rate may be. It is only when a party intends to delay payment that the interest rate becomes important. The rate in the Act is relatively high with the intention of deterring late payment or providing adequate compensation if payment is late. To reduce the rate is clearly contrary to the purpose of the Act. The JCT contracts stipulate only 5% above base rate, and the 2007 RIBA appointment contracts include a similar percentage (although the RIBA SFA/99, CE/99 and SW/99 appointments had an 8% rate in accordance with the Act), although these contracts do include additional remedies for late payment, e.g. the right to suspend or terminate. Within PPC the Act is referred to as the ‘Late Payment Act’, and at clause 20.9 it expressly states that the consultants and constructor confirm that the interest recoverable under the agreement is a substantial remedy under the Act. The rate of interest to be paid is set out in the project partnering agreement. Similar wording is included within clause 30.2 of MP. A great deal of useful information about the Act, including The Late Payment of Commercial Debts (Interest) Act 1998: A User’s Guide and an interest calculator are available on www.payontime.co.uk. See also: Interest.

Latent Damage Act 1986 In the case of Pirelli General Cable Works Ltd v. Oscar Faber & Partners582 the House of Lords laid down that the date on which the cause of action accrues in the case of negligent design and construction of a building is the date when the physical damage occurs. This is so even though that damage was not reasonably discoverable until a later date.583 Following the Pirelli ruling, on 29 November 1984 the Law Reform Committee published 580

Ruttle Plant Hire Limited v. Secretary of State for Environment, Food & Rural Affairs [2009] EWCA Civ 97. 581 Ruttle Plant Hire Limited v. Secretary of State for Environment, Food & Rural Affairs [2009] EWCA Civ 97. 582 (1983) 21 BLR 99. 583 The Court of Appeal in Abbott and Another v. Will Gannon & Smith Ltd (2005) 103 Con LR 92 held that the decision in Pirelli was still binding.

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Latent defect a report on latent damage584 that concluded, in the light of the Pirelli judgment, that the law of limitation as it then stood gave rise to uncertainty, and could cause injustice to both claimants and defendants. The Committee made two main recommendations: — In negligence cases involving latent defects the limitation period of six years should be extended to allow the claimant three years from the date of discovery or reasonable discoverability of significant damage. — There should be a long-stop that should bar a claimant from starting proceedings more than 15 years from the date of a defendant’s breach of duty in negligence cases involving latent damage. The Latent Damage Act 1986 is intended to give effect to the Committee’s recommendations. It came into force on 18 September 1986. The Act does not apply to contractual claims, and its effect on the construction industry is relatively small, owing to the difficulty in recovering damages for pure economic loss in tort.585 The Act inserts new sections 14A, 14B and 28A into the Limitation Act 1980. It is strange that ‘latent damage’ is not defined. Section 14A applies to ‘any action for damages for negligence’ for latent damage not involving personal injuries. ‘Negligence’ is not defined in the Act, but it is likely that it covers not only the tort of negligence but also the negligent breach by local authorities of their duties under the Building Regulations. In the case of fraud, concealment or mistake, time does not begin to run until the claimant has discovered the fraud etc. or could with reasonable diligence have discovered it. In all other cases, however, once the 15 years have expired, no action can be brought. This applies whether or not the relevant facts were known, and even if the damage has not yet occurred. The Act’s three main provisions are as follows. — In the case of latent damage not involving personal injuries, it introduces a special three-year time limit, which runs from the date of knowledge (qv) if this is later than the usual six years from the accrual of the cause of action. The three years can be extended where the claimant is under a disability (s. 28A). — There is an overall 15-year long-stop from the date of the breach of duty (Limitation Act 1980 Act, s. l4B). This protects defendants from stale claims. The 15-year long-stop runs from the date (or last date) on which there occurred any act or omission that is alleged to constitute negligence, and to which the damage is attributable. — Where another person acquires an interest in the property after the date on which the cause of action accrued, but before the material facts have become known to any other person with an interest, a fresh cause of action accrues.

Latent defect A defect that is not discoverable during the course of ordinary and reasonable examination, but which manifests itself after a period of time. Much confusion and difficulty seems to surround this concept, but it is actually very simple. ‘Latent’ means ‘existing but not visible or manifest’. For example, if a defect could have been discovered following a reasonable examination by the architect before certifying practical completion or making good of defects, it 584 585

Cmnd 9390. Murphy v. Brentwood District Council (1990) 50 BLR 1.

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Latent defects insurance would not be a latent defect. It would simply be a patent defect not picked up by the architect. Latent defects have been defined as those that could not ‘have been discovered on examination by a reasonably careful person skilled in building’.586 In building work the most common situation is for a defect to become apparent after the certificate of making good defects has been issued. None of the JCT contracts, nor indeed any other standard form contract, contains provisions for dealing with this situation. Some contractors and architects believe that the contractor’s liability for defective work ends with the expiry of the rectification period (qv). Clearly, that is incorrect. The rectification period is inserted in the contract for the benefit of the contractor, to allow the contractor to re-enter the site and make good defects which appear during that period, at the contractor’s own cost. All defects amount to breaches of contract (qv). Therefore, if the contractor refuses to remedy latent defects when they become patent, then a dispute or difference will exist. An employer can take action by referring the dispute or difference to adjudication, arbitration or litigation as appropriate under the contract. It used to be the case that the architect would withhold issue of the final certificate (qv) under certain of the JCT contracts, because the final certificate had been held to be conclusive evidence (qv) that the architect was satisfied with the quality and standards of all the workmanship and materials on the project. If a latent defect appeared after the issue of the final certificate, a contractor could rely on that certificate as a defence, and the employer was left in a difficult position, possibly having to consider suing the architect: hence the reluctance of many architects to issue the final certificate. The conclusive effect of the final certificate has since been revised. It is conclusive about the architect’s satisfaction only where it is expressly stated in the contract documents, or in an instruction, that materials, goods or workmanship are to be to the architect’s approval or satisfaction. Moreover, it is not conclusive that any such other materials, goods or workmanship comply with any term of the contract. Therefore, even if the architect has issued the final certificate before the latent defect comes to light, the employer should not be precluded from taking action against the contractor for damages, provided that it falls within the limitation period for that particular contract. In the case of contracts for the sale of goods there are implied terms that the goods will be in conformity with the description, and with the sample, if any. If the goods supplied appear to, but do not in fact, conform, the defects will be latent and the supplier liable. This principle applies even if the goods conform to the sample, and the sample itself contains hidden defects. It is the apparent sample, i.e. one without hidden defects, that is to be taken as the true sample.587 See also: Conclusive evidence; Latent Damage Act 1986; Limitation of actions; Patent defect.

Latent defects insurance A form of indemnity insurance that provides cover for the repair or reinstatement of a building (including commercial properties) as a result of damage through inherent defects. The cover encompasses damage arising from defective workmanship, materials or design, typically in the struc586 Victoria University of Manchester v. Hugh Wilson and Lewis Womersley (1984) 2 Con LR 43 at 78 per Judge John Newey QC. 587 Adcock’s Trustees v. Bridge RDC (1911) 75 JP 241.

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Latham Report ture, as well as non-load-bearing fixings and finishings providing a watertight and weathertight envelope. The protection is against damage that arises after practical completion, and usually lasts for a period of 10 years but can be up to 12 years. Protection is provided to the building owners, occupiers or others against damage, and possibly even collapse. There is no need to establish liability or fault on the part of a third party, although the insurer may do so through any subrogation rights they may retain. The precise nature of the cover is likely to vary, depending upon the insurer, and may, by means of optional additions, include consequential losses, e.g. lost rent. However, it may well not cover all losses, such as damaged stock. The insurance policies tend to be assignable, so that they stay with the building, thereby strengthening their worth if it is to be rented or sold. Cover is totally independent of the main contractor and the designers, and is therefore not affected by their insolvency. Ideally the insurance should be arranged prior to construction commencing on site, but some insurers offer it after commencement on site, or even for a recently completed building. However, the premium may well increase, the further the construction phase has progressed. The construction or completed building will be subject to a technical audit, which aims to ensure quality control and that appropriate standards for the design, workmanship and materials are or were adopted and achieved. In addition, the audit, through site inspection, will try to ensure that defects are avoided or rectified prior to practical completion. Such an audit becomes impossible, or at least more difficult, following practical completion, thereby increasing the risk to the insurer and usually resulting in a higher premium. Although such insurance may not offer the extent of protection of, say, a collateral warranty, it would offer a relatively inexpensive means of limited recovery from a single point of responsibility. PPC is the only standard form that expressly refers to latent defects insurance (i.e. clause 19.6). If so stated in the commencement agreement, the insurance is to be taken out by the identified partnering team member for the specified level and period of cover.

Latham Report The common name given to the final report of Sir Michael Latham, published in 1994, entitled Constructing The Team. The report calls itself a ‘Government/Industry review of procurement and contractual arrangements in the UK construction industry’. It was funded by the Department of the Environment, the Construction Industry Council (qv), the Construction Industry Employers Council, the National Specialist Contractors Council and the Specialist Engineering Contractors Group. Its terms of reference included consideration of the current roles, responsibilities and performance of the participants, including the client, with particular regard to: — the processes by which clients’ requirements are established and presented; — methods of procurement; — responsibility for the production, management and development of design; — organisation and management of the construction processes; — contractual issues and methods of dispute resolution. The object of the report was to make recommendations to the government, the construction industry and its clients regarding reform to reduce conflict and litigation, and to encourage the industry’s productivity and competitiveness. The report deals with the following topics in separate chapters: 310

Law of the contract — Project and contract strategies and briefing. — The design process: consultants and specialist sub-contractors. — Contract choice for clients. — Selection/tendering procedures. — Issues that determine performance. — Teamwork on site. — Dispute resolution. — Insolvency and security for payment. — Liability post-completion. The report sets out proposals for the implementation of its recommendations. In practice, key features of the report have been put into effect by Part II of the Housing Grants, Construction and Regeneration Act 1996 (qv) and the associated Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998 No. 649). In Scotland the Scheme for Constructions Contracts (Scotland) Regulations 1998 (SI 1998 No. 697) applies. In Northern Ireland the Construction Contracts (Northern Ireland) Order 1997 (SI 1997 No. 274) (N.I.1) (qv) and the Scheme for Construction Contracts in Northern Ireland Regulations (Northern Ireland) 1999 (SR 1999/32) are to the same effect. See also: Rethinking Construction; Scheme for Construction Contracts.

Law of the contract Often referred to as ‘the proper law of the contract’. This can be very important, because it determines the way in which a contract is interpreted. Generally, contracts carried out in England are subject to the law of England and Wales. Curiously, the JCT contracts adopt an inconsistent approach. For example, SBC clause 1.12 states the applicable law as ‘the law of England’ whereas the bonds in Schedule 6 are to be ‘construed in accordance with the law of England and Wales’. Currently, there is little difference in practice, but that may change in the future. A footnote to clause 1.12 invites amendments to be made if the law of England is not to apply. In Northern Ireland the adaptation schedule specifies the applicable law to be the law of Northern Ireland. It is perhaps fairly uncommon for English contractors to work in Northern Ireland, or vice versa, although it is relatively common for contractors to cross the border between England and Scotland. It is ironic, therefore, that the law of Northern Ireland is virtually identical to the law of England, whereas Scots law is quite fundamentally different. It is always advisable for the applicable law to be stated in the contract. The NEC is drafted for use internationally, and clause 12.2 states that the ‘contract is governed by the law of the contract’. The law of the contract is to be stated in the contract data part 1 by the employer. The ACA at clause 25C offers alternatives for English or Scottish law. Where no law is stated, the position is complex, particularly where a contract is made in one country in regard to construction operations in another, and the parties are of differing nationalities. The court may seek to infer the law of the contract from the dispute resolution clauses. Where a particular country is stated to have jurisdiction over disputes, there will be a strong implication that the law of that country is the law of the contract.588 Otherwise, the courts will take a variety of factors into account. These include the terminology of the contract, the location of the subject matter, and the currency of payment. Less 588

Hellenic Steel Co v. Svolmar Shipping Co (The Komninos S) [1991] 1 Lloyd’s Rep 370.

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Law report decisive factors include the nationality of the parties, the language in which the contract is written, and previous contracts between the parties. Useful evidence about the intentions of the parties would be whether some of the terms in the contract were valid under some legal systems but not valid under others. However, this is not conclusive.589

Law report A published account of a legal judgment giving a statement of the facts and the reasons for the court’s judgment. Reports of decided cases are essential for the operation of the doctrine of judicial precedent (qv). From the time of Edward I (1272–1306) until today there have been law reports in some form, although their quality and reliability vary. Law reporting has rested on private initiative. There are no ‘official’ law reports, although since 1865 the Incorporated Council of Law Reporting has published a continuous series of reports known simply as The Law Reports, divided for convenience into volumes to cover the divisions of the High Court. Cases in the Court of Appeal are reported in the volume containing reports of cases in the division in which the case was first heard. Decisions of the House of Lords are reported in a separate volume. The council is a private body but has semi-official status, and if a case is reported in The Law Reports that report will be cited to the court in preference to any other. The transcripts of the judgments are revised by the judge concerned. There are many other series of reports (e.g. the All England Law Reports), but until recently many decisions of importance to the building industry went unreported, and specialist building contract lawyers had to rely on privately circulated transcripts. Since 1976, however, Building Law Reports have been published and contain reports of cases of interest to the building industry. This includes a number of decisions from the Commonwealth. All the major decisions of the Technology and Construction Court (qv) (previously known as the Official Referees’ division of the High Court), and appeals therefrom that are of relevance to the building industry, are reported in Construction Law Reports published by LexisNexis Butterworths. Important judgments of the Technology and Construction and other civil divisions of the High Court, the Court of Appeal as well as Scottish cases are also now available on the Internet. References to law reports are given by standardised abbreviations, which indicate the volume and the series of reports in which the case is reported. So, D & F Estates Ltd v. Church Commissioners for England (1988) 15 Con LR 35 means that the case will be found in the fifteenth volume of Construction Law Reports at page 35. Round brackets are used when the date is not an essential part of the reference necessary to cite a case. The essential detail in this citation is the 15th volume of Construction Law Reports. The date in the round brackets is the date the judgment was pronounced. Where the reports are recorded annually, with their volumes being numbered sequentially in each year, beginning with volume 1 each time, the report is cited by reference to the date, given in square brackets, followed by the volume number of the year in which the case is reported, e.g. Amalgamated Building Contractors v. Waltham Holy Cross UDC [1952] 2 All ER 452. The date in this reference is an indispensable part of the citation, i.e. Volume 2 of the 1952 All England Law Reports at page 452. 589

Sayers v. International Drilling Co NV [1971] 1 WLR 1176.

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Lead designer 1952 is not necessarily the year the judgment was pronounced, but is the annual volume in which the case is reported. The judgment could, for example, have been pronounced in 1951. These are legal conventions that should be, but are not always, followed consistently. With the increased numbers of cases being reported on the Internet a so-called ‘neutral’ system of citation is now common. Therefore Bodill & Sons (Contractors) Ltd v. Harmail Singh Mattu [2007] EWHC 2950 (TCC) indicates that it is a judgment in the England and Wales High Court (Technology and Construction Court). Useful websites for law reports are: www.bailii.org/, www.hmcourts-service.gov.uk and www.adjudication.co.uk/cases.htm. A list of commonly used abbreviations for various reports is given with the table of cases at the back of this book. See also: Courts.

Lead designer A phrase used within CE, and the person identified within the contract particulars under clause 4.6. The lead designer is the person responsible for coordinating and integrating the designs of all suppliers in respect of design. Though the lead designer has this coordinating role, such person is not liable for the other suppliers’ designs. The phrase is also used within PPC to refer to the partnering team member identified in the project partnering agreement as responsible for filling the role of lead designer. The design team members are also identified within the project partnering agreement, and these, along with the lead designer, are responsible for developing the design and process of the project with the object of achieving best value for the client. Under clause 8.2 the design team members are to work individually and collectively in the development of an integrated design, supply and construction process in accordance with the partnering documents and the coordination of the lead designer. The lead designer’s role includes: — the preparation and submission of outline designs for the project to the client and core group, with input as agreed from the other design team members (i.e. clause 8.3); — the development of outline designs, again with input from the other design team members, for application for full planning permission in accordance with the stated timetable (i.e. clause 8.3); — obtaining maximum input from specialists when developing the design (i.e. clause 8.3); — following approval from the client, and after consultation with the core group, making an application for planning permission (i.e. clause 8.3); — coordinating and monitoring any site surveys and investigations (i.e. clause 8.4); — applying for and obtaining all regulatory approvals stated in the project brief or necessary to commence the project on site (i.e. clause 8.5); — coordinating the design following execution of the commencement agreement in accordance with clause 8.6; — at each stage of the design development: • taking account of any budget stated in the price framework (i.e. clause 8.7); • amending any designs following value engineering exercises in accordance with clause 5.1 (i.e. clause 8.8.); • providing copies of the design to the CDM coordinator (i.e. clause 8.9); 313

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providing of copies of the design to the constructor, and, following consultation with the client, constructor and other team members, amending the design as appropriate and if necessary (i.e. clause 8.11); • arranging the design team meetings (i.e. clause 8.13). The Standard Agreement for the Appointment of an Architect (S-Con-07-A) (qv) also refers to the ‘lead designer’, whose services include directing the design process, coordinating the preparation of programmes and the work of all consultants, specialists and suppliers, health and safety matters, deciding on design outputs, and communicating with the client about design. The Standard Form of Agreement for the Appointment of an Architect (SFA/99 (2004)) (qv) uses a somewhat different term, ‘design leader’ (qv), to describe a person providing very similar services.

Legal proceedings A term that is broader than litigation (qv) and embraces all kinds of procedures in the court system. Civil proceedings are governed by the Civil Procedure Rules (qv). Criminal proceedings are governed by the Criminal Procedure Rules. Although it has been said that adjudication under s. 108 of the Housing Grants, Construction and Regeneration Act 1996 is, like arbitration, quasi-legal proceedings,590 the better view is that adjudication does not amount to legal proceedings: I do not regard an adjudicator under the 1996 Act as a person before whom legal proceedings may be brought. Legal proceedings result in a judgment or order that in itself can be enforced. If the decision at the end of legal proceedings is that money should be paid, a judgment is drawn up that can be put in the hand of the sheriff or bailiff and enforced. That is not the case with an adjudicator.591

Most standard construction contracts give the option of either arbitration or legal proceedings for the final resolution of disputes (this is in addition to adjudication). The 2005 suite of JCT contracts generally give a choice, but the default position, if no option is specified in the contract particulars (qv), is that legal proceedings apply (e.g. SBC article 9). This is a complete change from previous editions, which defaulted to arbitration (qv) as the most suitable method of dispute resolution. The change appears to be a result of the House of Lords judgment that confirmed that the court has inherent jurisdiction to open up, review and revise architects’ certificates etc.,592 something conferred on the arbitrator by the contract, and the exceptions to arbitration stated in the contracts. SBC, DB, IC and ICD deal with legal proceedings in article 9; MW and MWD deal with them in article 8. ACA 3, clause 25C, provides alternatives 1 and 2 for arbitration or litigation respectively. GC/Works/1 (1998) makes no provision for legal proceedings, even as an option. Clause 60 specifies arbitration, which is sometimes referred to as ‘quasi legal proceedings’, as the system of dispute resolution. PPC provides for either arbitration or litigation at clause 27.6. Within NEC, dispute resolution is addressed in option w1 or option w2 (one has to be selected), and the choice 590

A Straume (UK) Ltd v. Bradlor Developments Ltd (2000) 2 TCLR 409. Austin Hall Building Ltd v. Buckland Securities Ltd (2001) 17 Const LJ 325 at 331 per Judge Bowsher QC. 592 Beaufort Developments (NI) Ltd v. Gilbert-Ash NI Ltd (1998) 88 BLR 1. 591

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Letters of intent of tribunal (either litigation or arbitration) is to be identified within the contract data part 1 by the employer. MP and CE, both JCT contracts, do not offer arbitration as an alternative; litigation is the final method of dispute resolution. See also: Courts.

Legal tender A creditor is entitled to demand payment of a debt in legal tender, i.e. money. Legal tender consists of Bank of England notes for payment of any amount in England and Wales, gold coin of the realm to any amount, cupronickel or silver coins of more than 10p for any amount up to £10, cupro-nickel or silver coins of 10p or less up to £5, and bronze coins to an amount not exceeding 20p. Scottish and Northern Ireland bank notes are not legal tender in England and Wales. Only Bank of England notes of less than £5 are legal tender in Scotland.593 A court would require little evidence, in practice, to be satisfied that a creditor had waived their legal right to payment in legal tender, e.g. past dealings where payment by cheque (qv) had been made and accepted. Strictly, where a cheque is accepted, it is only conditional payment, and the debt is still due but suspended until the cheque is honoured. If the cheque is dishonoured, the debt is live again, and interest is taken as running through the period during which the debt was suspended.594

Letters of intent The phrase ‘letter of intent’ is not a term of art, and such letters take many forms.595 They commonly express an intention to enter into a contract. It may simply amount to a letter of comfort stating a future intention to enter into a contract without obligation or liability. Therefore anything done on the strength of such wording by a contractor may well be at its risk. Alternatively, a letter of intent may require some limited work to be put in hand, given the need to meet a tight programme for completion, e.g. design, placing orders, mobilisation. These tend to create obligations in relation to the limited scope of work by means of an indemnity of any costs incurred by a contractor should the principal Works not proceed. At the other end of the spectrum is a letter of intent requiring a contractor to proceed with the project Works on the basis of the terms in the letter. The terms may reflect a full and complete agreement reached by the parties596 (pending issue of the formal documents), or simply those matters that have been agreed and identifying those matters still to be agreed. Such letters are usually sent by an employer to a prospective contractor. On occasion an employer may also send a letter of intent to a sub-contractor or supplier whose work is on a long lead-in, and even when the main contractor (qv) has yet to be selected, the intention being that the sub-contractor or supplier would later be engaged by the main contractor once selected.

593

S. 1(2) of the Currency and Bank Notes Act 1954. DPP v. Turner [1974] AC 357. 595 ERDC Group Limited v. Brunel University (2006) 109 Con LR 114. 596 Stent Foundations v. Carillion (2001) 78 Con LR 188; Harvey Shopfitters Ltd v. ADI Ltd (2003) 91 Con LR 71. 594

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Letters of intent The use of letters of intent is fraught with possible difficulties and pitfalls. For example: — Often letters of intent are poorly drafted and so ambiguous that the parties are uncertain whether or not there is a binding contract. It may be unclear as to whether any disputes can be referred to adjudication.597 — The wording may be such that the courts consider that a full binding contract has been created, when that was not the intention of the employer. — The employer may be committed to pay certain costs even if the contract for the Works does not proceed, e.g. loss of profit.598 Difficulties can arise if the formal contract documents are never properly or fully executed by the parties.599 It would seem prudent from an employer’s perspective to exclude certain costs, and to place a limit on the authorised expenditure under the letter of intent.600 In Diamond Build Ltd v. Clapham Park Homes the judge said with regard to a financial cap: It is argued by [the contractor] that the cap produces an unfair position for [the contractor] because it was foreseeable that the cap could be reached within a relatively short time. I reject that argument for a number of reasons: (a) It was always open to [the contractor] to commit itself to its sub-contractors and suppliers in a similar way to that predicated by the Letter of Intent. (b) If the cap was being approached it would have been open to [the contractor] to approach [the employer] for an increase of the cap. (c) If the sole reason why the formal Contract was not being executed was the withholding of signing by [the employer], the insistence by [the employer] that [the contractor] proceed beyond the cap would lead to at the very least an equitable claim for additional payment. (d) It was necessarily envisaged that, given that agreement was reached by the time that the revised Letter of Intent was sent out and then signed, the formal contract would be effected in a short period. What the parties did not legislate for was the delay which actually happened. Whether the delay by [the quantity surveyor] in producing the contract for signature gives rise to a cause of action was not canvassed before me and I do not decide that matter. (e) The Letter of Intent, and the cap, relate to the work which was the subject matter of the tender. If additional or different work was ordered by or on behalf of [the employer] to be done by [the contractor], that would attract payment in addition to and above the cap on a quantum meruit basis; that could be by way of a mini or implied contract or in restitution. Similarly, any breach of express or implied terms of the Letter of Intent agreement would attract damages which would not be caught by or subject to the cap.601

—

The main contractor, when appointed, may object to a sub-contractor who has been given a letter of intent by the employer. This may be

597 Westminster Building Company Ltd v. Andrew Beckingham (2004) 20 Const LJ T145. In Harris Calnan Construction Co Limited v. Ridgewood (Kensington) Ltd [2007] EWHC 2738 (TCC) it was held that the letter of intent in that case amounted to a contract in writing for the purposes of s. 107 of the Housing Grants, Construction and Regeneration Act 1996. See also Allen Wilson Shopfitters v. Anthony Buckingham (2005) 102 Con LR 154. 598 Serck Controls Limited v. Drake & Scull Engineering Limited (2000) 73 Con LR 100. 599 Diamond Build Limited v. Clapham Park Homes Ltd [2008] EWHC 1439 (TCC) case no. HT0869. 600 Mowlem plc (trading as Mowlem Marine) v. Stena Line Ports Limited [2004] EWHC 2206 (TCC). 601 Diamond Build Limited v. Clapham Park Homes Ltd [2008] EWHC 1439 (TCC) case no. HT0869 at paragraph 56 per Akenhead J.

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Letters of intent avoided if the sub-contractor is identified in the tender documents for the Works, along with a copy of the letter. Within Robert Cunningham Catherine Good Gelande Corporation Limited v. Collett and Farmer602 the judge offered some guidance on when it may be appropriate to use a letter of intent. This was when: (i) the contract workscope and the price are either agreed or there is a clear mechanism in place for such workscope and price to be agreed; (ii) the contract terms are (or are likely to be) agreed; (iii) the start and the finish dates and the contract programme are broadly agreed; (iv) there are good reasons to start work in advance of the finalisation of all the contract documents. The judge went on to state that if an employer wanted the Works to start promptly, and the contractor was agreeable, then a carefully drafted letter could be appropriate. The judge stressed the inherent risk that the full building contract might not materialise or be executed.603 The judge saw the aim of careful drafting as minimising, but not eradicating, risk. If the letter is to be sent by the client’s agent (e.g. the architect), then it must clearly state that it is sent on behalf of the client; otherwise the agent may become financially accountable to the contractor should the contract not proceed. The client must see the letter and agree to its content, preferably in writing. Legal scrutiny of each letter of intent is advisable, given that any issues that may arise are likely to turn on the precise wording used. Parties often do not realise that if a contractor proceeds in accordance with a letter of intent, a contract may be created on the basis of that letter, even when the letter does not amount to an acceptance of a contractor’s tender – for example when a letter states that the contractor can or should proceed with certain work, such as placing of orders, preparatory programming or design. If the contractor does proceed, there is likely to be a binding agreement between the employer and contractor that would entitle the contractor to reimbursement for the work covered by the letter, subject to any express words to the contrary. There is much case law concerning letters of intent, and much of it is conflicting. In general, the courts look at the substance of each transaction rather than its form. The case of Turriff Construction Ltd v. Regalia Knitting Mills Ltd604 is unusual. The contractor undertook pre-contract design work, provided it was given ‘an early Letter of Intent … to cover (them) for the work they will now be undertaking’. The contractor made clear that it would regard receipt of such a letter as recognition by the employer of a liability to pay for the design work. The employer sent the letter requested, and it concluded that ‘the whole [was] to be subject to an agreement on an acceptable contract’. It was held that the employer was liable for the design work carried out, the court ruling that the proviso applied only to the full main contract, and not to the preliminary work carried out by the contractor, which was done pending the conclusion of a

602

[2006] EWHC 1771 (TCC). For an illustration of the problems that can arise see ERDC Group Limited v. Brunel University (2006) 109 Con LR 114. 604 (1971) 9 BLR 20. 603

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Levels and setting out formal contract. The sending of the letter itself was seen as acceptance by the employer of a liability to pay for the design work. In contrast, British Steel Corporation v. Cleveland Bridge & Engineering Co Ltd605 held that no contract arose from a letter of intent, but a liability on the contractor to pay existed in restitution or quasi-contract (qv). In the case of named sub-contractors under IC or ICD, difficulties can be avoided through the use of ICSub/NAM/E, where clause 1.2 deals with advance design, clause 2 deals with advance ordering of work, and clause 5 deals with payment. A template letter of intent along with guidance notes is available from the City of London Law Society, whose website address is www.citysolicitors.org.uk, where it can be found under the construction law specialist committee. However, where possible the parties should avoid using letters of intent, and simply ensure that the contract documents are executed prior to work commencing on site.

Levels and setting out Under the traditional procurement approach an employer is responsible, through the architect, for showing accurately all necessary levels and dimensions on the drawings to set out the building on the site. The contractor is responsible for transferring the levels and setting out the building on site. Some building contracts (e.g. SBC clause 2.10) expressly so state. Even if not expressly stated, it is likely that the contractor’s responsibility would be a necessary implication. The position would normally be different under a design and build procurement approach, where the contractor is likely to be responsible for producing the necessary levels and dimensions required for setting out. See also: Setting out.

Liability A person is said to be liable when under a legal obligation to act or to suffer an action of another. Liability may be criminal (where a person may suffer fines or imprisonment606) or civil (where a person may suffer various sanctions, e.g. payment of damages or restriction on action). Civil liability may arise by the operation of statute (qv), or because parties have entered into a contract, or in tort (qv) by virtue of common law (qv). Contractual liability is sometimes referred to as arranged liability, in contrast with the liability under statute and tort that applies to all citizens. For example, in a building contract, the parties incur liabilities that they have decided upon themselves, and to which they would not have been subject were it not for the terms of the contract. The principal terms of a building contract are that the contractor must carry out the Works in accordance with the contract documents (qv), and the employer must pay the contractor for doing the Works. Common law will also imply certain liabilities into contracts, such as that the contractor must use the kind of skill and care that the average contractor would use in the same circumstances. Architects will be liable for the consequences of their negligence (qv). An architect who it is proved was negligent will be required to pay damages.(qv) Liability may be strict. In other words, a person may be liable even though not negligent and having no intention to commit a tort.607 Liabilities under 605

(1981) 24 BLR 94. For example, Health and Safety Offences Act 2008. 607 Rylands v. Fletcher (1868) LR 1 Exch 256. 606

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Licence certain Acts of Parliament fall into this category, and sometimes also into the category of absolute liability, where failure to carry out the duty imposed will render a person liable, quite irrespective of the amount of care taken or the intention, e.g. under the Animals Act 1971. See also: Care, duty of; Care, standard of; Strict liability.

Libel Defamation (qv) in permanent form, e.g. in writing. Libel is actionable without proof of actual damage, in contrast to slander (qv), which, in general, requires the claimant to prove loss.

Licence Permission or authority to do something, e.g. to enter on land. The law on the subject is complex. There are two kinds of licence commonly encountered in the process of constructing buildings. Under the ordinary building contract, the contractor has a licence to occupy the site for the purposes of the contract, i.e. a contractual licence.608 In general, the employer is not entitled to revoke the contractor’s licence before completion, although all well-drafted building contracts deal with the situation if the contractor’s employment is terminated (e.g. DB clause 8). If the contractor is in repudiatory breach of its obligations, its licence to occupy the site will come to an end if and when the employer accepts the breach. The licence will not necessarily come to an end if the employer repudiates. If the contractor refuses to accept the breach, and affirms the contract, it is arguable that its licence to be on site remains intact. Designers (e.g. architects) own the copyright (qv) in the designs and drawings that they prepare. Copyright is said to ‘vest in’ the designer. In the absence of an express term in the terms of engagement, a client is usually entitled to a licence to reproduce the architect’s design in the form of a building, provided the client has paid the architect’s fees. Standard terms of engagement produced by the RIBA contain express provisions relating to licences. The relevant terms are in SFA/99 and CE/99 clause 6.2 and SW/99 clause 31. The 2007 RIBA copyright licence terms are in S-Con-07-A clause A6.2, C-Con-07-A clause 6.1 and D-Con-07-A clause 6. In addition, where a contractor undertakes design, then there is usually provision within the contract giving the employer a similar licence to copy and use the documents produced by the contractor for the specified purposes, e.g. DB clause 2.38 and SBC clause 2.41 (use is subject to payment of any monies due), and PPC clause 9.2. The question sometimes arises whether a client who has commissioned a designer (e.g. an architect) to prepare a design and obtain planning permission, and who has paid the designer in full, obtains a licence to reproduce the design in the form of a building on the site that may be passed on to a future purchaser of the site. The general rule is that a licence cannot be assigned without permission; nor can rights under a licence be transferred without permission. If the licence is expressly stated, there should be no doubt about what it covers or to whom the licence is given. In SFA/99 the client is said to have a licence to copy and use the material. It is clear that the licence applies only to the client, and it cannot be transferred to a future purchaser without the permission of the copyright holder. Where there is no express term of the contract, the court will 608

London Borough of Hounslow v. Twickenham Garden Developments Ltd (1971) 7 BLR 81.

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Licensee probably imply a licence for all purposes connected with the erection of the building on that site, so that even if the site is sold, the purchaser will have a licence to erect the building in question.609 Where an express provision is in vague terms, e.g. ‘Licence will be granted to use the designs for the erection of the project on the site’, it is thought likely that the court will apply a similar broad interpretation. Therefore it seems that where there is no express term granting a licence, leaving it to be implied, or where there is an express term that does not restrict the licence to the client, the courts are apt to imply a general licence allowing any future owner of the site to construct the building. It is common for provisions to be inserted into bespoke collateral warranties (qv) to extend the licence to cover the warrantee. A copyright licence is usually granted for some or all of the following: operation, maintenance, repair, reinstatement, alteration, extending (but excluding the reproduction of the design for any part of any extension), promotion, leasing or sale of the project, e.g. ICD clause 2.33.1. See also: Forfeiture clause.

Licensee The holder of a licence (qv), e.g. a client with a licence to use the architect’s drawings for the erection of a building, or a contractor who enters land under licence to carry out a building contract. ACA clause 10 refers specifically to ‘Employer’s Licensees’. SBC, IC and ICD clause 2.7 and DB clause 2.6 contain a similar provision, referring, among other things, to work that does not form part of the contract, but which the employer requires to be executed by the employer, or by any of the employer’s persons (qv). The JCT provisions envisage two situations: (i) where the contract documents (qv) expressly provide for such work; and (ii) where they do not so provide. The work does not and does, respectively, require the contractor’s consent. Such clauses normally permit the employer’s licensees to enter upon the site, notwithstanding that the contractor has been given possession. The contractor then generally has a contractual claim for any loss and/or expense that it suffers or incurs as a result and/or a right to an extension of time (qv) on account of any resulting delay. GC/Works/1 clause 65 is to much the same effect. See also: Employer’s person; Contractor’s persons.

Lien A right to hold the property of another as security for the performance of an obligation. It is a right of retention that exists as a matter of law in connection with certain types of commercial property. The right can be lost by loss of possession or by waiver. Types of lien are: — Possessory lien: A creditor’s right to retain possession of a debtor’s property until the debt secured is discharged. — Special or particular lien: The most common lien. Security for the payment of a particular debt connected with the property over which the lien is claimed. For example, a mechanic has a lien for the cost of repairs over a piece of plant that has been repaired. Architects may retain drawings and specifications they have produced until their fees charged in connection with them have been paid. — General lien: These are not common, and relate to the balance owed. For example, a stockbroker has a general lien over documents in the stock609

Blair v. Osborne & Tomkins (a firm) and Another (1970) 10 BLR 96.

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Limitation Act 1980 broker’s possession relating to shares owned by the client for all amounts owed. Other examples are factors, insurance brokers, solicitors and bankers.

Life cycle cost analysis (LCCA) A technique deriving from the research of the Quantity Surveyors’ Research and Development Committee and published by the Royal Institution of Chartered Surveyors in July 1983. It seeks to examine the total costs of a building throughout its useful life, in order to evaluate and compare alternatives to achieve optimum long-term cost benefits. Two specific applications are: — to embrace construction and running costs at the design stage; — to evaluate the running costs of existing premises. The idea has been in circulation in the field of building maintenance for some time. LCCA refines and codifies it by providing a sophisticated methodology to arrive at a system of cost comparisons. A fundamental part of the system employs a form of cost on a comparable basis. The process is complicated, and four distinct categories of information should be assembled: — cost in use or running costs, including fuel, maintenance and management; — physical information regarding the construction and fittings of the building; — quality of finishes and fittings; — performance of the building. LCCA can be used to plan the cost management for the entire life of a building, or for any shorter period desired. Tax implications can also be assessed. Properly applied, the system should transform the owner’s approach to a new building and in particular the relationship between initial building design costs and costs in use. Essentially, the capital cost of a building will be at its highest at the beginning of its life, but costs in use will gradually increase over the lifespan of the building. The capital cost of a building has been found to be, on average, about one third of the total cost of the building throughout its life. That does not mean that a cheaper capital cost will give a reduced total of running costs. Generally, the reverse is true. Careful, comprehensive cost planning at the design stage is the essence of the system. See also: Facilities management.

Limitation Act 1980 An Act of Parliament for the purpose of consolidating the Limitation Acts from 1939 to 1980. The Act has been amended by the Latent Damage Act 1986 (qv), the Consumer Credit Act 1987, the Defamation Act 1996, and the Arbitration Act 1996 (qv). The Act sets out the time limits for the bringing of various kinds of action. In summary, the periods are as follows. — The time limit for actions founded on a simple contract is six years from the date of the breach of contract: s. 5. — The time limit for actions founded on a specialty contract (qv) is 12 years from the date of the breach: s. 8. — The time limit for actions founded on tort (qv), such as negligence, is six years (s. 2) from when the action accrues (e.g. when physical damage occurs), except in the case of actions for damages for personal injuries, when it is three years: s. 11. — In the case of latent damage (other than in personal injury cases) the period is either six years from the date on which the damage occurred 321

Limitation clause or three years from the date on which the claimant knew about the material and relevant facts: s. 14A. — There is a prohibition on the bringing of an action for damages for negligence (except in personal injuries cases) of 15 years after the expiry of the date of the negligent act or omission. This long-stop applies whether or not the material or relevant facts were known, and even if the damage occurs: s. 14B The Limitation Act 1980 does not extinguish the right to sue. It merely sets the time limits within which the claimant must begin the action and therefore, if a defendant pays up after the limitation period has expired, the payment is valid. This is in contrast to the situation in Scotland, where the right to sue is completely extinguished. The Prescription and Limitation (Scotland) Acts 1973 and 1984 prescribe a limitation period of five years in respect of actions for breach of contract, delict (tort) or breach of statutory duty. This period runs from the time when the pursuer (claimant) first knew, or ought reasonably to have discovered, the loss or damage. In England, in cases of fraudulent concealment (i.e. deliberate concealment of defects), time does not begin to run until the fraud is discovered, or could have been discovered with reasonable diligence.610 See also: Limitation of actions.

Limitation clause A clause within a contract that attempts to place a maximum amount of liability for any loss or damage suffered by a party. Within a number of the standard forms that include contractor design there commonly is provision for the contractor to limit the extent of its liability to the employer should the contractor’s design prove inadequate. An example of such a provision is SBC 2.19.3. The contractor’s liability for ‘loss of use, loss of profit or other consequential loss’ is limited, but not the cost of any repair or remedial work. In order to invoke the provisions an appropriate entry (i.e. an amount, e.g. £1 million) needs to be inserted within the contract particulars (qv). The provision cannot apply where the Works are for the provision of dwellings, to which the Defective Premises Act 1972 applies. The limitation is expressly stated not to apply or be affected by any liquidated damages that the employer may be entitled to deduct. A similar provision is included within DB clause 2.17.3 and ICD clause 2.34.3. NEC secondary option X18: Limitation of liability, if chosen, seeks to limit the contractor’s liability in three areas. Not all three have to be chosen. They are as follows. — Clause X18.1 places a limit on the contractor’s liability for any ‘indirect or consequential’ loss suffered by the employer to the amount stated in the contract data. — Clause A18.2 places a limit on the contractor’s liability for any loss of or damage to the employer’s property to the amount stated in the contract data. This provision may be relevant should a contractor be working within or adjacent to an employer’s facility. — Clause X18.3 places a limit on the contractor’s liability as a consequence of any defects not listed on the defects certificate. 610

1980 Act, s. 32: William Hill Organisation Ltd v. Bernard Sunley & Sons Ltd (1982) 22 BLR 1.

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Limitation of actions In addition: — Clause X18.4 is an all-encompassing limitation that seeks to limit the contractor’s overall liability to the employer to the amount stated in the contract data. There are a number of exclusions from the application of this provision: • loss or damage to the employer’s property; • delay damages if option X7 applies; • low performance damages if option X17 applies; and • contractor’s share if either of options C or D applies. The contractor is not liable to the employer unless the matter is notified to the contractor before the end of the liability date. This date is to be stated in the contract data and expressed as a period of years following completion of the whole Works. A similar overall liability limitation clause is included in CE clause 8.6. In addition within the NEC is secondary option X15 called ‘Limitation of the contractor’s liability for his design to reasonable skill and care’, which if chosen limits the contractor’s liability for any design work that it may carry out. The contractor is not liable for any defects in work due to its design if it can prove that it had exercised reasonable skill and care in ensuring its design complied with the Works information. If this option were not chosen, then the contractor’s liability would be one of fitness for purpose, in accordance with the Works information, for any design that it might carry out. SBC clause 2.19.1, DB clause 2.171 and ICD clause 2.34.1 have a similar effect. See also: Exemption clause.

Limitation of actions This term covers the rules prescribing the periods of time within which actions to enforce legal rights must be started, either by the issue of a claim form (qv) (the document that used to be known as a ‘writ’ (qv)) or by serving a notice of arbitration (qv) or adjudication (qv). In England and Wales the position is generally governed by the Limitation Act 1980 (qv). It is open to the parties to a contract to stipulate that actions under the contract must be commenced earlier than prescribed by statute. This is very common in professional terms of engagement such as the RIBA SFA/99 (2004 update) article 7 and S-Con-07-A clause A7.1 (although the latter clause is virtually incomprehensible). A provision in CE/95 similar to SFA/99 has been upheld by the court, which held that the contractual provision did not exclude the Act; it simply provides an additional contractual limitation on the ability of the client to bring proceedings.611 It is not always easy to establish the date on which the cause of action accrued in the case of claims in tort, particularly where defective building work is covered up. The leading case is the decision of the House of Lords in Pirelli General Cable Works Ltd v. Oscar Faber & Partners,612 which established that, in actions alleging negligence in regard to the erection of a building, time ordinarily begins to run not from the date of the alleged negligence, nor from when it ought to have been discovered, but from the date when the damage occurred. The Latent Damage Act 1986 (qv) altered the position as regards latent defects (qv). 611

The Oxford Architects Partnership v. The Cheltenham Ladies College [2006] EWHC 3156 (TCC) at paragraph 21 per Ramsey J. 612 (1983) 21 BLR 99.

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Limited company

Limited company A company may be limited by guarantee or by shares,613 thereby limiting the liability (qv) of the shareholders to the nominal value of the guarantee or the shareholding respectively. Previous legislation has been tidied and consolidated by the Companies Act 2006, which incorporates most of the Companies Acts 1985 and 1989. It now extends to the whole of the United Kingdom, and it is expected to be fully in force by October 2009. Previous Acts extended only to England, Wales and Scotland. Northern Ireland had its own system of Orders, which broadly contained what was in the Acts. It is open to the Northern Ireland Assembly to amend parts of the 2006 Act for use in Northern Ireland if it so wishes. Characteristics of a limited company are as follows. — It can only be formed under the rules laid down by the Companies Act 2006. — A limited company comes into existence when it has been registered with the Registrar of Companies. Transactions carried out before registration may be taken to be the transactions of a partnership with unlimited liability. — The powers of a limited company are generally unlimited under the 2006 Act, but may be constrained by what used to be referred to under the Companies Act 1985 as the ‘objects’ clause (s. 2(1)(c)), which was a clause in the memorandum of agreement setting out the objects of the company, e.g. to act as building contractors. — Accounts must be filed with the Registrar of Companies, and they may be inspected by the public. — Shareholders cannot bind the company by their actions. — Dividends must be apportioned strictly in accordance with the shareholding. A waiver is possible in certain circumstances. — The company is run by a board of directors. They may or may not be shareholders. Normally, they will carry no personal liability for the actions of the company. — A private limited company must put the word ‘Limited’ or the abbreviation ‘Ltd’ after the company name. Public limited companies must put the words ‘public limited company’ or the initials ‘Plc’ after the company name. — The minimum number of members in each case is one. — Changes in shareholding do not bring the company to an end. — A company normally comes to an end by being liquidated (qv) in accordance with the Companies Act 2006. This is a formal and possibly lengthy process. See also: Corporation; Ultra vires.

Limited Liability Partnership Act 2000 The Limited Liability Partnership Act 2000 came into force in all the United Kingdom except Northern Ireland on 6 April 2001. In Northern Ireland the provisions were put into effect by the Limited Liability Partnerships Regulations (Northern Ireland) 2004, which came into force on 1 November 2004. The new limited liability partnership (LLP) combines certain important structural features of both a company and a partnership. The general intention 613

S. 7 of the Companies Act 2006.

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Liquidated damages is that the LLP will have the internal flexibility of a partnership, but have external obligations equivalent to those of a limited company. In common with partnerships, the members of an LLP may adopt whatever form of internal organisation they choose. However, they are similar to limited companies in that the members’ liability for the debts of the business will be limited to their stakes in it, and therefore they will be required to regularly publish information about the business and its finances (including the disclosure of the amount of profit attributable to the member with the largest share of the profits). They will be subject to insolvency requirements broadly equivalent in effect to those that apply to companies. Like a limited company, an LLP has a separate legal personality from its members, and it must file returns with the registrar at Companies House. Partnership law does not apply to LLPs, but the Companies Acts do apply to LLPs to the extent stipulated within the Acts. Key features are as follows. — Members are not regarded as employed by the LLP. — Rights and duties are governed by agreement between members, or between the LLP and members, or if no agreement in accordance with s. 15(c) of the Act. — Every member is the agent of the LLP, and where a member is liable in the course of business, the LLP is liable to the same extent. — An LLP is not bound by a member if the member has no authority and the person with whom the member deals knows they have no authority. — Designated members are responsible for the formal and administrative duties of the LLP, and for filing accounts with the Registrar. If there is no or only one designated member, then every member is designated. — A member may cease membership on reasonable notice, but will be regarded as a member by the public unless proper notice has been given to the Registrar, or the public has notice of the cessation of membership. — The name of the company must end with LLP or llp. — The incorporation documents must state the company name, the location of the registered office, and names and addresses of members, and must specify the designated members (at least two). — Two or more people must put names to the incorporation document. A significant number of professional practices (e.g. architects, solicitors, accountants) have changed their status to LLPs. See also: Partnership.

Liquidated Fixed or ascertained. A debt is liquidated when paid and a company when wound up.

Liquidated damages A sum of money stated in a contract as the damages payable in the event of a specified breach. The sum must be a genuine pre-estimate of the loss likely to be caused by the breach, or a lesser sum. There is no need to prove actual damage after the event, and it does not matter that the actual loss is greater or less than the stated sum. The specified sum is recoverable even in the event that there is no loss.614 614 BFI Group of Companies Ltd v. DCB Integration Systems Ltd (1987) CILL 348; Clydebank Engineering Co v. Don Jose Yzquierdo y Castenada [1905] AC 6.

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Liquidated damages It is generally recognised that legal proceedings through the courts are expensive and time consuming. In order to recover damages where breaches of contract are concerned, it is necessary to prove that the defendant had a contractual obligation to the claimant, that there was a failure to fulfil that obligation, and that the claimant suffered loss or damage as a result. Very often it is clear that there is damage, but it is difficult and expensive to prove it. To avoid that situation the parties may decide when they enter into a contract that, in the event of a breach of a particular kind, the party in default will pay a stipulated sum to the other. This sum is termed ‘liquidated damages’. All the common forms of building contract include a liquidated damages clause to calculate the amount payable if the contractor fails to complete by the completion date (qv) or any extended date: for example, see SBC clause 2.32 and ACA clause 11.3. A sum is included to represent the damages on a weekly or daily basis as appropriate. If no figure were stated, the employer would need to prove actual loss and recover it by way of ‘unliquidated damages’ through adjudication, arbitration or the courts. Care needs to be taken when an employer seeks to deduct or recover liquidated damages, as the procedure differs across the standard forms, and some contracts include conditions precedent to the making of a deduction. For example, SBC clause 2.32.1 requires the issue of a non-completion certificate and a notice from the employer to the contractor stating the employer’s general intention to deduct liquidated damages. Such conditions are in addition to the withholding notice against the specific payment from which monies are to be withheld. This is in contrast to MW and MWD, which do not require the issue of a non-completion certificate, and the NEC, which requires only the issue of a proper withholding notice against the relevant payment. A common question is whether a party to a contract containing a liquidated damages clause can sue for actual damages suffered, or whether the party is restricted to claiming the sum expressed as liquidated damages in the contract. In principle, where parties enter into a contract, it must be assumed that they know what they are doing, and that the contract is an expression of their intentions.615 Therefore, if parties agree that in the event of a particular kind of breach liquidated damages are payable by the party in breach, that agreement will be upheld by the courts, and they will be allowed no other or alternative damages but the damages liquidated in the contract. A liquidated damages provision is an exhaustive agreement as to the damages recoverable for breach of the obligation to complete by the completion date in the contract.616 The advantages of liquidated damages are as follows. — They do not require proof after the event. — They can be simply deducted by the employer under the contractual mechanism. — They are agreed in advance and stated in the contract, so that the contractor knows the extent of its potential liability. It has been held that liquidated damages clauses are to be construed contra proferentem (qv).617 However, this is unlikely to be so if the contract is in a

615

Liverpool City Council v. Irwin [1976] AC 239. Temloc Ltd v. Errill Properties Ltd (1987) 12 Con LR 109. 617 Peak Construction (Liverpool) Ltd v. McKinney Foundations Ltd (1970) 1 BLR 111. 616

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Liquidated damages negotiated form, e.g. SBC.618 But handwritten or typewritten insertions that are inconsistent with the printed provisions will, it seems, be so construed.619 It is sometimes thought that a liquidated damages provision can be treated by the contractor as if it were an agreed price to be paid to permit the contractor to continue its breach. However, there is authority from the Court of Appeal that such an assumption is wrong.620 An employer who assures the contractor during the progress of the Works that liquidated damages will not be deducted may be estopped (prevented) from subsequently deciding to levy liquidated damages, even if the contract period becomes seriously prolonged.621 Before a sum is inserted into the contract to represent liquidated damages, it is essential that a careful calculation be made at pre-tender stage, taking all the circumstances of the particular project into account. That said, it has been held that liquidated damages are especially suited to situations where precise estimation is almost impossible.622 The employer should include every item of additional cost that will flow directly from the contractor’s failure to complete on the due date. It appears that the liquidated damages can be increased to include amounts that would normally be recoverable only under the second part of the rule in Hadley v. Baxendale623 if the employer can show that special circumstances were involved. It is not clear whether the special circumstances must be known to the contractor when the contract is made in the case of liquidated damages. It might be wise to reveal such circumstances at tender stage. From a purely practical point of view, an employer will very often reduce such a figure in order to make the proposed damages more palatable to prospective tenderers. Figure 8 shows a possible format for such a calculation. In the public sector, where it is difficult to estimate the loss, it is not unusual to make use of a formula calculation, and it is thought that this is an acceptable approach. There is often confusion between liquidated damages and a penalty. Whereas liquidated damages clauses are effectively agreed damages or compensation for loss, and they are enforceable by the courts, a penalty clause, which is essentially a punishment or deterrent, is not enforceable. A penalty may be either a predetermined sum that is not a realistic pre-estimate of damage, or a sum that is payable on the occurrence of any one of a number of different kinds of event. It is of no consequence whether the sum is described as a penalty or not. It is the real nature of the sum that matters. Even if a sum is held to be a penalty, the employer may still pursue an action for actual (unliquidated) damages at common law. In Dunlop Pneumatic Tyre Co Ltd v. New Garage Co Ltd624 Dunedin LJ noted the principles by which the court decides whether a clause provides for liquidated damages or a penalty as follows.625 618

Tersons Ltd v. Stevenage Development Corporation (1963) 5 BLR 54. Bramall & Ogden Ltd v. Sheffield City Council (1983) 1 Con LR 30. Bath & North East Somerset District Council v. Mowlem plc (2004) 100 Con LR 1. 621 London Borough of Lewisham v. Shepherd Hill Civil Engineering, 30 July 2001, Unreported. 622 Dunlop Pneumatic Tyre Co Ltd v. New Garage & Motor Co Ltd [1915] All ER 739. 623 (1854) 9 Ex 341. 624 (1915) All ER 739. 625 See Jeancharm Ltd (t/a Beaver International) v. Barnet Football Club Ltd (2003) 92 Con LR 26, which confirmed that the test in Dunlop Pneumatic Tyre Co Ltd v. New Garage Co Ltd remains the applicable test. 619 620

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Contract:.................................................................................................................................... Client:........................................................................................................................................ Architect:...................................................................................................................................

1.

Contract administrative staff (current rates) Architect: Estim. hrs/wk .... × time charge of £ ...... per hour Quantity surveyor: Estim. hrs/wk.... × time charge of £....... per hour Consultants: (as above for each one) Clerk of works: Weekly salary (yearly/52)

Cost/week £ £ £ £ ______________

TOTAL (1)

2.

£

Additional costsa (current rates) Rent and/or rates and/or charges for present premises Rent and/or rates and/or charges for alternative premises Charges for equipment Movement of equipment Additional and/or continuing and/or substitute staff Movement of staff (include travel expenses) Any site charges that are the responsibility of the client Extra payments to directly employed trades Insurance Additional administrative costs

£ £ £ £ £ £ £ £ £ £ ______________

TOTAL (2)

3.

Interest Interest payable on estimated capital expended up to the contract completion date, but from which no benefit is derived. Estimated expenditure taken as 80% of contract sum and fees Contract sum: Architect’s fees (90%)b Quantity surveyor’s fees(90%)c Consultant’s fees (90%)d Salary of clerk of works (£/wk × contract period)

£

£ £ £ £ £

______________ Total£ Interest charges at current rate of % Interest/wk (80% capital expended × interest) 52 ______________ TOTAL (3)

4.

Inflation Current rate of inflation .............%/year TOTAL (1) × .... % × contract period (years) TOTAL (2) × .... % × contract period (years) TOTAL (4)

5.

£

£ £ ______________ £

Total liquidated damages/week TOTAL (1) TOTAL (2) TOTAL (3) TOTAL (4) FINAL TOTAL

£ £ £ £ ______________ £

Figure 8 Calculation of liquidated damages: typical format. Notes: a It is essential that all costs noted are additional: i.e. they would not be incurred if the contract was completed on the contract completion date. The headings given are examples only. Every job is different. b Professional fees are taken as 90% of total, because some professional services remain to be performed after practical completion. c As note b. d As note b.

Liquidated damages (i)

(ii) (iii)

(iv)

Though the parties to a contract who use the words penalty or liquidated damages may prima facie be supposed to mean what they say, yet the expression used is not conclusive. The court must find out whether the payment stipulated is in truth a penalty or liquidated damages … The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged as at the time of the making of the contract, not as at the time of the breach. To assist this task of construction various tests have been suggested, which, if applicable to the case under consideration, may prove helpful or even conclusive. Such are: (a) It will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss which could conceivably be proved to have followed from the breach … (b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid … (c) There is a presumption (but no more) that it is a penalty when a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damages. On the other hand (d) it is no obstacle to the sum stipulated being a genuine pre-estimate of damage that the consequences of the breach are such as to make precise pre-estimation almost an impossibility. On the contrary, that is just the situation when it is probable that the pre-estimated damage was the true bargain between the parties.626

However, hypothetical situations cannot be used to argue that the amount was a penalty and thereby defeat a liquidated damages clause. The court will take a pragmatic approach.627 Liquidated damages clauses are usually linked with an extension of time (qv) clause, and the position has been clearly stated by the House of Lords,628 insofar as: — The general rule is that the contractor is bound to complete the work by the date for completion stated in the contract, or as extended under the contract. If it fails to do so, the employer is entitled to recover liquidated damages. — The employer is not entitled to liquidated damages if it by its own acts or omissions has prevented the contractor from completing by the due date, and if this occurs time may become ‘at large’ (qv). — These general rules may be amended by the express terms of the contract, and are so amended by the common standard forms. These provide for extensions of time to be granted in appropriate cases. — Failure by the contract administrator to properly extend time or for acts etc. of the employer not covered by the events listed in the extension of time clause may result in time being at large (qv) and liquidated damages

626 627 628

Ibid per Lord Dunedin at 742. Alfred McAlpine Capital Projects Ltd v. Tilebox Ltd [2005] BLR 271. Percy Bilton Ltd v. Greater London Council (1982) 20 BLR 1.

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Liquidated prolongation costs (LPC) being irrecoverable. The contractor’s obligation is then to complete within a reasonable time, and the employer is left to sue for unliquidated damages at common law. The final total should be examined to see if it appears reasonable in all the circumstances. It should be appreciated that the calculation can only be approximate. If in doubt about the figure, it should be reduced. It is sound procedure for the architect or quantity surveyor to calculate the totals with the client, have the calculations typed out, and send them to the client for signature. If possession and completion are to be by sections, the amount of liquidated damages should be apportioned, bearing in mind: — The value of each section. — The implications in cost to the client of each section. The cost to the client might be quite different from the value of the section as a proportion of the whole. For example, a relatively small-value section may contain equipment that makes it the key to the client’s business. — Other costs. For example, the clerk of works may be required to stay on site until the last section is completed, or their attendance may be reduced at some stage to half time. See also: Damages; Extension of time; Penalty.

Liquidated prolongation costs (LPC) A fixed daily or weekly rate to reimburse the contractor for extra costs incurred by delays caused by matters for which the employer is liable, e.g. variations. An LPC clause is sometimes found in construction contracts, and is often referred to as a ‘Brown clause’ (qv). Tenderers are asked to specify the LPC required in their tender so as to cater for delays or extended use of items in the bills of quantities (qv) or preliminaries (qv). Although superficially attractive as a cost-effective means of settling prolongation claims – and in one sense a reverse form of liquidated damages – LPC is inflexible. For example, it takes no account of disruption that does not result in prolongation of the contract period, or of when during the project the disruption actually occurs. It may well be very difficult for the contractor to estimate its losses, given that this will very much depend on the nature of the event, and on which trades are affected. It is for this reason that such clauses, given their very imprecise nature, tend not to be attractive to contractors. Nevertheless, if the parties are agreeable, an LPC clause may well provide a quick, albeit rough and ready, system of calculating what is usually referred to as loss and/or expense (qv) caused by prolongation. See also: Additional variation percentage.

Liquidation Also known as ‘winding-up’. The legal process for terminating the existence of a company registered under the Companies Acts. There are three types of winding-up: — winding-up by order of the court; — creditors’ winding-up; — members’ voluntary winding-up. The first two apply to insolvent companies, and are procedures applied by the creditors. A winding-up by order of the court of an insolvent company may be commenced by the company, a creditor or the receiver (qv) presenting a petition to 330

Liquidator the court to wind up the company. If the court makes a compulsory winding-up order, the official receiver becomes a provisional liquidator, who may apply to the court for the appointment of a special manager. A meeting of the creditors called by the provisional liquidator decides whether or not to apply to the court for the appointment of both a liquidator and a committee of inspection. A ‘creditors’ voluntary winding-up’ has the advantage that the creditors can settle matters without recourse to the court, but they may apply to the court if they deem it necessary. The procedure starts with the company members passing an extraordinary resolution that the company cannot, by reasons of its liabilities, carry on its business, and that it is expedient that it should be wound up. A meeting of creditors must be called on the same or the following day to appoint a liquidator and a committee of inspection. A liquidator may carry on the business only if it is beneficial to the windingup, e.g. if the overall capital available is likely to be increased. The object of the law governing liquidation is to ensure equal distribution of the company’s assets among the creditors, subject to the following order of preference: — fixed charges; — costs of liquidation; — preferential creditors (e.g. rates, taxes, National Insurance etc. for a fixed period, and wages for the previous four months to a statutory maximum per employee); — floating charges; — unsecured creditors (they may well be the creditors who force the winding-up). A members’ voluntary winding-up occurs when the directors, having carried out an extensive enquiry into the company’s business, decide that the company will be able to pay its debts in full, together with interest, within a year of the start of liquidation proceedings, and are prepared to swear a statutory declaration. The members may then pass a resolution to wind up the company. The detailed rules for winding-up in all its forms can be found in the Companies Act 1985 (as amended in 1989 and subsequently), the Insolvency Act 1986, the Insolvency Rules 1986, the Insolvency Act 2000, the Insolvency (Amendment) (No. 2) Rules 2002, the Insolvency (Amendment) (No. 2) Regulations 2002, the Enterprise Act 2002, and the Insolvency (Amendment) Rules 2003 (SI 1730/2003). Useful guidance is available on the Companies House website. If a company transfers the whole of its interest to a new company, it is known as ‘reconstruction’. The JCT series of contracts 2005 contain definitions of insolvency. SBC clause 8.1 includes: ‘without declaration of insolvency, [a party] passes a resolution or makes determination that [the party] be wound up’ and ‘[the party] has a winding-up order or bankruptcy order made against [the party]’. NEC clause 91.2 sets out what amounts to liquidation of a company, as does ACA clause 20.3. See also: Bankruptcy; Insolvency.

Liquidator A person who is appointed by a company or by the court to carry out the liquidation (qv) of the company’s assets for the benefit of creditors. The qualifications required of an insolvency practitioner are set out in ss. 388 to 398 inclusive of the Insolvency Act 1986. A person who acts as an insolvency 331

Litigation practitioner in relation to a company, or to an individual, when not qualified to do so is liable to imprisonment or a fine or both.

Litigation The process of resolving a legal dispute before a court. The JCT and other contracts refer to ‘legal proceedings’ (qv) rather than ‘litigation’, because ‘litigation’ is a somewhat narrower term. The term is used in contrast to ‘arbitration’ (qv), which is the settlement of disputes before what amounts to a private judge of the parties’ choosing, and to adjudication, which is a rather different dispute resolution process with the aim of achieving a quick and relatively inexpensive decision.

Local Act A statute (qv) that is of purely local operation. An example is the Leicester City Council Act 2006, which is an Act to confer powers on Leicester City Council for the better control of street trading in the City of Leicester. Many local Acts are of relevance in the field of building control (qv).

Local authority Local authorities are statutory corporations charged with a range of functions over a limited geographical area. They are subject to the doctrine of ultra vires (qv). There used to be special local authority editions of some standard form building contracts, e.g. JCT 98. However, the JCT 2005 suite of contracts dispenses with the specific local authority editions in favour of reference within the contract form to any differences. For example, in SBC, clause 4.8 refers to advance payment. The relevant entry in the contract particulars notes that it is not applicable where the employer is a local authority. Local authorities are subject to standing orders (qv), which often dictate that specific amendments must be made to the standard forms of contract. These are usually to be found in the preliminaries (qv) section of the relevant bills of quantities (qv) or specification (qv).

Lock-out A situation that exists when an employer refuses entry to their place of work to its employees. The purpose is usually to exert pressure for settlement, and it will usually be the result of an industrial dispute. SBC clause 2.29.11, IC and ICD clause 2.20.11, and DB clause 2.26.10 expressly refer to a lock-out as one of the grounds for extension of time (qv).

Locus sigilli The place of the seal. This Latin expression is often abbreviated to LS, and commonly appeared beside the attestation (qv) clause of a document requiring to be sealed, where executed as a deed (qv). By s. 1(1)(b) of the Law of Property (Miscellaneous Provisions) Act 1989 there is no longer any requirement in law for a seal in order to validly execute an instrument as a deed by an individual. There is a similar provision in article 3 of the Law Reform (Miscellaneous Provisions) (Northern Ireland) Order 2005. The requirement for a seal in the case of companies was removed by s. 130 of the Companies Act 1989. In Northern Ireland the need for a seal was removed by Schedule 4 of the Companies (No. 2) Order (Northern Ireland) 1990. S. 44(2)(b) of the Companies Act 2006 came into effect from April 2008 and allows a deed to be executed by one director signing in the presence of a witness who attests the signature. Attestation provisions in the JCT 2005 series contracts are now drafted to accommodate alternative methods of execution, and there is a specific locus 332

Loss and/or expense sigilli, although not so signified, for the use of companies that wish to use their common seals. Before execution of deeds could be achieved other than by sealing, it was ruled by the Court of Appeal that, where a defendant had signed across the printed letters LS in a circle and there was an attestation clause signed by a witness, a bank’s printed mortgage form was properly executed as a deed despite the absence of any wafer or other seal.629 Perhaps more significantly, it has been held that all that was necessary was that the parties clearly intended the document to be sealed.630 It is thought that, although the need for a seal has been removed, where parties intend to execute a deed under seal the intention, in the absence of an actual seal, will suffice. It is clearly preferable that any document intended to be under seal should have a seal attached, stamped or impressed to remove any possibility of a subsequent dispute on the matter.

Loss and/or expense A phrase commonly used in standard contracts that provide an entitlement of a contractor to additional monies for which it would not be reimbursed elsewhere under the contract. It is used in SBC clause 4.23, DB clause 4.19, MP clause 27 and IC and ICD clause 4.17. It is the reimbursement to which the contractor is entitled under the express provisions of the contract, and covers those events that are the responsibility of the employer. Typically it represents monies incurred or lost as a result of a delay in the possession of the site, or where the regular progress of the Works has been materially affected, or the contract period has been prolonged. This would include both disruption (qv) to and prolongation (qv) of the Works. ACA clause 7.1 refers to ‘damage, loss and/or expense’, and GC/Works/1 clause 46(1) refers to ‘directly incurs any expense’. It is now settled law that this phrase – or similar phrases such as ‘direct loss and/or damage’ – refers to loss and expense that arise naturally and in the ordinary course of things from the event concerned. That is, it equates with those heads of claim of damages (qv) which would be recoverable at common law as damages for breach of contract.631 The phrase covers both a loss of money and the incurrence of expense that is not part of the contract sum or paid for under another clause. Direct loss and/or expense also includes as a separate head of entitlement the right to finance charges or interest on the loss and/or expense ascertained.632 In practice, the ascertainment of loss and/or expense requires precise and exact calculation. Figures cannot be plucked out of the air, and it is up to the contractor to prove that it has in fact suffered or incurred the loss or expense claimed.633 Such calculation should specify each causative event, and the loss and/or expense attributed to it. The claim should not be a single global figure,634 although recent cases have suggested that while a global claim (qv) as such may fail, it does not follow that no claim would succeed. There may be in the

629

First National Securities Ltd v. Jones [1978] 2 All ER 221. Whittal Builders v. Chester-le-Street District Council (1985) 11 Con LR 40. 631 Wraight Ltd v. P H & T (Holdings) Ltd (1968) 13 BLR 26; F G Minter Ltd v. Welsh Health Technical Services Organisation (1980) 13 BLR 1. 632 F G Minter Ltd v. Welsh Health Technical Services Organisation (1980) 13 BLR 1. 633 Alfred McAlpine Homes North Ltd v. Property and Land Contractors Ltd (1995) 76 BLR 65. 634 Wharf Properties Ltd v. Eric Cumine Associates (No. 2) (1991) 52 BLR 1. 630

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Loss of productivity evidence a sufficient basis to make some connection, and to make a rational apportionment of part of the global loss to the causes for which the party was responsible.635 See also: Claim; Compensation event; Consequential loss; Direct loss and/or expense; Finance charges; Interest.

Loss of productivity Loss of productivity is a permissible head of recovery under the financial claims clauses of most standard forms of contract. Thus SBC clause 4.23 entitles the contractor to recover direct loss and/or expense (qv) if the regular progress of the Works has been or is likely to be affected by the relevant matters listed in the clause. Some authorities have argued that this must involve delay (qv) in progress, and that the contractor’s entitlement is limited to the effects of delayed completion. A careful reading of the clause (and similar wording in other contracts) does not support this view. It is clear that disruption of progress may be severe in non-critical activities and not affect the completion date (qv). In principle, the contractor is entitled to recover for loss of productivity, i.e. the effect of the event upon the cost of the work, of labour, plant and other resources that have not been used efficiently during the original contract period, even if no extension of time (qv) is involved. The additional cost (if proven) falls within the rule in Hadley v. Baxendale636 as being foreseeable. It is the natural consequence of the specified act, and must be something that the parties had, or should have had, in mind. In broad principle, loss of productivity may be easy to establish, but it is difficult to prove and quantify in detail. At the very least, the contractor must be able to isolate the various items of cost that have been affected by the particular disruptive events on which it relies. The use of arbitrary percentages by which the contractor may seek to discount the average productivity levels that theoretically existed before the disruptive event is meaningless. See also: Claim; Critical path; Foreseeability.

Loss of profit Loss of profit is a permissible head of recovery under the financial claims clauses of most standard forms of contract (one exception being GC/ Works/1), as well as being recoverable as a head of damages for breach of contract at common law – that is, assuming that the contractor would have earned the profit had it not been for the event giving rise to the claim.637 It is, however, only the ‘normal’ profit that is recoverable, because such a loss is within the contemplation of the parties. Exceptionally high profit that the contractor might otherwise have earned will not be similarly recoverable unless the other party to the contract knew, at the time of the contract, of the facts that would bring the abnormal profit within its contemplation.638 There is no automatic right to recover lost profit. Such a claim is allowable only where the contractor is able to demonstrate that it has been prevented 635

John Doyle Construction Limited v. Laing Management (Scotland) Ltd (2002) 85 Con LR 98. (1854) 9 LJ Ex 341. Hadley v. Baxendale (1854) 9 LJ Ex 341; Wraight Ltd v. PH & T (Holdings) Ltd (1968) 13 BLR 26. See also Chiemgauer Membran und Zeltbau GmbH v. New Millennium Experience Company (2000) CILL 1741. 638 Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd [1949] 1 All ER 997. 636 637

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Lump sum contract from earning profit elsewhere in the normal course of its business as a direct result of the disruption or prolongation, i.e. a lost opportunity. The position is similar to the criteria for recovery of overheads (qv). It is actual rather than notional profit that can be recovered. The contractor will have difficulty in demonstrating the profit it would have made if allowed to do other work. It is not sufficient for the contractor to refer to the amount of profit it had included in the relevant tender or contract, because such profit may be optimistic. The contractor will encounter considerable problems in proving that it turned away profit-earning work because of delays in the current Works. If that considerable hurdle is surmounted, the amount of profit is likely to be the result of informed estimation, based on a number of previous annual accounts rather than a precise calculation. See also: Claim; Damages.

Low performance damages A pre-estimated amount of liquidated damages (qv) that the contractor will be liable to pay to the employer in the event that a defect in the Works is such that some prescribed performance level stated in the contract is not achieved. Under the NEC (qv) contract such a provision is optional, and may be used by adopting Option S of the optional clauses. Where the clause is used, the contract data (qv) must be completed to insert the amount of damages to be applied in the event of low performance. When calculating and inserting the amount, the clause is no different in essence from any other liquidated damages provision, and if it is to be enforceable, it will be subject to the same tests as for any other provision for liquidated damages. See also: Liquidated damages.

Lump sum contract When one party carries out work for a stated and fixed amount of money payable by the other. Most of the main forms of building contract are considered to be lump sum contracts, even though they contain provisions for the adjustment of the contract sum (qv) for such things as fluctuations and variations. A lump sum contract is not one that remains fixed in price, come what may. The important point is that the original contract sum is stated for a given amount of work and materials. Some contracts are expressly not lump sum contracts, e.g. the Standard Building Contract With Approximate Quantities (SBC/AQ). If the contract expressly provides for remeasurement, it is not a lump sum contract. See also: Firm price contract; Fixed price contract.

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M Main contract A term often given to a contract made between employer and contractor (qv) to distinguish it from the contracts (sub-contracts) between the contractor and its sub-contractors (qv). Thus the contractor is often referred to as the ‘main contractor’ or ‘principal contractor’, although care must be taken not to confuse that term with the principal contractor under the Construction (Design and Management) Regulations 2007 (qv). A main contract is not necessarily the same as a ‘head contract’ (qv). A head contract is the highest in a tier or hierarchy of contracts. It may equate to a main contract, but it is more likely to refer to the contract between a client and a developer to carry out the design and construction of a building. The developer then lets a contract (the main contract) to a contractor, who, in turn, lets sub-contracts. See also: ACA Form of Building Agreement; BPF System; JCT contracts.

Maintenance The continuing of, or keeping up to, a particular standard. In relation to building, the word is used to refer to the carrying out of regular work and repairs, including replacement, over a period of time, possibly over the life of the building. The word is used in GC/Works/1 clauses 21 and 49, and in ACA clause 12.2, to denote what the JCT contracts used to refer to as the ‘defects liability period’ (qv) (JCT 98), but now refer to as the ‘rectification period’ (qv) (SBC). The NEC uses the term ‘defects date’. This use of the word ‘maintenance’ is regrettable, because it does violence to its ordinary meaning. If the contractor were indeed required to ‘maintain’ a building for a period of six months after completion, it would involve constant access and keeping it in pristine condition despite occupation and the passage of time. In fact, GC/Works/1 defines the contractor’s responsibility more narrowly than that. See also: Defects; Defects liability period; Maintenance clause; Maintenance period.

Maintenance clause A misleadingly named clause included in the ACA and GC/ Works/1 forms, at clauses 12.2 and 21 respectively, providing that the contractor is to make good defects that occur during a specified period of time after the Works are complete. See also: Defects liability period; Maintenance; Rectification period.

Maintenance period A misleading phrase used in some contracts when referring to a specified period of time after the Works are complete. Defects appearing during the period are to be made good by the contractor. For example, ACA at clause 12.2 refers to the maintenance period, as does GC/Works/1 at clauses 21 and 49. See also: Defects liability period; Maintenance; Maintenance clause.

Major Project Construction Contract (MP) The first version of this JCT contract was published in 2003, and the latest was published in 2005. JCT also publishes a guide, i.e. MP/G. The contract was said to have been drafted in response to the specific needs of those employers that have their own detailed 336

Major Project Construction Contract (MP) in-house procedures and undertake major projects on a regular basis. What constitutes a major project is not defined. As a consequence of the employer having its own detailed in-house procedures, the contract is drafted in brief and simple terms. It is anticipated by the JCT that those contractors that contract under this form will have the knowledge and resources to evaluate the risk inherent in major projects. This is because contractors take on increased risk and responsibilities under this form, so they need to be experienced in carrying out largescale projects, and be skilled in risk management. Therefore what the employer requires from the contractor for a particular project needs to be clear at tender stage, so that the contractor can price the risks and plan to manage those risks during construction. The employer prepares or defines requirements in an employer’s requirements document, which should make clear what is to be delivered, and the manner in which it is to be delivered. Paragraphs 118 to 120 in the MP/G give some helpful advice on how to prepare the requirements. It is expected that once the contractor has the requirements document, then it would need nothing further from the employer other than (i) access to the site, (ii) for the employer to review and comment on the design documents prepared by the contractor, and (iii) to make payment. The contractor does everything else necessary to convert the requirements into the completed works: complete the design, obtain consent, etc. The contract documents are not defined, but the contract (clause 1) is defined as comprising the conditions including the contract particulars and Schedule 1 (third party rights), Schedule 2 (pricing document) and any annexure (e.g. insurance documents), the employer’s requirements and the contractor’s proposals. The contract particulars set out the details specific to the project, e.g. start date, completion date, liquidated damages; the requirements set out what the employer requires the contractor to provide; and the contractor’s proposals set out how the contractor intends to meet those requirements. The pricing document contains the financial information, showing a build-up to the contract sum, and the information to be used to value changes and calculate interim payments. Schedule 1 deals with third party rights from the contractor in favour of any future purchasers, tenants and funder. The layout of the document is different from that of SBC and IC, and there is no obvious reason for this departure. No recitals or articles are included, and even the contract particulars and attestation provisions are included at the rear of the contract. There are 43 clauses, arranged under the following general headings: — Definitions (clause 1) — Interpretation (clauses 2 to 6) — General obligations (clauses 7 to 14) — Time (clauses 15 to 20) — Control (clauses 21 to 25) — Valuation and payment (clauses 26 and 31) — Indemnities and insurances (clauses 32 to 34) — Assignment and third parties (clauses 35 and 36) — Default and dispute resolution (clauses 37 to 43) Some of the key features of this contract are as follows: — The contract is administered by the employer, and there are no certificates. It is expected that the employer’s representative will undertake the 337

Management contract

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— — —

— —

— — — —

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contract administration duties (clause 21). In addition, the employer may appoint advisers, with whom the contractor is to cooperate but who have no authority under the contract (clause 12). Any design in addition to that included within the requirements is to be completed by the contractor. Therefore the contract could be used in a traditional procurement approach or used as a design and build contract. The employer reviews and comments on any design undertaken by the contractor, and is obliged to pay only for works in accordance with the design that warranted no comment (clause 12.7). There is a relatively detailed design submission procedure (qv) for the contractor’s design documents (qv) (clause 12). The employer may name in the requirements consultants and subcontractors to be used by the contractor (clause 24). There is an option for the employer’s consultants to be novated to the contractor (clause 24.1). Interim payments can be by monthly valuations, stage payments or scheduled payments. The payments are calculated in accordance with the pricing document. The contract makes no provision for the employer to retain a retention. This is one of the rare standard forms that require the contractor to submit a VAT invoice as a requirement of payment. There is an optional provision of the payment of a bonus to the contractor should practical completion occur before the completion date (clause 20). The employer may instruct changes to the requirements, the proposals, or the manner in which the Works are to be completed (clause 26). Such changes are to be valued to include any associated loss and/or expense. The price can be agreed in advance, or valued by the employer on a fair and reasonable basis. Under clause 25 the contractor may receive a portion of any financial benefit resulting from a suggested amendment to the requirements or proposals resulting in a saving to the employer in either time or money. The contractor is given access to, and not possession of, the site (clause 15). Practical completion is defined at clause 1. Under clause 14 ground conditions can be at either the employer’s or contractor’s risk. The contract uses the provisions of the Contract (Rights of Third Parties) Act 1999 to give any funder, purchaser or tenant direct rights against the contractor (clause 36 and Schedule 1). Insurance is not addressed in detail (clause 33). This is premised on the belief that for major projects the insurance requirements tend to be bespoke, and therefore provision is made for the incorporation of the bespoke insurance documents. Professional indemnity insurance is addressed at clause 34. There is no option to refer any dispute and/or difference to arbitration (clause 41). The procedures are either adjudication or litigation. There is a provision for the parties to refer a dispute or difference to mediation, but this clause is directory and non-mandatory.

Management contract A loose term covering a wide variety of contractual situations. In appropriate circumstances it may be seen as a useful means of provid338

Management contract ing a ‘fast track’ approach to the project in circumstances where responsibility for design and contract administration is to be left with directly engaged professionals (see, e.g., the Second Recital of MC). The term generally refers to a type of contract where the main contractor is selected at a very early stage, and is appointed to manage the construction process and input its own expertise during the pre-contract stages. The contractor receives a fee for its services, which is agreed between the parties before the contractor is appointed. First issued in 1987, the Joint Contracts Tribunal (qv) Management Contract package was produced in response to demands for standard documentation to suit this particular procurement method. A fully revised version was published in 1998. The current Management Building Contract was published by JCT in 2008. The total package consists of: — Management Building Contract 2008 (MC) — Management Works Contract Tender and Agreement (MCWK) — Management Works Contract Conditions (MCWK/C) — Management Works Contractor/Employer Agreement (MCWK/E) The contract consists of nine main sections and associated schedules as follows: — Section 1: Definitions and interpretations — Section 2: Carrying out the project — Section 3: Control of the project — Section 4: Payment — Section 5: Works contracts — Section 6: Injury, damage and insurance — Section 7: Assignment, third party rights and collateral warranties — Section 8: Termination — Section 9: Settlement of disputes — Schedules: • Schedule 1: Definition of prime cost • Schedule 2: Management fee: Adjustment of construction period fee • Schedule 3: Insurance options • Schedule 4: Code of practice • Schedule 5: Third party rights • Schedule 6: Acceleration quotation procedure — Annexes: • Annex A: Site facilities • Annex B: Services The contract has two stages: the pre-construction and construction periods. The management contractor is intended to be involved in both phases, subject to a break clause permitting the employer to stop the project at the end of the preconstruction period. There is now provision for the Works to be carried out in sections. There is no provision for the management contractor to carry out any work on site itself. Its obligations during the construction stage are essentially to: — set out the project, including all work done by works contractors; — manage the project, including all work done by works contractors; — organise the project, including all work done by works contractors; — supervise and secure the carrying out and completion of the project, including all work done by works contractors. Competitive tendering is usual for the various Works contract elements. Points to note are as follows. 339

Master —

The contractor is responsible to the employer for the construction process. — The system is most useful for large and complex contracts when a considerable degree of coordination of specialists is required, and where an early start on site is required. — Accurate programming and cost planning are essential for success. — The selection of a suitable contractor to undertake the management work is not an easy process. See also: BPF System; Cost reimbursement contract; Design and build contract; Directions; Project management.

Master (1) The traditional legal term referring to an employer of labour, i.e. the relationship of employer and employee. The major distinction between the relationship of master and employee and that of employer and independent contractor (qv) appears to be that in the former the employer has the power to direct and control how, when and what work is to be done. An employer is vicariously responsible for acts done by an employee in the course of employment. (2) Masters of the Supreme Court are officers of the High Court of England and Wales. They perform certain judicial work and issue directions on matters of practice and procedure. See also: Vicarious liability.

Master cost plan Under the BPF System (qv) this is a schedule prepared by the client’s representative (qv) showing the total expenditure required to complete the project. At all times it should provide the best possible estimate of the final cost of the project, of the future cash flow, and of the future cost of the building. The BPF Manual contains, in Appendix A2.3, a checklist of the information that the master cost plan should include, arranged under the following headings: — Description of project. — Basis of cost plan. — Forecast tender price. — Other costs. — Target cost. — Development cost.

Master programme (1) A term found in SBC at clause 2.9.1.2 referring to the contractor’s overall programme for the execution of the Works. The reference in the contract merely formalises what has long been the practice in most contracts through an appropriate clause in the bills of quantities (qv) or specification (qv). The clause does not state the form the programme should take. The type of programme required should be specified in the bills of quantities or specification as appropriate: bar chart, network analysis, etc. Except for the smallest projects, it is advisable to request a network analysis to be prepared, because it more readily highlights delay and disruption. Note that, if the contractor does not have a programme, it is probable that it is under no obligation to supply one, albeit that a contractor working without a programme would be a considerable cause for concern. Although the master programme is not a contract document (qv), but a document made available under this contract, it is an invaluable aid to monitoring contract progress for both architect and contractor, i.e. a management tool. A good programme should show not only 340

Material breach the start and finish dates, and the relationships and timings of the key operations, but also the way in which all categories of sub-contractor are to be integrated into the Works. It is good practice for the contractor to note (realistic) dates for receipt of information (e.g. drawings, schedules, naming instructions) from the architect. The architect should not ‘approve’ the contractor’s master programme, although such approval may have little practical significance.639 The architect must treat it merely as information from the contractor of what it intends to do, and when it intends to do it. It has been said that ‘contractors frequently produce programmes that were over-optimistic’.640 There is no provision in the SBC for the contractor to provide a revised programme unless the architect has given an extension of time, or a pre-agreed adjustment has been confirmed by the acceptance of a Schedule 2 quotation (qv). In such instances the contractor must provide an updated programme within 14 days. It is common for the architect to seek a revised programme if the contractor is in serious, culpable delay. In order to achieve this, it is necessary to make an amendment to clause 2.9.1.2. The addition of the following words should be sufficient: ‘and, in any event within 14 days of any reasonable request of the architect, provide two copies of a revision of the programme’. IC, ICD, MW and MWD have no express provision for a master programme. However, it is good practice for a suitable clause to be inserted in the preliminaries (qv) section of the specification or bills of quantities, as appropriate, requiring the contractor to provide one. (2) Under the BPF System (qv) for building design and construction the same term is used to describe the schedule prepared by the client’s representative (qv) of the main activities required to complete the project. This master programme is produced at an early stage in the development of the project, and it is updated by the client’s representative as the project progresses to tender stage. See also: Accepted programme; Regularly and diligently; Time schedule.

Material breach A term used within MP, and defined at clause 1. It is when the contractor: — fails to proceed regularly and diligently with carrying out its obligations under the contract; or — fails to comply with any instruction; or — suspends the project or part, except in accordance with the Housing Grants, Construction and Regeneration Act 1996, or in circumstances in clause 40.1; or — is in breach of the CDM Regulations; or — is in breach of CIS; or — is in breach of contract regarding named specialists or pre-appointed consultants; or when the employer fails to issue payment advice in accordance with the contract; or when either party: — fails to pay in accordance with payment advice issued under the contract; or

639 640

Hampshire County Council v. Stanley Hugh Leach Ltd (1991) 8-CLD-07-12. Glenlion Construction Ltd v. The Guinness Trust (1987) 39 BLR 89 at 99 per Judge Fox-Andrews.

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Materially affected — fails to insure in accordance with clause 33.3; or — is in repudiatory breach of contract. The phrase is used within the termination provisions at clauses 38 (termination by the employer) and clause 39 (termination by the contractor). The termination procedure is similar under the two clauses. If a party commits a material breach, then the other party is to give a notice specifying the default, and that the contractor’s employment will be terminated should the default not be remedied on the expiry of 14 days. If the default is not remedied, then the ‘injured party’ may, at any time during a subsequent 14-day period, issue a further notice terminating the contractor’s employment.

Materially affected A phrase used, in particular, in the JCT forms of contract. For example, SBC clause 4.23, IC and ICD clause 4.17 and DB clause 4.19 refer to regular progress of the Works being materially affected. It is a condition precedent to the contractor being able to claim loss and/or expense. SBC, IC, ICD and DB clause 8.4.1.3 refers to the Works being materially affected by the contractor’s refusal or neglect to comply with the architect’s instructions requiring it to remove defective work or materials. It is a ground for the employer to terminate the contractor’s employment. The addition of the word ‘materially’ in each case makes clear that it is not sufficient to say that the Works or progress (as the case may be) are affected. They must be affected in some important or significant way, or to a substantial extent. The word is not defined precisely in the contract. It is clear that trivial disruptions are excluded, and whether progress can be said to be materially affected will depend upon the exact circumstances of each case. GC/Works/1 clause 46(1), which is to the same effect as the JCT provisions noted above, refers to the Works being materially disrupted or prolonged.

Materials Although most building contracts draw a distinction between ‘goods’ and ‘materials’, there is no distinction in law. Both are ‘goods’ for the purposes of the Sale of Goods Act 1979. In building practice the things used to construct the building – bricks, sand and cement, timber, screws, etc., which are the raw elements of the building before any work has been done – are called ‘materials’. This is in contrast to such things as door furniture and sanitary fittings, which are normally described as ‘goods’ (qv). The Supply of Goods and Services Act 1982 (qv), which applies, among other things, to building contracts, implies certain conditions and warranties with regard to materials and goods supplied under such contracts. These implied terms (qv) parallel those implied by the Sale of Goods Act 1979 in relation to matters such as, for example, the satisfactory quality (qv) of the goods supplied. Under some forms of contract (e.g. JCT 98 clause 25.4.10.2) the contractor’s inability for reasons beyond its control, and which could not reasonably have been foreseen at the date of tender to secure such goods and materials as were essential to the proper carrying out of the Works, was cited as grounds for an entitlement to an extension of time. Such inability to secure materials would not excuse the contractor at common law for late completion. The 2005 suite of JCT contracts no longer include this provision as a ground for extension of time, possibly because it was frequently deleted in practice. See also: Sale of goods. 342

Measure of damages

Measure and value contract A general name given to any contract where there is no fixed contract sum (lump sum contract) but where the work is measured and valued, usually as the Works proceed, in order to arrive at the price to be paid to the contractor. To facilitate this process, such a contract should incorporate a schedule of rates or prices (qv). See also: Lump sum contract; Measurement contract.

Measure of damages The common law position is essentially quite simple, and it has been stated as follows: The governing purposes of damages is to put the party whose rights have been violated in the same position, so far as money can do, as if his rights had been observed.641

The defaulting party is not liable for all loss actually resulting from a particular breach of contract, however improbable or unpredictable it may be. The law therefore sets a limit to the loss for which damages are recoverable – sometimes called the ‘foreseeability’ rule. The injured party’s entitlement is to recover only that part of the loss as was reasonably foreseeable as liable to result from the breach. This is to be judged at the time the contract was entered into.642 Therefore, the amount claimable will include all foreseeable consequential loss, together with loss of profits.643 The principle of putting the injured party into the same position as if the contract had been performed without breach is not applied rigorously. This is the case if some other lesser remedy would be sufficient, and if the cost of strict enforcement of rights is out of proportion to the benefit to be gained.644 Moreover, the courts limit the damages to what is reasonable in the circumstances, by ruling out all damage said to be too remote. This well-known rule has been stated as follows: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e. according to the usual course of things from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it.645

The court said that the rule has two ‘limbs’. The first limb refers to damages ‘arising naturally’. Such damages are often referred to as ‘general damages’. They are the kind of damages that anyone would expect to be the result of the breach. The second limb refers to damages ‘in the contemplation of both parties at the time they made the contract’. These kinds of damages depend upon the knowledge of the parties of special circumstances, and they are often referred to as ‘special damages’. In Victoria Laundry (Windsor) v. Newman Industries646 the court explained the position in a series of propositions:

641

Victoria Laundry (Windsor) Ltd v. Newman Industries [1949] 1 All ER 997 (CA) at 1002 per Asquith LJ. 642 H Parsons (Livestock) Ltd v. Uttley Ingham & Co Ltd [1978] 1 All ER 525. 643 Wraight Ltd v. P H & T Holdings Ltd (1968) 13 BLR 26. 644 Forsyth v. Ruxley Electronics and Construction Ltd and Others (1995) 73 BLR 1 (HL). 645 Hadley v. Baxendale (1854) 9 Ex 341 at 354 per Alderson B. 646 [1949] 1 All ER 997 (CA) at 1002 per Asquith LJ.

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Measurement —

The purpose of damages is to put the injured party in the same position, so far as money can, as if its rights had been observed, but to pursue that completely would provide a complete indemnity and it is considered to be too harsh. — The injured party may only recover loss reasonably foreseeable at the time the contract was made. — Foreseeability depends on the knowledge of the party committing the breach. — Knowledge is of two kinds: (a) all reasonable people are assumed to know the kind of loss which is liable to result from a breach in the ordinary course of things; (b) actual knowledge of special circumstances which may cause greater loss. — The contract breaker will be liable provided that, if it had to ask itself, it would have concluded, as a reasonable person, that the loss was liable to result from that breach. — It is enough if the loss could be seen as likely to result. These principles apply to claims for direct loss and/or expense (qv) arising under standard form building contracts, and under other contracts where similar phraseology is used. However, the recovery of direct loss and/or expense is a specific term of such contracts, and the recovery of certain heads of claim may be permitted that might not be recoverable at common law.647 The measure of damages in tort is somewhat different from damages for breach of contract. Damages for tort endeavour to restore the injured party to its original position as if the tort had never been committed. See also: Damages.

Measurement Generally, the method of ascertaining length, breadth or height, volume or area of objects, buildings, land etc. in terms of a particular system of measurement, e.g. metric. In building contracts measurement of the work is normally carried out by the quantity surveyor, either before work begins, from the drawings prepared by the designers, or during the progress and after completion of the work. The quantity surveyor usually works to a set of rules embodied in a Standard Method of Measurement (SMM) (qv). SBC clause 2.13.1 provides that the bills of quantities have been prepared in accordance with the SMM unless the bills expressly state otherwise. Clause 2.14.1 then proceeds to stipulate that unstated departures from the SMM or errors in description, quantity or omission of items must be corrected and treated as a variation. Effectively, this amounts to a warranty on the part of the employer that the bills are accurate, or at least that the contractor does not carry the risk should they not be accurate. This is reinforced by clause 4.1, which confirms that the quality and quantity of the work included in the contract sum (qv) are deemed (qv) to be what is in the bills of quantities. IC and ICD clause 2.12 provides a similar effect where there are bills of quantities. IC and ICD clause 4.1.1 confirms that the quality and quantity of the work included in the contract sum are deemed to be what is in the bills of quantities. See also: Bills of quantities; Measurement contract. 647

Some of the grounds for such contractual claims are not breaches of contract.

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Mediation

Measurement contract Normally used where the precise quantity (and sometimes type) of work cannot be accurately determined at the time of tender. A basis is provided for tendering purposes, and the completed work is measured and payment made in accordance with the tendered rates and/or prices. The two main types of measurement contract are: — Where approximate quantities are used. This type is suitable where the type of work is known but the quantity is unknown e.g. SBC/AQ. — Where a schedule of rates or prices (qv) is used. This type is suitable where even the type of work is not known for certain. See also: Bills of quantities.

Mediation Mediation is a form of alternative dispute resolution, and is a voluntary process where the parties work towards an agreement with the aid of a neutral third party. It has become more popular in recent years, and the courts will in some cases refer issues to mediation, and may ‘penalise’ parties by way of costs if they refuse to mediate.648 There are now both professional and commercial bodies offering mediators and mediation. Mediation will not work unless both parties wish to participate and settle the dispute. The process does not result in a binding outcome unless the parties agree, and thus a successful mediation should end in a properly drafted agreement.649 The procedure is informal and adaptable, but will typically involve both parties setting out their positions in a brief written submission, including key documents relied upon. There will be a meeting, typically in a hotel, and the mediator will promote discussion of all the issues with both parties together and separately, trying to find common ground and areas for possible concessions. The role of the mediator is not to make a decision, but to encourage agreement and foster a compromise. Thus any outcome is not forced upon the parties but reached by them. Major advantages are: — Privacy and a degree of control over any outcome. — Flexibility, speed and convenience. — Relatively inexpensive, and costs can be fixed. Ideally non-adversarial – solicitors and barristers normally participate but they are not necessary. — Mediations are without prejudice, allowing the parties to make concessions as part of the process.650 — The process advances resolutions that the parties are content with, and may maintain long-term relationships. Mediation clauses are now included in many standard forms of contract, including the JCT 2005 suite of contracts and the ICE contracts. However, the provisions within the JCT contracts are non-binding, and simply remind the

648

Hurst v. Leeming [2002] EWHC 1051; see also Halsey v. Milton Keynes General NHS Trust; Steel v. (1) Joy (2) Halliday [2004] EWCA Civ 576. 649 See Brown (Tim) (as trustee in bankruptcy of the estate of Jane Elizabeth Rice) v. (1) Rice (Stephen) (2) Patel (Smita); and ADR Group (as intervener) [2007] EWHC 625 (Ch) 2467, where an agreement was not enforceable owing to a lack of certainty. 650 (1) Reed Executive plc (2) Reed Solutions plc v. (1) Reed Business Information Ltd (2) Reed Elsevier (UK) Ltd (3) Totaljobs.com [2002] EWHC 1015 (Ch). However, see Brown (Tim) (as trustee in bankruptcy of the estate of Jane Elizabeth Rice) v. (1) Rice (Stephen) (2) Patel (Smita); and ADR Group (as intervener) [2007] EWHC 625 (Ch) 2467, which seemed to leave the question of a distinct mediation privilege open.

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Merchantable quality parties that mediation is an available option. Where the provisions within a contract are sufficiently certain, the courts have been prepared to grant a stay while the parties refer the dispute or claim to alternative dispute resolution (ADR), e.g. mediation.651

Merchantable quality An obsolete term referred to in s. 14 of the Sale of Goods Act 1979, which implied a term into contracts for the sale of goods, that the goods were to be of merchantable quality. ‘Merchantable quality’ was defined as meaning that the goods ‘are as fit for the purpose … for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other circumstances …’ The term ‘merchantable’ was a relative one, but the goods were to remain ‘merchantable’ for a reasonable time. The term has now been replaced by the concept of ‘satisfactory quality’ (qv), which was introduced into the 1979 Act by the Sale and Supply of Goods Act 1994. A buyer who examines goods will not be protected against defects that the examination ought to have revealed, i.e. patent defects (qv). A similar provision is made by the Supply of Goods and Services Act 1982 (qv). In business transactions (which include sales of building materials) the term can be excluded so far as it is reasonable to do so. See also: Sale of goods; Satisfactory quality; Unfair Contract Terms Act 1977.

Milestone Within GC/Works/1 advances on account (i.e. interim payments) are made under clause 48, and one of the three possible options for determining the amount due is Alternative (B), i.e. payment by milestones. At clause 1 a milestone is defined as ‘the completion of each of the phases of the Works described in the Milestone Payment Chart (if any)’. The milestone payment chart is defined as ‘the chart or table (if any) included with the invitation to tender or agreed by the Employer which specifies the amounts of the advance payments to be made to the Contractor during the performance of the Works upon achievement of the Milestone’. Therefore the milestones are to be agreed prior to the execution of the contract, and the payment chart should show a cumulative total against each milestone. Clause 48 alternative B(a) sets out the payment procedure should this provision apply. The contractor is not entitled to a milestone payment unless all the preceding milestones have been achieved and payment is of 95% of the cumulative total. The contractor is not entitled to certification or payment unless an application is made. So as to avoid uncertainty and possibly disputes, it is necessary to define or describe each milestone clearly. Thought should also be given to the number of milestones identified, and the likely period between their completion. A contractor would not want too long a period between the milestone payments, given that it may impact on its cash flow, whereas an employer may not want too short a period between milestone payments, as it may become an administrative or funding issue. See also: Stage payments.

651

Cable & Wireless plc v. IBM United Kingdom Ltd [2002] 2 All ER (Comm) 1041; see also Hurst v. Leeming [2002] EWHC 1051.

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Minor Works Building Contract (MW and MWD)

Milestone payment chart See: Milestone. Minor Works Building Contract (MW and MWD) The JCT Minor Works Building Contract was first published in June 1968, revised in January 1980, again in December 1998 to comply with the Housing Grants, Construction and Regeneration Act 1996 (qv) and certain recommendations of the Latham Report (qv), and again in 2005. It is designed for use where minor building works are to be carried out for an agreed lump sum, and where an architect or contract administrator has been appointed on behalf of the employer. It is for use where a lump sum offer has been obtained based on drawings and/or specification and/ or work schedules, but without detailed measurements. (The SBCC version published for use in Scotland has the option for a bill of quantities.) JCT offers no guidance on the suitability of the form based upon project value. The principal deciding factor is probably not value but complexity of the Works. In 2005 a version of this form was introduced that included the provision for the contractor to undertake design for a part of the Works, i.e. a contractor’s designed portion (MWD). This is a welcome addition, given that even on small projects it may be necessary or appropriate for the contractor to design elements of the Works. The form consists of eight main sections and associated schedules, as follows: — Section 1: Definitions and interpretations — Section 2: Carrying out the Works — Section 3: Control of the Works — Section 4: Payment — Section 5: Injury, damage and insurance — Section 6: Termination — Section 7: Settlement of disputes — Schedules: • Schedule 1: Arbitration • Schedule 2: Fluctuations option: Contribution, levy and tax changes MWD has additional provisions addressing the contractor’s liability for the design undertaken, e.g. using reasonable skill and care, and that the contractor is not responsible for any design included within the employer’s requirements. However, there is no requirement for the contractor to take out and maintain professional indemnity insurance. In addition to the conditions and the schedules, there are also the usual articles of agreement (qv) and recitals (qv), the third of which defines the contract documents (qv). There is no provision for naming a quantity surveyor (again, the SBCC version for use in Scotland has provision for naming a quantity surveyor), so matters of valuation under the contract fall to the architect/contract administrator. Unlike its predecessor MW has a contract particulars (qv). The contractor’s basic obligation (clause 2.1) is to carry out and complete the Works in accordance with the contract documents, the construction phase plan (if applicable), and other statutory requirements. The contractor is to do all this with all due diligence, ‘and in a good and workmanlike manner’. There is no provision for money claims (qv) covering disruption or prolongation (but see below). Under the form, such claims would have to be dealt with at common law, i.e. outside the contract administration mechanism. The extension of time (qv) clause (MW clause 2.7, MWD clause 2.8) applies only while the Works are in progress. The architect has no power to carry out an extension of time 347

Minor Works Building Contract (MW and MWD) review after the Works have been completed. In addition, there is no deferred possession provision. Unlike SBC (qv) the final certificate is not stated to be conclusive evidence of performance to any extent. The final certificate referred to in clause 4.8 is merely the final certificate of payment. Similarly, in the certificate of making good issued under MW clause 2.11 and MWD clause 2.12, there is no requirement for the architect to state that the Works have been completed to the architect’s satisfaction. Following the end of the rectification period, questions of liability must be dealt with under common law. MW is a short, brief and simple form of contract, and as a consequence has to be administered with caution. In particular, it should be noted that: — There is no provision for the appointment of a quantity surveyor. In many cases a quantity surveyor should not be necessary. If it is thought necessary to appoint one, then they would no doubt act in an advisory capacity to the architect in valuing work done and variations, matters for which the architect would still remain responsible under the contract. — There is no provision for a bill of quantities (qv), except in the version for use in Scotland. The valuation of variations is to be carried out using the priced specification (qv), priced work schedules (qv) or a schedule of rates (qv) provided by the contractor. Alternatively, a price may be agreed before a variation is carried out. — There is no provision for the use of either named sub-contractors or suppliers. — The contract is on a fixed price basis, with no provision for fluctuation in the price of labour or materials. Provision is made (clause 4.11 and Schedule 2) for contribution, levy and tax fluctuations, if appropriate. — There are no interim payments following the penultimate certificate issued within 14 days of practical completion. The next payment certificate is the final certificate. — There is no general provision addressing a contractor’s claims for loss and/or expense, although there is limited power for the architect to include payment of loss and/or expense directly associated with a variation arising from an architect’s instruction or the employer’s failure to comply with the CDM Regulations. It appears that the contractor is not required to make any specific application, but it would seem sensible for it to do so. — There is no provision for a clerk of works. This is a strange omission, as it is possible that a clerk of works would be employed, part time, on the larger of the minor Works. However, the point is easily rectified by a suitable insertion. — The extension of time clause (MW clause 2.7, MWD clause 2.8) is very broad. The contractor may claim an extension when it becomes apparent that the Works will not be completed by the completion date. The contractor is to notify the architect in writing, along with the reason for the delay that is beyond its control. Such things as adverse weather, strikes and late instructions are all covered by this clause, but delay due to subcontractors or suppliers is expressly excluded. On projects where there may be considerable expense caused to the employer as a result of late completion, this clause would be inadequate to safeguard the employer’s interests. The contract must be used with care, as unforeseen problems invariably arise during construction, and this form presupposes a consid348

Minutes of meeting erable measure of goodwill on both sides. In particular, the clause appears to be inadequate to deal with all employer acts other than architect’s instructions.652 — The insurance provisions are fairly brief. There is no provision for the employer to take out insurance for new Works. Insurance for the work to or in existing structures is to be taken out by the employer, including the insurance of the existing structure itself (clause 5.4B). The policy is to be in joint names. The existing structure’s cover is ‘specified perils’ (qv) and the Works ‘all risks’ (qv). An option exists for the employer to take out insurance of the existing structures in their own name (5.4C). The option is available for the contractor to take out joint names ‘all risks’ cover for the Works: this could be for either new Works or Works in existing structures (clause 5.4A). It would seem that for work within existing structures clauses 5.4A and 5.4C would be used together. — There is no provision requiring the contractor to take out professional indemnity insurance under MWD, and no equivalent to the employer’s non-negligent insurance to be found in SBC, IC, ICD and DB.

Minutes of meeting The official record of a meeting. It is essential that all meetings, even of the most informal kind, that have any relevance to a contract should be recorded in some way. Short meetings, meetings between two people or telephone calls may be recorded by means of a brief note of all the important points, and the note being filed. Meetings on a more formal basis, such as prestart, design team or site meetings, should be minuted. All but the briefest meetings should have an agenda to ensure that the necessary points are discussed and, if possible, a time limit so as to concentrate minds. The minutes of such meetings should be the responsibility of one person. They must record only the important items, which in practice may mean recording only decisions made. A format for a typical site meeting is shown in Figure 9. Occasionally, project site meetings will be chaired by the contractor, who will be responsible for issuing the minutes. This is not especially good practice, because the task of setting the agenda, chairing the meeting and issuing minutes lies in the province of the contract administrator. Although it is becoming more common, it would seem inappropriate for an employer’s project manager (qv) to chair such site meetings and/or issue minutes unless, unusually, the project manager is also the contract administrator. It is essential to circulate the minutes to all participants as soon as possible after the meeting. Any disagreements as to the accuracy of the minutes should be recorded at the next meeting, if there is to be a series of meetings. Otherwise, some note must be put at the beginning of each meeting recording that the minutes are agreed as a true record. Where a contract calls for a certificate to be issued, a notice given or an application made, it is not thought that a note in the minutes will suffice. An item in the minutes recording an instruction issued orally by the architect may suffice as an instruction in writing if the architect is responsible for writing and issuing the minutes. However, it is not a particularly efficient way of issuing instructions. There is some authority for the proposition that site meeting minutes are not notices that comply with the requirement on the contractor to give notice of 652

Wells v. Army & Navy Co-operative Society (1902) 86 LT 764.

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Minutes of meeting Job title:

Ref. No:

Location: Site meeting no: Present: 1.0

Minutes of site meeting no …. held on ……… are agreed as a true record.

2.0

Matters arising

3.0

Contractor’s progress report

4.0

Clerk of works’ report

5.0

Consultants’ report 5.1

Heating and ventilating engineer

5.2

Mechanical engineer

5.3

Electrical engineer

5.4

Structural engineer

5.5

Drainage engineer

5.6

Landscape architect

6.0

Quantity surveyor’s report.

7.0

Any other business

8.0

Date and time of next meeting

Circulation of minutes to:

Employer

…cps Electrical engineer

…cps

Contractor

…cps Structural engineer

…cps

Quantity surveyor

…cps Drainage engineer

…cps

Heating and ventilating engineer

…cps Landscape architect

…cps

Mechanical engineer

…cps Clerk of works

…cps

File

Figure 9

Typical format of minutes of a site meeting.

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…cps

Misrepresentation delay (e.g. SBC clause 2.27.1).653 However, it has been held that minutes may serve as evidence of an agreement in writing under section 107(4) of the Housing Grants, Construction and Regeneration Act 1996.654

Misconduct Conduct falling below the standards required in the circumstances. It is particularly serious in the case of professional persons, who have a duty to conduct themselves with complete integrity, and especially those who have to make pronouncements or decisions affecting others. Thus an arbitrator (qv) who hears one party in the absence of the other without good reason would be guilty of misconduct, and liable to be replaced if the absent party made an application to the court. Similar considerations apply to an adjudicator. An arbitrator or adjudicator who falls foul of the rules of natural justice (qv) may be guilty of misconduct. S. 24 of the Arbitration Act 1996 provides that a party to arbitral proceedings may apply to the court to remove an arbitrator on various grounds. Those that may very broadly be termed misconduct or a breach of natural justice are as follows. — Circumstances exist that give rise to justifiable doubts about the arbitrator’s impartiality. — The arbitrator has refused or has failed to conduct the proceedings properly,655 or has refused or failed to use all reasonable dispatch in conducting the proceedings or making the award, and as a result substantial injustice will be caused to the applicant. Misconduct need not necessarily involve moral turpitude, and a good definition is ‘such mishandling of the arbitration as is likely to amount to some substantial miscarriage of justice’.656 An architect could be guilty of misconduct by favouring one contractor during the tendering process.

Misrepresentation A misrepresentation is an untrue statement of fact made during the course of pre-contractual negotiations and which is one of the factors which induces the other party to contract. If the misrepresentation becomes a term of the contract, then liability depends on whether it is a condition (qv) or a warranty (qv), but in either case the innocent party will have a remedy for breach of contract (qv). Misrepresentations that do not become part of the contract, which is the normal situation, may also give rise to liability at common law and under the Misrepresentation Act 1967, as amended. A misrepresentation may be: — fraudulent (qv), when it is made without honest belief in its truth;657 — innocent (qv), where it is made without fault; — negligent (qv), where it is made negligently. 653

John L Haley Ltd v. Dumfries and Galloway Regional Council (1988) 39 GWD 1599; Steria Ltd v. Sigma Wireless Communications Ltd (2007) 118 Con LR 177. 654 Connex South Eastern Ltd v. M J Building Services Group plc (2004) 95 Con LR 43. The case went to appeal, but not on this point. 655 In How Engineering Services Limited v. Lindner Ceilings Floors Partitions plc [1999] 2 All ER (Comm) it was held that, in the particular circumstances, the arbitrator’s meeting with the parties’ experts (without the parties and advisers) did not amount to misconduct. 656 Williams v. Wallis & Cox [1914] 2 KB 478. 657 An illustration can be found in Morris v. Jones and Others [2002] EWCA Civ 1790 relating to the sale of a flat.

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Mistake In all cases the innocent party may rescind the contract or, alternatively, claim damages (qv). Under s. 2(2) of the Misrepresentation Act 1967 damages can be granted as an alternative to rescission only in the case of innocent misrepresentations. The award of damages in that case is discretionary. An example is Howard Marine & Dredging Co Ltd v. A Ogden & Sons (Excavations) Ltd,658 where damages were awarded for an innocent misrepresentation about the dead weight of barges to be used in connection with excavation work. See also: Negligent misstatement; Rescission; Site conditions.

Mistake Where the contracting parties are at cross-purposes about some material fact, it may make a purported contract void (qv). This is referred to as an ‘operative mistake’, and it must be distinguished from ‘mistake’ in the popular sense, as the former is much narrower.659 Operative mistake is classified as: — common mistake, where both parties make the same mistake; — mutual mistake, where the parties are at cross-purposes about some essential fact; — unilateral mistake, where only one party is mistaken.660 An operative mistake may either nullify or preclude consent, but the cases establish that this is extremely limited in scope, although in some cases the courts have intervened to prevent hardship by giving equitable relief.661 Operative mistake has not proved important in the field of building contracts. Its main application is that an employer could not accept the contractor’s tender while knowing that its terms were not what was intended by the contractor, e.g. where an employer accepted a tender in the knowledge that the contractor had omitted its first page, which contained a fluctuations clause.662 Establishing that such knowledge existed may be very difficult to prove. The courts have power, though rarely exercised, to rectify contracts so as to remove mistakes. Some standard form contracts give the arbitrator express power to rectify the contract so that it accurately reflects the true agreement of the parties (e.g. SBC, IC, ICD and DB clause 9.5 and MW and MWD Schedule 1, paragraph 3). An adjudicator has no such power, although it has been held that an adjudicator does have the power to construe the terms of a contract, even if the result of that is effectively to decide the validity of appointment and jurisdiction.663 See also: Contract; Equity; Rectification.

Mitigation of loss A party seeking to recover damages for breach of contract (qv) (or any other reason) is expected to do everything reasonably possible to reduce the amount of its losses. A person is not entitled simply to sit back and wait. For example, if a builder constructs a roof badly, so that there are defects that allow water to enter the building, the architect will instruct the builder to make good the defects. If the builder refuses or simply fails to make good, the

658

(1977) 9 BLR 34. Great Peace Shipping Limited v. Tsavliris (International) Limited (2002) CILL 1943 illustrates the narrow application of the doctrine of mistake. 660 Hurst Stores and Interiors Ltd v. M L Europe Property Ltd (2004) 94 Con LR 66. 661 Solle v. Butcher [1950] 1 KB 671. 662 McMaster University v. Wilchar Construction (1971) 22 DLR (3d) 9. 663 Watson Building Services Ltd v. Harrison (2001) SLT 846. 659

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Mitigation of loss employer will doubtless take whatever steps are open within the contract or at common law to recover damages (qv). The employer should also take whatever steps are reasonable to reduce the amount of damage suffered. In this case the reasonable steps might well be to appoint others to do the work in order to avoid extensive internal damage to the building by the water, including possible temporary measures until the permanent making good can be completed. Even such simple measures as the strategic placement of buckets to catch the water are things that the law will expect to be done. The principles of mitigation of loss are straightforward: — A party cannot recover damages arising from another party’s breach of contract if it would have been possible to avoid damage by taking reasonable steps. — A party can recover the cost of taking reasonable steps to avoid or reduce the potential damages. — However, a party is not obliged to take steps to mitigate the loss if it cannot afford to do so on account of financial stringency arising from the breach.664 This is often stated as giving rise to a duty to mitigate.665 However, a failure to mitigate will not result in legal liability; it merely reduces the damages recoverable to the level they would have been if mitigating steps had been taken. It seems that the courts will not look too critically at attempts to mitigate. Whether the injured party acted in a reasonable manner is the important point.666 Where actions intended to mitigate actually result in an increase in loss, such increase will be recoverable if the actions were reasonable.667 The claimant is not obliged to do everything possible – only what an ordinary prudent person would do. The position is, in fact, expressly set out in the extension of time clauses of many standard form contracts (e.g. SBC clause 2.28.6) in relation to delay. The clause requires the contractor to use its best endeavours to prevent delay occurring, and to mitigate the effects of a delay once encountered. So far as the provisions for recovery of loss and/or expense are concerned, the general law imposes a duty to take all reasonable steps and prevent claims for damages that have resulted purely from a failure to take such steps. The onus is on the party receiving the claim to show that the claimant has failed to mitigate loss.668 Therefore, when the contractor submits an application for direct loss and/or expense, the architect must show that the contractor failed to mitigate its losses. Mitigation of loss does not, however, cover the situation where the employer or the architect might, by minute and careful inspection, have discovered defects at an earlier date than they did. In the House of Lords it has been said: ‘I am at a loss to understand why a negligent builder should be able to limit his liability by reason of the fact that at some earlier stage the architect failed to notice some defective work.’669 If the employer unreasonably refuses to allow the contractor to return to make good defects, and insists on engaging others, it may amount to a failure 664

Dodd Properties v. Canterbury City Council [1980] 1 WLR 433. British Westinghouse v. Underground Railways Company [1912] AC 673. Banco de Portugal v. Waterlow & Sons Ltd [1932] AC 452. 667 Melachrino v. Nicholl & Knight [1920] 1 KB 693. 668 Garnac Grain Co Inc v. Faure & Fairclough [1968] AC 1130. 669 East Ham Borough Council v. Bernard Sunley Ltd [1965] 3 All ER 619 at 637 per Lord Upjohn. 665 666

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Mobilisation to mitigate loss, and therefore may reduce or eliminate whatever damages may be recoverable.670 See also: Inspection of the Works; Supervision.

Mobilisation Strictly the getting ready or preparation of something, and often people. In the context of building contracts the term has come to mean action taken by the contractor before commencing work on site. Such things as arranging labour, plant, equipment, goods and materials and what is usually referred to as site set-up or establishment must be organised. In the 1999 revision of the RIBA Plan of Work (qv) the term was substituted for what was formerly known as ‘project planning’. The 2007 revision has retained the term. The stage is stated to include letting the building contract, appointing the contractor, issuing information to the contractor, and arranging site handover to the contractor. This is clearly a very brief description, but one that imparts the flavour of the stage. GC/Works/1 clause 48B deals with a mobilisation payment. It applies only if the abstract of particulars (qv) provides for the employer to make such a payment. The contractor is entitled to the payment if the contractor, no later than 28 days after acceptance of tender, delivers to the employer a mobilisation bond in the proper form. The clauses lay down provision allowing the employer to recover the payment in various ways. This payment appears to be similar in general approach to the advance payment that is permissible under SBC clause 4.8, IC and ICD clause 4.5, and DB clause 4.6.

Model form A term used in MP when referring to the novation of previously appointed consultants from the employer to the contractor. The term is defined at clause 1 as ‘where applicable, the model form of novation agreement that forms part of the Requirements’. The relevant condition is clause 24, which deals with pre-appointed consultants, and states that immediately upon the execution of the contract the parties shall execute the model form in respect of all pre-appointed consultants. A copy of the model form is to be included within the requirements. Though called a model form, there is no standard for use with this contract; the model form will be whatever novation agreement the employer wishes to include within the requirements. The consultants to be novated are also to be identified within the requirements. The term is also used to refer to the standard forms published for use with GC/Works/1. These include: — Model form 1: Insurance documents — Model form 2: Performance bond — Model form 3: Parent company guarantee — Model form 4: Retention payment bond — Model form 5: Mobilisation payment bond — Model form 6: Sub-contractor’s collateral warranty — Model form 7: Parent company guarantee of sub-contractor’s collateral warranty — Model form 8: Adjudicator’s appointment

670

City Axis v. Daniel P Jackson (1998) 64 Con LR 84.

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Moral rights Model forms 9–23 are administrative documents, such as interim payment certificates. The commentary to GC/Works/1 suggests that specific legal advice should be sought if it is proposed to amend the forms. See also: GC/Works/1 Contract.

Moiety A legal term meaning a half or one of two equal parts. It is found in some forms of contract, particularly in relation to retention money and the release of the first and then the second moiety of retention.

Monopoly Where the supply of certain goods or services is controlled by one or a group of manufacturers and traders. There are statutory restrictions on monopoly situations, but this is of little importance to the construction industry. More relevant is European Union legislation, which is intended to allow free movement of materials, goods and services across borders in the European Union. This has the effect in public works contracts of severely curtailing the right to stipulate materials, which excludes materials from other member states. It is not permissible to specify materials to purely national standards unless the specification gives the opportunity for a tenderer to provide something that is equivalent.671

Month A lunar month is a period of 28 days, in contrast to a calendar month which is a period of 30 or 31 days (28 days in February or, in a leap year, 29 days). In statutes, contracts and deeds ‘a month’ means a calendar month unless the contrary is indicated.672

Moral rights Rights introduced by ss. 77 to 89, 94 and 95 of the Copyright, Designs and Patents Act 1988. The rights apply to authors of copyright work and directors of copyright films. Insofar as it concerns copyright in a work of architecture or other artistic work, the provisions are important. The author has the right to be identified whenever the work is published commercially, or exhibited in public, or a visual image is broadcast. Where a work of architecture is involved, the right covers the work in the form of a building, a sculpture, a work of artistic craftsmanship, copies of a graphic work representing it, or a photograph of it when issued to the public. There are a number of exceptions to the right, generally being various commonsense matters to avoid the assertion of such rights clogging up day-to-day business.673 In addition, the author of a work of architecture has two other specific rights. The first is to be identified as the author of the building on the building itself, and visible to people approaching or entering the building. The author may specify the way in which they wish to be identified, for example with full name, or with initials and surname, or even with a pseudonym. The second is the right not to have the work subjected to derogatory treatment under s. 80. ‘Treatment’ means any addition to, deletion from, alteration or adaptation. Treatment is derogatory if it amounts to a distortion or mutilation, or otherwise is prejudicial to the honour or reputation of the author. Where the author is identified

671

Commission v. Denmark (C-243/89) [1993] ECR I-3353. S. 3 Interpretation Act 1978; s. 61 Law of Property Act 1925. 673 See s. 79 of the Act. 672

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Mutual dealings on a building that is the subject of derogatory treatment, the author has the right to require the identification to be removed. Under s. 84, the right extends to forbidding false attribution of work to a person. Moral rights cannot be infringed unless they have first been asserted by the author under s. 78. The rights may be asserted generally (as often seen at the front of a literary work) or specifically, as when the copyright is assigned to another person (not generally a good idea), or by writing to the party against whom the right is asserted. In the case of public exhibition, the right can be asserted by identifying the author clearly on the original drawing or on the mount. An assertion of moral rights may also be achieved by inclusion in any licence that authorises the making of copies. It is very common for an architect’s client to require the architect to waive moral rights. The Act expressly permits the rights to be waived under s. 87. The basis of the client’s objection seems to be that derogatory treatment of the architect’s drawings or models constitutes an infringement. Derogatory treatment of the building itself seems only to entitle the architect to have their name removed. It is not clear why clients are so insistent that the architect waives moral rights; it may stem from an excess of caution, or a misunderstanding of the Act. In any event, having been given the useful right by statute, it is not advisable for any architect to waive it. The notes on the use and completion of the Standard Form of Agreement for the Appointment of an Architect (qv) prepared by the Royal Institute of British Architects in 2007 seemed to advise clients to amend the provision, but the 2009 edition is likely to omit that advice.

Mutual dealings There are certain rules regarding set-off in regard to insolvent limited companies.674 They apply to a situation where, before the company goes into administration or liquidation, there have been mutual credits, mutual debts or other mutual dealings. In such a situation ‘an account shall be taken of what is due from one party to the other in respect of such mutual dealings, and the sums due from one party shall be set off against the sums due from the other.’ The rules embrace debts and credits arising out of any number of contracts between the same parties. Sums owing on one contract may be set off against sums due on another. This is of great importance in the construction industry, where such dealings take place between main contractors and their sub-contractors or suppliers,675 and as between employers and their contractors. In the normal course of things each party would be liable to pay money owing to the other, and any set-off between contracts would be by agreement only. This would mean that, if liquidation occurred, the solvent party would be liable to pay its debts to the party in liquidation, and in turn could expect to receive only whatever dividend was finally declared. For example, A owes £100 to B; B owes £80 to A. A becomes insolvent. If B pays the £80, B may then have to wait until A’s affairs are settled to receive perhaps 1p in the pound, i.e. £1. If the mutual dealings are taken into

674

Rules 2.85 and 4.90 of the Insolvency Rules 1986 as substituted by the Insolvency (Amendment) Rules 2005. 675 Rolls Razor Ltd v. Cox [1967] 1 All ER 397.

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Mutual dealings account, B would owe nothing, and would eventually expect to receive 1p in the pound of £20 (the balance), i.e. 20p. B’s loss in the first instance would be £99, in the second instance £19.80. The procedure is a great protection for the solvent party. The operation of a building contract between employer and contractor may be held sufficient to establish that there had been ‘mutual dealings’ between them.676 See also: Course of dealings.

676

Willment Brothers Ltd v. North-West Thames Regional Health Authority (1984) 26 BLR 51.

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N Named specialist A term used in the MP contract at clause 24 to mean any person identified in the employer’s requirements to undertake any design or work specified. The identification of a named specialist may be by naming a specific organisation, or a list of acceptable organisations from which the contractor may select. Upon the appointment of a named specialist the contractor is to inform the employer of its name and provide a copy of the contract, excluding any financial details. This contract is not to be amended, or any provisions waived, without the prior written consent of the employer. This ensures that the employer’s intentions are fulfilled. The contractor cannot terminate the engagement of a named specialist without the prior written consent of the employer. In addition, the contractor is responsible for any work undertaken by the named specialist, and any replacement under clause 23.8.

Named sub-contractors and suppliers A term used across a number of contracts to refer to a procedure for the identification and engagement by the contractor of particular sub-contractors or suppliers. There is no standard definition for the phrase, and the provisions in each contract have to be read to establish a precise meaning under that contract. Within the BPF System (qv) the phrase is used to refer to specialists whose advice has been sought during the design stages. They are named in the invitation to tender for the main contractor, with an indication of whether the client requires that sub-contractor or supplier be invited to tender for part of the Works. Provision for named sub-contractors and suppliers is included in ACA at 9.3. IC and ICD refer to ‘Named Sub-Contractors’ at clause 3.7 and in Schedule 2. The two situations envisaged under both contracts are the execution of work: (i) by a person named for the work described in the bills of quantities, specification or work schedules (qv); or (ii) by a person named in an instruction for the expenditure of a provisional sum. The provisions within the ACA permit the architect to identify a subcontractor or supplier, and the contractor is to agree terms compatible with those in the ACA. There is no standard documentation. The architect is entitled to be notified of any meeting to discuss such terms, and to be copied with any relevant documentation. If the contractor is unable to enter into a sub-contract with the named person, for whatever reason, then the contractor is to notify the architect. Under clause 9.6 the contractor is to select an appropriate alternative person, subject to the approval of the architect, which shall not be unreasonably withheld. The contractor is not entitled to an extension of time or an adjustment to the contract sum as a consequence of the contractor being unable to agree terms and engage another person. The same procedure and liabilities apply under clause 9.7, should a named sub-contractor or supplier’s subcontract be determined or discharged. The provisions for named sub-contractors under IC and ICD are closer to the former nomination provisions of JCT 98 than to the provisions in the ACA. Standard documentation is available for naming under IC and ICD, i.e. ICSub/ NAM/IT and ICSub/NAM/T, ICSub/NAM/A and ICSub/NAM/C. The 358

National House-Building Council provisions at Schedule 2 are detailed, and give the architect the opportunity to rename should the named sub-contractor’s employment be terminated before completion of the sub-contract works. Named sub-contractors must be distinguished from nominated sub-contractors (qv) referred to in JCT 98. The successor to JCT 98, SBC, has no provision for nominated sub-contractors. SBC clause 3.8 provides a mechanism under which the architect may detail, in the main contract documents, work that the contractor is to price but which is to be executed by a sub-contractor chosen by the main contractor from a list (of not less than three) provided by the employer. The bills of quantities (qv) must provide to this effect, and the contractor’s right to select from the list is at its discretion. The supplemental provisions in DB Schedule 2 provide for named persons at paragraph 2. The paragraph includes provisions for the engagement of the named person as a sub-contractor to the contractor, and also the termination of the sub-contract where necessary. It is not expressly stated that such subcontracts must be executed using the JCT Design and Build Sub-Contract Agreement (DBSub/A) and Conditions (DBSub/C). This should be contrasted with clause 3.4, which deals with the conditions of sub-letting where a contractor asks the employer to consent to sub-letting of part of the Works. The clause sets out specific clauses that must be included in any sub-contract to which the employer has given consent, and in footnote [39] points out that the use of the standard sub-contracts will satisfy the requirements. The named sub-contractor provisions in Schedule 2 are not subject to the employer’s consent; indeed the employer has named a person in the employer’s requirements. It seems, therefore, that the contractor is free to sub-contract on any terms that take the provisions of paragraph 2 into account. Named sub-contractors in all the above-mentioned situations will effectively be domestic sub-contractors, for which (excepting sub-contractor design and termination) the contractor is entirely responsible to the employer. This is expressly stated in IC and ICD Schedule 2 paragraph 11.1, DB Schedule 1 paragraph 8.3, and clauses 9.8 and 9.9 of ACA. (ACA also makes the contractor liable for sub-contractor design.)

National House-Building Council The NHBC is an independent, non-profitdistributing company limited by guarantee, with no shareholders, and employing more than 1,000 staff including 350 building inspectors. It is authorised and regulated by the Financial Services Authority. Its principal aim is to improve the private house-building industry in the United Kingdom. To achieve this end the NHBC: — Undertakes research into housing and construction in order to improve its standard building specification (called ‘the Council’s Requirements’), with which all builders registered must comply. — Carries out a system of spot-check inspections of all registered dwellings. On completion, NHBC issues a 10-year notice stating that the dwelling appears to have been designed and constructed substantially in accordance with its requirements. — Operates an insurance scheme that guarantees the performance of the builder or developer to complete dwellings to satisfactory standards, to remedy all defects that occur within, broadly, the first two years and thereafter to insure the property for a further eight years against major 359

National Schedule of Rates damage caused by structural defects or subsidence, settlement or heave affecting the structure. This is called ‘Buildmark’ (qv), and the scheme was revised and improved with effect from 1 April 1999. It covers more than 85% of all new homes. Houses built by registered builders are exempt from the provisions of s. l of the Defective Premises Act 1972 (qv). The contractual arrangements between the builder and the house purchaser are set out in an offer of cover. This incorporates the relevant cover, and there may be provision for arbitration (qv) in respect of disputes arising under the scheme, but there is no arbitration agreement in the contract between builder and householder, or within the standard Buildmark warranty.677 NHBC will honour an arbitrator’s award if the builder fails to do so. The NHBC has more than 350 field staff responsible for inspecting dwellings and investigating claims, and more than 20,000 registered builders and developers. The ten-year insurance scheme has been in operation since 1967, and some 1.6 million home owners are currently protected. More than £35 million was paid out in claims during 2004 and 2005. By careful monitoring of the cause of insurance claims the NHBC is able to amend its standard building specification in order to prevent such claims from arising in the future. In 1975, for instance, it was established that over 50% of claims related to defective infill, which caused sinking to the floor slab. The NHBC introduced a requirement in 1975 that specified that if more than 600 mm of infill was used, the builder must put in a suspended floor construction. As a result of this change claims for foundation failures are now less than half of what they would otherwise have been. The NHBC publishes an extensive list of both technical publications and information booklets for purchasers, builders and the professions generally. They are all available, most of them without charge, from Customer Services, NHBC, Buildmark House, Chiltern Avenue, Amersham HP6 5AP. Comprehensive information about NHBC, what it does and the services it provides, the benefits of registration and how to register is also available on the Internet address www.nhbc.co.uk, from where useful leaflets can be downloaded.

National Schedule of Rates A coded library of thousands of items, priced and generally conforming to the classification and description requirements of the Standard Method of Measurement 7th edition (qv). It was first introduced in 1982 for the benefit of local authorities engaged in maintenance and repair work, and certain other minor building work. Its principal use is with term contracts (qv), e.g. the JCT Measured Term Contract (qv). The intention is to make available a standard and generally acceptable set of documents to assist organisations in carrying out their maintenance obligations. The schedules are republished annually to incorporate development and price changes. The following publications and software equivalents are available: — The building schedule. — The access audit schedule. — The painting and decorating schedule. — The mechanical schedule. 677

Crest Nicholson (Eastern) Ltd v. Mr and Mrs Western (2008) 119 Con LR 18.

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Negligence — The electrical schedule. — The housing schedule. — The road works schedule. See also: Schedule of prices.

Natural justice A concept of procedural fairness binding those with power to take decisions that affect others. It incorporates certain guidelines for fairness, but in reality it is easier to recognise than to define. As far as construction and engineering contracts are concerned, it may be said to include the following. — A person making a decision (arbitrator/adjudicator) should be impartial and unbiased, and should act in good faith (qv). — Proceedings should be conducted in a fair manner, and both parties should have the opportunity to present their case and comment on the other side’s arguments and evidence.678 An arbitrator is obliged by s. 33(1)(a) of the Arbitration Act 1996 to act fairly and impartially, giving each side a reasonable opportunity to put their case and deal with that of the other side. An adjudicator is obliged by reason of s. 108(2)(e) of the Housing Grants, Construction and Regeneration Act 1996 and clause 12 of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (and the Scottish and Northern Ireland equivalents) to act impartially. Adjudicators work under tight timetables, and the concept is construed in the light of the short time given to them. The courts have made clear as a principle that it will only be in rare cases that they will interfere with an adjudicator’s decision.679 However the courts will not enforce decisions of an adjudicator reached after substantial and relevant breaches of natural justice.680 A failure to take into account all the evidence will not necessarily preclude enforcement of a decision if that results from an error of law,681 although normally all evidence should be considered. Telephone calls between one party and the adjudicator may be misconstrued as bias, and should be avoided. If it is necessary for such calls to take place, there is no reason why they should cause substantial injustice,682 and will not usually constitute a breach of natural justice. See also: Good faith.

NEC See: Engineering and Construction Contract. Negligence A category or branch of the law of tort (qv). Negligence is not the same as carelessness or mistake. It is a matter of conduct, and not a state of mind. It is a breach of a duty of care, being an omission to do something that a reasonable man would do, or the doing of something that a prudent and reasonable man would not do. A claimant (qv) suing in negligence must show: — The defendant (qv) was under a duty of care (qv) to the claimant. — The defendant was in breach of that duty.

678

Damond Lock Grabowski v. Laing Investments (Bracknell) Ltd (1992) 60 BLR 112. Carillion Construction Ltd v. Devonport Royal Dockyard Ltd (2005) 104 Con LR 1 (CA). Discain Project Services Ltd v. Opecprime Developments Ltd (No. 2) [2001] BLR 285. 681 Kier Regional Ltd (t/a Wallis) v. City and General (Holborn) Ltd [2006] BLR 315. 682 Discain Project Services Ltd v. Opecprime Developments Ltd (No. 2) [2001] BLR 285.

679 680

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Negligence —

As a result the claimant suffered damage (qv), which must normally be damage to persons or property. The damage must be foreseeable and not too remote. The duty of care is founded in the seminal case Donoghue v. Stevenson.683 The famous principle espoused by Lord Atkin was ‘you must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour’. A neighbour was stated to be a person ‘so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called into question’. The breach of duty is established by showing that the conduct or standard of care exhibited was not that of a reasonable person (or, more famously, the man on the Clapham omnibus). The standard of reasonable care is flexible, and may be said to be from low (for a participant in a competitive sport) to high (for motorists). Inevitably the cost of avoiding a risk is taken into account.684 The question of damage has been a more tortuous affair. Some years ago it became increasingly fashionable to base actions in contract and in tort. The argument for so doing was that the rules for each were different in regard to liability, limitation of actions and damages. The two-pronged attack therefore gave a better chance of success. One of the rules in tortious actions, however, is that pure economic loss is not usually recoverable. In general, pure economic loss is loss not related to physical damage to property or injury to persons, or at least danger to health and safety. In Spartan Steel & Alloys Ltd v. Martin & Co (Contractors) Ltd685 it was held that a contractor’s negligence in severing an electricity supply to a foundry resulted in recoverable damages in respect of the metal that had to be poured away, but not damages for loss of the profit that would have been made on work that could not be carried out until the repair was effected. That was held to be economic loss, and irrecoverable. It was not attached to physical damage. It is often a problem to decide what amounts to economic loss. At the time it was decided, Junior Books Ltd v. The Veitchi Co. Ltd686 appeared to represent a change of judicial opinion on the question of economic loss in tort. The flooring installed by Veitchi developed cracks, and Junior Books took action directly against Veitchi, alleging negligence. They claimed the cost of replacing the floor, temporary book storage costs, loss of profit, wages and overheads amounting to some £200,000. The House of Lords held that there was a duty of care owed by Veitchi to Junior Books such as to make Veitchi liable for all the damages claimed. The duty was said to arise because of the proximity of the relationship between the parties. However, soon after, in Muirhead v. Industrial Tank Specialities Ltd687 it was emphasised that the Junior Books case was decided on its own special facts, and that an analysis of the judgment was difficult to reconcile with the facts. The

683

[1932] AC 562. Latimer v. AEC Ltd [1953] AC 643. 685 [1971] 3 All ER 557. 686 (1982) 21 BLR 66. 687 (1986) 3 WLR 993. 684

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Negligence courts appear to have taken two strands in particular and woven them effectively to retrieve the situation: — the importance of contractual relationships; and — the difference between damage and defects. The case of D & F Estates Ltd v. Church Commissioners688 took matters further. The judgment finally disposed of Junior Books as a ‘unique’ case, which could not be regarded as laying down any principle of general application in the law of tort. The principles that tentatively can be derived from D & F Estates are as follows. — Negligence that results in a defect is not actionable in tort if the only damage suffered is the discovery of the defect. — To be actionable, the defective structure must cause damage to something else. — If, however, the defect is discovered before it has caused damage, the cost of making good the defect is not recoverable. — The exception to that appears to be if the defect threatens the health or safety of the occupants or third parties, and possibly other property, when the necessary cost of averting the danger can be recovered. — In a complex structure such as a building it might be possible to consider a defect in one element, such as foundations, causing damage to another. In such a case the cost of rectifying the damage might be recoverable, and also the cost of putting right the initial defect, if necessary, to repair damage to ‘other property’. The most important in the line of cases was Murphy v. London Borough of Brentwood.689 The result of this case was that the House of Lords overruled its previous decision in Anns v. London Borough of Merton.690 It reaffirmed the first three principles in D & F Estates, and went on to say that if a defective building threatened neighbouring persons or property, only the cost of averting the danger may be recoverable. Following the House of Lords decision in Murphy, a person bringing an action in negligence against another will not normally succeed if that person has suffered only economic loss. So, if a contractor builds a house in which a defect becomes apparent after the house has been purchased from the original owner, the purchaser will have difficulty in claiming against the builder. A claim will be possible only if the defect has caused injury to persons or damage to other property, or probably if the defective work is on a boundary with other property and the other property is threatened. In any event, the cost of correcting the original defect is not recoverable. Therefore, where a defect in property affects only the property itself, the purchaser may be left without a remedy unless they can sue in contract. The House of Lords discussed a possible exception to the rule. That was where the property was considered to be a ‘complex structure’ consisting of several distinct parts, so that a defect in one part affected the remainder.691

688

(1988) 15 Con LR 35. (1990) 50 BLR 1. 690 [1977] 2 All ER 492. 691 See Beoco Ltd v. Alfa Laval Co Ltd and Studley Engineering Ltd (1992) 66 BLR 1. 689

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Negligence The only real exception to this rule is when a person can show that they suffered a financial loss by acting on negligent advice. It must be shown that the giver of advice assumed a responsibility to the other. This usually involves reliance on the part of the receiver, and knowledge of the reliance on the part of the giver.692 The Hedley Byrne principle was re-emphasised in D&F Estates. It has been famously said: ‘Their Lordships do not, however, accept that the parties’ mutual obligations in tort can be any greater than those to be found expressly or by necessary implication in their contract.’693 In effect, this is saying that the contracting parties have sorted out their own bargain. The point was taken up in the case of Greater Nottingham Co-operative Society v. Cementation Piling and Foundation Ltd.694 In 1979 the Co-operative Society entered into a contract with a firm of builders for the erection of an extension to a store. The contract was on JCT 63 terms (July 1977 revision). It was to be on piles erected by Cementation, the first defendants, who entered into a direct employer/nominated sub-contractor form of agreement. Shortly after piling commenced, cracking was noted in an adjacent restaurant. The Official Referee found that the piling scheme was not negligent in design, but the damage was due to negligent conduct of the piling operations. The society paid the claims of the restaurant in respect of the physical damage, and carried out certain other remedial works. For this the society was able to claim from the main contractor, which in turn claimed from Cementation under the indemnity clauses of the contract. It was deemed unwise to proceed with the original scheme, and a revised scheme was designed. This caused delay to the Works, for which the main contractor was granted an extension of time. In addition, the main contractor was paid loss and expense, fluctuations, and the extra cost of the revised scheme, and the society suffered losses due to the late completion. The case came to the Court of Appeal because Cementation appealed against the award of damages against them for these economic losses incurred by the society. The key ingredient was that there was a collateral contract in this case. It was pointed out that in this contract the parties had the opportunity to define their liabilities, and took it. However, the contract was silent as regards liability for the way in which the work was executed. It was difficult to construct a special obligation in tort for pecuniary loss, disassociated from the physical damage, to fill the gap. In theory, the situations in which negligence may arise are endless. In Donoghue v. Stevenson Macmillan LJ said ‘The categories of negligence are never closed,’695 but recent developments indicate that the courts are taking a more restrictive view. However, the courts have held that liabilities in both contract and tort can coexist.696 Questions of public policy must be taken into account, and so in Ryeford Homes Ltd v. Sevenoaks District Council697 it was held that it would be contrary to public policy for a planning authority to be liable to an applicant in negligence, because the authority’s overriding duty is not to individuals but to the public at large. A police authority is similarly

692

Hedley Byrne & Co Ltd v. HelIer and Partners Ltd [1964] AC 465. Tai Hing Cotton Mill Ltd v. Liu Chong Hing Bank Ltd [1986] AC 80 at 107 per Lord Scarman. (1988) QB 71. 695 Donoghue v. Stevenson [1932] AC 562. 696 Henderson v. Merrett Syndicates Ltd [1995] 2 AC 145. 697 (1989) 16 Con LR 75. 693 694

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Negligent misstatement/misrepresentation protected when investigating a crime.698 In relation to building contracts, the most usual negligence situations are: — Professional or other negligence actions where, for example, the architect may be negligent in designing a building or in the inspection of it; the quantity surveyor or architect may also be negligent when preparing estimates of cost.699 A professional owes a duty (subject to express terms of the contract) to exercise reasonable skill and care in carrying out their duties. Cases concerning individual professions have developed along their own separate lines, but generally it may be said that a professional does not warrant to achieve the result required by a client, but simply to achieve the ordinary standard of the reasonable professional working in that profession. — Negligence action where, for example, the contractor may be negligent in carrying out the work. There is a large and fast-growing body of case law dealing with the negligence of architects, contractors and local authorities. See also: Care, duty of; Contributory negligence; Foreseeability; Negligent misstatement.

Negligent misstatement/misrepresentation Since 1963 it has been the law that a negligent misstatement that is acted upon may give rise to liability in tort (qv).700 This is so even if only economic or pure financial loss results, as opposed to physical damage to persons or property. It appears that there must be some ‘special relationship’ between the maker of the statement and the recipient, as well as reliance on the statement. In Thomas Saunders Partnership v. Harvey701 a nominated sub-contractor’s director was held personally liable for giving a false post-contractual assurance of compliance with a specification. The director was in breach of the personal duty of care (qv) owed both to the architects (to whom the assurance was given) and to the employer under Hedley Byrne principles. The director had specialist knowledge and skill, and assumed responsibility for what he said.702 Liability under the Hedley Byrne principle is not confined to factual statements; it extends to all forms of negligent advice, legal and financial, even if these are matters of opinion, e.g. advice as to probable building costs. Indeed, the principle has been held to extend to include the performance of services other than the giving of advice or information.703 For there to be a liability for negligent misstatement it is not necessary for there to be a voluntary assumption of responsibility by the person giving the advice.704 It has recently been held that consultants providing information as part of a tender process owe no duty of care to tenderers.705

698

Hill v. Chief Constable of West Yorkshire (1989) AC 53. Nye Saunders & Partners v. Alan E Bristow (1987) 17 Con LR 73. Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] AC 465. See also Caparo Industries v. Dickman [1990] 1All ER 568. 701 (1989) 30 Con LR 103. 702 Esso Petroleum Ltd v. Mardon [1976] 1 Lloyd’s Rep. 305. 703 Henderson v. Merrett Syndicates Ltd (1995) 2 AC 145. 704 Smith v. Eric S Bush [1990] 1 AC 831 (HL). 705 Galliford Try Infrastructure Ltd v. Mott MacDonald Ltd and Rowen Structures Ltd [2008] EWHC 1570 (TCC). 699

700

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Negotiated contract There can also be liability for negligent misrepresentation (qv) under s. 2(1) of the Misrepresentation Act 1967, which imposes liability in damages for negligent misrepresentations made in a pre-contractual situation, i.e. made prior to the execution of the contract. Under the Act it is for the person making the representation to disprove their negligence, in contrast to the position at common law, where the claimant bears the burden of proving negligence (qv).706

Negotiated contract A contract that is not put out to tender, but where the terms – e.g. prices – are agreed by negotiation between the parties. However, often the negotiation takes place with a contractor that has already taken part in a previous tendering process, perhaps on another project. The employer and their professional advisers would adopt this approach if they were reasonably confident of arriving at a reasonable conclusion. The position with regard to public sector contracts is stricter, and the relevant EU directives must be carefully observed. See also: Negotiated tendering procedure; Serial contract.

Negotiated tendering procedure European Union law severely controls procurement of public contracts, with much complicated legislation. Essentially, a contracting authority has the choice of three procedures for awarding contracts: — open tendering procedure (qv); — restricted tendering procedure (qv); — negotiated tendering procedure. Under the negotiated procedure contracting authorities can deal with particular contractors, and enter into negotiations with one or more. Unlike the open or restricted procedures this procedure may be used only in exceptional cases, such as where there is great urgency, where the nature of the work or the risks does not allow normal tendering, where there are no tenderers in response to the other procedures, where only one contractor is suitable to carry out the Works, or where the Works are essentially a repeat of what the same contractor has already carried out and certain other criteria are satisfied.

Nemo dat quod non habet One cannot give what one has not got. A fundamental principle of great importance so far as the ownership of goods and materials is concerned. If, therefore, goods are stolen the buyer does not receive ownership, even if there was no indication the goods were stolen. Although most standard contracts provide for ownership in goods and materials to pass when their value is included in interim certificates (qv), this is effective only insofar as the contractor owns the goods and materials. If they are sold to the contractor subject to a known and effective retention of title (qv) clause, then the terms of the clause will act to prevent ownership passing from supplier to contractor until the relevant conditions are satisfied. SBC clauses 2.25 and 2.26 are typical vesting clauses (qv), which provide for the property in goods and materials stored on site and listed items stored off site and intended for the Works to pass to the employer when the contractor has received payment. ACA clause 6.1 is to similar effect. Such clauses are not 706

S. 2(1) Misrepresentation Act 1967.

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Net contribution clause binding on those who are not parties to the contract,707 and will not defeat the maxim nemo dat quod non habet. See also: Fixture; Incorporation: Retention of title.

Net contribution clause A clause, usually found in consultants’ terms of appointment or some collateral warranties, for example SFA/99 clause 7.3. The clause is designed to avoid the situation where a person may be responsible for only a small percentage of the damage suffered, but in law may be liable for the full 100%. This may happen in various circumstances. For example, say an architect, a mechanical engineer and an electrical engineer are each one third responsible for defects in a design. The injured party, who is usually the employer, may choose to bring a legal action against just one of the consultants for the whole of the cost of rectification. The unfortunate consultant is then left to join the others in the action, or seek a contribution from them. This may be difficult if the others lack professional indemnity insurance, or are unavailable for some reason, e.g. are insolvent. The sole consultant is left to bear the whole of the cost. The following is a typical net contribution clause: In any proceedings arising out of or in connection with this Appointment the Consultant’s liability for loss and/or damage in respect of any one occurrence or series of occurrences resulting from any one event shall be limited to such sum as it is just and equitable for the Consultant to pay after taking into account the extent of the Consultant’s responsibility for the relevant loss and/or damage compared to the responsibilities of all other consultants engaged on the project, contractors, subcontractors and any other person whomsoever for that same loss and/or damage. Such sum to be calculated on the basis that such consultants, contractors, sub-contractors and persons have provided contractual undertakings to the client which are no less onerous than those of the Consultant under this Appointment, that they are deemed to have paid the client such sums as would be just and equitable for them to pay after taking into account their responsibility for the relevant loss and/or damage and that there are no exclusions or limitations of liability nor of joint insurance or co-insurance as the case may be between the client any other party referred to herein.708

It had been thought that this type of clause might be caught by the Unfair Contract Terms Act 1977 (qv) on the basis that it tended to restrict liability, but a recent case has held that a net contribution clause does not exclude or restrict liability. Rather, it ensures that parties using such a clause are liable only for the consequences of their own breaches, and would not be held to be liable for the breaches of duty of others. Therefore the clause is not subject to the Act, but even if it were, the clause and reliance upon it would be fair and reasonable. The case concerned a net contribution clause in the Association of Consulting Engineers’ Conditions of Engagement.709

707

The position is not affected by the Contracts (Rights of Third Parties) Act 1999. The last assumption was added to standard net contribution clauses following the House of Lords decision in Co-operative Retail Services Ltd v. Taylor Young Partnership Ltd [2002] 1 All ER (Comm) 918. 709 Langstane Housing Association Ltd v. Riverside Construction (Aberdeen) Ltd and Others [2009] CSOH 52. 708

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Neutral event

Neutral event A cause of delay included as a ground for an extension of time (qv) in standard form contracts, but which is not the result of any action or inaction of the employer or their agents; events that fall outside both parties’ control. Because these are events that are not under the control of the employer, they are not reflected in the grounds for which most standard form contracts allow increased costs or loss and/or expense. Neutral events are sometimes described as a sharing of the risk, in the sense that the employer does not recover liquidated damages, and in turn the contractor does not recover any costs for the delay. The flaw in that view is that the employer would otherwise have had a right to liquidated damages, but the contractor would never have had a claim for loss and/or expense. The employer is conceding possible liquidated damages, but the contractor is conceding nothing. SBC clause 2.29 includes as relevant events (qv): — the carrying out of or failure to carry out obligations by a statutory undertaker; — exceptionally adverse weather conditions; — loss or damage by specified perils; — civil commotion and terrorism; — strike or lockout; — the exercise of statutory power by the UK government after the base date (qv); and — force majeure (qv). All of these would be categorised as neutral events. A similar collection of neutral events can be found in IC and ICD clauses 2.20.7 to 2.20.13, DB 2.26.6 to 2.26.13, and ACA clause 11.5(a) to (d) and (h), alternative 2. The NEC is an exception to the rule, in that a contractor may be reimbursed additional costs as a consequence of a neutral event, e.g. clause 60.1(13) a weather measurement. In contrast, the MP form includes fewer neutral events than SBC: for example, exceptionally adverse weather conditions are not included. The inclusion of neutral events in extension of time provisions passes some of the risk from the contractor to the employer. If such events were not identified in the extension of time clause, then the risk of delay associated with them would rest with the contractor. The inclusion, in an extension of time provision, of matters that lie within the control of the employer or their agents, e.g. late instructions or information, variations and other acts of prevention, allows an extension of time to be given in appropriate circumstances, thus preventing time from becoming at large (qv). The contractual mechanism permits the adjustment of the completion date for such events, which protects an employer’s right to deduct or withhold liquidated and ascertained damages.

Nominal Less than the actual amount; small, trivial or token amount. Usually used when referring to a financial value or payment. A nominal sum of money is a sum so small as to be virtually worthless, having regard to the circumstances. A court may award nominal damages to a claimant (qv), even though the claimant has technically proved its case. This may be because the court considers that, as a consequence of the claimant’s conduct, it deserves no more. Nominal damages may also be awarded for a technical breach of contract that results in little or no actual damage suffered by the claimant. An architect might charge only nominal fees, perhaps because the architect is hopeful of further 368

Nomination commissions from the same client, or because the client is a charity that the architect wishes to support. See also: Copyright; Damages.

Nominated sub-contractors Sub-contractors (qv) named by the employer, but taken on as sub-contractors by the main contractor. Often a nominated subcontractor is given responsibility for part of the design, and for that and other reasons it is usual for the employer to require a direct warranty from a nominated sub-contractor. Such an arrangement should in no way affect the contractual relationship between the nominated sub-contractor and the main contractor.710 JCT 98, the predecessor of SBC, had very long and complex provisions at clause 35 and a sheaf of ancillary documentation to allow nomination to take place. The possibility to nominate was removed with the introduction of SBC, apparently because the facility was little used. Anecdotal evidence points to the fact that nomination was seldom, if ever, achieved in conformity with the clause 35 documentation and procedure. In view of the complexity and sheer volume of such documentation, it is hardly surprising. Nomination, as a concept, is beset with difficulties. This is to a large extent because there is a clear opposition between the idea that an employer can require a contractor to use a particular sub-contractor, with whom the employer has probably already had discussions, and the idea that the employer can insist on the contractor taking responsibility for the sub-contractor that is forced upon it. In practice, and in law, the employer may not escape some liability, despite very careful and complex drafting. For example, considerable problems can arise under JCT 98 where a nominated sub-contractor fails and renomination becomes necessary. Under this contract, in such circumstances the employer usually has a duty to renominate, and the contractor has neither the duty nor the right to carry out the work itself.711 GC/Works/1 clause 63 is one of the few remaining contracts that includes provision for nomination; another is the ICE Conditions of Contract Measurement Version 7th edition. However, the clauses are relatively brief in comparison with the former JCT 98 provisions. There are provisions for named sub-contractors (qv) in other forms of contract, e.g. IC, ICD and DB. See also: Named sub-contractors; Nominated suppliers; Nomination.

Nominated suppliers Provisions for the nomination of suppliers were found in JCT 98 at clause 36. The clause provided that (unless otherwise agreed) the architect would only nominate a supplier who would enter into a contract of sale with the contractor containing the extensive provisions detailed at clause 36.4. A form of tender was available. The possibility to nominate suppliers was removed with the introduction of SBC. GC/Works/1 clause 63 provides for nomination of suppliers. See also: Named sub-contractors; Nominated sub-contractors; Nomination.

Nomination In general, the naming of a person or firm to undertake a particular task or office. In building contracts, nomination refers to the naming of a

710 711

George E Taylor & Co Ltd v. G Percy Trentham Ltd (1980) 16 BLR 15. North West Metropolitan Regional Hospital Board v. T A Bickerton & Son Ltd [1970] 1 All ER 1039.

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Notices person or firm to undertake part of the work, or to supply goods. Such nomination is done by the employer. Certain contracts, e.g. MW and MWD, make no provision for nomination. Despite common assumptions to the contrary, there is no general concept in law concerning nomination or naming, and reference has to be made to the terms of each contract to identify the roles, responsibilities and liabilities of the parties to each other in respect of the nominated or named person. See also: Named sub-contractors; Nominated sub-contractors; Nominated suppliers.

Notices To give notice to a person means that the matter referred to in that notice has been brought to their attention. A person given notice cannot thereafter deny knowledge of the matter. It is often said that a person is ‘put on notice’. For example, a contractor may be put on notice that there are defects in the Works, or an architect may be put on notice by the contractor that part of the design is defective. Notices may be of three kinds: — Actual: The most useful kind of notice associated with building contracts is communicated from one party to another, preferably in writing (qv) but sometimes orally. The problem with oral notices is, if necessary, proving that they were ever given. A witness to an oral notice would be necessary. — Imputed: Where an agent and principal are involved, a notice given to the agent is deemed (qv) to be given to the principal. Thus a notice given by the contractor to the architect would be deemed to have been given to the employer, provided the notice concerned something for which the architect was empowered to act as agent for the employer, and provided that there were no express terms in the contract to the contrary. In SBC under the termination provisions at clause 8.9.1, for example, the contractor is required to give the initial notice of default to the employer. It is thought that it would not be sufficient to give the notice to the architect. Notices of adjudication and arbitration given by the contractor must be served on the employer. — Constructive: Notice is deemed to have been given to a party if that party could have been aware of the notice by reasonable enquiry. An example is a notice posted on a site where development is to take place under the Town and Country Planning Act 1990. Some contracts make express provision for notice to be given in a particular form, or in a particular way. For example, GC/Works/1 clause 1(3) requires notice to be in writing. The Housing Grants, Construction and Regeneration Act 1996 provides for the giving of notices in s. 115. In JCT contracts SBC, IC, ICD and DB clause 1.7, and MW and MWD clause 1.6 deal with the giving of notices in general to be by any effective means. They will be deemed properly served if given by actual delivery, or sent by prepaid post to the address in the contract particulars, or any other address as agreed. The possibility of there being no agreed address is catered for by the provision that a notice is properly served if sent to the last known principal business address or, if it is a corporate body, its registered office. Under the NEC clause 13.1 states that any communication, which would include a notice, is to be communicated in a form that can be read, copied or recorded. Clause 13.7 makes clear that any notification required under the 370

Notices contract is to be given separately from any other communications. This then prevents the possibility of the notice being missed because it was not readily identifiable. However, the termination provisions within some standard forms of contract have their own specific notice requirements. For example, there are specific provisions for notices in SBC, IC, ICD and DB clause 8.2 and in MW and MWD clause 6.2. These provide that notices given under the termination section must be given by actual, special or recorded delivery. Special delivery has replaced what used to be called ‘registered post’, to which many bespoke contracts still refer. An example of this is clause 5.2 in the MP form. In view of the need to calculate time periods carefully from the default notice, and not issue the termination notice prematurely, service of the notice by next day special delivery is advisable. The clause provides that notices given by special or recorded delivery are deemed to have been received on the second business day after posting. (A ‘business day’ is defined in clause 1.1 as a day that is not a Saturday, Sunday or public holiday.) But, importantly, this is subject to proof to the contrary. It can easily be proved whether the notice was actually received on the first business day. It was recently held that, under the JCT Intermediate Form of Contract (IFC 98), with provision for giving notices almost identical to the provision in the 2005 JCT contracts, a default notice given by fax amounted to actual delivery for the purposes of the contract: A fax, it seems to me, clearly is in writing; it produces, when it is printed out on the recipient’s machine, a document, and that seems to me is clearly a notice in writing. The question is, is that actual delivery? It seems to me, if it has actually been received, it has been delivered. Delivery simply means transmission by an appropriate means so that it is received, and the evidence in this case is that the fax has actually been received. There is no dispute as to that. It may not have been read when received, which is a different matter.712

It is also possible that service of notices by email may amount to actual delivery on the same basis. Certainly, email has been held to constitute writing and to be good service for a notice of arbitration where sent to an email address held out as being the address of the recipient.713 It is important to comply precisely with contractual provisions regarding notices. A party in default may try to plead an irregularity in service if the matter comes before an adjudicator, arbitrator or judge. If the contract requires a notice to be sent by special delivery and it was, for example, delivered by hand, the tribunal might rule that it was improperly served. However, a number of cases714 suggest that contractual requirements specifying service of notices in a particular way (e.g. by special delivery) are directory and not mandatory. Therefore, if a notice is actually received, it is likely to be valid service, although it is wise to follow the contract provisions.715 See also: Withholding notice.

712

Construction Partnership UK Ltd v. Leek Developments [2006] EWHC B8 (TCC) at para. 31 per Judge Gilliland. 713 Bernuth Lines Ltd v. High Seas Shipping Ltd (2006) 1 Lloyd’s Rep 537. 714

Goodwin & Sons Ltd v. Fawcett (1965) Unreported. J M Hill & Sons Ltd v. London Borough of Camden (1980) 18 BLR 31.

715

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Notional

Notional Imaginary or speculative; not known for certain. In a building context it is generally used with regard to sums of money. An architect working on a percentage fee basis may make a calculation of the likely total fee, based on a notional figure for the contract sum (qv). Contractors commonly base applications for loss and/or expense (qv) on notional figures if actual figures are difficult to discover. Only in cases where the facts are virtually impossible to ascertain will notional figures be considered.716

Notorious When applied to persons, and especially their conduct, it usually implies bad conduct. But when applied to facts, it refers to facts of any kind that are commonly known. A tribunal will not generally expect notorious facts to be proved. See also: Judicial notice.

Novation The substitution of a new contract for an existing one. It can be undertaken only with the consent of all parties concerned, usually three. Unlike assignment (qv), which involves a transfer of rights or benefits, novation consists in cancelling existing rights and obligations between two parties, and then creating a another set of rights and obligations in their place between one of the parties and a third party. The new contract is often on precisely the same terms as the original contract, or with such adjustments as are necessary to reflect the changed circumstances. Novation agreements are invariably executed as deeds, because of the difficulty of proving consideration between the parties if executed as a simple contract. A novation agreement must be differentiated from consultant switch (qv), with which it is often confused. Consultant switch does not transfer rights, does not require a tripartite agreement to achieve, and the two contracts are often on substantially different terms. Novation can be used to effectively replace one contractor with another on a project, e.g. where an insolvency has occurred. However, it is more commonly associated with design and build (qv) contracts. Often one or all of the design team are initially engaged by the employer to do preliminary work, and are then ‘transferred’ to the design and build contractor to undertake the detailed design. The consultants are expected to enter into novation agreements to create new contracts between each consultant and the design and build contractor, e.g. clause 24.2 in the MP form. This procedure has given rise to the incorrect use of novation as a verb, as in ‘the architect was novated to the contractor’, e.g. MP see clause 1 definition of ‘Pre-Appointed Consultant’. Where a consultant enters into a novation agreement, so that the contract between employer and consultant is replaced with a contract between contractor and consultant, there is the possibility of an actual or potential conflict of interest. The only saving point is that all parties are aware of the potential conflict, and therefore may be considered to have accepted it. It is essential that the novation agreement brings the relationship between employer and consultant to an end. It is regrettably quite common to find a clause in the novation agreement that requires the consultant to continue some kind of reporting duty to the employer. It is a truism that no person can serve two masters, and 716

Chaplin v. Hicks [1911] 2 KB 786.

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Nuisance consultants who execute a novation agreement in these terms potentially face significant conflicts of interest, and may be in breach of their professional codes of conduct. Novation agreements are complicated to draft effectively, and are best left to lawyers. Usually such documents are expressly drafted for a particular situation. Two standard documents are available: — Novation Agreement CIC/NovAgr, first edition 2004, produced by the Construction Industry Council. It is debatable whether this is a true novation agreement. It comes with detailed notes. — Standard Form of Novation Agreement (20844941.05), produced by the City of London Law Society. It comes with detailed notes. At clause 24 in the MP form reference is made to a ‘model form’ and preappointed consultants. Such consultants are to enter into a novation agreement on the terms of the model form upon execution of the building contract. There is no standard model form available for use with MP, and a document would have to be supplied, most likely by the employer. It would be sensible for it to be included within the employer’s requirements issued at tender stage. Clause 22.7 of ACA also refers expressly to novation. If the contractor’s employment under the contract is terminated, and the employer so requires, the contractor agrees and consents to the novation to the employer of the contractor’s interest in and under any sub-contracts and to take all necessary steps to make the novation effective. This, of course, would require the subcontractor’s consent.

Nuisance A category of the law of tort (qv). There are three types of nuisance: —

Public nuisance: An act or omission without lawful justification that causes damage, injury or inconvenience to the public at large. It is a crime as well as a tort. Examples are obstructing the highway, or keeping an immoral house. A private individual has a private remedy for public nuisance only if the individual suffers damage or inconvenience over and above that being caused to the public at large, e.g. where a builder’s skip obstructs the highway and the access to private property. Prosecutions for public nuisance are rare.717 — Private nuisance: An unlawful act that interferences with the owner’s or occupier’s use and enjoyment of their land. Examples are smell, smoke, noise, and encroaching tree-roots. Strictly, a person wishing to sue for nuisance must prove actual damage, but a presumption of damage may be made, and in any event action may be taken by a party who suffers interference with a proprietary right.718 Self-help may be adopted to abate the nuisance, for example by cutting off the branches of overhanging trees, or the affected person may sue for an injunction, or damages, or both. An action for nuisance can only be brought by a person with an interest in the land. Something that was originally a nuisance can be

717

Corby Group Litigation v. Corby Borough Council [2007] EWHC 3174 (TCC) is an example of a recent prosecution in public nuisance. 718 A-G v. Sheffield Gas Consumers Co (1853) 3 De GM & G 304.

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Null legalised by the passage of time.It is no defence to show that the situation existed before the claimant came to the land. For example, where a defendant had used noisy machinery for more than 20 years, the associated vibrations became a nuisance only when the claimant erected a consulting room at the end of the garden near the noise, in which case time would begin to run only when the act in fact became a nuisance.719 A defendant would not therefore be able to rely on prescriptive right. — Statutory nuisance: Something declared to be a nuisance by statute, e.g. where an Act of Parliament lists ‘any premises in such a state as to be prejudicial to health or a nuisance’.720 The remedy is by way of an abatement notice served by the local authority (qv) on the person responsible. If an abatement notice is not complied with, or the nuisance is likely to reoccur, the offender can be taken before the magistrates’ court, which may make a nuisance order and/or impose a fine. See also: Abatement.

Null Invalid; devoid of legal effect. For example, an adjudicator’s decision reached without jurisdiction is null, and cannot be enforced. See also: Void.

Numbered documents Defined in the Standard Building Sub-Contract Conditions (SBCSub/C) as the documents listed in the sub-contract particulars and annexed to the sub-contract agreement. The idea is that all the documents that are intended to be sub-contract documents, but which are not expressly set out in the relevant article, should be included in the list of numbered documents. Numbered documents commonly include drawings and schedules of applicable rates and prices. However, it is not unknown for contractors to attach less appropriate documents, such as minutes of an initial meeting and notes of the interview of the sub-contractor. Although the relative priority of the numbered documents is stated in clause 1.3.2, the priority of documents within the numbered documents is left to be decided. This may sometimes create difficulties should there be any conflict, and would have to be resolved in accordance with the usual principles of interpretation of contracts. Other JCT contracts have similar provisions for numbered documents. See also: Interpretation of contracts.

719 720

Sturges v. Bridgman (1879) 11 Ch D 582. Ss. 9l and 92 of the Public Health Act 1936.

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O Oaths and affirmations The general rule is that all witnesses must give evidence (qv) on oath or affirmation in proceedings before a Court, and this is often followed in arbitration. S. 38(5) of the Arbitration Act 1996 provides, if oral evidence is to be given, that the arbitrator may decide that such evidence will be given on oath or affirmation, which the tribunal has the power to administer. The current general rules about oaths and affirmations are found in the Oaths Act 1978. A false statement on oath or affirmation amounts to the criminal offence of perjury. The usual form of oath in civil proceedings is: ‘I swear by Almighty God that the evidence I shall give shall be the truth, the whole truth, and nothing but the truth.’ The person taking the oath holds the New Testament or, in the case of a Jew, the Old Testament, in their uplifted hand, and says or repeats this formula after the person administering the oath. Witnesses not of the Christian or Jewish faith may take the oath with the appropriate ceremonies that are binding on them, but if this would cause delay or inconvenience, they may be required to affirm instead. This also applies to any person who objects to being sworn, e.g. a Quaker. Such people solemnly affirm by repeating after the administrator: ‘I, ABC, do solemnly, sincerely and truly declare and affirm that the evidence I shall give shall be the truth, the whole truth, and nothing but the truth.’ In Scotland the oath is administered in a slightly different way, with uplifted hand but without either Testament, by repeating the words of the oath after the judge or arbitrator, who stands up and holds up their right hand similarly, while saying the words to be repeated. Anyone who wishes to take the oath in the Scottish manner may do so in any part of the United Kingdom.

Obiter dictum Part of a judgment (qv) which is not the ratio decidendi (qv) or reason for the decision. It is a statement of law made by the judge in the course of a judgment that is not necessary for the decision or based upon the facts as found. A statement is obiter if: — It is based on facts that were not found to exist or, if so found, were not material. — It is a statement of law that, although it may be based on facts as found, is not material to the decision. For example, where the decision of an adjudicator is referred to the court for enforcement, the only matter with which the court is concerned is whether the adjudicator had the jurisdiction to make the decision and, if so, whether the adjudicator acted in some way that otherwise made the decision unenforceable. However, in many instances the court will make comment on the decision itself. Inexperienced readers of law reports (qv) are often seduced into believing that such pronouncements are part of the ratio, and quote them accordingly. An example is the often quoted S L Timber Systems Ltd v. Carillion Construction Ltd,721 in which the court merely had to decide whether the adjudicator had the 721

(2001) 85 Con LR 79.

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Obscurities jurisdiction to make the decision. The court held that the adjudicator had such jurisdiction, even though they had examined the decision and decided that it was wrong. Whether it was right or wrong was neither here nor there to the question of jurisdiction, which simply turned on whether the adjudicator had correctly understood the effect of ss. 110 and 111 of the Housing Grants, Construction and Regeneration Act 1996, and thereby had fallen into error, mistaking the true scope of the adjudicator’s jurisdiction. In deciding that the adjudicator’s decision was wrong, the court was speaking obiter. That part of the judgment is not binding on other courts. Sometimes a claimant or defendant will put forward two grounds for a claim or defence, and if the court decides that the first ground succeeds, it will usually decline to examine the second ground. However, in some instances a claimant will ask the court to state what its decision would have been on the second ground. In R C Pillar & Son v. The Camber (Portsmouth) Ltd, the judge said: ‘I am prepared to determine these defences, albeit that my findings and conclusions are obiter or non-binding.’722 It is often difficult to decide what is and what is not obiter dictum until a later court considers a previous case and isolates the basis of the previous decision. Thus statements long thought to be part of the ratio are sometimes put to one side. Words said obiter may be persuasive in future cases, depending upon the circumstances and the standing of the judge. In the absence of direct authority they may form the basis of future decisions.

Obscurities Things that are not clear. See also: Ambiguity. Obstruction Something hindering progress or movement, or preventing a particular occurrence. SBC, IC, ICD and DB clause 8.9.2 and MW and MWD clause 6.8.2 specify interference with or obstruction by the employer of the issue of any certificate due under the contract as a ground on which the contractor may give a default (qv) notice prior to terminating its employment under the contract. Other standard form contracts contain similar provisions, e.g. ACA clause 20.2 (b). In considering a similarly worded clause in an earlier form of contract it was said: I think, without attempting an exhaustive enumeration of the acts of the employer which can amount to obstruction or interference, that the clause is designed to meet such conduct of the employer as refusing to allow the architect to go on site for the purpose of giving his certificate, or directing the architect as to the amount for which he is to give his certificate or as to the decision which he should arrive at on some matter within the sphere of his independent duty.723

It seems therefore that, in this context, obstruction is used in the sense of impeding. In a different context, obstruction by the employer of the contractor’s undertaking of the Works amounts to a prevention (qv) or hindrance (qv), which will be a breach of an implied term of the contract. There is a considerable body of case law on what constitutes interference or obstruction, but for the most part it deals with the contractor’s right to recover 722 723

(2007) 115 Con LR 102 at paragraph 15 per Judge Thornton. R B Burden Ltd v. Swansea Corporation [1957] 3 All ER 243 at 253 per Lord Tucker.

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Occupier’s liability money without a certificate where the employer has interfered with the independent exercise of the architect’s powers as certifier. In such a case the contractor can sue without a certificate.724 See also: Good faith; Interference.

Occupation This term refers to the actual physical control or use of land. Title to certain personal property (qv) may be acquired by occupation, e.g. taking physical control of it, as is the case with such things as fish, game, etc. See also: Adverse possession; Occupier; Occupier’s liability.

Occupier Someone who owns and occupies land or other premises, and who has actual use of that land or premises. An occupier owes a duty of care (qv) to third parties under the Occupiers’ Liability Acts 1957 and 1984. Whether a person is the occupier is largely a matter of common sense, but the important factor is control of the land or premises. In Wheat v. E Lacon & Co Ltd 725 it was said: ‘Wherever a person has sufficient degree of control over premises that he ought to realise that any failure on his part to use care may result in injury to a person coming lawfully there, then he is an “occupier” and the person coming lawfully there is his “visitor” and thus is under a duty to his visitor to use reasonable care.’726 The owner of land is not always the occupier, as, for example, when it is let to a tenant. In the case of a building project the building contractor is often the occupier, sometimes jointly with the owner.727 See also: Dangerous premises; Occupier’s liability.

Occupier’s liability S. 2 of The Occupiers’ Liability Act 1957 provides that an occupier of premises owes ‘the common duty of care’ to ‘visitors’, who are those invited or permitted by the occupier to be there, including those who enter under legal authority, e.g. a police officer. The occupier in this context means the person who has physical control or possession of the premises, and may include the landlord.728 A trespasser is not a visitor for the purposes of the Act, the duty to trespassers being contained in the Occupiers’ Liability Act 1984, which replaced the rather complex common law rules. The common duty of care is defined as a duty to take such care as in all the circumstances is reasonable in order to ensure that the visitor will be reasonably safe in using the premises for the purposes for which the occupier invited or permitted the visitor to be there. It does not impose on the occupier any obligation in respect of risks willingly accepted by the visitor. The occupier must be prepared for children to be less careful than adults,729 and may expect that a person, in the exercise of such person’s particular trade or calling, will appreciate and guard against risks ordinarily incident to it, so far as the occupier leaves such person free to do so.730

724

Hickman & Co v. Roberts [1913] AC 229. [1966] AC 552. 726 [1966] AC 552 at 579 per Lord Denning. 727 AMF International Ltd v. Magnet Bowling Ltd [1968] 2 All ER 789. 728 Wheat v. E Lacon & Co Ltd [1966] AC 552. 729 S. 2(3)(a) Occupiers Liability Act 1957; Moloney v. Lambeth Borough Council (1966) 64 LGR 440. 730 S. 2(3)(b) Occupiers Liability Act 1957. 725

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Offer The duty can be discharged by a reasonable warning of any known danger, but as a result of s. 2(l) of the Unfair Contract Terms Act 1977 (qv) it is not possible by means of a notice to exclude or restrict liability for death or personal injury resulting from negligence (qv). The obligations imposed by the 1957 Act apply to all those occupying or having control over any fixed or movable structure or any premises or structure, e.g. scaffolding, and so a sub-contractor may be an ‘occupier’ in respect of part of the Works. Trespassers are owed a lesser duty under the 1984 Act, which also affords some protection to people exercising rights of access to the countryside, or using private rights of way. S. 1(3) of the 1984 Act says that an occupier owes a duty to a trespasser etc. only if ‘(a) he is aware of the danger or has reasonable grounds to believe that it exists; (b) he knows or has reasonable grounds to believe that the other is in (or may come into) the vicinity of the danger … ; and (c) the risk is one against which, in all the circumstances of the case, he may reasonably be expected to offer the other protection.’ The lesser duty is to take such care as is reasonable in all the circumstances of the case to see that the entrant does not suffer injury (not property damage) on the premises by reason of the danger concerned (s. l(4)). It is possible that this duty may be excluded altogether by an appropriately worded notice731 subject to the effect of the Unfair Contract Terms Act 1977.

Offer An expression by one party of willingness to be bound by some obligation on certain terms to another. If the offer is unequivocally accepted, a binding contract (qv) results. An offer may be made in writing, or orally, or by conduct. It may be made to an individual or group, or to the whole world. An offer terminates: — if rejected by the offeree; — if revoked by the offeror by notice (qv) to the offeree before acceptance; — if either party dies before acceptance; — if a time limit is stipulated, and it expires before acceptance; — by lapse of time, if not accepted within a reasonable time, and no time limit has been specified. If a party rejects an offer, then that offer is no longer available for acceptance without the further agreement of the offeror. Any subsequent attempt to accept the offer following a rejection by the offeree, without the consent of the offeror, would not be binding. An offer is normally rejected if the offeree, in response to the offer, responds with a counter-offer (qv); again, the offeree cannot subsequently decide to accept the original offer. If an offer is made by post, it is revoked only when the offeree receives the revocation. If the offeree has already posted an acceptance (qv) the revocation is of no effect, and a full, binding contract is formed. An offer can be accepted only by the party to whom the offer is made, unless the offeror agrees otherwise. A tender (qv) is an offer. An invitation to tender (qv) is not an offer but what is known as an invitation to treat (qv), or an invitation to make an offer.

731

Ashdown v. Samuel Williams & Sons Ltd [1957] 1 All ER 35.

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Off-site materials

Official Referees See: Technology and Construction Court (TCC), Judge of. See also: Courts; Scott schedule.

Off-site materials Materials that are intended to be used on the Works but which, for convenience or safety, are not stored on site. A significant problem with securing and storing materials off-site is that the contractor invariably requires payment. The problem of payment for off-site materials is twofold. On the one hand, the contractor may be seriously financially embarrassed if it has paid for large quantities of materials without the opportunity of reimbursement until they are brought to site, and it may be tempted to bring them onto site and risk damage in order to obtain payment. The difficulty for the contractor is that the JCT forms of contract do not permit interim payments for materials brought onto site prematurely (see e.g. SBC clause 4.16.1.2, IC and ICD clause 4.7.1.2, MW and MWD clause 4.3.2 and DB clause 4.4.14.1.2). On the other hand, the employer must be certain of owning the materials and goods for which payment has been made, and that no other party retains an interest in those materials or goods. It is not usually in the employer’s interest to pay for materials off-site because of the difficulty that may be experienced in proving ownership if, for example, the contractor becomes insolvent (qv). Where the employer decides to pay for materials off-site, the JCT contracts make special provision in SBC clause 4.17, IC and ICD clause 4.12 and DB clause 4.15. MW and MWD do not contain specific provisions. The JCT off-site materials clauses provide that the materials must be listed and attached to the contract bills of quantities (qv) in the case of SBC, to the priced document (qv) or specification (qv) in the case of IC or ICD, or to the Employer’s Requirements (qv) in the case of DB. The items on the list are to be shown in two categories: the first is ‘uniquely identified items’, and the second ‘not uniquely identified items’. Uniquely identified items are those materials or goods that are simple to identify, such as special equipment, sink units, baths, washbasins, etc. Items not uniquely identified are things such as bricks, tiles, gravel, and anything that it would be difficult to identify as belonging to a particular site. The architect must include all such listed materials and goods in the valuation in any certificate, and they must be included before they are delivered to site. Under the provisions of DB, the contractor is entitled to include them in its application for payment. In all cases the contractor must fulfil certain specified criteria as follows: The items: — must be in accordance with the contract; and — must be kept at the premises where they have been manufactured or stored; and — must either be set on one side or clearly marked so as to identify the employer and that they are destined for the Works; and the contractor: — must have provided reasonable proof that it owns the items, so that after it has been paid for items included in certificates, the ownership of such items will pass to the employer; and — must have provided reasonable proof that the items are insured in respect of specified perils; and — must have provided the employer with a bond, if so required by an entry in the contract particulars. The surety for the bond must be approved 379

Omissions by the employer and, unless otherwise agreed, the terms of the bond must be in terms agreed between the JCT and the British Bankers Association. In the case of materials that are not uniquely identified, the provision of a bond is mandatory. There is no provision for payment for off-site materials under MW, MWD or GC/Works/1. ACA, in clause 16.2A(b), alternative A, refers to goods and materials intended for the Works but not incorporated. It is a broadly worded clause, which is capable of including materials off-site if the contract documents (qv) expressly so state. It makes payment subject to whatever conditions the contract documents (qv) may provide. See also: Ownership of goods and materials; Retention of title.

Omissions In the context of building contracts, omissions refer to work or materials that have been priced by the contractor and included in the contract sum, but which the employer no longer requires. The contract administrator issues an instruction to omit the work or materials, and the omitted work is valued and an appropriate adjustment made in the next financial certificate. An omission may also refer, if so provided by the contract, to the removal of obligations or restrictions imposed by the contract documents on the contractor in respect of working space, working hours, access to site, and the order of work. Such provisions are to be found in SBC clause 5.1.2. The valuation of omissions is to be found in SBC clause 5.6.1.2. Other examples are ACA clause 8.1(d) and NEC clause 60.1(1), where changes to the Works information would include omissions. There is a serious consequence for an employer who omits work from a contract when the contract does not expressly provide for such omission, or if the employer intends to give the work to another contractor to carry out. It is a basic principle of English contract law that once a party has contracted to do a certain quantity of work, that party has the right to do it if it is to be done at all. If the contract expressly so provides (as in JCT contracts), the work may be omitted, but only if it is not to be done at all, not in order to give it to someone else. That would be a clear breach of contract.732 The same principle can be applied to the division of work within the contract. The original contract Works may be divided between work to be done and materials to be supplied by the main contractor and work to be done by special sub-contractors and materials to be supplied by ‘nominated’ suppliers. That division, once fixed by the contract, cannot be changed unilaterally by the employer unless expressly so stated in the contract. The main contractor has a right to do that work which is set out in the contract documents for it to do, and it cannot be taken away from the contractor to allow it to be done by a specialist sub-contractor. Thus, for example, if poor ground conditions are encountered, the employer is not entitled to bring in a directly employed specialist foundation contractor to do the work instead of the original contractor. If work is set out to be done by a ‘nominated’ sub-contractor, the main contractor cannot be forced to do the work itself; nor, for that matter, can it insist upon doing it itself.733 A main contractor that, without consent, brings others 732 Vonlynn Holdings Ltd v. Patrick Flaherty Contracts Ltd, 26 January 1988, Unreported; AMEC Building Contracts Ltd v. Cadmus Investments Co Ltd (1997) 13 Const LJ 50. 733 This was a significant part of the ratio in T A Bickerton & Son Ltd v. North West Metropolitan Regional Hospital Board [1970] 1 All ER 1039.

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Operational bills of quantities onto the site to supplement the labour of a sub-contractor already properly on site is in breach of contract. In certain circumstances it may amount to repudiation so as to entitle the sub-contractor to vacate the site.734 See also: Omitted work; Variation of work.

Omitted work All commonly used standard form contracts contain provision for the architect to omit work from the contract. Without such a provision an instruction to omit work would amount to a breach of contract. In general, the value of omitted work is ascertained by reference to the rates in the bills of quantities (qv), or the priced specification (qv), or the priced schedule of rates (qv). ACA, however, contains provisions, in clause 17, for the contractor to submit estimates, which are to be agreed. The principal clauses relating to the valuation of omitted work are SBC clauses 5.6.1.2 and 5.8.3, IC and ICD clauses 5.3.2 and 5.7.3, MW and MWD clause 3.6, and GC/Works/1 clause 42. See also: Omissions; Variation of work.

Open book This phrase is in common use in connection with partnering contracts (qv). It is used within PPC, and defined at appendix 1 as involving the declaration of all price components. These include profit, head office overheads, site overheads, the cost of materials, goods, equipment, work and services. It is said to include the revealing of all relevant account books, all relevant correspondence, invoices, receipts agreements, orders, and any other relevant documents to be open for inspection. ‘Open book’ is referred to in clause 10, which deals with the procedure to establish specialist (qv) relationships in relation to all aspects of the project.

Open tendering procedure European Union law severely controls procurement of public contracts, with much complicated legislation. Essentially, a contracting authority has the choice of three procedures for awarding contracts: — open tendering procedure; — restricted tendering procedure (qv); — negotiated tendering procedure (qv). Under the open procedure the contracting authority must advertise its intention to seek tenders for a project. Any contractor that satisfies the technical and economic standards may submit a tender, which the contracting authority is obliged to consider. A key factor in the initial consideration will be whether, in fact, each tenderer does satisfy the technical and financial requirements. This may be a long process: hence the popularity of restricted tendering where appropriate.

Operational bills of quantities A system of setting out bills of quantities (qv) in terms of operations rather than the more usual trade bills. The series of operations are predetermined, as is the order in which they are carried out. Only the materials are measured by the quantity surveyor; it is the contractor’s responsibility when pricing to allow for the labour required for each operation. Individual prices are totalled to obtain the total tender sum. The system has not found great favour, probably because it is not usual for the 734

Sweatfield Ltd v. Hathaway Roofing Ltd (1997) CILL 1235.

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Order contractor to be informed of the order in which it is to carry out the work. The contractor may well be able to carry out the total work at a cheaper overall price if left to its own order of working. The system probably works best when the tenders are to be negotiated, so that the contractor can discuss the order of work before bills are prepared. The system is similar, and related, to the activity schedule (qv) referred to in the JCT and other standard contracts.

Order A direction of a court, arbitrator or adjudicator. All directions of a court in any proceedings are termed ‘orders’ unless they determine a case, when they are usually referred to as judgments (an ‘award’ in arbitration (qv) and a ‘decision’ in adjudication (qv)). The term may be applied to certain secondary legislation, such as the Construction Contracts (Northern Ireland) Order 1997 (qv). In general terms the word is often used to refer to the placing of a formal request for the supply of material, or services, or both.

Others A term defined in both the NEC and MP. NEC clause 11.2(10) defines it as people or organisations excluding the employer, project manager, supervisor, adjudicator or the contractor or any of its employees, sub-contractors or suppliers. Clause 25.1 requires the contractor to cooperate with ‘Others’ in obtaining and providing information that they need for the Works, and the contractor is to share the working areas and cooperate with them as stated in the Works information. Such others could include public utilities, and would include other contractors directly engaged by the employer. Within MP at clause 1 ‘others’ are defined. They are persons, other than the contractor, sub-contractors or suppliers, authorised by the employer to be present on site. Again, this would include direct contractors engaged by the employer.

Overheads Fixed costs that a business incurs so that production can be maintained. The overheads (or expenses, or indirect costs) of a business are costs that are not attributed to any particular part of the production process, e.g. a specific project. Overheads can be cut if limits to production are made, or if production is stopped, although some overheads will be incurred whether there is production or not. Generally, overheads are the cost of head office or regional office administration support. Included would be the cost of owning or renting offices, management including directors, general support staff, rates, electricity, heating, telephones, office equipment, etc. These costs tend to be apportioned to individual projects, e.g. on a percentage basis. Sometimes the costs of projectspecific management, such as contracts managers and quantity surveyors, are not specifically allocated to a project, but are included within overheads allocation. The right to recover overheads when the contract period is prolonged owing to some default on the part of the employer or architect is hotly debated. The grounds for claiming head office overheads are not well understood. The usual basis of claim for recovery of head office overheads is that the contractor has lost the opportunity to recover its overheads in the price of another contract by being kept on the particular site after the allocation of overheads has been exhausted. This assumes that the contractor allocates a percentage of head 382

Overheads office overheads to each project. To take a simple example: if the head office overheads are £20,000 per annum and the contractor has two projects of the same contract price each lasting 12 months, it will want to recover £10,000 overheads from each project, and it will load its price accordingly. If one of the contracts lasts 15 months instead of 12 months, the contractor will be looking to recover the overheads for the extra three months that it could have earned if it had another project of the same size immediately following the first, i.e. £2,500. The usual contrary argument is that, unless the contractor did only one project at a time,735 it must be able to show that it had other work that it could have done during the delay period; otherwise there would have been no loss.736 There are two kinds of head office overhead: general items such as rent, rates, light, heating and cleaning; and managerial time, which can be directly allocated to a particular project provided good time sheets are kept. In order to make a claim involving overhead levels, it appears that actual overheads must be identified – not merely theoretical or assumed levels. It seems that the use of formulae cannot generally be justified as a method of ascertaining the contractor’s entitlement under the contract terms unless backed up by supporting evidence and subject to various limitations. Formulae assume that the contractor with finite resources is working in a healthy construction industry. If formulae have any application at all, a period of recession will make them invalid. A more direct argument that is employed is that, on any contract, delay or disruption may lead to some increase in direct head office administrative costs, related not only to the delay but also to the involvement of staff in dealing with the problems caused by disruption. However, if it can be shown that such staff would not have been fully employed in any event, the contractor may face serious difficulties in recovering such overhead costs, which, it could be argued, it would have incurred as part of its head office expenditure in any event. It has been said: It is important, in my view, that [the contractor] places some evidence before the court that there was other work available which, but for the delay, he would have secured, but which, in fact, he did not secure because of the delay; thus he is able to demonstrate that he would have recouped his overheads from those other contracts and thus, is entitled to an extra payment in respect of any delay period awarded in the instant contract.737

It is always difficult for a contractor to show that it has been prevented from using its workforce on another project because the current project is delayed. Much, if not all, of a modern workforce is sub-contracted. In any event, the kinds of operatives engaged during a period of delay when a contract is coming to an end are finishing trades, and not the early trades needed for a new project. The type of foreman changes also. It would appear that a contractor faces an uphill battle to recover the equivalent of a lost opportunity to earn head office

735

Alfred McAlpine Homes North Ltd v. Property and Land Contractors Ltd (1995) 76 BLR 65. Finnegan v. Sheffield City Council (1988) 43 BLR 124. AMEC Building Contracts Ltd v. Cadmus Investments Co Ltd (1997) 13 Const LJ 50 at 56 per Mr Recorder Kallipetis. City Axis Ltd v. Daniel P Jackson (1998) 64 Con LR 84, Norwest Holst Construction Ltd v. Co-operative Wholesale Society Ltd, 17 February 1998, Unreported and Beechwood Development Company (Scotland) Ltd v. Stuart Mitchell [2001] SCLR 725 are also relevant. 736 737

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Overriding principle overheads unless it can produce substantial evidence that a real opportunity to do work has had to be turned away due solely to the prolongation of an existing project. See also: Eichleay formula; Emden formula; Formulae; Hudson formula.

Overriding principle A defined term at clause 1 within CE. However, the definition simply cross-refers to clause 2.1. Section 2 is headed ‘Working together’ and clause 2.1 is a lengthy clause whose opening sentence states that collaboration is the overriding principle guiding the purchaser and supplier. The parties are to work together in a cooperative and collaborative manner in good faith and a spirit of mutual trust and respect. In the guidance notes it states that this overriding principle is intended to be analogous to the application of the overriding objective set out in Rule 1.1 of the Civil Procedures Rules. In cases of ambiguity the preferred interpretation of the contract is the one that enables the overriding principle to be achieved. It also states in the guidance notes at paragraph 46 that ‘The application of the Overriding Principle means that, above all else, the parties should act collaboratively and the other provisions should be interpreted so as not to conflict with this principle.’ Though not described as an overriding principle, clause 10.1 within the NEC is drafted with a similar purpose. See also: Collaborate; Cooperate.

Ownership of goods and materials If goods and materials are unfixed, the employer must take care not to pay for them unless sure that, on payment, ownership passes to the employer. An example of the problems that may arise occurred under a contract made on the JCT 63 terms where the contractor had sub-contracted the roofing to the claimants on the ‘blue form’.738 The blue form provided that the subcontractor should be deemed to ‘have knowledge’ of the terms of the main contract. JCT 63 provided that ownership of materials was to pass to the employer when their value had been paid to the main contractor by the employer. Unfortunately, the main contractor went into liquidation (qv) after the employer had paid it for slates delivered to site by the claimants, but before the main contractor had paid the claimants. It was held that the claimants were entitled to recover the slates and damages, or the value of the slates. In effect, the employer was put into the position of paying twice for the same goods, because the contractor had no title in the slates to pass on to the employer and there was no privity of contract (qv) between employer and sub-contractor. JCT contracts have since been amended in an attempt to rectify the situation, e.g. SBC clauses 2.24 and 3.9.2. The position is complex, and much depends upon the relevant terms being passed on to the sub-contractors within the various sub-contracts. Architects and quantity surveyors should carry out whatever checks are feasible to establish that good title in materials and goods etc. has passed to the contractor so that they can be passed on to the employer. See also: Fixtures; Incorporation; Retention of title; Vesting clause.

738

Dawber Williamson Roofing Ltd v. Humberside County Council (1979) 14 BLR 70.

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P P&T rights A phrase used within a number of JCT contracts (e.g. DB clause 6.11) to refer to the rights to be given in favour of a tenant or purchaser from either or both the contractor and sub-contractor. The rights are given by means of either a collateral warranty or the use of third party rights in the case of the contractor, or collateral warranties from sub-contractors. The details are set out within the contract particulars. See also: Contracts (Rights of Third Parties) Act 1999.

Package deal contracts Sometimes known as ‘design and build contracts’, because they incorporate both elements in one package (hence ‘package deal’). It is especially suitable to describe systems of industrialised building that can be purchased and erected as a package. Figure 10 compares this type of contract with the traditional form. The main benefit, from the employer’s point of view, is that the package deal places all the responsibility for the work, from taking the initial brief to completion of the work, in one place, i.e. with the contractor. Strictly, the term suggests that the contractor is responsible for the provision of everything. If something goes wrong, or there are defects, the employer is not faced with the common difficulty of sorting out design from workmanship and materials responsibilities. The main disadvantages are that the employer loses control over quality, except to the extent that it is already designed or specified, and the employer has no independent advice on which to call if in doubt, since the contractor, however kindly motivated, will have its own financial interests at heart. An unscrupulous contractor could take advantage of the employer’s lack of expertise. Therefore the DB contract will rarely fall into this category, because it envisages that the contractor will merely ‘complete’ the design of the Works (clause 2.1.1). It is up to the employer to weigh the advantages and disadvantages before deciding whether to opt for design and build or some other system. In any event, it is wise to appoint a consultant to deal with all the administration and inspection duties on the employer’s behalf, whatever procurement system is chosen. See also: Design and build contract; Turnkey contract.

Parol evidence A term that describes evidence that is extrinsic to, or lying outside, a contract. Once a contract has been reduced to writing, ‘verbal evidence is not allowed to be given … so as to add to or detract from, or in any manner to vary or qualify the written contract.’739 This basic rule of interpretation is called the ‘parol evidence rule’. It covers not only oral evidence but also other extrinsic evidence (qv); drafts, minutes of meetings, pre-contract letters, etc. are all excluded. It also prevents evidence being given of preliminary negotiations between the contracting parties. The rule applies to those documents that are intended to be a conclusive expression of agreement by the parties.

739

Goss v. Nugent (1833) 5 B & Ad 58 at 64.

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Parol evidence Package deal employer

contractor

management design (architect) (consultants)

costing (QS) construction

Traditional employer

consultants overall design and management (architect)

costing bills of quantities (QS) c/w

contractor

lines of contractual relationship

Figure 10

Package deal contract compared with a traditional contract.

Since most building contracts are in standard form, various optional clauses may be deleted, and there may be typewritten or manuscript amendments. Logically the rule would exclude a court or arbitrator from looking at the deletions, and it has been held that there is no difference between words omitted or deleted.740 After some judicial variance on the point, it is now settled law that words deleted from a contract must be ignored, and treated as if they did not exist, except in the most exceptional cases, where they may aid in resolving an ambiguity. In Wates Construction (London) Ltd v. Franthom Property Ltd 741 the Court of Appeal had to consider an application from a contractor, under the JCT Standard Form of Building Contract 1980, to place retention money in a separate bank account. The clause in the contract requiring this to be done at the contractor’s request had been deleted. After a thorough review of the authorities the court held that the deleted clause must be treated as not existing, 740 741

Team Management Services plc v. Kier Management and Design Ltd (1993) 63 BLR 76. (1991) 53 BLR 23.

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Partial possession and the court proceeded to hold that the employer must deposit the retention money in a separate account as a matter of law relating to trust funds. There are exceptions to the parol evidence rule: the most important is that concerning contracts that are only partly written. The courts will admit extrinsic evidence of additional terms if it is clear that the written document was never intended to contain the whole of the agreement, or to show the existence or absence of consideration. The rule does not apply where misrepresentation (qv) is alleged, or where one party claims that there is a collateral contract (qv), or where it is said the written contract does not reflect the actual agreement and so must be rectified. Extrinsic evidence will be admitted to explain the written agreement, and in particular to show the meaning of individual words and phrases used by the parties. The starting point is ordinary English usage as defined in a standard dictionary, but both courts and arbitrators must give effect to any special technical, trade or customary meaning that the parties intended the word to bear. Extrinsic evidence will also be relevant where one of the parties is attempting to show that the contract is invalid for some reason. See also: Interpretation of contracts; Rectification.

Partial possession This is when the employer takes possession of part of the Works before practical completion (qv). Many of the standard forms (exceptions being MW and MWD) make provision for the employer to take possession of part of the Works before completion. In some forms it is called ‘partial possession’, and in others phrases such as ‘Taking-Over of any part of the Works’ (ACA) or ‘taking over parts of the Project’ (MP) are used. Under GC/Works/1 clause 37 the project manager can instruct the contractor to allow partial possession. In forms such as SBC clauses 2.33 to 2.37, IC and ICD clauses 2.25 to 2.29, DB clauses 2.30 to 2.34, ACA clause 13 and MP clause 17 the contractor’s agreement (which it cannot unreasonably withhold) must first be obtained. Generally for partial possession under JCT contracts: — The architect (or the contractor under DB or employer under MP) must issue a written statement (i.e. not a certificate) identifying the relevant part (qv) of the Works that has been taken into possession, and the relevant date (qv) when the employer took possession. — On the relevant date, practical completion (qv) of the relevant part is deemed to have taken place. — The rectification period (qv) for the relevant part will then begin to run from the relevant date, except under the MP form, where the rectification period runs from practical completion of the project. — The contractor’s obligation to insure under option A or the employer’s obligation under option B or option C.2 (as appropriate) comes to an end, and the employer’s obligation to insure under option C.1 (i.e. existing structures) must include the part taken into possession. — The amount of liquidated damages must be reduced in the same proportion as the value of the part taken into possession bears to the contract sum. In other words, the amount is reduced pro rata. — Half the retention in respect of the relevant part is released. Partial possession must not be confused with sectional completion, for which a number of JCT forms have integrated provisions. Nor must it be confused with the provisions for early use (qv), e.g. SBC, IC and ICD clause 2.6, and DB clause 2.5. 387

Partnering For partial possession to have contractual significance, it requires a formal act such as the issuing of a statement to that effect in terms set out in the contract. Partial possession will not necessarily be implied simply because the employer moves items of furniture into a part of the Works742 or commences fit-out works.743 In Skanska Construction (Regions) Ltd v. Anglo-Amsterdam Corporation Ltd 744 it was held, when considering the JCT 81 With Contractor’s Design form of contract (a predecessor to DB), that it was possible to take partial possession of the entire Works, and the provision was not limited to discrete parts of work. Therefore in this case it meant that even though significant parts of the Works remained to be completed, the Works were deemed to be practically complete. See also: Sections.

Partnering This has been defined as: A management approach used by two or more organisations to achieve specific business objectives by maximising the effectiveness of each participant’s resources. The approach is based on mutual objectives, an agreed method of problem resolution and an active search for continuous measurable improvements.745

Or, more succinctly, as ‘a structured approach to facilitate team working’.746 Many people, including employers, contractors and construction professionals, are unsure what constitutes partnering. Although it is said to be an excellent process, its essentials are vague. There is still a great deal of confusion, and people tend to make it mean what they want it to mean. There is little doubt that, as a concept, it is fairly fluid, and capable of embracing varied situations. However, there are some basic criteria that can be laid down so that when partnering is mentioned, perhaps in the context of a tender, as in ‘It is intended that this project will be procured using best partnering principles’, the reader or hearer has a fairly clear idea of what is and what is not included in that concept. Most importantly, partnering is not at all the same as partnership (qv). When parties enter into partnership, they intend to, and do, enter into a legal relationship. This is not what is usually intended by parties who enter into a partnering arrangement. Normally, the parties will prepare a set of their joint objectives on a single sheet of paper, often termed a ‘charter’. This may not be a legally binding document. Partnering is more about setting in place a particular ethos than anything else. Concepts of good faith, trust and fair play are important. No two partnering arrangements need be, and probably are not, the same. Partnering was one of the recommendations in the Latham Report (qv).747 Ideally, it should be a means to enable employers and contractors, or contractors and sub-contractors, or professionals and clients, to work together with the

742

English Industrial Estates Corporation v. George Wimpey & Co Ltd (1972) 7 BLR 122. Impresa Castelli SpA v. Cola Holdings Ltd (2002) 87 Con LR 123. (2002) 84 Con LR 100. 745 The Best Practice Guide to Partnering in Construction: Trusting the Team (1995). Centre for Strategic Studies in Construction, University of Reading and the Reading Construction Forum. 746 Partnering in the Team (1997). Construction Industry Board Working Group 12. 747 Latham, Sir Michael, Constructing the Team (1994). The Stationery Office. 743 744

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Partnering adviser object of reducing costs and conflict between the parties. It is not a procurement system. It is a commercial system based on the reasonable assumption that if all the people involved in producing a finished building were working in harmony, there should be benefits all around. Some basic principles have been established, although not all of them are common to all partnering arrangements: — elimination of the ‘blame culture’; — cooperation in teamwork to achieve results; — identification of the interests of all the parties; — identification and elimination or reduction of potential conflict areas; — mutual trust and respect; — an all-inclusive system of incentives and rewards; — continuous improvement of quality and production targets; — performance indicators; — an open book policy. This is not an exhaustive list, and many if not all of the principles were taken for granted in the construction industry of 50 years ago. Indeed, the introduction of partnering is seen by many as an attempt to return to the more collaborative atmosphere that undoubtedly prevailed in the industry in former years. There are two ways of entering into a partnering arrangement. The first requires the parties to enter into a legally binding contract that includes partnering principles such as trust and cooperation as part of the contract. A problem with this is that many partnering concepts depend upon the good sense and goodwill of the participants for their implementation. It may be difficult to make them enforceable at law. The second way requires the parties to enter into a standard form, legally binding contract while at the same time setting out the partnering objectives in a separate non-binding charter. This has the great advantage of separating the agreement that can be enforced at law from the other agreement, which is simply an expression of intention. Any kind of building contract can be used to procure the project, but very often some kind of cost plus or target cost arrangement, with some form of incentive arrangement, is used. Some contracts are so framed that the contractor is always sure of getting the costs of the project, even if there is no profit. Theoretically, in such cases the contractor cannot actually make a loss, although the employer certainly can do so. Forms of contract specifically drafted as ‘partnering contracts’ are PPC (qv) and CE (qv), and to a lesser extent the NEC. The chances of successful partnering are increased when there is a succession of similar projects in prospect, because the inducement of further work and turnover is always there in the future, even if the current project is not as successful as envisaged. Partnering appears to be least successful when only one project is involved, or when a contractor is carrying out the last of a series of projects. It may be thought that partnering is merely serial contracting with attractive packaging. Anecdotal evidence suggests that problems in partnering are the result of employers and contractors failing to put the partnering principles into practice, because neither party properly understands what is involved – or the partners simply fall out about money. See also: Serial contract.

Partnering adviser The CIC partnering task force considered that persons within the construction industry, given the history of ingrained adversarial ways of 389

Partnering contract working, could not adopt a partnering approach without assistance. It believed that this could be done through a partnering adviser. Within the CIC guide748 it states that the adviser would be there to facilitate the smooth creation and development of the project partnering team. Within PPC provision exists, under clause 5.6 of the partnering terms, for a partnering adviser. The intention is that the partnering adviser should not be a member of the project team. The person so appointed is there to advise the project team members, either collectively or individually. The idea is that the partnering adviser can advise on the basis of the project or partnering team as a whole, rather than simply advise for the benefit of an individual. The nature of the advice to be given is set out at clause 5.6 as: — selection of partnering team members, team building, and review of specialist contracts for consistency with the partnering documents; — preparation of the project partnering agreement, and any partnering charter; — preparation of any joining agreements, pre-construction agreement and commencement agreement; — provision of fair and constructive advice as to the partnering process, the development of the partnering relationship, and operation of the partnering contract; — attendance at meetings of the core group or partnering team as appropriate; — assistance in solving problems, and the avoidance or resolution of disputes. The partnering adviser is named within the project partnering agreement, and should there be a need for a replacement then this is undertaken by the core group (clause 5.7). The initial selection should be made by the partnering team. It is important that the team has trust in the adviser. A person taking on the role of adviser requires good management and interpersonal skills as well as knowledge specific to the particular project and partnering approaches.

Partnering contract A term used and defined within PPC at appendix 1 as ‘the partnering contract created by and between the Partnering Team members’. The partnering contract comprises the partnering documents (qv). Whereas most contracts are bilateral, this contract is a multi-party contract: i.e. it is executed by all the project team members. Therefore a single document is used to cover what would otherwise be a number of separate bilateral contracts. For example, PPC would be executed by the client and constructor plus the design consultants. Therefore the partnering terms are required to address varied situations, e.g. the design services provided by consultants as well as the construction of the Works by the constructor. In addition, the provisions are required to address the transition from the design stage to the construction stage. This is done by means of a commencement agreement (qv).

Partnering documents A term used and defined within PPC (qv). The partnering documents are defined at appendix 1 as ‘the documents governing the implementation of the Project and the partnering relationship between the Partnering 748

The Construction Industry Council Guide to Project Team Partnering, 2nd edition (2002).

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Partnering documents Team members as described in clause 2 of the Partnering Terms’. In addition, most of the documents are also defined at appendix 1. Under clause 2.1 the purpose of the partnering documents is to describe the roles and responsibilities of the partnering team, and to govern the relationship between them. Clause 2.2 states that, in addition to the project partnering agreement and the partnering terms, the partnering documents are those listed in the project partnering agreement. The documents generally comprise: — The commencement agreement (qv). — The project partnering agreement: This is the agreement executed by the original partnering team members. This document identifies the parties, and includes provisions for identifying the specific details relating to each project, e.g. client’s representative, third party rights, sharing arrangements, defects liability period. It expressly refers to the partnering terms, which are said to be attached to the agreement. — The partnering terms: These are the terms annexed to the project agreement, i.e. clauses 1 to 28 plus the nine appendices. — Project timetable: This is the timetable agreed in accordance with clause 6 for the implementation of the project following the date of the commencement agreement. — Partnering timetable (qv): This is the timetable set out in or based on the form at appendix 6 governing the activities of the partnering team members in relation to the project prior to the date of commencement. The template form at appendix 6 makes provisions for the identification of the activity, the relevant partnering term applicable, the partnering team member responsible for the activity, and the period or deadline by when it is to be completed. — Any pre-construction agreement: Following the execution of the project partnering agreement it may become necessary to undertake early work on or off site prior to execution of the commencement agreement. The client and the constructor would execute a pre-construction agreement. The agreement should clearly identify the scope of work, the timetable, and the price. The execution of such an agreement does not mean that the project will proceed. A template pre-construction agreement is included at appendix 3 (part 1) of the partnering terms. The agreement is governed by the project terms (clause 13.5 and 13.6), and the constructor must cease the pre-construction work and leave site when instructed to do so by the client’s representative. One of the ideas behind this agreement is to avoid the use of letters of intent and their inherent uncertainties. — The consultant’s services schedule and consultant’s payment terms: All consultants should have their roles, expertise and responsibilities set out in sufficient detail within a schedule of services. The various consultants’ schedules should be integrated with those of the other consultants, the project brief and project proposals so that the interface between each project team member can be identified. This should state the fees and expenses payable to each consultant for the provision of their services in connection with the project. It should state any milestones and/or what the payment arrangements are. — The project brief, including the constructor’s services schedule: This is a brief provided by the client, which sets out the client’s requirements of 391

Partnering team the constructor in either fully ‘prescriptive terms’ or in ‘performance related terms’. This would include information on: • the site and the project, including any constraints; • methods of communication; • any interested parties (qv); • client’s objectives for the project; • constructor’s services. A more comprehensive list is included within the Guide to the ACA Project Partnering Contracts 2000 and SPC 2000 published by the ACA. — The project proposals: These are the proposals submitted by the constructor for achieving the brief, and which are subject to development in accordance with clauses 8 and 10. — The price framework: This is defined at appendix 1 as ‘the price framework for the Project subject to development in accordance with clause 12 of the Partnering Terms’. Clause 12 addresses the prices. At the time the project partnering agreement is executed, the framework will comprise: • the agreed amount for the constructor’s services (clause 12.1); • the client’s budget for the project (clause 12.3); • the constructor’s agreed profit, central office overheads (qv) and site overheads (qv) (clause 12.4); the cost of any known items of fully designed elements (clauses 12.6 • and 12.7); • agreed arrangements for discounts or other benefits payable by the constructor to any specialists; • the constructor’s statement as to its pricing of risk and contingencies (clause 12.9); • if any, the agreed milestones, activity schedules or cash flows, or other agreed payment arrangements (clause 20.2); any agreed periods for payment (clause 20.3); • • any agreed fluctuations provisions (clause 20.10). The price framework will be developed and built up over agreed stages once tenders for packages of work have been agreed, and following value engineering and management exercises. — Any joining agreement: This is an agreement executed for the inclusion of new or replacement members in the partnering team. A template joining agreement is included at appendix 2 of the partnering terms. — Pre-construction agreement. — Risk register (qv). — The key performance indicators (qv) and targets. — Any other partnering documents. Clause 2.2 makes it clear that any additional or amended partnering documents developed in accordance with the partnering terms, e.g. design agreed in accordance with clause 8, are partnering documents. At clause 2.6 the documents are listed in priority in order to resolve a discrepancy, should this not prove possible under any of the other provisions, i.e. clause 2.5.

Partnering team A term used (and defined at appendix 1) within PPC to refer to those persons who execute the project partnering agreement or any subsequent joining agreement. The nature and extent, and the timing, of their appointment will depend upon their contribution to the project. It would seem inevitable 392

Partnership that a client would have to appoint consultants to prepare a brief, e.g. a designer and cost adviser. These could be appointed by means of a simple letter to cover the early services, and would require the inclusion of an undertaking to enter into a subsequent agreement on the PPC (qv) terms. The partnering team members can be selected on the basis of negotiation or competition. The partnering team will usually comprise the client, the constructor, the client’s representative, and other consultants and specialists. Other persons can join the team by means of a joining agreement.

Partnering timetable A term used and defined (at appendix 1) within PPC to mean ‘the timetable governing the activities of the Partnering Team members in relation to the Project prior to the date of the Commencement Agreement’. A template for the timetable is included at appendix 6, which makes provisions for the identification of the activity, the relevant partnering term applicable, the partnering team member responsible for the activity, and the period or deadline by when it is to be completed. In addition the guidance notes included in a footnote at appendix 6 state that the timetable should clearly show the nature, sequence and duration of the agreed activities for each team member, and should identify any preconditions for subsequent activities up to the signature of the commencement agreement (qv). Examples of the activities that should be shown in the timetable are: — agreed dates for core group and partnering team meetings; — agreed dates for value engineering and risk and value management exercises; — business case submissions; — agreed dates for partnering workshops; — risk management exercises; — finalisation of the project timetable; — development of the pre-construction information; — agreed dates for design team meetings; — development of an integrated design and construction process, the obtaining of planning permission if required, and other regulatory approvals; — build-up of a supply chain; — build-up and finalisation of the guaranteed maximum price and price framework; — finalisation of KPIs (qv), targets and incentives. The timetable should identify the project team member responsible for each identified activity. See guidance at footnote in appendix 6.

Partnership A way of carrying on business that is governed primarily by the Partnership Act 1890, under which it is defined as ‘The relation which subsists between persons carrying on business in common with a view of profit’. It is probably still the most common type of professional business arrangement, although different forms of practice are gaining ground, particularly among larger firms. The characteristics of a partnership are that the partners share profits and losses (not necessarily equally), and they carry on the business together. In the absence of any other agreement, the Act governs the relationship of the parties. It is wise for the partners to enter into a partnership agreement specially drawn to reflect their requirements. This is because the Act makes no reference to many things that the partners would consider to be 393

Partnership important. A partnership agreement can not only add to but also vary the provisions of the Act. The following are common heads of terms: — Name of the firm. — Place of business. — Ownership of place of business. — Ownership of other property. — Value of goodwill. — Amount of capital brought in by each partner. — How work in progress is to be treated. — Duties of partners. — Proportions of shareholding. — Cash drawings. — Banking arrangements. — Accountancy arrangements. — Partnership solicitors. — Termination. — Outgoing partners. — Partner insurance. — Professional indemnity insurance. — Professional standards. — Partnership benefits. — Dispute resolution. Perhaps the most important of these matters are the provisions for the inevitable exit of a partner. This can give rise to ill-feeling, usually on the part of the outgoing partner, who may feel that they have not received all the money to which they are entitled. The liability of partners under the Act is often misunderstood, even by partners. It is usually thought that partners carry joint and several liability for all partnership debts. This is not strictly correct. Partners acting in the course of business are certainly jointly and severally liable for wrongful acts or omissions, or for the misapplication of money or property. Thus a creditor may sue the partnership or an individual partner to recover a debt. For example, if a partnership runs into debt, which the assets of the firm will not cover, and one partner removes themselves from the jurisdiction (qv), the other partner or partners will be liable for the whole of the debt to the full extent of their personal assets. However, a partner is merely jointly liable (not severally) for the debts and obligations of the firm. However, in Scotland a partner is also severally liable under this head. The threat of joint and several liability ruining one or more partners has led to a call for a more practical vehicle for professional practice. The goal of practising as a partnership, while having the liability of directors of a limited company, has been partly achieved by the Limited Liability Partnership Act 2000 (qv), and increasing numbers of professionals are setting up or changing their businesses to limited liability partnerships (indicated by the letters LLP after the firm name). If a partner dies or becomes bankrupt (qv) the partnership comes to an end or, in the language of the Act, it is dissolved. It also ends when a partner retires, or a new partner is taken into the firm. The Act provides749 that no majority of part749

S. 25.

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Party Wall Act 1996 ners can expel another partner from the partnership unless it is expressly stated in the partnership agreement. It is rare to find such a provision, and many partnerships have difficulties in persuading an unproductive partner to resign. Although there is no legal maximum, the number of partners is normally no more than 20, but certain professional partnerships have an unlimited number of partners, e.g. architects, surveyors, estate agents, solicitors, and accountants. Each partner has the power to bind the others in regard to any matter concerning the partnership. Partners may be bound, even though a partner acts beyond such partner’s authority, if the general public has reason to believe that the partner is acting on behalf of the partnership. For this reason, all partners must show the utmost good faith (qv) in their dealings with one another. This means revealing all matters to one another that may affect the partnership. Whether or not a partnership exists is a matter of fact. A court will look at all the circumstances. Sharing of profit and loss suggests a partnership, but the situation, particularly in small firms, may be confused. Frequently, employees share in the profits by way of bonuses. Therefore some indication that a person has a more fundamental interest is required, e.g. involvement in the making of policy decisions. Persons may be liable as partners if they are represented on office stationery or hold themselves out by words or conduct in any other way as such, whatever the internal arrangements of the firm may be.750 Where some members of a firm are named as ‘associates’ or ‘executives’, it is desirable that their names be separated from the names of the partners on the firm’s notepaper, or they may well find themselves being liable in the event of the firm becoming insolvent (qv).

Party (Parties) In a general sense the word is used to refer to the persons who execute the contract, e.g. the employer and contractor, or the contractor and sub-contractor. Within many of the JCT contracts the word is defined at clause 1.1, e.g. DB, to mean the employer and contractor. This is also the case within NEC, i.e. clause 11.2(11).

Party Wall Act 1996 The Act, which currently applies only to England and Wales, came into force on 1 July 1997. If anything is to be done to a party wall as defined by the Act, notice must be given in certain forms. The Act sets out several important definitions, as follows. — A party wall is a wall, standing on land of different owners not taking account of projecting foundations, which is part of a building; or that part of a wall which separates buildings belonging to different owners. — A party structure is a party wall, floor or other structure separating parts approached by separate entrances. — A party fence wall is a wall, standing on land of different owners not taking account of projecting foundations, which is not part of a building, but separates adjoining lands. — Foundation is the ground or artificial support resting on ground on which the wall rests. — Surveyor is any person who is not a party to the matter and who is appointed or selected under s. 10 of the Act to determine disputes.

750

S. 14(1).

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Party Wall Act 1996 If the two adjoining owners do not agree (and it is often unwise to agree in advance), each party must appoint a surveyor to whom certain powers are given by the Act to determine any difference and to decide, subject to the provisions of the Act, what contribution each party is to make to the cost of the Works. Both building and adjoining owners have statutory rights, which they can exercise under the Act, and those rights can never be overlooked or set aside. There are three basic situations that are envisaged by the Act: — the building of a new party wall; — carrying out work to existing party walls; — carrying out adjacent excavations and constructions. The building of a new party wall under s. 1 of the Act This is where adjoining land is not built on at the line of a junction, or built only as a boundary wall (i.e. not a party fence wall or the external wall of a building). There are two situations. (1) If the wall is intended to straddle the boundary, one month’s notice of a wish to start the work must be given to the other party by the party wishing to build. The notice must indicate a desire to build, and describe the intended wall. If notice of consent is received from the other party, the wall must be built half and half or as agreed, the cost borne by each in proportion to use. (2) If the wall is wholly on the applicant’s own land, a one-month notice of a wish to start work must be given. The notice must indicate a desire to build, and describe the intended wall as before, but the building owner has the right to project foundations, if necessary, under adjacent land any time within 12 months from expiry of the notice. The work must be at the building owner’s own expense, and the adjoining owner or occupier must be compensated for damage caused by building the wall or the foundations. This also applies where the adjoining owner refuses consent to a party or party fence wall. Carrying out work to existing party walls under s. 2 of the Act A building owner may exercise these rights with the written consent of the adjoining owner. If adjoining land is built on at the line of a junction as a party or party fence wall, or as the external wall of a building, the building owner must give a two-month ‘party structure notice’ of the date when work will start before exercising any right under the Act. The notice must state the name and address of the building owner, particulars of the proposed work, whether special foundations are intended, and plans, sections and details including the loads to be carried. The notice ceases to have effect if the work is not begun within 12 months of the date the notice is served, or if it is not continued with due diligence. There is provision for the adjoining owner to serve a counter notice. If no consent is received within 14 days of the date of service of a party structure or counter notices, dissent is deemed, and a dispute is deemed to have arisen. S. 3 deals with the serving of party structure notices. Breach of s. 3 is not actionable as breach of statutory duty.751 A building owner has specific rights in respect of existing walls. The scope is very broad, and what follows is a summary. The building owner has the right to:

751

Hough and Another v. Annear and Another (2007) 119 Con LR 57.

396

Party Wall Act 1996 — underpin, thicken or raise, but if it is not due to a defect or lack of repair the owner must make good all damage to adjoining premises, internal furnishings and decorations, and if it is a party structure or external wall any adjoining owner’s flues and chimneys that rest on or form part of the party structure or external wall as may be agreed or settled by the disputes process must be carried up; — repair or demolish and rebuild a party structure or party fence wall if the work is necessary because of defects or lack of repair; — demolish a partition that does not conform with statutory requirements, and build a party wall that does conform; — demolish structures over public ways or passages belonging to other persons, and rebuild them so as to conform to statutory requirements; — demolish a party structure and rebuild it so as to make it of sufficient strength or height for any intended building of the building owner, or rebuild it to lesser thickness or height provided it is still sufficient for any adjoining owner, but the owner must make good all damage to adjoining premises, internal furnishings and decorations. If it is a party structure or external wall, any adjoining owner’s flues and chimneys that rest on or form part of the party structure as may be agreed or settled by the disputes process must be carried up; — cut into a party structure or away from a party, party fence, external or boundary wall any foundation, chimney breast or other projection over the building owner’s land, or take away or demolish overhanging parts of wall or building of the adjoining owner, to the extent necessary to enable a vertical wall to be erected or raised against the wall or building of an adjoining owner, but all damage to adjoining premises, internal furnishings and decorations must be made good; — cut into an adjoining owner’s wall to carry out weatherproofing of a new wall erected against it, but all damage to the wall must be made good; — carry out other necessary works incidental to the connection of a party structure with the premises adjoining; — raise a party fence wall, or raise it for use as a party wall, or demolish it and rebuild it as a party fence or party wall; — reduce or demolish and rebuild a party or party fence wall, either to not less than 2 metres if not used by the adjoining owner other than as a boundary wall, or to a height currently enclosed by the building of an adjoining owner, but the building owner must reconstruct or replace any existing parapet, or construct one if needed; — expose a party wall or structure, but adequate weathering must be provided. Adjacent excavations and constructions under s. 6 of the Act There are two situations: (1) Where a building owner proposes to excavate and erect a structure, any part of which is within 3 metres horizontally from any part of the structure of an adjoining owner, and which extends to a lower level than the level of the bottom of the foundations of the adjoining structure; (2) where a building owner proposes to excavate and erect a structure, any part of which is within 6 metres horizontally from any part of the structure belonging to an adjoining owner, and which extends to a lower level than a point measured at 45 degrees from the point of intersection 397

Passing of risk of the external face of the adjoining structure and the bottom of the foundation. The owners of such structures are deemed to be adjoining owners for the purposes of this section, even though the property is not touching the boundary. The building owner must give one month’s notice of the date when work will start. The notice must set out the proposals, and whether underpinning or other strengthening or protection is proposed. Plans and section must show the site and the depth of any excavation proposed and, if the erection of a building is proposed, its site. The notice ceases to have effect if work is not begun within 12 months of the date the notice is served, or if the work is not continued with due diligence. The building owner may at their own expense strengthen the foundations of the adjoining structure, or may be required to do so by the adjoining owner. If there is no consent within 14 days of the date of service of notice, dissent is deemed, and a dispute is deemed to have arisen. There are additional provisions in the Act. It is an offence if an occupier, knowing that a person is entitled to enter and remain on land in order to execute work under the Act, and to remove fittings and take other necessary action, or knowing that an appointed surveyor is entitled to enter and remain on the land for the purpose for which he/she is appointed, refuses to allow that person access, or hinders or obstructs such person. There are also provisions dealing with notices, rights of entry, expenses and – importantly – provision for the resolution of disputes, with the use of surveyors and the issue of an award to decide a disputed matter.

Passing of risk In a general sense the transfer of a risk from one person to another. An example would be under a design and build contract where the Employer’s Requirements contain elements of design. Under DB that design would remain at the risk of the employer (or more accurately the employer’s design consultants) as a consequence of clause 2.11, which expressly excludes the contractor from any liability for design in the Employer’s Requirements. Often this clause is amended to expressly make the contractor responsible for any design in the Employer’s Requirements. Therefore the risk associated with that design passes from the employer’s design consultants to the contractor on execution of the building contract. Goods and materials are said to be at the risk of a party when that party is liable for the accidental loss of or damage to them. The basic presumption with the sale of goods is that initially risk will move to the buyer at the same time as ownership is transferred,752 but the parties to a contract can always provide otherwise. This is invariably the case under the standard forms of building contract in common use where, although ownership may pass to the employer, e.g. on incorporation (qv) into the Works or on payment, the risk remains with the contractor. For example, under SBC the contractor’s obligation (clause 2.1) is to ‘carry out and complete the Works’. The contractor does not fulfil that obligation until the architect certifies practical completion. The passing of property does not, in this instance, transfer the risk. ACA, clause 6.2, expressly places risk with the contractor: 752

S. 20 of the Sale of Goods Act 1979.

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Patent defect The risk of loss or damage to any Section or to the Works and to any goods and materials intended for the Works shall remain with the contractor until the TakingOver of such Section or of the Works, as the case may be.

Within the NEC, clause 81.1 states that from the start date until the issue of the defects certificate (qv) the contractor carries the risks not accepted by the employer. Clause 80.1 sets out the risks carried by the employer. Therefore, upon the issue of the defects certificate, it appears that the balance of the risks transfers to the employer. See also: Sale of goods.

Patent A Crown grant of sole rights with regard to an invention. The grant is normally valid for a period of 20 years from the date when the specification is filed. Under standard form building contracts payment in respect of patent rights (i.e. the right to use a patented article or process belonging to another) is generally the responsibility of the contractor. SBC clause 2.22 deems such sums to have been included in the contract sum (qv), and provides that the contractor shall indemnify the employer against any claims arising from the infringement of patent rights by the contractor. However, the contractor is not liable to indemnify the employer where the contractor is complying with an architect’s instruction, and then monies payable shall be added to the contract sum (clause 2.23). GC/Works/1 clause 12 is a broadly similar provision. See also: Indemnity clauses.

Patent defect A defect that is discoverable by reasonable inspection. In the context of the building contract, the term embraces all the items that, say, the architect or the clerk of works might be expected to find and bring to the contractor’s attention so that remedial work can be carried out. Patent defects (in contrast to latent defects) are plain to see – or at least that is the theory. Whether the architect could or should have seen defects on site during site visits has exercised more than one judicial mind. In Baxall Securities Ltd and Another v. Sheard Walshaw Partnership (a firm) and Others it was stated: In summary, I would put the matter in this way. Where, in the normal course of events, a surveyor would be engaged in a survey of a building for a purchaser, and, with the exercise of due diligence, that surveyor would have discovered a defect, that defect is patent whether or not a surveyor is in fact engaged and, if engaged, whether or not the surveyor performs his task competently.753

Where the final certificate (qv) is conclusive or partially so, its issue may preclude the employer from bringing any proceedings against the contractor for defects, whether patent or latent. Although the issue of the final certificate under certain JCT contracts was held to have that effect,754 the wording has been amended in order to avoid that outcome unless the contract expressly provides for it. See also: Certificates; Inspector; Latent defect; Supervision.

753 754

[2002] 83 Con LR 164 (CA) at p 177 per David Steel J. Crown Estates Commissioners v. John Mowlem & Co (1994) 70 BLR 1.

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Pay when certified

Pay when certified Usually referring to a clause in a contract, typically a subcontract, which makes the receipt of payment conditional on the issue or content of a certificate from a third person under a separate contract. For example, payment of a sub-contractor is dependent upon the issue of a certificate by the contract administrator under the main contract. However, they may also appear in certain PFI arrangements. They are seen as having the same or similar effect as ‘pay when paid’ (qv) clauses, which are ineffective under s. 113 of the Housing Grants, Construction and Regeneration Act 1996. Pay when certified can take many forms, and either link the timing process under the sub-contract to that of the main contract, or link the amount paid under the sub-contract to the amount certified in the main contract certificate. The principal problem with such a provision is that the payee will not necessarily be entitled to receive a copy of the certificate issued under the separate contract. Therefore it will not know when it was issued or the amount certified, including how that amount certified was made up.

Pay when paid Usually referring to a clause in a contract that stipulated that payment would not be made until money was received by the payer. It was common for such clauses to be included in sub-contracts (qv). They were usually in addition to normal clauses dealing with the amount and timing of payments. They provided that, notwithstanding any other provision in the contract, the contractor was not obliged to make any payment to the subcontractor until the contractor had received payment from the employer that included an amount in respect of the matter for which the sub-contractor was claiming payment. They were often referred to as ‘pay if paid’ clauses, because if the employer never paid the contractor such amounts, there was little incentive for the contractor to press for payment. Although it has been suggested that such clauses might be held to be unreasonable under the Unfair Contract Terms Act 1977 (qv), there is no authority on the point. The Housing Grants, Construction and Regeneration Act 1996 (qv) addressed this problem in s. 113, which states that such a provision is ineffective unless the person, from whom payment is required before payment can be made by the payer to the payee, becomes insolvent. Where such a provision becomes ineffective, the parties are free to agree other payment terms. If they cannot agree, the relevant payment terms of the Scheme for Construction Contracts (England and Wales) Regulations 1998 will apply.755 Before the Act, contractors used to find pay when paid clauses very useful, and it is not surprising that, after the Act came into force, much ingenuity went into drafting alternative clauses in which the trigger for payment was not payment by a third party, but a notification or other occurrence over which the contractor might have some control. S. 113 of the Act is not restricted to the main contractor–sub-contractor relationship, but would also apply to an employer who attempted to link payment to the main contractor to receipt of monies from a bank. It would also apply to the situation where an architect sub-contracted work to another consultant, and tried to link payment to the other consultant to receipt of fees from the employer. See also: Scheme for Construction Contracts. 755

Or the corresponding Schemes for Scotland and Northern Ireland.

400

Payment schedule

Payment into court Now more correctly termed a Part 36 payment.756 In any action for debt or damages the defendant may pay money into court in satisfaction of all or any of the claimant’s claims. This may be done at any time after proceedings have been commenced, and may be increased at any time. An offer made before proceedings have commenced will not be classed as a Part 36 payment, but it will be taken into account when the court comes to decide upon the question of costs. The idea is to encourage the settlement of proceedings without expensive court action. The court can and will levy sanctions upon a party who unreasonably rejects a settlement offer. The payment may be made with or without denial of liability. A claimant can accept the amount paid in and discontinue the action by withdrawing the amount from court. The claimant is then entitled to costs to the date when payment into court was made. Alternatively, the claimant can leave the money in court and continue the action. The judge will not be told of the payment until all questions of liability and damages have been determined. A claimant who recovers less or no more than the amount paid in will usually have to pay the whole costs of the action, including the defendant’s costs, from the latest date on which payment could have been accepted without permission of the court. The concept (and effect) is common in arbitration, although no actual payment is paid into court or to the tribunal. The amount is merely offered, and is now commonly referred to as a Part 36 offer, whereas they used to be known as Calderbank offers (qv). See also: Costs; Sealed offer.

Payment schedule A defined term at clause 1 of CE and applicable when the ‘Contract Sum Option’ at clauses 7.16 to 7.24 is chosen. The schedule shows the payments due to the supplier by reference to the completion of certain activities or milestones, or progress against a programme. The payment schedule is to be set out at part 7 of the contract particulars. Should the Works not progress in accordance with the programme applicable to the schedule, then either the purchaser or supplier can, under clause 7.24, give a notice requesting a revision to the schedule. Should the parties fail to agree on a revised schedule, then the purchaser is to make such revisions as they consider appropriate. The revised schedule then becomes the payment schedule under the contract. Whenever there is an adjustment to the contract sum, upwards or downwards, the parties are to agree an appropriate adjustment to the schedule, failing which the purchaser shall, acting reasonably, make such adjustment as they consider appropriate. Under clause 7.16 the supplier is to make applications for payment in accordance with the payment schedule. Clause 7.18 permits the purchaser to question whether an activity or milestone has been completed. Should the purchaser raise such a question, then the parties are to seek to agree the matter in question and, if necessary, meet to discuss any differences. Within 10 business days of receipt of the application the purchaser, under clause 7.19, is to issue a notice stating the amount due to the supplier. This is:

756

Part 36 of the Civil Procedure Rules.

401

Payments — the amount claimed by the supplier; or — such amount agreed under clause 7.18; or — such amount as the purchaser reasonably considers as due. The amount under clause 7.19 becomes due to the supplier 10 days after receipt of the supplier’s application under clause 7.16.

Payments These are usually made by the employer to the contractor as the work progresses, and then on down the line from contractor to sub-contractor, and so on. On very small jobs or an entire contract (qv) the payment may be one lump sum, paid when the Works are complete. For cash flow purposes the standard form contracts provide for payment to be made at regular intervals (e.g. monthly) on the basis of architects’ certificates or, in the case of DB, on application by the contractor. The basis of payment under a construction contract (qv) was put on a statutory footing by the Housing Grants, Construction and Regeneration Act 1996 (qv). S. 109 of the Act provides that the contractor will be entitled to payment in instalments, stage payments or other periodic payments unless the project duration is less than 45 days. The parties are free to agree the intervals between payments and the amounts of such payments. S. 110 provides that every contract must have the means of working out the amount due, and the date on which it is due, and must provide a final date for payment. Under s. 111 payment may not be withheld nor money set off unless notice has been given particularising the amount to be withheld, and the grounds. The notice must be given no later than the agreed period before final payment. Where a construction contract fails to include these provisions, the relevant paragraphs of the Scheme for Construction Contracts (England and Wales) Regulations 1998 will apply to similar effect. Scotland and Northern Ireland have similar schemes. See also: Advances on account; Certificates; Performance; Scheme for Construction Contracts; Stage payments.

PC Initials representing prime cost (qv). Penalty A sum of money inserted in a contract that is extravagant and unconscionable, the purpose being to coerce a party to performance. A ‘penalty clause’ is invalid, and the sum is irrecoverable, in contrast to liquidated damages (qv). Although many contractors think otherwise, the sums generally inserted in the ‘liquidated damages’ clauses in standard form building contracts are usually moderate. There appears to be no reported English case in which a sum has been disallowed as a ‘penalty’ merely because of its amount under a building contract.757 The term is often to be found in correspondence, in site minutes, and occasionally in forms of contract drafted by construction professionals. Although common, it is wrong to speak of liquidated damages clauses as ‘penalty clauses’. However, when the court is called upon to decide whether a sum is a penalty or liquidated damages, it looks at the substance and not at the form.758 In some cases the courts have held that sums stated as being penalties are in fact liquidated damages.759 757 758 759

See for example Alfred McAlpine Capital Projects Ltd v. Tilebox Ltd [2005] BLR 271 Kemble v. Farren [1829] All ER 641. Ranger v. Great Western Rail Co [1854] All ER 321.

402

Peremptory order A sum may be liquidated damages although it is not a genuine pre-estimate, for example if the sum is agreed at a lower figure. The decision whether a sum is liquidated damages or a penalty will depend not only on the terms of a particular contract but also on the particular circumstances of that contract. The terms and circumstances are those in existence at the time the contract was made, not when the term was breached. It used to be argued that if a sum would not normally be considered to be a penalty, but under certain circumstances it would be penal, then it is to be treated as penal in its entirety.760 It is unlikely that the courts would take that approach now. The fact that the sum stipulated as liquidated damages bears no relation to the contract sum is not relevant to the question of whether it is a penalty.761 It is likely to be a penalty if a single sum of money is made payable on the occurrence of any one or more of a number of different events. This principle was applied in Ariston SRL v. Charley Records Ltd,762 where a sum of money was said to be claimable if certain parts were not returned within 10 working days. The provision was held to be a penalty, because the same sum was payable whether the whole or just a few of the parts were late, and if only a few parts were late the sum would be extravagant in relation to the greatest likely loss. Other decisions in relation to building contracts have been based on this principle where there have been no proper provisions for dividing liquidated damages expressed as a single sum when part of a building is taken into possession.763 Four principles have been set out by the Court of Appeal to differentiate liquidated damages from a penalty:764 — The parties’ intentions must be identified by examining the substance rather than the form of words used. — A sum will not be a penalty where a genuine pre-estimate of loss has been carried out. — The contract should be construed at the time the contract was made, not at the time of the breach. — It would be a penalty if the amount was extravagant or unconscionable compared with the greatest foreseeable loss. See also: Pay when certified.

Peremptory order An order made by a judge that sets out a direction and sets a specific time for compliance. Such orders are normally made where a similar direction has already been given and not complied with, e.g. the requirement to disclose a certain document. If a party fails to comply with such an order the judge may take certain actions accordingly. The actions will vary, but for example in relation to documents the judge may ignore the document (if the document was to the defaulting party’s advantage), draw the relevant conclusion (if the document was not to the defaulting party’s advantage), and penalise the defaulting party in costs.

760

Stanor Electric Ltd v. R Mansell Ltd (1988) CILL 399. Imperial Tobacco Co v. Parsley [1936] 2 All ER 515. 762 (1990) The Independent 13 April 1990. 763 For example see Gleeson v. Hillingdon Borough Council (1970) 215 EG 165. 764 Jeancharm Ltd v. Barnet Football Club Ltd (2003) 92 Con LR 26 at paragraph 27 per Gibson LJ. 761

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Performance Such orders may also be issued by arbitrators,765 but not by adjudicators.

Performance The carrying out of an obligation imposed by contract or statute. In building contracts complete performance, where the contractor carries out the whole of the Works in accordance with the contract documents and the employer pays the contract sum (qv), will discharge the contract. If one party has not made formal acceptance of the contract terms, partial performance by that party may be sufficient evidence of its intention to be bound by the contract. Such a situation may arise when an employer does not accept a contractor’s quotation but allows the contractor to commence work, and starts to pay in accordance with the quotation. Whether or not performance has been discharged is a matter for the courts to decide in each particular case. The point is particularly important in the case of an entire contract (qv), where payment depends upon the whole of the Works being completed. However, the courts will grant relief to the contractor that can show, in such a case, that it has achieved substantial performance (qv), i.e. the work is complete except for some minor omissions or defects. ‘Where a contract provides for a specific sum to be paid on completion of specified work, the courts lean against a construction of the contract which would deprive the contractor of any payment at all simply because there are some defects or omissions.’766 See also: Specific performance.

Performance bond See: Bond. Performance specification An alternative to the specification (qv) as traditionally understood. Instead of describing precisely all the work and all the materials required in a building, the performance specification sets out criteria that must be met by the contractor. The idea is to give the contractor maximum scope for initiative and price competition. For example, a traditional specification might describe an external wall in terms of type of a brick, the number of courses to a given height, the thickness of the wall, the size of the cavity, the material for the internal leaf, the insulation type and thickness, wall ties, dpc, etc. A performance specification would require that the wall last a given number of years, be waterproof, have a given U-value, have a certain colour range, have certain maintenance characteristics, etc. The criteria may be very precise or very broad, and commonly contain the overall requirement of compliance with building regulations (qv) and British Standards. The writing of a performance specification is a skilled task, and may take longer than for a traditional specification. It is a mistake, therefore, to use a performance specification to attempt to overcome pressing deadlines. It is important to make a clear distinction, in the specification, between those criteria that are mandatory and those that are at the contractor’s discretion. Where DB is used, outline dimensioned drawings are usually provided with the specification, and form part of the Employer’s Requirements (qv). The other essential part of the DB contract documentation is the Contractor’s Proposals. A performance specification always requires the input of design (qv), and often

765 766

See the Arbitration Act 1996 s. 41(5). Hoenig v. Isaacs [1952] 2 All ER 176 at 181 per Denning LJ.

404

Period of suspension there will be an obligation that the finished piece of work be fit for its purpose, particularly where the obligation is both to design and to construct.767 However, many of the standard forms step down a contractor’s common law liability to design and construct a building that is fit for its purpose by the inclusion of an express term to the same standard as an architect or other appropriate professional designer, i.e. the use of reasonable skill and care (qv) (e.g. DB clause 2.17.1, SBC clause 2.19.1, ICD clause 2.34.1 and MWD clause 2.1.1). ACA in clause 3.1(c) requires that the parts of the Works designed by the contractor must be fit for the purposes for which they are required, while GC/Works/1 offers the choice between reasonable skill and care and fitness for purpose in clause 10(2) alternatives A and B. Very often the architect will prepare a performance specification for work for which tenders are to be invited for sub-contract work. A lift installation is a good example of work that requires a tight performance specification in order that a proper comparison of prices can be made. See also: Design and build contract.

Performance specified work A term that used to be contained in JCT 98 at clause 42. The idea was for the architect to be able to specify certain elements of the work by performance, and the contractor would price for satisfying that specification (qv). Its main use was intended to be for proprietary items such as specialist suspended floors, staircases or roofs – the kind of item that did not require a consultant, but did need the design responsibility to be clearly traceable to the right party. Such items were often, and still are, specified in the contract, for example as ‘suspended floors by XYZ Flooring Ltd’, it being understood that XYZ would do the design work. The contractor would duly place an order, and the floors would be delivered and installed. Although in most instances that was the end of the matter, trouble could occur if there was a defect in the floor that was found to be due to design. The contractor was unlikely to have any design liability under a traditional contract, and unless there was a warranty (qv) in existence between the employer and XYZ, the employer would be reliant upon the goodwill of the contractor to chase XYZ for a remedy. Under performance specified work provisions the contractor’s liability for design was restricted to the exercise of reasonable skill and care (qv), and the work could not be carried out by a nominated sub-contractor (qv) or supplier (qv). When the JCT brought out a new suite of contracts in 2005, the successor to JCT 98 was SBC, which did not have provision for performance specified work. The reason given was that it was seldom used and, when used, often the contractor’s designed portion provisions would have been more appropriate.

Period of suspension A term used in the contract particulars (qv) of SBC, IC, ICD and DB indicating the continuous period of time during which the Works must be suspended before an entitlement to terminate the contractor’s employment under the contract can be exercised. The power is also included in MW and MWD, but the period is specified in the termination provisions. In SBC, IC, ICD and DB the period is to be inserted by the parties. If the parties fail to insert any period, the default period is two months. Clause 8.9.2 in each case allows the contractor to terminate if the Works are suspended for the relevant 767

Viking Grain Storage Ltd v. T H White Installations Ltd (1985) 13 BLR 103.

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Persistent neglect period due to architect’s instructions dealing with discrepancies, variations or postponement (this does not apply to DB) or any impediment, prevention or default that is the responsibility of the employer. Clause 8.11 in each case allows either party to terminate if suspension for the relevant period is due to force majeure (qv), certain instructions issued as a result of the negligence of a statutory undertaker (qv), loss or damage due to specified perils (qv), civil commotion (qv) or terrorism (qv), the exercise of statutory power by the UK government that directly affects the Works and, in the case of DB only, delay in the receipt of development control permission. In MW and MWD clause 6.8.2 deals with termination by the contractor if there is suspension for a continuous period of one month for the same reasons as in SBC. The same reasons as SBC are also given in clause 6.10 for suspension for a continuous period of one month, which allows either party to terminate. A similar provision exists within the MP at clause 40.1 allowing termination by either party should the project be suspended beyond the period specified in the contract particulars as a consequence of any listed reasons. The listed reasons include specified perils, terrorism, force majeure and hostilities involving the United Kingdom. Though the phrase ‘period of suspension’ is not used NEC, clauses 91.6 and 91.7 permit termination in given circumstances by either party should the Works be stopped or suspended for more than 13 weeks. See also: Termination.

Persistent neglect A term that was formerly used in JCT 80 as one of the grounds for determination (clause 27.1.3). It referred to the situation where a contractor refused or persistently neglected to comply with a written notice from the architect requiring removal of work, materials or goods not in accordance with the contract, and the Works were materially affected (qv) as a result. The requirement for the neglect to be ‘persistent’ was removed by Amendment 4 to the JCT 80 published in July 1987. All subsequent revisions of JCT 80, JCT 98 (clause 27.2.1.3) and now SBC (clause 8.4.1.30) provide simply that the contractor’s employment may be terminated (as JCT has called ‘determination’ since 2005) if it neglects to comply with a written instruction ordering removal of defective work, etc. The position under the IC, ICD and DB contracts is the same, dealt with at clause 8.4.1.3 in each case. There is no equivalent provision in MW or MWD. Despite the removal of the word ‘persistent’, the overriding requirement that notice of termination must not be given unreasonably or vexatiously means that the neglect to comply on the part of the contractor must effectively be persistent.

Person A word that includes a body of persons corporate or unincorporate.768 The term is defined in SBC clause 1.4.4, and in other JCT contracts, so as to include an individual, a firm, a partnership, a company or any other corporate body. Therefore, when SBC clause 3.8.2 refers to a list of sub-contractors comprising not less than three persons, the ‘persons’ may be individuals, partnerships or limited companies. 768

Schedule 1 of the Interpretation Act 1978. Strictly, the Act applies only to the interpretation of Acts of Parliament and statutory instruments, but its definitions are widely used in other contexts.

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Plaintiff

Person-in-charge The name used in some JCT contracts to refer to what is generally known as the site agent or foreman. SBC, IC, ICD and DB clause 3.2 provide for the contractor to keep a competent person-in-charge on the site at all times. The person is clearly intended to be and is to be capable of receiving instructions from the architect, such instructions being deemed (qv) to have been given to the contractor itself. ‘At all times’ is not to be taken literally. It is rather more stringent than a requirement that the person-in-charge be on site ‘at all reasonable times’, but it must be read in context with the rest of the contract to mean at all times during which work is in progress. Therefore, if the contractor wishes and receives permission to work outside normal hours, the person-in-charge must be on site. MW and MWD refer to the person-incharge in clause 3.2 in similar terms to the other JCT contracts, but the attendance requirement is ‘at all reasonable times’. Although this may amount to attendance when work is in progress, much will depend upon the size and complexity of the work and, if known, the dates of the architect’s visits. Frequent visits by the person-in-charge may suffice in the case of very small and simple projects. See also: Competent; Site manager.

Personal injury See: Injury. Personal property Also called personalty. All forms of property other than freehold estates and interests in land. It is contrasted with real property (qv), and covers everything (other than freehold estates and interests) that is capable of being owned. Some things are incapable of being owned, e.g. the air or running water. Such an item is known as res nullius – a thing belonging to nobody. Personal property is not confined to tangible objects, which are known as chattels (qv), but includes intangible rights such as debts and copyright. Rights of this sort are called choses in action (qv) as opposed to choses in possession (qv). For example, a lender of money has a present right to repayment from the borrower – a chose in action. That right is a property right enforceable by means of legal action and may, subject to conditions, be transferred to a third party by assignment (qv). Leasehold interests are, for historical reasons, classified as personal property, and are called chattels real in contrast to chattels personal. Figure 11 shows the position in diagram form. See also: Intellectual property rights.

Personal representative An executor or administrator of the estate of a deceased person. The representative is a trustee, and stands in the shoes of the deceased. In contractual terms, a personal representative is a named person acting as agent for one of the parties with full authority. The architect is not the personal representative of the employer. The Employer’s Representative (qv) under clause 3.3 of SBC is able to exercise the employer’s functions under the contract, except to the extent stated by the employer in the notice of appointment given to the contractor. See also: Agency; Representative; Trust.

PFI See: Private Finance Initiative. Plaintiff See: Claimant. 407

Plan of Work personal

land buildings woods etc.

chattels real (leaseholds)

personal

personal property

corporeal hereditaments

real

choses in possession goods vehicles furniture etc.

easements profits

chattels

incorporeal hereditaments

choses in action patents trade marks debts rights of action

‘ “Land” includes land of any tenure, and mines and minerals ... buildings or parts of buildings (whether the division is horizontal, vertical or made in any other way) and other corporeal hereditaments; also [any] incorporeal hereditament, and an easement, right, privilege or benefit in, over, or derived from land...’ Law of Property Act 1925, s. 205 (1) (ix)

Figure 11

Division of property.

Plan of Work See RIBA Plan of Work. Planning consent Statutory control over the development and use of land in England and Wales is now principally consolidated within six Acts: the Town and Country Planning Act 1990; the Planning (Listed Buildings and Conservation Areas) Act 1990; the Planning (Hazardous Substances) Act 1990; the Planning (Consequential Provisions) Act 1990; the Planning and Compensation Act 1991; and the Planning and Compulsory Purchase Act 2004. The Acts, together with various rules, regulations and orders, constitute the Town and Country 408

Planning consent Planning Code, which controls the development and use of all land and buildings. A planning application should be made on the relevant form issued by the local planning authority. It must be submitted, properly completed, together with relevant plans, documents and the fee. A national planning application form is being considered, and often it should be possible to submit applications (and drawings) on-line to a local planning authority.769 Applications are of two main types: (i) detailed application and (ii) outline application. It is often prudent, before making a detailed application, to obtain outline permission to establish that the principle of the development is acceptable, or whether access or siting are acceptable. Details not provided at this stage can be reserved for subsequent approval. This is a convenient and relatively inexpensive way of establishing the likelihood of a proposal being approved. A statement of development principles may be required with an outline application. A detailed application must provide all the details of a proposed development, including design, access, parking, landscaping and so on. Additional supporting information may also be required, depending on the scale and nature of the proposals. In complicated cases a transport, retail impact or economic impact assessment and a planning, design or environmental statement may be necessary. All types of application (apart from applications for listed building consent) must be accompanied by a fee. Definition of the applicant for planning permission is important, and it may have legal implications. Certainty is required about ownership of the site as well as about the access. It is possible to submit a planning application even if none or only part of the land is in the ownership of the applicant, provided that the proper formal notice has been served on any person other than the developer who has an ownership interest in the land. Both outline and detailed applications must include a completed relevant certificate of ownership and declaration in respect of any agricultural holding. Publicity for planning applications is required by the 1990 Act, but it is now largely the responsibility of the local planning authority, not the architect or the applicant (except in Scotland). The planning authority is under a duty to carry out various consultations before it makes a decision on certain types of application. Apart from neighbouring owners, statutory bodies such as highway authorities, the Environment Agency, English Heritage, local interest groups, nature conservation bodies, environmental health etc. may be consulted. The authority must come to a decision within 8 weeks, or 13 weeks for major applications, from the application date unless extended by agreement. If the authority fails to decide the application within that appropriate period there is no deemed consent, but the applicant can appeal. The authority may grant permission outright, or grant it subject to conditions, or refuse it, giving reasons for the conditions or refusal. Outline permissions are usually valid for three years. Full permissions are valid for three years (reduced from five years by the 2004 Act), and development must begin during this period. Permission is normally given for the land; only rarely is it personal to the applicant. Therefore permission is transferred when land is sold. In certain circumstances a planning 769

Information is available from the Planning Portal: www.planningportal.gov.uk.

409

Plans authority can decline to determine an application. Such instances include situations where an application is submitted within two years of a previous refused similar application, which has also been dismissed on appeal. Planning regulations are exceedingly complex, and the advice of the local planning officer or a specialist planning consultant should always be sought when any development is contemplated. See also: Building line; Notices.

Plans A very general word, of imprecise meaning. It is usually taken to mean the drawings to a small scale, showing work to be carried out. Strictly, a plan is a horizontal section through a portion or the whole of the work to any scale, as opposed to a vertical section or cut. In broad terms it may refer to any idea or scheme of action, for example the RIBA Plan of Work (qv).

Plant A word with two different but connected meanings. (1) The first is a rather broad term, normally referring to the equipment used by the contractor. Its meaning may be restricted by the wording of the contract. Thus SBC clause 8.7.1 refers to ‘all temporary buildings, plant, tools, equipment and Site Materials’. In this instance it is clear that plant refers to something other than equipment, tools or temporary buildings. Mechanical diggers, mixers and vehicles are indicated. However, in general terms ‘plant’ might be used to describe any kind of mechanical or non-mechanical equipment, including scaffolding and huts. Contractor’s plant will be temporarily on site, such as dumpers, cranes and the like. The NEC uses the word ‘equipment’ to define ‘items provided by the Contractor and used by him to Provide the Works and which the Works Information does not require him to include in the Works’, e.g. a mechanical digger. (2) The second meaning refers to permanent equipment built into the Works, such as boilers, fans and air conditioning units, and heating plant. This is the meaning used within the NEC at clause 11.2(12), which defines plant as ‘items intended to be included within the Works’.

Pleadings See: Statement of case. Point of law A question of law as opposed to one of fact. The term is generally encountered in the context of arbitrations (qv). If a question of law arises in the course of the proceedings, and it will significantly affect one of the parties’ rights, the party may, with the arbitrator’s consent, apply to the court for a decision on that question.770 However, if an arbitrator has decided a question of law in the award (qv), it will be very difficult, although not impossible, for either party to appeal the decision in the courts.771 Standard form contracts often make provision for either party, on notice to the other party and the arbitrator, to apply to the courts to decide a question of law arising in the course of a reference (qv), or to appeal on a question of law arising out of an award. SBC clause 9.7 is such a clause. Such clauses were originally viewed with

770 771

S. 45 Arbitration Act 1996. S. 69 Arbitration Act 1996.

410

Possession doubt as to their effectiveness in satisfying the requirements prior to an appeal; however, this type of clause has been held to effective.772

Possession In the absence of an express term (qv) in a building contract, a term will be implied that the contractor must have possession of the site in sufficient time to allow completion of the Works by the contract completion date (qv).773 Failure by the employer to give sufficient possession will amount to a breach of contract entitling the contractor to damages.774 Many standard forms state the date on which possession must be given, e.g. SBC, IC and ICD clause 2.4, DB 2.3 and ACA clause 11.1. However, under the MP form the contractor is given not possession of the site but access to the site (clause 15.1) – such access as may reasonably be necessary to undertake the Works. Clause 15.1 expressly states that the contractor is not entitled to exclusive possession of the site. SBC, IC, ICD and DB empower the employer to defer the giving of possession for a stated period. However, that course cannot be taken without consequence. Where deferment is required, the contractor will inevitably be entitled to an extension of the contract period, and is likely to be able to successfully claim loss and/or expense. MW and MWD do not give a date for possession. They give a date on which the Works may be commenced (MW clause 2.2 and MWD clause 2.3), but in practice and in law this must also be the latest date for possession. GC/Works/1 clause 34 makes provision for the employer to give possession within the period or periods specified in the abstract of particulars (qv). Where no period is specified, the order must be given within a reasonable time after acceptance of the contractor’s tender. The contract period, and hence the date for completion, is to be stated in the abstract of particulars. If the employer fails to give possession on the due date then, unless the contract provides for deferment of possession, the contractor is entitled to sue for damages, and the date for completion may become at large (see Time at large). It is not possible to overcome the problem by issuing an instruction to postpone the Works and subsequently awarding an extension of time to cover postponement. Possession of the site and the carrying out of the Works are two entirely different things. In preparing to commence the Works the contractor will need to do a number of things that are not strictly carrying out the Works, but for which it must have possession of the site, e.g. erecting fencing and establishing site accommodation and compounds. A failure by the employer to give possession on the date named is a breach of contract, and since default in giving possession is a breach of a significant term of the contract, prolonged failure to give possession, and acceptance by the contractor of the employer’s breach, may entitle the contractor to accept the breach as repudiation of the contract and to sue for damages, which would include the loss of the profit that it would have earned if the contract had been completed.775 Contractors rarely take that course, and usually decide to treat

772

Vascroft (Contractors) Ltd v. Seeboard plc (1996) 52 Con LR 1. Freeman & Son v. Hensler (1900) 64 JP 260. 774 Rapid Building Group Ltd v. Ealing Family Housing Association Ltd (1984) 1 Con LR 1. 775 Wraight Ltd v. P H & T Holdings Ltd (1968) 13 BLR 26. 773

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Possessory title the breach as a minor matter and to claim damages at common law for any loss actually incurred.776 Employers sometime argue that the contractor is entitled only to ‘sufficient possession’, and that therefore the employer need give only that degree of possession that is necessary to enable the contractor to carry out work. However, it has been stated: I think there was an implied condition on the part of the defendant that he would hand over the land to the plaintiffs to enable them to carry out what they had contracted to do, and that it applied to the whole area.777

This concerned a contract in which possession was not expressly mentioned. The court considered the matter so important that they were prepared to imply a term that possession of the whole site must be given. This appears to be the correct view. In any event, whether or not the contractor has been given sufficient possession is a matter of fact. The phrase ‘possession of the site’ has been considered, and it was held that the phrase meant possession of the whole site and that, in giving piecemeal possession, the employer was in breach of contract so as to entitle the contractor to damages: Taken literally the provisions as to the giving of possession must I think mean that unless it is qualified by some other words the obligation of the employer is to give possession of all the houses on 15 October 1973. Having regard to the nature of what was to be done that would not make very good sense, but if that is the plain meaning to be given to the words I must so construe them.778

Even if not expressly stated in the contract, the contractor will have a licence to occupy the site for the duration of the contract period in order to enable it to perform the contract. Normally it is only when the architect has certified practical completion (qv) that the contractor’s licence (qv) to occupy the site comes to an end and the employer has the right to take, or retake, possession of the site. With the exception of MW and MWD, all traditional JCT contracts make express provision for the employer to take possession of any part or parts (partial possession (qv)) of the Works before practical completion, provided that the contractor’s agreement is first obtained.

Possessory title Title to land acquired by occupying it for 12 years without paying rent or otherwise acknowledging the rights of the true owner. The period is 30 years in the case of Crown land. See also: Adverse possession.

Possible Capable of existing or happening, or that something may be done or is permissible. See also: Frustration; Impossibility.

Postponement All the common forms of contract allow the architect to postpone the whole or any part of the Works. There is usually an express term to that 776

London Borough of Hounslow v. Twickenham Garden Developments Ltd (1970) 7 BLR 81. Freeman & Son v. Hensler (1900) 64 JP 260 at 261 per Collins J. 778 Whittal Builders v. Chester-le-Street District Council (1985) 11 Con LR 40 at 51 per Mr Recorder Percival. 777

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Postponement effect, e.g. SBC clause 3.15, IC and ICD clause 3.12 and DB clause 3.10. In DB, the Works includes the completion of design. Postponement is a serious step, because the contractor will be entitled to: — an extension of time, e.g. SBC clause 2.29.2.1, IC and ICD clause 2.20.2.1, and DB clause 2.26.2.1; — financial reimbursement for loss and/or expense, e.g. SBC clause 4.24.2.1, IC and ICD clause 4.18.2.1, and DB clause 4.20.2.1. — terminate its employment if the Works are postponed for a longer period than allowed by the contract or, if no period is stipulated, a reasonable period, e.g. SBC, IC and ICD clause 8.9.2.1, and DB clause 8.9.2. The employer, in the absence of an express term (qv), has no implied right to postpone the Works. There is an implied term (qv) in every building contract that the employer will allow the contractor to begin work on the date fixed for commencement and continue working so as to complete the Works by the contract completion date (qv). Therefore, without the express term, the contractor may be able to treat postponement as an act of repudiation (qv) on the part of the employer, and sue for damages. In general, the wording of the usual postponement clauses will not extend to an express right to defer the giving of possession (qv) of the site. GC/Works/1 allows suspension of the Works under clause 40(2)(g), with the consequent extensions of time provided for under clause 36(2), provided the suspension is not a result of the contractor’s default. Provision for the contractor to determine its employment is given under clause 58(3)(e) following 182 days’ suspension. ACA allows postponement of the Works under clause 11.8, a resultant extension of time under clause 11.9, and additional payment under clause 11.8 and clause 17.1, Clause 11.8 is essentially a provision for postponing the date of taking-over, but some degree of suspension is implied. It is likely that in addition the architect also has wider powers of suspension under clause 8.1(f), which enables the issue of instructions ‘on any matter connected with the Works’. In that situation an extension of time would be awarded under clause 11.6 and, if appropriate, clause 17. There is no provision for termination of the contractor’s employment due to suspension of the Works unless the delay lasts for 60 consecutive days or more and is due to: — force majeure (qv); — clause 6.4 contingencies; — war, etc. Therefore, if suspension is ordered by the architect, the contractor is thrown upon its common law rights if the delay lasts for an unreasonable period (which in the circumstances might well be considered to be 60 consecutive days). MW and MWD probably give the architect power to postpone under clause 3.4; extension of time would fall under clause 2.7 or 2.8 as appropriate. There is no provision for reimbursement of loss and/or expense, which would have to be agreed by the employer or would become the subject of an action by the contractor at common law. The contract expressly allows the contractor to terminate its employment if the employer suspends the carrying out of all, or substantially all, of the Works for a continuous period of at least one month. It has been held that an instruction to postpone will be implied if the architect issues an instruction to the contractor that necessarily entails postponement of 413

PPC 2000 (PPC) the work, even though the instruction is not issued under the appropriate clause and does not specifically instruct postponement.779 See also: Suspension.

PPC 2000 (PPC) The PPC, updated in 2003 and 2008, is published by the Association of Consultant Architects and is titled ‘ACA Standard Form of Contract for Project Partnering’. It is a multi-party partnering contract, i.e. entered into and executed by the client, constructor, consultants and some subcontractors. PPC is recommended by Constructing Excellence as a means of helping collaborative working, is endorsed by the Construction Industry Council, and is supported by the Housing Corporation. The contract enables the client, the constructor (i.e. the main contractor), the various consultants (the client’s appointees) and, if appointed, specialists (the constructor’s sub-contractors or consultants) to work together as members of a partnering team using contractual project management practices. Further consultants and specialists may also join the contract at a later stage by signing a joining agreement. Partnering documents set out the roles of the members and govern the relationship between the partnering team. The intention is that PPC sets out a practical and clear basis for the partners to work together, according to agreed timetables, from design right through the construction phase to commissioning and handover, thus ensuring the best use of all involved from an early stage. One of its main actions is to create a core group comprising those identified in the project partnering agreement as members. The core group deals with design and cost issues, and where necessary tries to resolve disputes. In addition, partners give early warning of problems so that the core group can take prompt action. Other important aspects of the procedural framework include a commitment to manage risks cost-effectively, incentives to encourage partnering team members to maximise their efforts for the benefit of the project, and key performance indicators to measure performance. The process of making all the participants contract on identical terms means there is a single contractual point of contact rather than the more usual myriad sets of conditions. PPC has been used on a wide range of projects in the public and private sectors. The intention is that all shall share the objectives of finalising the design, agreeing a price framework, producing timetables and a maximum price so that the project is completed within the agreed time. PPC provides that the partnering team members owe each other a duty to use reasonable skill and care appropriate to their respective roles, expertise and responsibilities. This duty of care can however be amended by agreement or by using one of the standard options provided. The structure is as follows: (i) Project partnering agreement. (ii) Attestation. (iii) Partnering terms. (1) Project and partnering team members (2) Partnering documents (3) Communication and organisation (4) Objectives and targets

779

M Harrison & Co (Leeds) Ltd v. Leeds City Council (1980) 14 BLR 118; Holland, Hannen & Cubitt (Northern) Ltd v. Welsh Health Technical Services Organisation and Others (1981) 18 BLR 80.

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PPC 2000 (PPC) (5) Client representative and partnering adviser (6) Partnering timetable and project timetable (7) Health and safety, site welfare and employees (8) Design and process development (9) Intellectual property (10) Supply chain (11) Volume supply agreements (12) Prices (13) Incentives and pre-construction activities (14) Preconditions to start on site (15) Project on site (16) Quality and environment (17) Change (18) Risk management (19) Insurance and security (20) Payment (21) Project completion and support (22) Duty of care and warranties (23) Key performance indicators (KPIs) and continuous improvement (24) Joint initiatives and strategic alliancing (25) General (26) Termination (27) Problem solving and dispute avoidance or resolution (28) Special terms Appendix 1 Definitions Appendix 2 Form of joining agreement Appendix 3 Part 1 – Form of pre-construction agreement Part 2 – Form of commencement agreement Appendix 4 Part 1 – Insurance of project and site and third party property damage Part 2 – Third party liability insurance Part 3 – Professional indemnity or product liability insurance Part 4 – Insurance – general Appendix 5 Part 1 – Conciliation Part 2 – Adjudication Part 3 – Arbitration (if applicable) Appendix 6 Form of partnering timetable Appendix 7 Form of risk register Appendix 8 KPIs and targets Appendix 10 Project bank account (if applicable) A supplement is available to facilitate the use of PPC within Scotland, i.e. the Scottish Supplement PPC(S) 2000. The supplement amends the PPC terms to take account of differences with Scottish law, and also introduces suitable attestation provisions. In addition, a form for use by the constructor and specialist called the Specialist Contract for Project Partnering (qv) (i.e. SPC 2000) was published in March 2002 and amended in October 2008. Unlike the PPC this is a bilateral agreement. There is a helpful guide called the Guide to the ACA Project Partnering Contracts PPC 2000 and SPC 2000, which was published by the ACA in 2003 covering both these contracts but not the recent amendments. 415

Practicable steps In addition, the ACA has published an international version of the contract (i.e. PPC International) and also an international version of the Specialist Contract for Project Partnering (i.e. SPC International). The ACA has also published a Standard Form of Contract for Term Partnering (TPC 2005). This was published in 2005 and amended in October 2008. It is a partnering contract for the provision of works and/or services and/ or supplies on a term basis. Like the PPC this is a multi-party agreement. See also: Constructing Excellence; Partnering; Partnering documents.

Practicable steps A phrase that was found in JCT 98 at clause 25.4.7, where it referred to nominated sub-contractors’ or suppliers’ delay that the contractor has taken ‘all practicable steps’ to reduce. The steps that the contractor was required to take were all those steps that, in practice, it could take. In order to decide whether the contractor had taken all practicable steps, all the circumstances had to be properly considered. Current JCT contracts have dispensed with this phrase, but it is still encountered in some bespoke contracts. ‘Practicable’ should not be confused with ‘practical’, which describes what is possible in practice as distinct from theory. ‘Practicable’ is also to be distinguished from ‘possible’ (qv), and it is restricted in meaning. Practicable is what is possible taking all the circumstances into account, particularly those circumstances that the steps are intended to address. The reference in JCT 98 to the taking of all practicable steps is quite onerous. It is more usual to see a reference to what is reasonably practicable (qv), which connotes a selection among the possible steps to remove those that it would be unreasonable to take in the circumstances.

Practical completion The date on which the work being carried out reaches completion. It has a very special meaning.780 It is a phrase found in JCT contracts, e.g. SBC clause 2.30, IC and ICD clause 2.21, MW clause 2.9, MWD clause 2.10, and DB clause 2.27. As well as marking the date when the work is complete, it also marks the date at which: — The rectification period (qv) begins, e.g. SBC clause 2.38. — The contractor’s liability for insurance (qv) if applicable ends, e.g. SBC clause 6.7. — Liability for liquidated damages (qv) ends, e.g. SBC clause 2.32. — The employer’s right to deduct full retention ends. Half the retention percentage becomes due for release, e.g. SBC clause 4.20. — Regular interim payments (qv) cease, e.g. SBC clause 4.9. Under MW and IC contracts regular interim payments cease within 14 days of practical completion. — The period for final review for extensions of time begins, e.g. SBC clause 2.28.5. This would not apply to the MW contracts. 780 In Mariner International Hotels Limited Sino Land Company v. Atlas Limited Hang Lung Group Limited (formerly known as Hang Lung Development Company Limited) FACV No. 3 of 2006 the Court of Final Appeal of Hong Kong appears to have held the view that the expression ‘practical completion’ is a wellknown term of art used in building contracts. The court had to examine a sale agreement for a hotel and decide an issue that was conditional upon the hotel having reached practical completion. The court held that practical completion was a state of affairs in which the hotel was complete, free from any patent defects other than those to be ignored as trifling.

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Practical completion Despite the enormous importance of the date, the JCT contracts do not define ‘practical completion’, with the one exception of the MP form (see below). Under SBC clause 2.30 the architect must issue a certificate forthwith (qv) when: — in the architect’s opinion practical completion is achieved; and — the contractor has complied sufficiently with its obligation to provide as-built drawings specified in the contract to be provided in connection with any contractor’s designed portion; and — the contractor has complied sufficiently with its obligations under the CDM Regulations (qv). It is generally agreed that practical completion does not mean ‘nearly complete’. Some commentators refer to it as complete for all the practical purposes of the contract, but it is not the same thing as substantial completion (qv). Some architects insist that all work is totally complete before issuing a certificate of practical completion. Others certify when a considerable amount of work is complete, save only that which can be finished without inconveniencing the employer. It would appear to be going too far to insist on total completion before issuing a certificate; otherwise the contract would have expressly so provided.781 It might be thought that the addition of the word ‘practical’ to ‘completion’ must have some relevance. However, it has been held that ‘completion’ (qv) is the same as ‘practical completion’ in a building context.782 From a legal point of view the phrase is ambiguous. The question is whether it covers the situation where the Works are substantially finished but there are defects. This is an important matter, since the architect’s power to order the remedying of defects during the rectification period (qv) refers to defects that ‘appear’ during that period. There is conflicting case law. The House of Lords has taken the view that practical completion means that there must be no defects apparent in the Works at the date on which the architect issues the certificate: The defects liability period is provided in order to enable defects not apparent at the date of practical completion to be remedied. If they had been apparent, no such certificate would have been issued.783

In other words, the architect can issue a certificate even if some latent defects (qv) are present. In contrast, in another House of Lords case it was suggested that the architect could withhold the certificate until all known defects, except trifling ones, were corrected.784 However, in H W Neville (Sunblest) Ltd v. Wm Press & Son Ltd 785 the High Court favoured the view expressed in the Jarvis case. The judge, who was very experienced in construction disputes, said: I think that the word ‘practically’ … gave the architect a discretion to certify that [the contractor] had fulfilled its obligation … where very minor de minimis works had not

781 See Cheltan PTY Ltd v. Stanton [2001] 122 Con LR 110. The issue in this Australian case concerned the meaning of ‘practically complete’ in relation to the accrual of the right to a stage payment. Here the court held that practical completion denotes something less than full completion, and may be achieved not withstanding ‘minor omissions and/or defects’. 782 Emson Eastern Ltd (in Receivership) v. E M E Developments (1991) 26 Con LR 57. 783 Jarvis (J) & Sons Ltd v. Westminster Corporation (1970) 7 BLR 64 at 75 per Viscount Dilhorne. 784 P & M Kaye Ltd v. Hosier & Dickinson Ltd [1972] 1 All ER 121. 785 (1981) 20 BLR 78.

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Practical completion been carried out, but if there were any patent defects in what [the contractor] had done the architect could not have given a certificate of practical completion.786

The same judge said in another case: Because a building can seldom if ever be built precisely as required by drawings and specification, the contract realistically refers to ‘practical completion’, and not ‘completion’ but they mean the same.787

It seems, on balance, that the architect is justified in issuing a certificate if reasonably satisfied that the Works accord with the contract, notwithstanding that there are very minor defects and work to be completed that can be dealt with during the rectification period (qv).788 ‘Practical completion’ is expressly defined in clause 1 of the MP form. It provides that practical completion takes place when the project is complete for all practical purposes. In particular: compliance with relevant statutory requirements must have been achieved, and necessary consents and approvals obtained; the project’s use ought not to be affected by minor outstanding work; if there are essential stipulations in the requirements, they should have been satisfied; and the health and safety file, ‘as built’ information and operating and maintenance information have been delivered to the employer. The overriding criterion is that the project be complete for all ‘practical purposes’. The definition permits the existence of minor outstanding work, but there is no mention of minor defects. It is possible to identify within the requirements specific stipulations that must be satisfied before practical completion is achieved. Under clause 15.4 the contractor is to notify the employer of when it believes practical completion has occurred. If the employer does not agree, then the employer is to notify the contractor of the outstanding work preventing the issue of a statement. Under CE at clause 3.7 the purchaser is to issue a certificate when, in the reasonable opinion of the purchaser, the services are complete. This is the only certificate issued under the contract. The certificate is to be issued following a satisfactory inspection by the purchaser, and when all commissioning and testing are complete as well as the services. ACA uses the phrase ‘fit and ready for Taking-Over by the Employer’ at clause 12.1. Taking-over may be considered to be loosely equivalent to practical completion, and includes compliance with obligations to provide information for the health and safety file in accordance with the CDM Regulations 2007 (qv), but there are some important differences: — The contractor must notify the architect when it considers that the Works are or will be fit and ready for taking-over. — The contractor must attach a list if there are any outstanding items of work necessary to make the Works fit and ready for taking-over. — The architect may either issue the taking-over certificate, or notify the contractor of items of work the architect believes are necessary to make

786

H W Neville (Sunblest) Ltd v. Wm Press & Son Ltd (1981) 20 BLR 78 at 87 per Judge John Newey. Emson Eastern Ltd (in Receivership) v. E M E Developments (1991) 26 Con LR 57 at 63 per Judge John Newey. 788 It would seem sensible to reach an agreement with the contractor, set out in writing, as to how and by when the minor defects and works are to be addressed during the rectification period. 787

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Practical completion certificate the Works fit and ready for taking-over, or approve the contractor’s list, or at any time add to the contractor’s list. — The architect is expressly given discretion to issue a taking-over certificate upon receipt of the contractor’s written undertaking to complete with all due diligence any work contained in the architect’s or the contractor’s list. In any event the architect must issue the certificate forthwith (qv) when the items are completed. The certificate marks the date at which: — The contractor’s liability for loss or damage to the Works and to goods intended for the Works under clause 6.2 ends. — The contractor’s liability for insurance under clause 6.4, Alternative 1, ends. — Liability for liquidated or unliquidated damages, under clause 11.3, alternatives 1 or 2 respectively, ends. — The maintenance period (qv) under clause 12.2 begins. — The regular calculation of fluctuations (if applicable) on interim certificates under clause 18.1 ends. — The period for review of extensions of time granted begins under clause 11.7. GC/Works/1 makes reference, at clause 34(1), to the Works or any relevant section being ‘completed’ in accordance with the contract by the date or dates for completion. The project manager is specifically required, by clause 39.1, to issue a certificate stating the date when the Works or any section or any completed part under clause 37 is complete, including sufficient compliance with the obligation to provide information for the health and safety file in accordance with the CDM Regulations 2007. The wording indicates that this is equivalent to ‘practical completion’, and the certificate marks the date at which: — The contractor’s liability for liquidated damages ends. — The contractor is entitled to receive the estimated final sum less one half of the reserve. — The maintenance period begins. At the end of the longest relevant maintenance period the project manager must issue a further certificate when the defects are made good. It is generally accepted that if practical completion is validly issued then the architect or engineer cannot issue further instructions (qv) requiring variations.789 There is some precedent to the effect that a contractor is obliged to comply with variations issued after practical completion.790 That unfortunate decision may be distinguished on the grounds that the case is based on a JCT prime cost form of contract, which did not contain an adjudication clause (as there is no stipulated scope of work, the contractor simply carried out instructed work), and the contractor agreed to remain on site after practical completion to carry out further work.

Practical completion certificate The name given to the certificate issued by the contract administrator under a number of JCT contracts, e.g. ICD clause 2.21

789

New Islington and Hackney Housing Association Ltd v. Pollard Thomas and Edwards Ltd [2001] BLR 74. 790 Treasure & Son Ltd v. Martin Dawes [2007] EWHC 2420 (TCC).

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Practical completion statement and SBC clause 2.30, when the Works or a section has, in the opinion of the contract administrator, reached practical completion (qv). Figure 12 shows an example of a practical completion certificate.

Practical completion statement A statement issued by the employer under DB clause 2.27 to identify the date when practical completion (qv) was achieved.

Pre-action protocol The pre-action protocol was introduced by the Civil Procedure Rules (qv) in 1999, and was revised in April 2007. The objective is to — encourage the early exchange of information about claims; — try to avoid litigation, by agreeing settlements before litigation; and — promote the management of litigation proceedings if they are necessary. It does not apply to enforcement of adjudication (qv) proceedings, injunctive relief, summary judgment pursuant to Part 24 of the Civil Procedure Rules (qv), or cases where the same issues (or substantially so) have been recently adjudicated or subject to alternative dispute resolution procedures. Paragraph 1.5 makes it clear that costs incurred in the protocol process must be proportionate to the complexity of the case and the sum in dispute. The following pre-action protocols with particular relevance to construction came into force as stated: — Construction and engineering disputes 2 October 2000 — Professional negligence 16 July 2001 Other protocols may be added. The courts do not view favourably those who act unreasonably, and will not be sympathetic to parties who do not follow the principles of the protocol. It has been held,791 where a party’s conduct was found to be heavy handed and where they were in breach of the protocol, so that their behaviour was found to be unreasonable (with the result that the judge found it was unnecessary to commence the litigation), that such party should be penalised in costs. In that case indemnity costs were imposed after making allowance for the costs that would have been incurred in mediation. The aim is that, before court proceedings commence, the parties provide early information so that each knows the other’s case and is able to accept or reject parts of the case, and that they meet formally to agree issues and attempt to resolve the differences. There are three basic elements to the protocol. First, in a letter of claim, the claimant sets out the details of the parties and the claim being made. They must set out the facts, the basis of the claim, and the relief claimed, including how the damages are quantified, and whether an extension of time is sought for the period claimed. The names of any expert instructed must also be disclosed. Second, the defendant must acknowledge receipt within 14 days and state, if relevant, whether they intend to object on jurisdictional grounds. If there are no jurisdictional grounds the defendant must then respond to the claimant within 28 days (which can be extended by agreement up to three months), and must state what facts and claims are agreed or not agreed, and why. If the claim is rejected in whole or in part, they must state why the claim is rejected and whether a counterclaim will be made and, if so, give the equivalent information that is required to be given in a letter of claim. Again, any experts instructed 791

Paul Thomas Construction Ltd v. Hyland [2000] ADR LR 03/08 TCC.

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Pre-action protocol

Figure 12 Practical completion certificate. This form is part of a suite of contract administration forms published by RIBA Publishing, and available from ribabookshops.com.

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Pre-agreed adjustment must be disclosed. Third, there must be a pre-action meeting to be held within 28 days, or 28 days after the claimant sends a response to any counterclaim. The meeting is held without prejudice (qv) and should be attended by those who are authorised to make settlements on behalf of the parties and their legal advisers. The purpose is to agree issues where possible, and identify areas of difference and how they may be settled without litigation. If litigation is unavoidable then agreement should be reached on the need for and use of experts, disclosure of documents, and the conduct of the case in litigation. The parties should at least consider the use of alternative dispute resolution, but no party can be forced to mediate or use any other form of dispute resolution. Full details of the protocols can be found on www.hmcourts-service.gov.uk, under the ‘Civil Procedure Rules’ link. See also: Limitation Act 1980.

Pre-agreed adjustment A term used in SBC, and defined in clause 2.26.2 as the fixing of a revised completion date for the Works, or for a section by a confirmed acceptance of a Schedule 2 quotation (qv) in respect of a variation or other work under clause 5.2.1. Although extensions of time and the fixing of a later date for completion of the Works are duties normally undertaken by the architect under clause 2.28, the contract now acknowledges that a new date can be agreed between the parties as part of the Schedule 2 quotation process, and the architect must take such agreed date into account when determining new extensions of time under clause 2.28. The architect cannot reduce the period for a pre-agreed adjustment. The term is also used in DB and defined at clause 1 simply by a reference to clause 2.23.2. It is defined as meaning the fixing of a revised completion date for the Works or a section in connection with a change (qv) under clause 5.2, which sets out the valuation rules for changes and provisional sums.

Precedence of documents See: Priority of documents. Precedent See: Judicial precedent. Pre-construction activities A phrase used and defined (appendix 1) within PPC when referring to activities other than the constructor’s services to be undertaken by the constructor prior to the execution of the commencement agreement. The constructor’s services include design or other services to be undertaken by the constructor and for which a fee has been agreed and included within the price framework. These services are to be completed by the constructor in accordance with the partnering documents (qv) and prior to the date of commencement. In contrast, the pre-construction activities would be undertaken by means of a pre-construction agreement (qv). These activities may be undertaken on or off site, e.g. commence ‘off site’ fabrication or on-site diversion of services.

Pre-construction agreement See: Partnering documents. Preferred specialist A term used and defined (appendix 1) within PPC for specialists (qv) proposed by the constructor in a business case (qv) (e.g. subcontractors, suppliers or consultants) in accordance with clause 10.3. See also: PPC. 422

Prescription

Preferred supplier Following the decision in Proforce Recruit Limited v. Rugby Group Limited 792 it would seem that the word ‘preferred’ in the sense of ‘preferred supplier’, ‘preferred tenderer’ or ‘preferred contractor’ does not confer any special rights. Subject to any evidence to the contrary (e.g. a written definition in the agreement) it simply means ‘approved’. It does not mean ‘exclusive’ or ‘sole’. The court reached its decision on the basis of what it thought a reasonable person would believe the word to mean, having knowledge of the parties’ precontract negotiations. The courts took this approach given that the parties failed to define what they meant by ‘preferred supplier’. See also: Factual matrix.

Preliminaries That part of the bills of quantities (qv) or specification that describes the Works in general terms and lists the contractor’s general obligations, the restrictions imposed by the employer, and the contractual terms, including any necessary amendments to such terms. It must be remembered that, when using a JCT contract, any amendments noted in the preliminaries section as being made to the contract must in fact be made to the printed form of contract. Where amendments are solely in the preliminaries they are not effective to override or modify what is in the printed contract, e.g. SBC clause 1.3. The preliminaries should be priced by a contractor tendering for a project. SBC within the valuation rules (clause 5.6.3.3) requires that allowance must be made, where appropriate, for addition to or reduction of preliminary items as referred to in the Standard Method of Measurement (qv).

Prescription The vesting of a right by reason of lapse of time. Prescription is the most important method of acquiring easements (qv) over property, such as rights of light and rights of way. It is based on long enjoyment as of right. At common law it was necessary to prove that the right had been enjoyed since 1189 – the beginning of legal memory – but because of the difficulty of proving enjoyment for so long a period, evidence of use for a period of 20 years raised a presumption that the right had existed in 1189. A prescriptive claim could be defeated by showing that the right must have arisen at a later date, and to make matters easier the courts evolved the doctrine of ‘lost modern grant’, under which if a user could be proved for 20 years, a lawful grant would be presumed. That presumption could be defeated by proof that during the period when the grant could have been made there was nobody who could lawfully have made it. The Prescription Act 1832 was passed to simplify these difficulties, so that claims to easements generally cannot be defeated by showing that use commenced after 1189 if 20 years’ uninterrupted enjoyment as of right is shown. If 40 years of enjoyment without interruption is proved, the right becomes absolute unless it has been enjoyed by written agreement or consent.793 In the case of rights of light (qv) there is only one period, 20 years, and the actual enjoyment need not be as of right.

792 793

[2007] EWHC 1621 (QB). S. 3 Prescription Act 1832.

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Presumption The Act makes no change in the common law requirements as to prescription itself. The right claimed must have been exercised nec vi, nec clam, nec precario – it must not be exercised forcibly (vi), secretly (clam) or with consent (precario). See also: Right of light

Presumption A conclusion or inference that may or must be drawn from other established facts. Presumptions are important in the law of evidence (qv). They may be said to be a conclusion that should be drawn unless the contrary is proved. There are presumptions of law such as: (i) the presumption of regularity, so that where a public act has been carried out it is presumed it has been carried out with all proper formalities; and (ii) res ipsa loquitor (the facts speak for themselves), where it may be said that the event that caused the damage complained of would not have occurred if proper care had been taken. There are also presumptions of fact. For all intent and purposes these are judicial notice, i.e. knowledge attributed to judges and arbitrators, such as notorious (qv) facts that are so well established no one can question them, including, surprisingly, that criminals have unhappy lives. Other presumptions include facts noted after enquiry from proper sources (e.g. reference books) and the existence of common law, statutes and treaties and the like.

Pre-tender design Under the BPF System (qv) this is the term used to refer to the design and specification carried out by the design leader (qv) and consultants (qv) before tenders are invited.

Pre-tender information Information, in the form of drawings, details, schedules or reports, which the employer or the architect and other members of the design team prepare for the contractor to consider and take into account when preparing its tender. Some of this information will be sent to the contractor with or as part of the invitation to tender (qv). Other pieces of information may be retained by the architect, and the contractor will be notified of their existence and availability. Usually, there will be a contract provision to the effect that the contractor is deemed (qv) to have inspected the information available at the architect’s office, whether or not the contractor has in fact done so. It is important that all pre-tender information be accurate. Inaccurate or misleading information can lead to an action for damages, or to the contract being set aside on the grounds of misrepresentation (qv).

Prevention In its ordinary sense, the act of preventing something is to keep it from happening. There is an implied term in every contract that neither party will prevent or hinder the other in the carrying out of its obligations. This has long been supported by the courts: There is an implied term by each party that he will not do anything to prevent the other party from performing the contract or to delay him in performing it. I agree that generally such a term is by law imported into every contract.794 794

Barque Quilpé Ltd v. Brown [1904] 2 KB 264 at 274 per Vaughan Williams LJ. The principle was repeated in Cory Ltd v. City of London Corporation [1951] 2 All ER 85.

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Priced activity schedule/activity schedule In building contracts, acts of prevention can occur directly where the Works are suspended or postponed, or when access to the site is deliberately obstructed. Prevention can also be indirect. For example, an instruction to a contractor to carry out a large amount of additional work will prevent it from completing by the completion date in the contract. In such instances, if there were no provision in the contract for fixing a new date for completion, time would become ‘at large’ (qv). SBC contains express provisions giving grounds for extension of time and loss and/or expense, in clauses 2.29.6 and 4.24.5 respectively, in the case of ‘impediment, prevention or default’ of the employer or one of the employer’s persons (qv).

Price The monetary value of something. The price at which a builder is prepared to carry out work. It will include the cost of labour, materials and overheads, together with an addition for profit. ‘Prices’ is a word often used to refer to the sums that the builder inserts against the items in a priced document, e.g. bills of quantities, and must be distinguished from the rate (qv), which is the sum that the contractor inserts per unit. The price is then the product of the unit rate multiplied by the number of units. SBC refers to both rates and prices in this sense in clause 5.6 dealing with measurable work. Occasionally, bespoke building contracts will refer to the price as the amount to be paid by the employer for the whole of the Works. This is in contrast to the more usual ‘contract sum’ (qv) used by the JCT and ACA contracts. See also: Priced statement; Schedule of prices.

Price framework See: Partnering documents. Priced activity schedule/activity schedule An alternative document used for the valuation of part of the Works. Reference is made to the schedule in SBC, IC, ICD and the appropriate sub-contracts. Finding the definition in SBC, IC and ICD is a tortuous process. The definitions clause (1.1) merely refers the reader to the second recital (SBC), the fourth recital (IC) or the fifth recital (ICD). Each recital merely gives the option that the contractor provides the schedule or the provision can be deleted. It is only when the footnote is explored that a definition is revealed. Essentially it provides in each instance that each activity should be priced so that the total of the activity prices equals the contract sum (qv) after deleting provisional sums (qv), prime cost sums (qv) and the contractor’s profit on them, together with the value of approximate quantity work in the bills of quantities (qv). This definition is repeated in the relevant footnotes to the IC and ICD recitals. The sub-contracts generally follow a similar pattern. In SBCSub/A the definition is found in the footnote to the third recital, and the definitions in SBCSub/ D/A, ICSub/A and ICSub/D/A are to be found in the footnotes to the seventh, third and seventh recitals respectively. Although there is provision for an activity schedule in the Intermediate Named Sub-Contract Tender and Agreement (ICSub/NAM), it is only to be found in the Invitation to Tender (ICSub/NAM/ IT) at the end of, and somewhat apart from, the list of priced documents. However, there is no definition. SBC clause 4.16.1.1 provides that, where there is an activity schedule, the value to be included in the valuation for each activity is to be a proportion of the value allotted to the activity equal to the proportion of the work in that 425

Priced document activity that has been properly executed. The valuation derived from the priced activity schedule replaces what would have been valued in accordance with the priced bill of quantities. Although the activity schedule is defined very broadly, it is left to the contractor or to the employer to decide exactly how the activities are to be allocated and divided. The best schedules are undoubtedly those that are sufficiently detailed, both in description of activities and in apportionment of prices, to allow a realistic valuation to be made. If the activity is too generalised (e.g. ‘central heating – £153,478’), the valuation becomes little more than an informed guess. A similar schedule, termed a ‘schedule of activities’, is included in the BPF System (qv). Activity schedule is also referred to in the NEC (qv) contract options A (priced contract with activity schedule) and option C (target cost with activity schedule). The activity schedule is defined at clause 11.2(20) as the activity schedule in the contract data (qv) unless it is later changed under the contract. This is a rather unhelpful definition. The schedule is identified within the contract data part two (data provided by the contractor). The activity schedule is neither Works information nor site information (clause 54.1); it is a pricing document, which cannot be used to determine what the contractor is to design or build. The schedule is used to value work carried out for the purposes of interim payments under option A, and payment is made for completed activities (clause 11.2(27)). Under option C it is used to calculate the target cost. Should the contractor change its planned method of working, so that the schedule does not reflect the activities shown on the programme, then the contractor is to submit a revised schedule. The revised schedule is to be submitted to the project manager for acceptance.

Priced document A phrase used in IC and ICD at the fifth recital to refer to a priced copy of the bills of quantities, specification or works schedule under pricing option A or the schedule of rates or contract sum analysis provided under pricing option B.

Priced programme Under the BPF System (qv) the design leader must produce a priced programme. This consists of a priced schedule of the design activities and a programme showing when they will be carried out. Where separate consultants (qv) are appointed, they must undertake a similar exercise. Priced programmes become part of the BPF master programme (qv) and master cost plan (qv). The priced programme is used as a plan of work, and as a basis for reporting progress. Payments to the design leader and consultants are based on completed activities shown in the priced programme. See also: Schedule of activities.

Priced statement This is a procedure that was included in JCT 98 at clause 13.4.1.2, IFC 98 at clause 3.7.1.2, and WCD 98 at clause 12.4.2 for the valuing of work instructed as a variation, or of work approximately quantified in the contract documents. Upon receipt of an instruction, or at commencement of the approximately measured work, the contractor had the option to provide a statement of its price for carrying out the work. The process was complicated, 426

Prime cost and the contract provisions were not easy to understand. The priced statement procedure was made the default situation so far as valuation was concerned – something that was frequently overlooked in practice. The JCT abandoned the procedure when it revised its contracts in 2005.

Prima facie A Latin expression that means ‘at first view’. It is less common now, but it was often used when making clear that what was being said amounted only to an initial conclusion. For example: ‘The employer refuses to pay, but there is an architect’s certificate, and prima facie the contractor is entitled to its money.’

Prime contracting A procurement system whose principles were proposed by the Egan Report (qv). The Construction Supply Network Project (CSNP) has been set up to develop and promote the new approach. The government has published a document called the ‘Building Down Barriers Approach’, which identifies and integrates certain techniques. CSNP identifies five key phases in prime contracting: — Inception: During this phase the client team establishes the client’s needs, completes option studies, drafts the strategic brief, and appoints an adviser. — Definition and qualification: The client team selects the prime contractor, which in turn drafts the project programme and identifies key supply chain partners (qv). — Concept design: The prime contractor continues the principal role by exploring the client’s functional requirements, drafting the project brief, involving the supply chain, developing and appraising potential solutions, and providing an initial guaranteed maximum price based on optimum whole life cost. — Detailed design and construction: In this phase the prime contractor completes the design, constructs the building ‘right first time’ (qv), optimises whole life costs, develops a compliance plan, and hands over the building. — Post handover: The prime contractor monitors and maintains the facility until proof of compliance. Further information can be obtained from the Prime Contractor Handbook of Supply Chain Management, developed by Richard Holti, Davide Nicolini and Mark Smalley, supported by the Defence Estate Organisation, Department of the Environment, Transport and the Regions, AMEC Construction and John Laing. See also: Continuous improvement; Supply clusters.

Prime cost The actual cost to the contractor of undertaking work, e.g. the wages paid, the cost of supervision, the price of materials and of sub-contract work. In contracts let on the basis of reimbursing the contractor its prime cost, it is important to have a precise definition of what prime cost is to be reimbursed. The JCT Prime Cost Building Contract (PCC) provides for the contractor to be paid its prime costs plus a percentage or a lump sum fee. It is suitable for projects where, for one reason or another, it is not possible to prepare detailed production information (qv) before Works commence. Under SBC, where variations cannot be properly valued by measurement, there is provision for 427

Prime cost (PC) sums valuation by reference to its prime cost. Clause 5.7.1 provides that the prime cost is to be calculated in accordance with the definition of prime cost of daywork issued by the Royal Institution of Chartered Surveyors and the Construction Confederation.

Prime cost (PC) sums A term found in many standard forms of contract. Its meaning is subject to some variation, depending upon the contract or the person using the phrase. It is often confused with the term ‘provisional sums’ (qv) and the phrases ‘PC sums’ and ‘provisional sums’ are used indiscriminately. A prime cost sum is a sum of money included in a contract, usually by means of an item in the bills of quantities (qv), to be expended on materials or goods from suppliers or on work to be carried out by sub-contractors nominated by the employer. The contractor has to add its required profit to this sum at tender stage. By definition, a prime cost sum should be a specific and accurately known amount, and should be obtained as a result of a direct quotation or tender from the supplier or sub-contractor concerned. The reason for confusion with a provisional sum becomes clear when it is appreciated that, in practice, a PC sum is seldom put in the bills as a precise amount. Thus, for example, a figure of £988.90 is obtained from the supplier and a figure of £1,000.00 is put in the bills ‘to allow for increases for various reasons’. The additional £11.10 is, in effect, a small contingency sum. Alternatively, a PC sum is inserted before quotations have been invited. The contractor’s profit is calculated on the bill sum (i.e. £1,000.00), and must be adjusted when the final supply sum is known. Where bills of quantities are based upon the Standard Method of Measurement (qv) 7th edition, ‘prime cost sum’ is referred to but nowhere defined. GC/ Works/1 mentions PC sums in clause 63.

Principal contractor A competent individual or firm appointed under the Construction (Design and Management) Regulations 2007 (qv) and whose duties are set out in regulations 22 to 24. The main duty is to plan, manage and coordinate the work during the construction phase so that risks are properly controlled. Therefore it must be skilled in health and safety issues, and in the management of construction sites. Often the principal contractor will be the main contractor engaged for the building Works. The duties include: — being satisfied that clients are aware of their duties, a CDM coordinator is appointed, and the Health and Safety Executive has been notified before work commences; — being satisfied that designers and contractors are competent and properly resourced; — planning, managing and monitoring the construction phase, including management on site suitable for the risk and activity; — preparing a construction phase plan, developing and implementing it, and keeping it up to date; — informing each contractor of the minimum pre-planning and preparation time before commencement; — ensuring safe working and coordination on site; — providing appropriate welfare facilities; — enforcing site rules; — ensuring that workers are provided with information on and consulted regarding health and safety; 428

Private Finance Initiative (PFI) —

ensuring the provision of all necessary health and safety information to all engaged on site; — liaising with CDM coordinator on design; — providing information on health and safety to the CDM coordinator; — taking reasonable measures to prevent unauthorised access to site. Appointment of the principal contractor should be made as soon as reasonably practicable before management of the construction and the construction phase of the project begin, but in any event early enough to ensure that the construction phase plan is prepared under regulation 23. The phrase is usually defined or identified within most standard forms, e.g. DB article 6.

Priority of documents The ranking of documents in the order in which they are to be interpreted in the event of discrepancies between the documents making up a contract. The phrase ‘precedence of documents’ is also sometimes used. Standard form contracts often contain an express term dealing with the priority to be given to the various contract documents. In the absence of such a term, where there is a contract in printed form with handwritten or typewritten insertions, additions or amendments that are inconsistent with the printed words, the written words prevail.795 This sensible rule can be overridden. In SBC clause 1.3 it is stated that ‘nothing contained in the Contract Bills or the CDP documents shall override or modify the Agreement or these Conditions.’ The wording in clause 1.3 of IC, ICD and DB is slightly different, to allow for the different documents involved, but it is to the same effect. This clear wording means that specially written clauses in the bills of quantities (e.g. dealing with insurance) will not prevail if they conflict with the wording of the printed form.796 However, a written clause that merely amounts to an explanation of, or an addition to, one of the printed clauses in the conditions will still have its desired effect. For example, a provision in the bills of quantities requiring compliance with an agreed programme is unlikely to qualify as an attempt to override or modify the printed terms of the contract.797 GC/Works/1 clause 2 governs the priority of contract documents, and also accords them an artificial order of precedence. A similar listing approach is used within PPC at clause 2.6. More sensibly, ACA clause 1.3 provides that ‘The provisions of this Form of Agreement shall prevail over the provisions contained in any other of the Contract Documents save only the following provisions which shall prevail over anything contained in this Agreement.’ This gives the opportunity to the parties to insert whatever provisions or alternative order of precedence they choose. See also: Interpretation of contracts; Precedence of documents.

Private Finance Initiative (PFI) PFI was introduced in 1992. It is not a procurement system, although it is becoming clear that procurement routes based on an adaptation of design and build (qv) are standard. PFI is a procedure

795

Robertson v. French (1803) 102 ER 779. Gleeson v. Hillingdon London Borough (1970) 215 EG 165. 797 Moody v. Ellis (1983) 26 BLR. 39. 796

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Privilege based upon the idea that the private sector should be involved in providing and operating various assets that might otherwise never have been started, but with the eventual aim being that the project concerned will return to the public sector. The idea has much to commend it, but despite its obvious advantages there are also many complications. On the plus side, private finance invested in the public sector introduces a high level of technical, managerial and financial skills and experience, while at the same time a construction company willing to engage in such a project might actually be in the position of creating its own workload. However, it is usual for a special purpose vehicle (SPV) to be set up for the express purpose of obtaining finance and carrying out the project. More often than not it is a joint venture company between the finance providers and the building contractor. To ensure that the SPV secures a satisfactory return on investment, the agreements with central or local government are normally for periods of as much as 25 years. While this apparently ensures sufficient time to make a substantial profit, the long period places a high level of risk on the SPV, which more often than not must enter into several undertakings about the services to be provided. The system is not yet fully proven, and there are still misgivings among some construction companies, which have indicated that they have had to bear most of the losses. At the heart of any PFI project is the concession contract. This sets out what is required from the public service facility, and the basis of payment. It also specifies the way in which risk is shared between the public and private sectors. When tendered, the bids must take in account the whole life costs of the building, including the appropriate level of repair and maintenance. Projects that the government has said would be suitable for PFI schemes include hospitals, prisons, public sector offices, types of housing, roads and railways. There is a wealth of information available on the Internet at www. hm-treasury-gov.uk.

Privilege In the law of evidence (qv) this is the rule that permits a witness to refuse to answer certain questions, or to refuse to produce a document. In the law of defamation (qv) privilege refers to a defence: for example, statements made by witnesses in judicial proceedings are absolutely privileged, so that the person making them is not liable in defamation. Other statements may be privileged to a lesser extent (generally termed ‘qualified privilege’), provided that the contents are honestly believed to be true by the writer, and there is an absence of malice. As a matter of public policy, communications between client and professional adviser made with litigation in mind are also usually privileged. It is generally accepted that communications between a client and solicitor enjoy absolute privilege, for obvious reasons. If a defendant (qv) seeks to use some part of their own privileged document in evidence, the defendant will be deemed to have waived privilege in the whole document so far as it relates to the same subject matter.798 A party can also make admissions or concessions – either orally or written – without prejudice, and these are also privileged, as it is considered to be in 798

Great Atlantic Insurance Co v. Home Insurance Co (1981) 2 All ER 485.

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Privity of contract the public interest for litigation or arbitration to be avoided where possible. However, there is no privilege unless there is a real attempt to settle. See also: Without prejudice.

Privity of contract The English common law rule that only the actual parties to a contract can acquire rights and liabilities under it.799 The rule applies even if the contract itself expressly provides that a third party shall benefit.800 The doctrine of privity of contract is subject to several common law exceptions. For example: — Covenants (qv) in a lease are normally binding not only on the original parties but also on their successors in title. — A husband who insures his life in favour of his wife or children may, under statute, create enforceable rights in them. — Agency (qv). Privity of contract is an inconvenient notion in modern commercial practice. Commonly a contractual relationship between two parties involves a series of other linked transactions; yet the law generally treats each link as an entirely separate relationship. It can be argued that there is considerable merit in analysing interlocking relationships in this way. However, commercial interests tend to see the doctrine as unduly restrictive. The perceived restrictions resulting from the doctrine of privity of contract were eased by the Contracts (Rights of Third Parties) Act 1999 (qv), which came into force in 1999 in England, Wales and Northern Ireland. The common law doctrine is now significantly modified and, subject to the provisions of the Act, a third party who is not a party to a contract may enforce a term of the contract either if the contract makes express provision to that effect or if one or more terms of the contract purport to confer such a benefit. It is notable that most contracts, whether standard or bespoke, include a clause that expressly excludes the effect of the Act, e.g. IC and ICD clause 1.6. SBC is a notable exception. Clause 1.6 of SBC only partly excludes the operation of the Act. The contract makes use of the Act in clause 7 and part 2 of the contract particulars (qv) to save the need for a separate warranty from the contractor to various parties. This is done by printing the terms normally to be found in such warranties as a schedule at the back of the contract, and making provision for certain specified third parties to enforce those rights. It remains to be seen how what appear initially to be fairly complex provisions work in practice. In building contracts, unless the Contracts (Rights of Third Parties) Act 1999 alters the position, the consequences of the doctrine of privity are as follows. — The main contractor is responsible for a sub-contractor’s work so far as the employer is concerned. — The employer cannot sue the sub-contractor directly in contract, unless there is a separate direct contract between them – e.g. where the Intermediate Named Sub-Contractor/Employer Agreement (ICSub/ NAM/E) is signed. — As there is no direct contractual relationship between sub-contractor and employer, neither can sue the other in contract, although a breach

799 800

The leading modern authority is Beswick v. Beswick [1968] AC 58. Tweddle v. Atkinson (1861) 1 B&S 393.

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Problem-solving hierarchy of the sub-contract may at the same time amount to a tort (qv), in which case the employer may be able to sue the sub-contractor in tort, e.g. for negligence. However, recent cases have severely restricted, if not eliminated, that possibility. The PPC contract (qv) is unusual in that the employer, constructor, consultants and some specialist contractors are all parties to the contract, thus opening up interesting litigation opportunities not possible under traditional contracts.

Problem-solving hierarchy A phrase used and defined in PPC at appendix 1 as meaning the arrangements for a dispute to be referred to senior individuals representing each partnering team member that is involved in a particular dispute, as set out in the project partnering agreement (qv) and clause 27.2 of the partnering terms (qv). Under clause 27.2 the partnering team members involved in the dispute or difference are to apply the problem-solving hierarchy as described within the project partnering agreement. They may be guided if necessary by the partnering adviser (qv). They are to exercise reasonable skill and care to ensure that the employee named shall express their view and proposed solution within the stated timescales.

Proceedings Usually refers to legal proceedings (qv). It has been held that the reference to ‘other proceedings’ in s. 11(3)(d) of the Insolvency Act 1986 means legal or quasi-legal proceedings such as adjudication and arbitration.801 However, in Austin Hall Building Ltd v. Buckland Securities Ltd 802 it was held that adjudication is not legal proceedings. Therefore it seems that while ‘proceedings’ is something of a generic term applying to adjudication, arbitration and litigation, only proceedings through the courts ought properly to be called ‘legal proceedings’.

Procurable The normal meaning is ‘obtainable’. SBC clause 2.3.1 and DB clause 2.2.1 are important qualifications of the contractor’s obligations. These clauses provide that materials, goods and workmanship must be of the kinds and standards described in the contract bills (qv) – or, in the case of DB, the Employer’s Requirements – only so far as is procurable. Therefore, if the contractor is unable to obtain goods etc. of the required kinds or standards, its obligation appears to end. On what is to happen then, the contract is silent. It is sometimes argued that if the contractor cannot obtain the kind of materials for which it tendered because it was late in placing its order, or if the materials were unobtainable at the time it offered to provide them, the onus is on the contractor to offer an alternative of at least equal standard at no increase in price. If, however, the materials become unobtainable through no fault of the contractor, it is suggested that the architect or employer, as the case may be, will be obliged to issue an instruction (qv) varying the materials, with consequent adjustment to the contract sum (qv). An alternative view is that the provision means exactly what it says and that if, for any reason, including the

801 802

A Straume (UK) Ltd v. Bradlor Developments Ltd [2000] 2 TCLR 409. (2001) 17 Const LJ 325.

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Production information contractor’s failure to order at the correct time, the materials are not procurable, its duties are at an end, and it is for the architect or employer to select another material as a variation. On balance, the latter view is to be preferred. A further argument is that if the contractor ordered all materials at the commencement of the contract, there would be no question of inability to procure them. That argument is likely to fail, not least because, if the contractor has a duty to so order all materials, it probably has a complementary right to be paid for all such materials off-site. That, of course, is not what any of the traditional contracts say. Architects will be prudent to make full enquiries before accepting that materials are not procurable. It is not unknown for a contractor to plead this clause because the materials are either more expensive than anticipated or more difficult to obtain. Neither situation falls under the qualification in SBC or DB. IC, ICD, MW, MWD and ACA have no similar qualification. Therefore it seems that a failure to supply would be a breach of contract. If the material was impossible to procure, the contract may be frustrated if the materials are sufficiently important to the carrying out of the Works.803

Product liability insurance Product liability insurance covers a company (the supplier) against financial losses to a business or person caused by a faulty product manufactured, serviced or supplied by the supplier. A product is seen as any physical item that is sold or given away. Products must be fit for the purpose for which they were supplied, and a supplier is liable for any damage or injury caused. A supplier of a product will generally be liable if: — the supplier’s business name is on the product; — the supplier repairs, refurbishes or changes the product; — the supplier imported the product into the European Union; — the supplier cannot identify the manufacturer; or — the manufacturer has gone out of business. Otherwise the manufacturer is liable, or a processor if the product comprises parts from multiple manufacturers. However, a supplier must be able to show that: — the product was faulty when supplied; — the supplier gave adequate safety instructions to the purchaser; — provision for return to the manufacturer or processor was included in the contract; — an adequate provision was in the contract between supplier and manufacturer for the return of defective products; — the supplier had good quality control and record keeping systems.

Production information A term to describe all the information that the architect has to prepare in order for the contractor to be able to carry out and complete the Works. This information includes: — detailed technical drawings; — drawn schedules; — work schedules; — specifications. 803

Davis Contractors Ltd v. Fareham UDC [1956] AC 696.

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Productivity payments The term was first used in the original RIBA Plan of Work (qv) as the name of stage F, and the tasks to be done were identified as the preparation of the final production information, i.e. drawings, schedules and specifications. The latest edition of the RIBA Plan of Work divides this stage into F1 and F2 to reflect the fact that, on many projects, much of the production information is not completed until the Works are progressing on site. For many years what is now known as production information was simply referred to as ‘working drawings’, which was used as a generic term to encompass everything currently covered by production information.

Productivity payments Sometimes known as ‘bonus payments’ or ‘incentive schemes’. They are paid to operatives by contractors to encourage rapid completion of work. Many contractors agree special bonus schemes with their workforce (qv), but schemes that are in accordance with the rules of the Construction Industry Joint Council or other wage-fixing body (qv) rank for inclusion in fluctuations payments under SBC clause B.1.1.4.

Professional indemnity insurance Professional indemnity insurance is liability insurance that covers a person or a business in the event that a third party makes a claim that they have suffered a loss as a result of professional negligence. Such insurance is usually underwritten on a ‘claims made’ basis. This means that a claim is addressed under the policy in existence at the time the claim is made, and not when the negligent act occurred. Therefore such policies tend to include provisions requiring notice of all claims and circumstances as soon as possible.804 Even when a person retires it is normal for there to be a run-off period of insurance in the event that a claim arises some years after the negligent act. Appointment documents for consultants such as architects and engineers usually include provision requiring the consultant to have in place appropriate professional indemnity insurance, e.g. SFA/99 (2004) clause 7.4.1. The insurance may be on the basis of ‘each and every event’ or ‘in the aggregate’, and usually specifies a level of cover. In basic terms, ‘in the aggregate’ means that the specified amount is the total extent of the insurance company’s liability under that policy for all claims made during the period of the insurance, e.g. a year. ‘Each and every claim’ or similar wording means that the sum stated is the extent of the insurance company’s liability for each claim made during the insured period. In addition, most standard forms of building contract, where a contractor undertakes design, require the contractor to take out professional indemnity insurance, e.g. DB and SBC clauses 6.11 and 6.12, and ACA clause 6.6. MWD does not require the contractor to take professional indemnity insurance.

Profit In its general sense, a pecuniary gain or excess of returns over outlay. Under PPC profit is defined at appendix 1 as the ‘agreed gain’ from the project, to distinguish it from central office overheads (qv) and site overheads. Under 12.4 the constructor’s profit for the project is fixed at the agreed amounts

804

See Kajima UK Engineering Ltd v. Underwriter Insurance Co Limited [2008] 122 Con LR 121, which addresses the importance of giving a timely and proper notice to the insurer of a claim.

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Programme stated in the price framework (a partnering document (qv)). It is subject to adjustment as agreed between the constructor and client, and forms a part of the agreed maximum price. A similar approach is adopted within the CE under the target cost option, where the contractor’s profit is called ‘the Supplier’s Margin’. See also: Loss of profit.

Programme A schedule or chart showing stages in a scheme of work. The main or master programme (qv) is usually produced by the contractor, which may produce many subsidiary programmes during the course of a contract to assist in the effective planning of sub-contract work. The architect will also produce programmes, particularly at the commencement of the design stage as a tool for the management of the design team. Popular forms of programme are: — network analysis and critical path; — precedence diagrams; — bar (Gantt) charts; — advancing fronts. Each method has its own particular advantages, depending upon the type of project and the people for whom it is intended. SBC clause 2.9.1.2 makes reference to a master programme, but it is not a contract document (qv). Two copies are to be provided to the architect as soon as possible after the execution of the contract. Within 14 days of any extension of time given by the architect, or any agreement of a pre-agreed adjustment (qv), the contractor must provide a further two copies of the amended programme taking account of the extension of time or agreement. This provision is not really satisfactory for the architect, because it does not permit the architect to require an amended programme if the contractor is in culpable delay (qv). It is common for this clause to be enlarged in the preliminaries (qv) section of the bills of quantities (qv), not only to provide for the specific type of programme required but also to give the architect power to reasonably require an updated version of the programme from time to time. Such enlargement of the clause does not fall foul of clause 1.3, which prevents the contract bills only from overriding or modifying the printed form. Under CE clause 4.19 the supplier is to provide a programme if it so states in the contract particulars. The supplier is to prepare, monitor and update the programme to show amendments. Key decision events are to be identified, being those that are likely to involve the purchaser or the purchaser’s representative during the project. In addition the supplier is to coordinate any proposed changes by members of the supply chain, and amendments are to be circulated to all members of the project team promptly. GC/Works/1 clause 33 is very specific in its requirements for a programme, and under this contract it is a most effective control document. Under clause 33(1) the contractor is required to warrant that the programme is achievable, that it is based on the contract period and allows reasonable time for the employer to provide information, and additionally that it: — Shows the sequence in which the contractor proposes to carry out the Works. (This is important because, although under SBC the programme is a valuable monitoring tool and indicator of whether the contractor is progressing regularly and diligently (qv), the contractor is not strictly obliged to progress the Works in accordance with the programme.) 435

Progress meeting — Shows details of temporary work and method of work. — Shows proposed labour and plant. — Shows critical events. — Permits effective monitoring. Clause 33(2) provides for the contractor to submit proposals for amending the programme at any time. A probably otiose sentence states that the project manager’s agreement to an amendment will not relieve the contractor from any liability under the contract. Under the NEC the accepted programme (qv) is a key management tool in the success of the contract. See also: Master programme; Priority of documents.

Progress meeting A meeting of key people concerned in the design and construction of a project to consider the progress of the project on site, usually in relation to the programme (qv). Regular progress meetings are commonly held, no matter what form of contract is used, but their usefulness is often questioned. They tie up key personnel for anything up to half a day, and generally produce nothing that could not be produced by other, less labour-intensive means. Progress on site is in the hands of the contractor, whose best interests will be served by a speedy conclusion to the contract. The contract administrator’s principal role in assisting progress is to ensure that all necessary production information is provided at the proper time. The contractor can be asked to submit a separate weekly report. The clerk of works (qv), if appointed, can be asked to submit a weekly progress report in any format and incorporating whatever information the contract administrator may desire. Any problems with the progress of the project can be taken up directly and most effectively between the contract administrator and the contractor, in person, by telephone or, best of all, by correspondence. The site meeting is not the best forum for answering queries. Questions arise at any time, and they should be answered immediately. It is best to answer queries and provide information in writing so that there is a proper record. Progress meeting minutes are unsatisfactory vehicles for recording instructions, and often merely serve to record what the contract administrator later wishes had been said. Although progress meetings are generally preceded by a site inspection, inspections can be carried out without progress meetings. Despite this, few contract administrators have the courage to abandon them in favour of a select number of meetings for specific purposes. GC/Works/1 clause 35 bears this heading, and deals expressly with such meetings under this form of contract. The contractor’s agent must attend regular progress meetings to assess the progress of the Works. Subject to contrary instructions, they must be held at no less than one-month intervals. The time and place are to be specified by the project manager. Five days before each meeting, the contractor must submit a written report including requests for information, causes of delays, and extensions of time requested, and setting out proposals to ensure prompt completion. Within seven days after each progress meeting the project manager must give the contractor a written statement stating whether the Works are delayed, early or on time, and setting out matters that the project manager considers will or may delay completion or increase costs, estimates of such costs, any agreed steps necessary to avoid or reduce the delay or costs, the up-to-date situation 436

Project management regarding extension of time, and responses to any outstanding requests for information.

Project Within CE a general description of the project is to be included within the contract particulars. This is defined at clause 1 as the client’s project for which the services are being provided. It should be remembered that the JCT intended that the CE be used as a main contract, as a sub-contract, or for the appointment of consultants. Therefore within each agreement executed the identity of the ultimate client (if not the purchaser) is stated, along with a brief description of the project. Therefore everyone in the supply chain, and project team, should be aware of the name of the client and the overall project. Under PPC ‘Project’ is defined at appendix 1 as being the project including all incidental activities as described in the partnering documents (qv). The project is identified within the partnering agreement (qv).

Project bank account A term used within PPC (qv) to refer to a bank account set up under a bank account agreement executed by the client and constructor, and with the signatures of any specialists (qv) who are to be a bank account party added to the agreement. The bank account agreement is to be in a format annexed to the project partnering agreement (qv) or as required by the named bank. The bank account agreement is executed at the same time as the commencement agreement (qv). The account is for use by the client, constructor and identified specialists on the project. The use of this bank account is optional, and is chosen by selecting the appropriate entry in the project partnering agreement (qv). If chosen, then appendix 9 applies and amends the partnering terms accordingly. The amendments, which include the identification of the bank, are to clause 20 (payment) and appendix 1 through the introduction of further defined terms. Following execution of the commencement agreement, the amounts to be paid by the client are paid into the bank account. The client and the constructor nominate authorised individuals who are empowered to give instructions to the bank, including the amounts to be paid to the parties identified in the bank account agreement, i.e. the constructor and specialists. Following the issue of a valuation by the client’s representative (qv), the constructor is to issue to the client a breakdown showing the amounts to be paid to the parties identified in the bank agreement, i.e. the constructor and each of the specialists. The bank would pay those amounts on the instruction of the authorised individuals.

Project management An extremely popular but nevertheless very loose term referring to the management of any project. Its principles were developed in the manufacturing industry in the United States, and its use in relation to the construction industry in this country is relatively recent, perhaps 40 years or so. Although the principles and practice of project management are well suited to a closed environment such as a factory, it is arguably less suited to the construction industry, with its notoriously fragmented constituents. Nevertheless, the proponents of project management are loud in its praises. At best it is a loose term, which may, but not invariably, relate to the management of a building project. A project manager (qv) may be appointed by the employer to coordinate the entire job from inception to completion. The relationship with the other professionals must be clearly set out, and their respective powers and responsibilities established. In practice this is seldom done. Since practice varies from contract 437

Project manager to contract, it is impossible to define the role of the project manager precisely. In theory the project manager could be appointed to take over the whole of the architect’s traditional management and coordinating functions, together with those of the main contractor. The concept is still in the process of evolution, and there are problems with relationships. The supporters of project management suggest that it provides an efficient and cost-effective method of producing a building. Opponents believe that it fragments existing responsibilities, and fails to achieve any improvement in timing and cost. Project managers can be architects, engineers, quantity surveyors, surveyors or managers specialising in the building field. The techniques deployed in the practice of project management draw upon both well-established and some new principles, including management, value management, value engineering, cost control, risk management, contract administration, contract law and project planning. There is an Association for Project Management (APM), whose mission statement is ‘To develop and promote the professional disciplines of project and programme management for the public benefit.’ It has over 16,500 individual members and 500 corporate members throughout the United Kingdom and abroad. Its headquarters is located in High Wycombe, Buckinghamshire, and it has 12 regional branches throughout the United Kingdom and one branch in Hong Kong. APM is the United Kingdom member of the International Project Management Association (IPMA). See also: Client’s representative.

Project manager This is essentially the person who practises project management (qv). Difficulty has been expressed by the courts in receiving expert evidence concerning the duties of project managers: There is no chartered or professional institution of project managers nor a recognisable profession of project managers. In so far as it may be appropriate to accept expert evidence, the nature of the evidence that might be acceptable will depend on what the project manager has agreed to do. In some cases the project manager will be the architect who will design the project and then, acting as project manager, supervise the contractor and the sub-contractors in carrying out the work. This is the role with which [the expert] is familiar. At the other end of the scale the project manager will supervise the work of the contractor and sub-contractors and ensure that the work is carried out in conformity with the design drawings. In these circumstances the project manager will have no design function even to the extent of providing an outline specification. This bears no relation to the function of the Architect acting to project manage his project.805

A definition of a project manager approved by the RIBA was: The Project Manager is a construction professional who can be given executive authority and responsibility to assist the client to identify the project objectives and subsequently supply the technical expertise to assess, procure, monitor and control the external resources required to achieve those objectives, defined in terms of time, cost, quality and function.806

805

Pride Valley Foods Ltd v. Hall and Partners (Contract Management) Ltd (2000) 16 Const LJ 424 at 440 per Judge Toulmin. 806 Project Management: A Role for the Architect (June 1995). RIBA Practice Committee, paragraph 3.2.

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Project manager The wording ‘control the external resources’ is presumably a reference to contractors, and it is as surprising in this context as it is broad in scope. The only person capable of controlling a contractor is the contractor itself, either by way of a managing director or, if a sole trader, by its principal. Not even the architect in the traditional role of contract administrator can control a contractor. Control suggests a degree of regulation, and the power to ensure compliance with instructions that is beyond the scope of most building contracts. Therefore a project manager conforming to this definition (and there are many others in similar vein) would have enormous power. Project managers with such powers are rare to the point of extinction. A project manager may or may not be the same person as the lead consultant or the contract administrator. Project managers can be divided broadly into two categories: — those who act in a technical capacity as part of the employer; — those who carry out the contract administration role in regard to building contracts. It is not always properly appreciated that the contractual relationships are different. Project managers who act in a technical capacity as part of the employer are really the client’s representatives. Generally they act as agent for the client, with the power to do, in relation to the project, everything the client could do. They will often interview and appoint consultants and carry out the briefing exercise with consultants, having first taken the brief from the client. Whether interposing another professional between designers and client is an efficient method of procurement must be doubted. It is said that the advantage to the client is that there is a skilled professional looking after the client’s interests, and being paid to watch the other professionals. This appears to be as sensible as hiring another accountant to watch one’s accountant, or another solicitor to watch the solicitor, another physician, dentist and so on. This type of project manager has no powers under the building contract. Indeed, most building contracts do not even acknowledge the project manager’s existence as separate from the contract administrator. There is provision under SBC for an employer’s representative, who might well be the project manager, to be appointed to carry out the employer’s functions. GC/Works/1 refers to the project manager, but the reference is clearly intended to be the contract administrator. Unless the standard form contracts are amended, the project manager has no more right than the employer to enter site, nor to attend site meetings and certainly not to give instructions to the contractor. A contractor taking instructions from a project manager in this position does so at its peril. This project manager has no status on site. This is probably the usual position occupied by the person termed ‘project manager’. It does not replace the traditional architect’s role, and there is still a need for a lead consultant, whoever that might be. The second type of project manager carries out all the functions of a contract administrator under the building contract, and must be named as contract administrator in the contract, e.g. NEC (qv). They are responsible for the issue of instructions and certificates. Where this kind of project manager is employed, it is essential that the appointment documents of the other construction professionals reflect the situation. For example, the project manager is responsible for coordinating their roles, and must have the authority to do so. The project manager in this situation wields a great deal of power. If the project manager’s function is to manage the project, this type of project manager is closest to that 439

Project programme role. However, it is comparatively rare to find a project manager in this position. Because this is the role traditionally taken by architects, training in project management techniques can be extremely useful. GC/Works/1 clause 1(1) defines ‘the PM’ as the project manager named in the abstract of particulars (qv) and appointed to act on the employer’s behalf, performing the contractual duties or such other person appointed by the employer. Extensive powers of delegation are conferred on the project manager by clause 4.

Project programme A term used and defined within CE as the programme showing the sequence of events for the delivery of the services (qv). See Programme.

Project proposals A phrase used and defined within PPC at appendix 1. They are the proposals submitted by the constructor in response to the requirements of the project brief (qv). The nature of the proposals will depend upon how prescriptive the project brief is. If it is very prescriptive, then the constructor’s proposal may simply be an acknowledgement or confirmation of agreement to comply. Otherwise the constructor will be making a detailed submission of drawings, specifications, proposals for value engineering procedures, etc. The project proposals are developed during the pre-construction stage and possibly during the construction phase in accordance with clauses 8 and 10.

Project team A defined term within CE, being the integrated team involved in managing the delivery of the project. The team is made up of the client and such other persons as are listed at table C part 4 of the contract particulars. Other persons can join the team in accordance with clause 2.3 or, if executed, the project team agreement (qv). Under clause 2.2, should the persons making up the project team execute a project team agreement, then clauses 2.3, 2.4 and 2.6 are superseded by the project team agreement. Clause 2.3 deals with the composition of the team, and changes to its make-up; clause 2.4 addresses the role of the project team; and clause 2.6 deals with the possibility of establishing a project protocol.

Project team agreement The project team agreement is published by the JCT, and is intended for use with the CE (qv) contract. It is described as an optional, simple multi-party agreement that can be entered into by the project team members. It records their respective obligations to work together as a team. It is intended as a supplement to the relevant biparty agreements and not to override them. It sets out in greater detail the function and roles of the project team. There is an optional provision for sharing the risk amongst the participants by offering a ‘pain/gain’ incentive.

Project timetable A phrase used and defined within PPC at appendix 1 to refer to the timetable applicable to the construction phase of the project following execution of the commencement agreement. The timetable is to be developed in accordance with clause 6. The timetable should show the agreed activities of each partnering team member and, if relevant, how these activities interface with activities of other team members. Under clause 6.2 the constructor is to submit a proposed project timetable showing the date of possession, the date for completion, and the other detailed arrangements for the implementation of the project from the date of the commencement agreement (qv). It is to be submitted to the 440

Proof of evidence client’s representative, along with method statements and procedures, in accordance with the dates identified in the partnering timetable (qv). The proposed project timetable is subject to review by the core group and approval by the client. The project timetable is to address possession of the site, including deferred possession, and identify whether the constructor has exclusive possession. Subject to any agreed conditions, the project team are to undertake their agreed activities regularly and diligently in accordance with the project timetable. The following are some of the activities that may be shown on the project timetable in respect of those activities to be undertaken or completed following execution of the commencement agreement: — agreed dates for core group and partnering team meetings; — agreed dates for value engineering and risk and value management exercises; — agreed dates for design team meetings; — development and finalisation of construction and design; — finalisation of the guaranteed maximum price; — final date for the selection of specialists; — review of KPIs and targets; — agreed date for post-project completion review. The timetable should identify the project team member responsible for each identified activity. Agreement of the project timetable under clause 6 is a precondition to starting on site (clause 14.1.(i)).

Prolongation claim A claim made by a contractor for financial reimbursement on the ground that the contract period has been extended as a result of some action, or the default of the employer or of someone for whom the employer is responsible. Such claims are typically for the costs of maintaining a site presence, and sometimes the prices in the preliminaries (qv) are used, although this is not the correct way to establish such a claim. It is expressly mentioned in clause 46 of GC/Works/1 but not in other standard forms. Contractors commonly refer to all claims for loss and/or expense (qv) as prolongation claims. This is misleading. It implies that either every extension of the contract period carries an automatic claim for reimbursement, or that a financial claim cannot be made unless an overrun of the contract period has occurred. Both of these implications are wrong. It is possible for a contractor to have a claim for additional financial recompense or loss and/or expense if the contractor completes the Works by the completion date or even before that date. However, it is probably true that prolongation claims are, in principle, easier to make and substantiate than claims of other kinds. See also: Claims; Disruption.

Proof of evidence A written statement of what a witness (qv) will say. It is produced mainly for the benefit of counsel, who will use it to examine a witness before a court or arbitration hearing, and to assist in cross-examining witnesses for the other party. In Scotland it is referred to as a ‘Precognition’. The proof is usually written after discussion with counsel or the solicitor conducting the case. Sometimes counsel or the solicitor will actually draft the proof after interviewing the witness. It must be remembered, however, that it is the witness’s own statement, and although counsel may draft the framework, the actual words are usually best left to the witness. 441

Property If evidence is to be a matter of opinion rather than fact, and it is to be given by an expert (qv), it is the expert who will draft the expert report, and there is no proof of evidence as such. The expert will have prepared the report independently in response to formal instructions from one party or, more commonly now, both parties. See also: Expert witness.

Property In legal terms ‘property’ denotes something capable of being owned, with all that flows from this. Property is divided into two sorts (see Figure 11): real and personal. This very approximately equates to land and movable goods respectively. Real property is divided into corporeal and incorporeal hereditaments. Corporeal hereditaments include land, buildings, woods and the like. Incorporeal hereditaments include easements and profits. ‘Land’ includes land of any tenure, and mines and minerals … buildings or parts of buildings (whether the division is horizontal, vertical or made in some other way) and other corporeal hereditaments; also [any] incorporeal hereditament, and an easement, right, privilege or benefit in, over, or derived from land …807

Personal property includes chattels real (leaseholds) and chattels personal, which in turn includes choses in possession, such as goods, vehicles and furniture, and choses in action, such as patents, copyright, trade marks, debts and rights of action. See also: Bailment; Chattels; Choses in action, in possession; Corporeal property; Hire; Incorporeal hereditament; Lien; Personal property; Real property.

Provide the Works A phrase used within NEC at clause 20.1, where it requires the contractor to ‘provide the Works’ in accordance with the Works information. The phrase is defined at clause 11.2(13) as the work necessary to complete the Works in accordance with the contract, including all incidental work, services and actions required under the contract. In other standard forms the phrase normally adopted is something along the lines of ‘the contractor must carry out and complete the Works in accordance with the contract documents’. Alternative wording could be ‘the contractor shall execute and complete the Works in strict accordance with the Contract Documents’, e.g. ACA clause 1.1.

Provisional quantities In otherwise accurately measured bills of quantities (qv) it is common to find some quantities noted as ‘provisional’. They usually refer to items that are unknown or uncertain in extent at the billing stage. For example, with regard to substructure or drainage works, it is not uncommon for the quantity surveyor to include items for excavating in rock, or in running sand, or below the water table. The quantity is only an estimate; as the work proceeds it is remeasured at the rate the contractor has inserted against the bill of quantities item. Provisional quantities are often included for excavation in rock, in other selected substrata and under the water table, and are also taken for such things as cutting holes through walls and floors for plumbing and other services. They

807

S. 205(1)(ix) Law of Property Act 1925.

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Public holiday are often taken from a schedule supplied by the specialist concerned, and are commonly referred to as ‘builder’s work’. See also Approximate quantities.

Provisional sum A term used to denote a sum of money included in the contract by the employer, normally as an amount in the bills of quantities (qv). It is provided to cover the cost of something that cannot be entirely foreseen or detailed accurately at the time tenders are invited. Contractor’s profit is not added to this sum. It may be expended as the architect instructs, upon which a prime cost sum (qv) may arise. For example, the architect may know that a retaining wall must be constructed, but does not know accurate dimensions or details. The architect may ask the quantity surveyor to make an estimate (qv) of the likely cost, and insert that sum in the bills of quantities at tender stage. During the progress of the contract the architect may issue an instruction, together with full details of the wall, to the contractor. At final account (qv) stage the quantity surveyor deducts the provisional sum from the contract sum (qv) and adds back the value of the retaining wall, ascertained in accordance with the contract provisions for the valuation of variations (qv). JCT 80 clause 1.3 since 1988 and SBC clause 1.1 since 2005 (versions with quantities and with approximate quantities) has contained a definition of ‘provisional sum’ as one including a sum provided for work whether or not identified as being for defined or undefined work. Where bills of quantities are based upon the Standard Method of Measurement (qv), 7th edition, the term ‘provisional sum’ is defined in General Rule 10. A provisional sum for defined work, though not fully designed, must state: the nature and construction of the work; how and where the work is to be included within the building; the quantity of work; and any specific limitations. Where such information is given, the contractor is deemed to have made due allowance for programming planning and pricing of preliminaries. This is not the case for undefined provisional sums. As SBC without quantities is not based upon bills of quantities, there is no reference to defined and undefined provisional sums. The definition at clause 1.1 simply refers to a sum included, which the employer may or may not decide to carry out, or which cannot accurately be specified in the documents.808 SBC clause 3.16, IC and ICD clause 3.13 and MW and MWD clause 3.7 provide that the architect must issue instructions for the expenditure of provisional sums. Therefore it is the architect’s duty to do so. Within DB provisional sums are defined at clause 1 as sums included within the Employer’s Requirements, as against the Contractor’s Proposals. Any such provisional sums are not subject to the rules of the standard method of measurement, and therefore the distinction between defined and undefined does not exist. Only those provisional sums included within the Employer’s Requirements can be expended under clause 5.2.3. Any sums that the contractor includes within the Contractor’s Proposals as provisional are in fact firm amounts under the contract.

Public holiday In England and Wales and Northern Ireland, Christmas Day, Good Friday or a day defined as a bank holiday under the Banking and Financial Dealings Act 1971. The term is usually defined within most standard 808

Midland Expressway Ltd v. Carillion Construction Ltd (2006) 107 Con LR 235.

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Public liability insurance forms, e.g. DB clause 1. This meaning is used in s. 116 of the Housing Grants, Construction and Regeneration Act 1996.

Public liability insurance Liability insurance pays compensation when a person has been held legally liable following an adverse event. Public liability insurance covers a company’s liability to the public at large for causing death, personal injury, or damage to property as a consequence of business activities. The insurance required under SBC clause 6.4. would be public liability insurance.

Public policy A somewhat fluid and developing doctrine composed of fundamental principles that form the basis of the ethos of the legal system. English moral, social and economic values lie at the heart of the policy, which tends to change as the underlying assumptions and values of society change. Laws are most likely to be effective when they do not conflict with the generally accepted morality of a particular society. The application of the doctrine will depend upon particular circumstances. Examples of the application of public policy include the concept of privilege, the courts’ refusal to enforce contracts in restraint of trade, contracts to commit a fraud, in regard to prostitution, or contracts intended to oust the jurisdiction of the courts.

Purchaser A defined term within DB, SBC, IC and ICW as a person named as such in the contract particulars (qv) and to whom the employer is to transfer or agrees to transfer an interest in the Works. Under the CE form the purchaser is the person so named in the contract, and is the party for whom the services under the contract are being provided. So, depending on the circumstances of when the CE is being used, the purchaser could be an employer, or a main contractor or sub-contractor.

Purchaser’s contract Within the CE against clause 3.1 in the contract particulars (qv) the purchaser is to identify the nature and form of any contract they have entered into in connection with the project. The date of this agreement, parties and the nature/form are to be stated. For example: — Dated: November 2008 — Parties: Chappell Developments Ltd and Cowlin Builders Ltd — Form/Nature: Construction Excellence and the main building contract. Under clause 3.1 the purchaser is to provide the supplier with such information in their possession regarding the project and which is necessary for and the purchaser reasonably considers necessary for the provision of the services. The purchaser is to respond to all such reasonable requests for the provision of any further information. Where the purchaser is engaged under any other contract as a purchaser that may relate to the provision of the services, then the purchaser is to give the supplier a copy of that contract. However, any rates and prices may be omitted or any other relevant matters not directly related to the services.

Purchaser’s representative The person named in the contract particulars under the CE form and engaged by the purchaser to act on its behalf. The purchaser’s representative is appointed under clause 3.5, and has the authority to act on behalf of the purchaser in relation to the project. The purchaser’s representative is expressly stated as being the first point of contact for the purchaser. Should the purchaser remove its representative, then the purchaser must appoint a replacement. 444

Q Quality management system Quality management is the function of determining and implementing a person’s quality policy. A quality management system is a system of procedures and techniques that seek to ensure both quality assurance and quality improvement. It is the development, implementation and administration of quality control systems. Under PPC clause 16.3 the partnering team members are to implement a quality management system as set out in the project brief, project proposals and consultant services schedule. Though identified in appendix 1 (definitions), this is simply a circular reference back to clause 16.3. Within the guide it states that it is intended that the partnering team members should identify provisions for inspection, testing, sampling and other quality management techniques within the relevant sections of the project brief, project proposals and consultant services schedule so that they form a cohesive system that is easy to understand and implement.

Quality of work Standard or degree of excellence. The term is used in SBC, clause 4.1. This clause provides that the quality and quantity of work that is included in the contract sum (qv) is deemed to be that which is in the contract bills (qv). The term is also used in IC and ICD clause 4.1, which provides that, where there are contract bills, the quality and quantity of work that is included in the contract sum is deemed to be that which is in the contract bills, but where there are no contract bills, the position is more complex. The work included is deemed to be what is in any quantities or in all the documents taken together. To the extent that there are no quantities, and drawings are inconsistent with specification or work schedules, the drawings prevail. The quality of work can be the subject of much debate on site, and it is notoriously difficult to specify a quality to any fine degree. The use of British Standards, Codes of Practice, standard specification clauses and the definition of tolerances is all helpful, but the contractor may base its pricing on its knowledge of the architect and employer. Where quality is specified precisely, the contractor is bound to provide materials and workmanship to that quality, but not, it should be noted, above the quality described. GC/Works/1 clause 3.1 is quite specific in its terms and, among other things, requires the contractor to undertake a form of quality testing and to warn the project manager of any goods or materials that it considers are unsuitable for incorporation. SBC clause 2.3.3 and IC and ICD clause 2.2 provide that where and to the extent that the approval of quality of materials and goods or standards of workmanship is a matter for the architect’s opinion, they must be to the architect’s reasonable satisfaction. This provision is in essentially the same form as it was in JCT 80 when it was considered by the Court of Appeal, which approved the following, which it termed the ‘wider’ construction: … the whole scheme of the contract is that the architect must be satisfied as to the quality of all materials and the standard of all workmanship and form the opinion that they conform to those required by the contractual terms. For example, he must be so satisfied before he issues interim certificates, certificates of practical completion

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Quantity surveyor and the final certificate. His standard of satisfaction cannot be subjective or arbitrary; it must be reasonable and this is what clause 2.1.4 is concerned with …809

It is notable that, although the JCT has amended its contracts with the intention of preventing the final certificate becoming conclusive about the architect’s satisfaction except in very precisely stated circumstances, it has not amended the basic requirement for the architect’s reasonable satisfaction in respect of all materials and all workmanship (e.g. IC and ICD 2.2.1). This potentially still places a huge responsibility on the architect under these contracts. DB clause 4.1 does not include wording similar to that in SBC. Within DB, materials, workmanship and goods are covered by clause 2.2, which requires them to be to the standard set out in the Employer’s Requirements. If not specifically described in the Employer’s Requirements (qv) then they are to be to the standard specified in the Contractor’s Proposals (qv). This supports the argument that the Employer’s Requirements take precedence over the Contractor’s Proposals. See also: Reasonable.

Quantity surveyor A professional person whose expertise lies mainly in the fields of the measurement and valuation of building and civil engineering work, and cost advice. The professional governing body is the Royal Institution of Chartered Surveyors, which issues a code of conduct for its members. Most standard forms of building contract make reference to the quantity surveyor, generally with regard to the valuation of work in progress, the valuation of variations, financial claims, and the preparation of the final account. There is provision for the quantity surveyor to be named in the contract in SBC, IC and ICD (clause 5.2), and the valuation of variations is reserved to the quantity surveyor unless otherwise agreed between the employer and the contractor. It used to be an unusual feature of MW 98 that there was provision for inserting the name of the quantity surveyor, but no corresponding duties were allocated in the conditions. This anomaly has been removed in MW and MWD by the simple expedient of removing the provision for naming a quantity surveyor. The CE and MP forms make no reference to a quantity surveyor. Under the JCT forms the ascertainment of the amount of ‘direct loss and/or expense’ incurred by and reimbursable to the contractor is the responsibility of the architect. It is entirely a matter for the architect whether to instruct the quantity surveyor to carry out that function. However, it would be unusual for the architect to carry out the actual ascertainment, although the architect always retains the responsibility for deciding whether the claim itself is valid i.e. as a matter of principle. The quantity surveyor’s powers under JCT forms are limited: His authority and function under the contract are confined to measuring and quantifying. The contract gives him authority, at least in certain instances, to decide quantum. It does not in any instance give him authority to determine any liability, or liability to make any payment or allowance.810

809

Crown Estate Commissioners v. John Mowlem and Company Ltd (1994) 70 BLR 1 at 9 per Stuart-Smith LJ. 810 County & District Properties Ltd v. John Laing Construction Ltd (1982) 23 BLR 1 at 14 per Webster J.

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Quantity surveyor Although this was said of a quantity surveyor under the JCT 63 form of contract, the position appears to be the same under SBC, IC and ICD. If so instructed by the architect it is the quantity surveyor’s duty to find out the actual amount of loss and/or expense incurred by the contractor as a direct result of the effect upon regular progress of the Works. The employer should pay no more than the actual amount of loss and/or expense (qv) directly and properly incurred by the contractor. It is equally the quantity surveyor’s duty to ensure that the contractor recovers no less. It is not the quantity surveyor’s duty to deprive the contractor of amounts properly recoverable under the contract, but rather to establish, on the architect’s instructions and in strict accordance with the contract, the amount payable to the contractor. In order for the quantity surveyor to undertake this task properly, the architect is required to give clear instructions and guidance, e.g. when the delay occurred, and the period during which the work was affected. The quantity surveyor is usually retained directly by the employer, although sometimes through the architect, and, particularly where the employer is a local authority or large organisation frequently involved in construction, the quantity surveyor may be a member of the employer’s own staff. The duty of the quantity surveyor in such situations is owed wholly and exclusively to the employer, while always maintaining proper professional standards of integrity. However, once a contractor is appointed and the contract is let, the quantity surveyor, like the architect, assumes a dual function and a dual responsibility. The contractual relationship, whether under a consultancy agreement or under a direct contract of employment, is still solely with the employer; but one of the duties under that contract is to carry out the functions ascribed under the building contract in accordance with its terms. Therefore the proper carrying out of those functions in strict compliance with the building contract terms is in itself a crucial part of the duty to the employer. The quantity surveyor will also have a duty to the employer to act fairly to the parties. If the quantity surveyor fails to carry out those functions in accordance with those terms, the employer may be liable to the contractor for that failure as a breach of a contractual undertaking, having failed to procure that the quantity surveyor performs those functions correctly, but such liability would depend upon the employer being aware of the quantity surveyor’s failure.811 Whether or not the quantity surveyor also owes a duty of care under the Hedley Byrne principle,812 in the exercise of professional skills, to others in the building process is debatable. It seems unlikely that a contractor or subcontractor could bring an action in tort (qv) for negligent valuation,813 although the point is far from settled. An action would certainly lie if the quantity surveyor deliberately abused the contractual provisions to reduce valuations. Long before a contract is placed for the Works, the quantity surveyor will be involved in advising both the employer and the architect on the probable costs of the completed Works. The quantity surveyor can produce a cost plan, permitting a structured approach to controlling costs throughout the design and development stage. If the work is of sufficient size, bills of quantities (qv) 811

Penwith District Council v. V P Developments Ltd [1991] EWHC Technology 231 (21 May). Hedley Byrne & Co v. Heller and Partners Ltd [1964] AC 465. 813 Pacific Associates v. Baxter (1990) 16 Con LR 90. The case was decided on its own particular facts, which included an exclusion of liability clause. 812

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Quantum meruit will ultimately be produced, or such other document for pricing can be produced. The quantity surveyor normally undertakes all negotiations with the contractor with a cost implication. ACA contains an optional provision in clause 15.2 for the appointment of a quantity surveyor. Under clause 15.3 the quantity surveyor can carry out all duties assigned under the contract to the architect relating to adjustments to the contract sum (qv), the ascertainment of loss and/or expense, and the valuation of work. These are identified at clauses 15.1 and 15.3. However, the quantity surveyor undertakes only those duties expressly instructed by the architect under clause 15.3. Quantity surveyors are also employed within contractors’ firms, where they may undertake the preparation of estimates or tenders, prepare interim applications for payment, prepare and settle final accounts, place and manage subcontracts, and prepare financial reports on individual projects for internal use.

Quantum meruit ‘As much as is deserved’, i.e. a reasonable sum. This Latin phrase is often used as a synonym for quantum valebat (qv), which means ‘as much as it is worth’. It is the measure of payment where the contract has not fixed a price or where, for some reason or another, the contract price is no longer applicable. There are four situations in which a quantum meruit approach is applicable: — where work has been done under a contract without any express agreement as to price; — where there is an express agreement to pay a ‘reasonable price’ or a ‘reasonable sum’; — where work is done under a contract that both parties believed to be valid at the time, but which is in fact void (qv); — where work is done at the request of one party, but without an express contract, e.g. work done pursuant to a letter of intent (qv). This is a claim in quasi-contract (qv) or restitution, since: In most cases where work is done pursuant to a request contained in a letter of intent, it will not matter whether a contract did or did not come into existence; because if the party who has acted on the request is simply claiming payment, his claim will usually be based upon a quantum meruit, and it will make no difference whether that claim is contractual or quasi-contractual. A quantum meruit claim … straddles the boundaries of what we now call contract and restitution …814

If extra work is done completely outside the contract, then payment on a quantum meruit may be implied,815 but this is very rare. Many contractors erroneously assume that they are entitled to claim on a quantum meruit basis merely because they are losing money, but in fact such a claim will only lie, if at all, where what the contractor does is substantially different from what it undertook to do. It is often said that, where there is no contract, but a contractor carries out work at the request of another, there is an implied promise to pay. This is a convenient, if inaccurate, way of looking at the situation, which is more properly founded on the law of unjust enrichment.816 814

British Steel Corporation v. Cleveland Bridge & Engineering Co Ltd (1981) 24 BLR 94. Sir Lindsay Parkinson & Co Ltd v. Commissioner of Works [1950] 1 All ER 208. 816 Woolwich Equitable BS v. LRC [1993] AC 70. 815

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Queen’s (King’s) enemies Quantum meruit is usually described as a reasonable sum. That description is adequate, but not particularly helpful to those wishing to arrive at the actual sum owing. It has been likened to a ‘fair commercial rate’,817 which is more useful, because it is usually possible to discover what a fair commercial rate would amount to for a particular job. The rates in a non-applicable or unenforceable contract might be evidentially persuasive but non-conclusive – such an approach may be used to confirm a fair commercial rate was reasonable. However, information about the normal level of pricing in the area for similar work may be taken into account.

Quantum valebat ‘As much as it is worth’; a payment of a fair price for goods or materials supplied. It may be compared with quantum meruit (qv), which refers to a fair price for work carried out. In the absence of an agreed sum, the law will require a reasonable sum to be paid. In reality the term is not used, as such claims are invariably claims for both work and materials, and are made on a quantum meruit basis.

Quasi-contract ‘Restitution’ is the term used to cover those cases where money is paid at another’s request, or money is received for the use of someone else. The common feature is that the category covers cases of unjust enrichment or unjust benefit, and aims ‘to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep’.818 So where a contractor carries out work in the belief that it is to be awarded the contract for a project, the law does not allow the building owner to retain the benefit of the work without payment. It used to be argued that there was an implied contract created, but that approach has somewhat fallen out of favour. In the context of the construction industry, the most common instance is that of a quantum meruit (qv) claim for work done or services rendered. If money is paid under a mistake of fact (not of law), it is recoverable in this way. Under the provisions of the Law Reform (Frustrated Contracts) Act 1943, where a contract is frustrated, money paid under the contract may be recovered, subject to a claim for set-off (qv) for expenses incurred by the recipient of the payment. If a partnership (qv) is terminated prematurely, the court has power to order the full or partial return of any premium paid by a partner for admission to the firm.819 See also: Frustration; Implied promise.

Queen’s (King’s) Counsel Senior barristers (qv) who have been appointed counsel to Her Majesty on the recommendation of the Lord Chancellor. Also called ‘leading counsel’ or ‘silks’ because they wear silk gowns.

Queen’s (King’s) enemies A traditional term used in contracts to refer to enemies of the State. It was formerly found in GC/Works/1, where ‘King’s enemy risks’ was listed among the ‘accepted risks’ for insurance purposes. It was defined by reference to s. l5(l)(a) of the War Risks Insurance Act 1939, 817

Laserbore v. Morrison Biggs Wall (1993) CILL 896. Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 at 61 per Lord Wright. 819 S. 40 Partnership Act 1890. 818

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Quotation where the definition is ‘risks arising from the action taken by an enemy or in repelling an imagined attack by an enemy, as the Board of Trade may by order define’. The term has fallen out of use, and no longer appears in GC/Works/1.

Quotation A price given usually in the form of an offer (qv) for the carrying out of work or the supply of materials or both. It must be sufficiently definite so that, on acceptance (qv), it will form a binding contract. See also: Estimate; Tender.

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R Rate(s) A word with two different meanings: (1)

Strictly, the value or worth of something, which is not the same as the cost: hence the sum that the contractor inserts in the bills of quantities (qv) or schedule against each unit. The price (qv) for that particular item is the product of the unit rate multiplied by the number of units. SBC refers to both rates and prices in clause 5.6 dealing with measurable work, but without differentiating between them. (2) A local tax assessed on and made payable by a business in respect of its occupation of land or buildings. SBC clause 2.21 requires the contractor to pay, and indemnify the employer in respect of, any fees or charges, which are said to include rates or taxes, which are legally required under any of the statutory requirements. If they are stated by way of a provisional sum (qv) in the bills of quantities (qv), they must be dealt with under clause 4; otherwise they are to be added to the contract sum (qv) unless they are priced in the bills of quantities, or relate just to the contractor’s designed portion (qv). Rating is dealt with in the Local Government Finance Act 1988 as amended and supplemented by a large number of Regulations. Site huts, cabins and related buildings are not usually rateable while the Works are in progress. However, each case will be considered on its merits, and it is conceivable that, where there is a sufficient degree of permanence, rates will become payable.

Ratio decidendi The principle of law on which a judicial decision is based. It is the reason or ground for the decision, which establishes a precedent for the future. For the purpose of the doctrine of precedent it is the ratio that is the vital element in the decision. Not every statement of law made by a judge in the course of a judgment is part of the ratio. It must be distinguished from obiter dictum (qv), which is a statement made ‘by the way’ and which is not necessary for the decision. In general, the ratio of a case will be the statement of the principles of law that apply to the legal problem disclosed by the facts before the court. Identifying the ratio is fraught with difficulty because: — A judge does not usually state that a particular statement is the ratio. — A judge may give what may appear to be alternative rationes decidendi. — A later court may distinguish the precedent. — Even if the facts found in an earlier case appear identical with those in a later case, the judge in the later case may draw a different inference from them.820 — In the Court of Appeal or House of Lords, several judges may each give a judgment on the same case, and although each may arrive at the same conclusion, the expressed reasons may be quite different. — Two subsequent courts may give different versions of the ratio in the same earlier case. See also: Judicial precedent. 820

Qualcast (Wolverhampton) Ltd v. Haynes [1959] 2 All ER 38.

451

Real property

Real property Most legal systems recognise a distinction between land, which is immovable and as a general rule indestructible, and other pieces of property such as cars, books or clothes. In England, for historical reasons, ownership may exist in respect of both real and personal property (qv). Real property (realty) is, broadly speaking, a freehold estate or interest in land. In law, ‘land’ has a very wide definition, which includes not only the actual soil itself but all the things growing upon it or permanently attached to it, as well as rights over it. This has important consequences in building contracts, because as goods and materials are incorporated into the building they generally cease to be personal property and become part of the land. ‘Real property’ is a term that is applied solely to interest in land. Interests under leases, leaseholds, are ‘interests in land’ in one sense, but for historical reasons are classed as personal property (qv). They occupy an anomalous position, and are technically known as chattels real (qv). See also: Personal property; Property.

Reasonable A term that is virtually impossible to define satisfactorily. What is reasonable in one case will almost certainly be considered unreasonable in another. The law considers what is reasonable to be an objective judgment – for example, what is reasonable to the man or woman in the street. It used to be referred to, memorably, as the view of the man on the top of the Clapham omnibus. Although it is relatively easy to decide whether two extremes are reasonable or unreasonable respectively, the difficulty arises when attempting to judge fine differences. In contracts it is commonly assumed that powers and duties must be exercised reasonably, and it is certainly settled that those who have to carry out a certifying obligation are bound to act in a fair and unbiased manner, which really equates to certifying in a reasonable manner.821 Guidelines concerning what may be considered reasonable have been set out in the Unfair Contract Terms Act 1977 (qv), which are valid for that Act only, but they may be found useful as an indication of the statutory position in a particular case. It is for the courts to decide whether any particular action or inaction is reasonable in all the circumstances. SBC refers to the quality of materials, goods or standards of workmanship to be to the ‘reasonable satisfaction’ of the architect (clause 2.3.3), to the architect fixing such later date for completion as the architect estimates to be ‘fair and reasonable’ (clause 2.28.1), and to the contractor having a ‘reasonable time’ to make good defects during the rectification period (qv) or after receipt of the architect’s schedule of defects (clause 2.38). Contracts tend to qualify something with the word ‘reasonable’, either when greater precision would not be appropriate or when greater precision would not be possible. Therefore, although it would have been possible to specify that the contractor should make good defects within four weeks of receiving the architect’s schedule of defects, that might be too long a period in some instances, and far too short in others if substantial defects are present. Use of the qualification ‘reasonable’ is intended to allow the period to be adjusted to suit the particular circumstances.

821

London Borough of Merton v. Stanley Hugh Leach Ltd (1985) 32 BLR 51.

452

Reasonable skill and care

Reasonable endeavours An obligation to take steps to minimise or avoid a situation. It may be compared with best endeavours (qv). It has been held that an obligation to use reasonable endeavours requires a party only to take one reasonable course available but not all, whereas an obligation to use best endeavours probably requires a party to attempt or to take all the reasonable courses available.822

Reasonable satisfaction SBC clause 2.3.3 and IC and ICD clause 2.2.1 refer to the quality of materials, goods or standards of workmanship to be to the ‘reasonable satisfaction’ of the architect. In Crown Estates Commissioners v. John Mowlem & Co Ltd 823 the Court of Appeal held that all materials, goods and workmanship were inherently matters for the approval of the architect, and not simply those things that were expressly so stated. In any challenge to the architect’s opinion under these clauses the question is whether, objectively, the architect ought to have been satisfied. An unreasonable desire for perfection is ruled out. Materials, goods and workmanship are usually specified in the contract documents (qv) with some precision, and an architect is not entitled to require a higher standard than the contract sets down. Hence the architect would be reasonably satisfied only if the materials, goods and workmanship were in accordance with the contract specification. It is a matter of interpretation of the contract in each case whether the contractor has a dual obligation to comply with the specification and to satisfy the architect.824 Generally, if the obligations are linked with the word ‘and’, the contractor will have a dual obligation, so that even if the architect expresses satisfaction about some matter, it will not protect a contractor if it can be demonstrated that it has not complied with the contract documents.825 The position is more complex when the issue of the final certificate (qv) is taken into account.

Reasonable skill and care This is the standard of care to be exercised by a professional person as generally understood for many years: Every person who enters into a learned profession undertakes to bring to the exercise of it a reasonable degree of care and skill. He does not undertake, if he is an attorney, that at all event, you shall gain your case, nor does a surgeon undertake that he will perform a cure; nor does he undertake to use the highest possible degree of skill.826

The precise definition of the term varies, depending on the profession concerned and, possibly, the members of that profession. Different professions may have differing standards, and the members of each profession will be qualified and experienced to varying degrees. Therefore the commonly accepted standard of the average competent architect, surveyor, engineer, etc. may not be appropriate. Where a professional is highly experienced or qualified it is suggested that the appropriate standard of skill and care will be the standard usually exercised by fellow members of the same profession having similar experience 822

Rhodia International Holdings Ltd and Another v. Huntsman International LLC [2007] EWHC 292. (1994) 70 BLR 1. 824 National Coal Board v. William Neill & Son [1984] 1 All ER 555. 825 Billyack v. Leyland Construction Co Ltd [1968] 1 All ER 783. 826 Lanphier v. Phipos (1838) 8 C & P 475 per Tindall CJ. 823

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Reasonable time or qualifications.827 The standard of care is judged at the time of the decision or act, and not with hindsight, for example at the time of a hearing some years later, when knowledge in the profession may have improved or changed. Although expert evidence will be heard, it is for the court to decide in any given instance what standard a profession should achieve. If a firm of consultant engineers provides a junior member of staff to perform services that ought to be provided by a senior engineer, the court will judge the standard of skill and care required on the basis of the senior engineer.828 A court is likely to take much the same approach where members of one profession hold themselves out as the members of another, or if an unqualified person purports to be a professional of particular discipline. It is the skill and care expected that is relevant. For a professional person to be found in breach of the duty of reasonable skill and care it is usually necessary for expert evidence to be brought from members of the same profession, and evidence from members of other, even related professions, will not usually suffice: A court should be slow to find a professionally qualified man guilty of a breach of his duty of skill and care towards a client (or third party) without evidence from those within the same profession as to the standard expected on the facts of the case and the failure of the professionally qualified man to measure up to that standard. It is not an absolute rule as Sachs LJ (in Worboys v. Acme Investments Limited [1969] 4 BLR 133 at 139) indicated in his example but unless it is an obvious case, in the absence of the relevant expert evidence, the claim will not be proved.829

Reasonable time What is a reasonable time will depend upon the circumstances of each particular case. It is a favourite expression in contracts when it is impossible to set down exactly how much time is intended. It might well be equated with ‘appropriate time’ in some cases. SBC clause 2.38 lays down that defects etc. shall be made good by the contractor within a reasonable time after receipt of the architect’s schedule of defects. In other parts of SBC there is no stipulation about the time of performance. It has been said: When the language of a contract does not expressly, or by necessary implication, fix any time for the performance of a contractual obligation, the law implies that it shall be performed in a reasonable time. The rule is of general application …830

It has been suggested that where a contract contains express provisions as to time in relation to some obligations and nothing for others, then where no period was mentioned, none was intended, and it would be wrong to infer a reasonable or any period of time for other obligations. This suggestion has been rejected.831 Where the contract expressly provides a period of time for some action, the law will not overrule the stipulated time, even if it can be shown to be unreasonable. ACA attempts to clarify the matter by stating precise times as often

827

Duchess of Argyll v. Beuselinck [1972] 2 Lloyd’s Rep 172. Wilsher v. Essex Area Health Authority [1987] QB 730. The case was appealed, but not on this point. 829 Sansom v. Metcalfe Hambleton [1998] 26 EG 154 at 156. 830 Hick v. Raymond & Reid [1893] AC 22 at 32 per Lord Watson. 831 R M Douglas Construction Ltd v. CED Building Services (1985) 3 Con LR 124. 828

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Rectification as possible. It does not state that the times are reasonable, and indeed in some cases they appear to be unreasonable, e.g. five working days to agree to the contractor’s estimates (clause 17.3). See also: Reasonable.

Reasonably practicable A term used in health and safety legislation, e.g. section 2 of the Health and Safety at Work Act etc. 1974. It is a narrower term than ‘physically possible’, and is not as strict as a requirement qualified by ‘practicable’ alone. Reasonably practicable requires a computation to be made between the quantum of risk on one side and the sacrifice in avoiding the risk (in terms of money, time and effort) on the other.832 Thus if the risk is insignificant in comparison with the sacrifice required to avoid the risk, the person on whom the duty is placed discharges the burden of proving that compliance was not reasonably practicable.

Receiver A person appointed by a creditor or by the court. The holder of a floating charge may be invited by shareholders to appoint a receiver, or a creditor may take the initiative. An official receiver is appointed by, and is usually an officer of, the court, often as a temporary measure until a trustee in bankruptcy has been appointed. In both cases the purpose is to gather the assets of a company, and to protect them for the benefit of creditors. See also: Bankruptcy; Insolvency; Liquidation.

Recitals Statements in a contract that are introductory of its operative clauses. Their purpose is to set out the facts on which the contract is based (narrative recitals) and to give reasons for the subsequent clauses (introductory recitals). The operative clauses prevail over the recitals, and the recitals cannot be used to modify clear words in the operative clauses. Only if the operative clauses are ambiguous may the recitals be an aid to interpretation (qv) of the operative clauses.833 Recitals usually begin ‘Whereas’. In standard form building contracts they may be of very great importance, particularly as regards description of the Works or the site (qv). For example, in SBC, IC, ICD, MW and MWD the recitals are the only place in the contract where the exact nature of the work to be undertaken by the contractor is specified. The MP and CE do not include recitals.

Rectification A discretionary remedy whereby the court can order the correction of errors in a written contract. It is not often granted. The House of Lords described the remedy as one available ‘where parties to a contract, intending to reproduce in a more formal document the terms of an agreement upon which they are already ad idem, use, in that document, words which are inapt to record the true agreement reached between them. The formal document may then be rectified so as to conform to the true agreement which it was intended to reproduce, and enforced in its rectified form.’834

832

Edwards v. National Coal Board [1949] 1 KB 704. Rutter v. Charles Sharpe & Co Ltd [1979] 1 WLR 1429. 834 American Airlines Inc v. Hope [1974] 2 Lloyd’s Rep. 301. 833

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Rectification period Rectification will be ordered only where the written document fails to represent what the parties agreed. It will not be ordered where the document fails to represent what they intended to agree. It must be shown that the parties were in complete agreement on the terms of the contract, but by an error wrote them down wrongly. Although it was formerly thought that the mistake had to be of fact, not law, the position may be changing. Parol evidence (qv) is admissible where rectification is sought. An arbitrator does not ordinarily have power to rectify the contract, but can be given such power, and it is expressly given in SBC, DB, IC and ICD clause 9.5 and MW and MWD Schedule 1, paragraph 3. An adjudicator is thought not to have such authority under the Housing Grants, Construction and Regeneration Act 1996, given that rectification would not give rise to a ‘dispute arising under’ (qv) the contract. However, given the recent decision in Premium Nafta Products Ltd and Others v. Fili Shipping Company Ltd and Others,835 this may now be in some doubt. It would be open to the parties to expressly give, by agreement, such powers. See also: Clerical errors; Discretion; Error.

Rectification period A term used within the JCT contracts, which replaced the term ‘defects liability period’ (qv). It refers to the period following practical completion (qv) when a contractor has a right to return to make good or rectify defects that were latent at practical completion. The period is stated within the contract particulars, and the default is six months in SBC (clause 2.38), DB (clause 2.35), IC (clause 2.30) and ICD. The default is three months within MW (clause 2.10) and MWD (clause 2.11), and 12 months under MP (clause 1) and CE (clause 4.3.2). Under the MP form the rectification period commences from practical completion of the project and not practical completion of individual sections, should they apply. It is only those defects that arise during the rectification period and are notified to the contractor no later than 14 days following the expiry of the rectification period that the contractor has a right to return and make good. The 14-day period within which to notify the contractor does not apply to MW, MWD and MP. Under MW and MWD the architect (or within MP the employer) would have to notify the contractor on the expiry of the rectification period. The relevant provisions cover defects that existed before practical completion,836 but not those that are not notified in accordance with the contractual provisions, e.g. after the expiry of the 14-day period or on expiry of the rectification period (MW and MWD). The contractor would be liable for these defects, but not through the administration of the ‘rectification period’ clauses. Once the contractor has made good the notified defects, either a certificate or a statement is issued by the person responsible for administering the contract to confirm that the contractor has fulfilled its obligations in respect of the ‘rectification’ clause. This usually, but not in the case of IC and ICD, results in the release of the balance of retention monies being withheld. Other standard forms use different terminology for this period: for example, GC/Works/1 uses ‘maintenance period’ (qv) and NEC uses ‘defects date’ (qv).

835 836

[2007] 4 All ER 951. William Tomkinson v. Parochial Church Council of St Michael (1990) 6 Const LJ 319.

456

Referral

Re-examination The final stage in the examination of witnesses in judicial or arbitral proceedings. Following cross-examination (qv) the witness may be reexamined by or on behalf of the party calling them, with the object of reinstating any of the witness’s testimony that has been shaken in cross-examination. Leading questions may not be asked, and new matters cannot generally be raised. See also: Examination-in-chief; Witness.

Reference The proceedings before an arbitrator (qv). So the ‘costs of the reference’ means the costs incurred by the parties in the conduct of the proceedings, as opposed to the costs of the award (qv), which are the arbitrator’s fees and expenses. The same term is used for a written testimonial about someone’s character and abilities.

Referral A document to be submitted by the referring party (qv) as part of the adjudication (qv) procedure. It is sometimes referred to as the referral document, and (confusingly) the Scheme for Construction Contracts (England and Wales) Regulations 1998 refers to it as the referral notice (as distinct from the notice of adjudication (qv)). Effectively, it is the referring party’s claim, and consists of a statement of case together with relevant documents such as a copy of the contract and correspondence, invoices, certificates, etc. It should set out the remedies sought from the adjudicator (qv). The referral may flesh out, but may not change or add to, the dispute in the notice of adjudication. Unlike the statement of case prepared in litigation (qv) or arbitration (qv), where there is opportunity to enlarge upon the arguments during the process, the adjudication referral must contain the whole of the contentions of the referring party. There will be scant opportunity to repair omissions within the very short adjudication timescale. The Scheme for Construction Contracts (England and Wales) Regulations 1998 (qv) provides that the referral notice must be given within seven days of the notice of adjudication, must include the contract and other documents to be relied upon, and must be copied to the responding party. Importantly, the referral is to be confined to the issues raised in the notice of adjudication. The Construction Industry Council Model Adjudication Procedure (3rd edition) has been found not to comply with s. 108 of the HGCRA 1996. The Scheme for Construction Contracts (England and Wales) Regulations 1998 would therefore be applicable to adjudications stated to be under these rules.837 The default has now been corrected within the 4th edition. It has been held that the 28 days in which the adjudicator must make the decision begin to run from the date the referral is received.838 Generally, a referral is invalidly served if it is not submitted to the adjudicator within seven days of the notice of adjudication,839 and the adjudicator has no jurisdiction to give directions to the parties until the adjudicator receives the referral. See also: Scheme for Construction Contracts.

837 838 839

Epping Electrical Company Ltd v. Briggs and Another [2007] BLR 126. Aveat Heating Ltd v. Jerram Falkus Construction Ltd (2007) 113 Con LR 13. Hart Investments Ltd v. Fidler and Another (2006) 109 Con LR 67.

457

Referring party

Referring party In adjudication (qv) proceedings, the party who initiates the adjudication by issuing the notice of intention to refer to adjudication.

Registered office Every company, private or public, must have an office registered with the Registrar of Companies. The office need not be, and often is not, the normal place at which the company does business. It is often the address of the company’s solicitors or accountants. Whatever the address, the important thing is that members of the public must have an address, not subject to overnight change, to which correspondence may be sent, or where formal notices, such as claim forms and notice of adjudication or arbitration, may be served. Service at the registered office is deemed (qv) to be service on the company. All standard form contracts provide for the address of the registered office to be the address inserted in the articles of agreement (qv). However, in practice, most companies conduct everyday business not through their registered offices but through their business addresses, and these business addresses may be stipulated as sufficient for normal contractual communications. SBC, DB, IC and ICD clause 1.7 and MW and MWD clause 1.6 expressly provide for service to be to the address in the contract particulars, but in the absence of such address the default position is service to the registered office of a body corporate. GC/Works/1 has a similar provision in clause 1(3).

Registrar There are many different registrars for various purposes. Well known are the registrars of companies and the officer of the High Court or county court exercising both judicial and administrative functions. Many of the functions that used to be carried out in the county court by registrars are now dealt with by district judges. See also: Courts.

Regular progress A term used in many standard forms of contract to indicate the way in which the work is to be carried out. To amount to ‘regular progress’ the progress of the work must bear a relationship to the contractual completion date (qv). What amounts to regular progress in any particular instance will depend upon the precise terms and circumstances of the contract. ACA clause 7.1 and GC/Works/1 clause 46 make reference to the regular progress of the Works being affected and thereby giving the contractor a right to make a claim. See also: Regularly and diligently.

Regularly and diligently The phrase used in SBC, IC, ICD clause 2.4 and DB clause 2.3 to describe the contractor’s obligation as to progress. Breach of this obligation is a ground for termination under SBC, IC, ICD and DB clause 8.4.1.2. This phrase probably means more than an express restatement of the contractor’s common law obligation as to progress, i.e. it must bear some relationship to the specified date of completion, and progress must be constant, systematic and industrious. Whether or not the contractual standard is achieved is probably best judged by the custom of the construction industry, and in light of the express terms of the contract. The number of workers on site and the amount of plant and equipment there are relevant factors in considering whether or not the contractor is making regular and diligent progress. The architect must look at the master programme (qv), the work done and to be done, the time available, the labour, and the 458

Regularly and diligently contractor’s capacity or ability to do the work. A slow rate of progress judged against the performance of other contractors is an indicator that the contractor is not proceeding ‘regularly and diligently’, although low productivity on site may well be explained by other factors that are outside the contractor’s control, and comparison of contracts is notoriously difficult. According to one line of authority, merely going slowly is not a breach of contract. It becomes a breach of contract only if there is ultimately delay in completion or, in cases where the work stops before completion, there inevitably would be such delay if the Works had continued to completion. It is a question of fact whether the contractor is going ahead regularly and diligently and this is clearly to be judged by the standards expected of the average competent and experienced contractor. The Court of Appeal has given useful guidance on the matter: Although the contractor must proceed both regularly and diligently with the Works, and although each word imports into that obligation certain discrete concepts which would not otherwise inform it, there is a measure of overlap between them and it is thus unhelpful to seek to define two quite separate and distinct obligations. What particularly is supplied by the word ‘regularly’ is not least a requirement to attend for work on a regular daily basis with sufficient in the way of men, materials and plant to have the physical capacity to progress the work substantially in accordance with the contractual obligations. What in particular the word ‘diligently’ contributes to the concept is the need to apply that physical capacity industriously and efficiently towards the same end. Taken together the obligation upon the contractor is essentially to proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the Works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work. Beyond that I think it impossible to give useful guidance. These are after all plain English words and in reality the failure of which [the clause] speaks is, like the elephant, far easier to recognise than to describe.840

GC/Works/1 provides, in clause 34(l), that the contractor’s progress obligation is to proceed ‘with diligence and in accordance with the Programme or as may be instructed by the PM’, while ACA, clause 11.1, requires the contractor to proceed ‘regularly and diligently and in accordance with the Time Schedule’. Oddly, neither MW nor MWD expressly requires the contractor to progress regularly and diligently, although their predecessor, MW 98, in clause 1.1 required the contractor to carry out and complete the Works ‘with due diligence’. However, having failed to place an obligation on the contractor to proceed regularly and diligently, both MW and MWD, in clause 6.4.1.2, make the contractor’s failure to proceed regularly and diligently grounds for termination. It is doubtful whether a term would be implied requiring the contractor to proceed regularly and diligently, and ‘although neglect by the contractors to execute the Works with due diligence and expedition would entitle the employers to discharge them under [the termination clause] it would not by itself be a breach of contract.’841 This may cause some difficulties in practice. 840

West Faulkner v. London Borough of Newham (1995) 11 Const. LJ 157 (CA) at 161 per Simon Brown LJ. Greater London Council v. Cleveland Bridge & Engineering Co Ltd (1984) 8 Con LR 30 at 40 per Staughton J when considering similar provisions. This judgment was upheld by the Court of Appeal (1986) 8 Con LR 44 (CA). 841

459

Regulations The contractor’s obligation as to progress is important in relation to claims for extension of time (qv) and loss and/or expense, as well as termination (qv) of employment.

Regulations Restrictions and/or directions. The word is found in GC/Works/1, clause 22, which compels the contractor to comply with the rules and regulations of any government establishment within whose boundaries it is executing work. All standard form contracts require the contractor to comply with statutory requirements (qv). Many regulations are made pursuant to an Act of Parliament (qv), e.g. the CDM Regulations 2007 and the Scheme for Construction Contracts (England and Wales) Regulations 1998, and European Union legislation.

Reinstatement A word used normally in connection with the insurance provisions of the standard forms (e.g. SBC and DB Schedule 3, paragraphs A.1, B.1, C.1 and C.2, IC and ICD Schedule 1, paragraphs A.1, B.1, C.1 and C.2, MW and MWD clauses 5.4A, 5.4B and 5.4C, and ACA clause 6.4). Reinstatement means the putting back of materials or workmanship to the same state and to the same standard as they were before the need for reinstatement arose. The reinstatement value may well be greater than the straightforward value of the Works, because reinstatement will include all necessary demolition, removal and ancillary work. It is therefore important that insurance covers the full cost of all work, clearing debris, and including a percentage for professional fees. The Guide to SBC contains some useful advice about irrecoverable VAT.

Rejoinder An answer to a reply. In the pleading process it is the response to the claimant’s reply to the defendant’s defence. A surrejoinder is the reply to the rejoinder.

Relevant date The phrase used within a number of JCT contracts (e.g. SBC clause 2.33) when referring to the date when the employer, with the consent of the contractor, has taken part or parts of the Works into partial possession (qv). The part taken in possession by the employer is referred to as the ‘Relevant Part’ (qv). Both the relevant part and the relevant date are to be identified in a statement issued by the architect. See also IC and ICD clause 2.25 and DB clause 2.30.

Relevant event A term used in the SBC, IC, ICD and DB forms of contract to indicate the grounds for giving an extension of time (qv). SBC clause 2.29, IC and ICD clause 2.20 contain 13 such events, the first six being events that are the responsibility of the employer and for which extension of time provision must be made if it is intended to avoid time becoming at large (qv). The remainder of the 13 events are termed neutral, and at common law would not normally be the contractual liability of an employer. DB clause 2.26 also contains 13 such events, but only the first five are events that are the responsibility of the employer. The relevant events listed in SBC are briefly: — variations; — instructions; — deferment of possession; — approximate quantity not a reasonably accurate forecast; — contractor suspension; — employer impediment, prevention or default; 460

Relief event — work in pursuance of statutory obligations; — exceptionally adverse weather; — loss or damage due to specified perils; — civil commotion or terrorism; — strike, etc.; — exercise of UK statutory power; — force majeure. See also: Force majeure.

Relevant matter A term used in the SBC, IC, ICD and DB forms of contract to indicate the grounds under which the contractor may apply for payment of direct loss and/or expense (qv). In JCT 98, IFC 98 and WCD 98 such grounds were formerly referred to simply as ‘matters’. SBC clause 4.24, IC and ICD clause 4.18 and DB clause 4.20 contain five such relevant matters. The relevant matters listed in SBC are briefly: — variations; — instructions; — contractor suspension; — approximate quantity not a reasonably accurate forecast; — employer impediment, prevention or default. For reasons best known to the JCT, the deferment of possession is not listed as one of the relevant matters, but is included in the body of the clause. Since deferment is listed in the relevant events (qv), the result is apt to be confusing.

Relevant omission A term defined in SBC clause 2.26.3 to mean the omission of work or obligation as a result of an instruction requiring a variation under clause 3.14, or as a result of an instruction regarding the expenditure of a provisional sum for defined work (qv) under clause 3.16. The reduction in time that the architect or contract administrator has attributed to each relevant omission must be stated in the decision about extension of time (qv), e.g. SBC clause 2.28.3.2. The term is also used in DB but defined to mean the omission of work or obligation through an instruction for a change (qv) under clause 3.9.

Relevant part The phrase used within a number of JCT contracts (e.g. SBC clause 2.33) when referring to the part or parts of the Works that the employer has taken into partial possession (qv) with the consent of the contractor. The date the relevant part is taken in possession by the employer is referred to as the ‘Relevant Date’ (qv). Both the relevant part and the relevant date are to be identified in a statement issued by the architect. See also IC and ICD clause 2.25, and DB clause 2.30.

Relief event A term used within CE and defined at clause 1 as one or more of the events described at clauses 5.7 and 5.8. These events equate to the terms ‘relevant events’ (qv) or ‘relevant matters’ (qv) used in other JCT contracts. They include: — Instructions from the purchaser changing the services or the project. — Any act or omission of the purchaser or anyone for whom the purchaser is responsible. — The occurrence of a risk referred to in the risk allocation schedule (qv) to the extent that the schedule does not apportion any of the risk to the 461

Remedies supplier. The extent that the supplier is permitted to recover is only that amount that exceeds the amount or duration stated in the schedule. — The occurrence of a risk not referred to in the risk allocation schedule and which was not reasonably foreseeable at the date of the contract. The consequences of such risks are to be apportioned in accordance with the allocation identified within the contract particulars. — The opening up of Works and the undertaking of tests, except where such tests are provided for in the contract, or the test or inspection discloses work not in accordance with the contract. The supplier is entitled to recover against a relief event only if it affects the cost of performing the services or any date for completion.

Remedies See: Rights and remedies. Remoteness of damage A party in breach of contract is not liable for all the damage that ensues from that breach, nor is a tortfeasor (qv) responsible for all the damage that flows from a wrongful act. Some damage is said to be too remote, and is therefore irrecoverable. In contract the basic rule was stated in Hadley v. Baxendale: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either as arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.842

There are two branches to this rule (indicated by the italicised ‘either’ and ‘or’ in the quotation above): under the second branch only a party in breach of contract who knew of the special circumstances at the time the contract was made is liable.843 A similar test is applied in tort, where the phrase ‘reasonably foreseeable’ is normally used, as opposed to ‘reasonably contemplated’.844 See also: Damages; Knowledge.

Removal of defective work SBC clause 3.18.1 gives the architect power to order the removal from site of work, materials or goods that are not in accordance with the contract. Oddly, the architect is not empowered merely to order that defective work should be corrected. For the instruction to be valid, the architect must order removal from site. In Holland, Hannen & Cubitt (Northern) Ltd v. Welsh Health Technical Services Organisation and Others, a case on JCT 63 (in which clause 6(4) had much the same wording as clause 3.18.1 of SBC), it was said: In my opinion, an architect’s power under clause 6(4) is simply to instruct the removal of work or materials from the site on the ground that they are not in accordance with the contract. A notice which does not require removal of anything at all is not a valid notice under clause 6(4).845 842

Hadley v. Baxendale (1854) 9 Exch 341 at 354 per Alderson B. Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd [1949] 1 All ER 997. For example, see Overseas Tankship (UK) v. Morts Dock and Engineering Co (The Wagon Mound) [1961] AC 388. 845 Holland, Hannen & Cubitt (Northern) Ltd v. Welsh Health Technical Services Organisation and Others (1981) 18 BLR 80 at 120 per Judge Newey. 843 844

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Renomination The clause is a very blunt instrument, and is not well suited to the realities of construction work. For example, if the paintwork is found to be of poor quality, the architect has no power to simply instruct the contractor to rub it down and provide another coat overall, without incurring a claim for a variation. The instruction must instruct the contractor to remove the defective paint from site. Under clause 3.18.2 the architect has power to allow any defective work, goods or materials to remain after consultation (qv) with the contractor, and with the agreement of the employer. In such a situation the architect must write to the contractor and confirm the situation, but it is not to be taken as an instruction requiring a variation, and an appropriate deduction (qv) is to be made from the contract sum. Most of the JCT contracts include similar drafting to clause 3.18.1, as does ACA clause 8.1(a). In contrast, GC/Works/1 clause 31(6)(6) states that the contractor shall ‘replace, rectify or reconstruct’ Works or any part that does not conform to the contract, at its own cost. This would appear to give the project manager some latitude, rather than simply instructing its removal, e.g. to rectify a defect. The NEC clause 43 also seems to offer similar latitude to the project manager as the contractor has to ‘correct’ defects.

Renomination JCT 98 used to provide a mechanism whereby the architect, on behalf of the employer, could nominate specialists as sub-contractors. The latest equivalent JCT contract, i.e. SBC, does not provide for nomination, and therefore the problems of renomination do not arise.846 Difficulties arose when the nominated sub-contractor defaulted or failed. The problem was considered by the House of Lords under JCT 63,847 where a sub-contractor nominated under a PC sum (qv) went into liquidation. The liquidator (qv) refused to complete the sub-contract. It was held that in these circumstances the employer, through the architect, was bound to make a fresh nomination. The main contractor was neither bound nor entitled to take over the nominated subcontractor’s work. That principle appeared to be of general application, in the sense that where the original contract provided for work to be done by a nominated sub-contractor, if the nominated sub-contractor defaulted or otherwise failed, the employer was obliged to provide a substitute. This general position could, of course, be affected by the particular wording of the contract. For example, ACA clause 9.7, dealing with ‘named sub-contractors’ (qv), provides that in such circumstances the main contractor should ‘select another person to carry out and complete the execution of the work’. Under GC/Works/1 clause 63(7) the employer may (but is not bound to) renominate. Under the JCT 98 standard form the problem was overcome by an extraordinarily complex clause 35.24, which expressly provided for the architect to renominate where the original sub-contractor failed for any reason. Therefore, in the absence of some express term to the contrary, the main contractor was neither bound nor entitled to do the nominated sub-contract work itself. Later cases developed the position further. The immediate loss to

846 847

Though IC, ICD and DB have provisions for naming sub-contractors. North West Metropolitan Regional Hospital Board v. T A Bickerton & Son Ltd [1970] 1 All ER 1039.

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Renunciation the contractor arising from the nominated sub-contractor’s withdrawal or failure fell on the main contractor,848 since the nominated sub-contractor’s failure was not a default or breach of contract on the part of the employer. However, the architect was bound to renominate, and the employer was responsible for any loss arising from a delay in renomination. The architect had a reasonable time (qv) in which to make the renomination (which ran from the date of receipt of the contractor’s request for a renomination instruction) and it has been held that: — An apparent delay in renomination did not of itself make the period of time involved unreasonable unless the delay was caused by the fault of the architect or employer. — The architect was entitled to have regard to the interest of the employer by seeking lump sum tenders from proposed re-nominees. However, it has also been suggested that (unless the contract wording provided otherwise) the main contractor was not bound to remedy defects in the work of the original nominated sub-contractor where these arose before completion of the sub-contract works, and such loss fell on the employer. To be valid, the renomination had to cover both existing defective sub-contract work and completion work, otherwise the main contractor was entitled to reject the renomination.849

Renunciation When a party to a contract demonstrates, by words or actions, that it does not intend to carry out some essential obligation under the contract. The renunciation may be express or, perhaps more often, it will be shown by the actions of one party. In such circumstances the test as to whether renunciation has occurred is whether the actions would lead a reasonable person to conclude that the party no longer intends to be bound by the contract.850 See also: Repudiation.

Repair The word is found in the insurance clauses of some contracts, e.g. SBC Schedule 3 paragraph A.4.3, where it states that the contractor must replace ‘or repair’ lost or damaged materials on site. The word has its ordinary meaning, i.e. to restore to the same condition as obtained before the event that necessitated a repair being carried out.

Representative One who stands in the place of another. SBC clause 5.7 provides that, in respect of work to be valued on a daywork basis, vouchers (commonly known as ‘daywork sheets’), specifying the time, operatives’ names, plant and materials spent daily upon the work, should be given weekly to the architect or to the architect’s authorised representative. The rules of agency (qv) govern a representative. It is therefore important that the architect specifies: — who is to be the authorised representative; and — the extent of the representative’s authority. The architect must put the information in writing, and must communicate it to anyone who may have dealings with the representative. The contractor should

848

Percy Bilton Ltd v. Greater London Council (1982) 20 BLR 1. Fairclough Building Ltd v. Rhuddlan Borough Council (1985) 30 BLR 26. 850 Nottingham Building Society v. Eurodynamics plc [1995] FSR 605. 849

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Rescission do likewise in respect of its representatives. The information is commonly exchanged and minuted in the first contract meeting. See also: Employer’s representative.

Repudiation This is the term used to describe those breaches of contract that consist of one party clearly indicating, at a time before the contract has been fully performed, that it no longer intends to fulfil its contractual obligations. When faced with repudiation, the innocent party has two options: — to affirm the contract but claim damages for the breach; or — to accept the repudiation, in which case the obligations of the parties are at an end and the innocent party may sue for damages. The innocent party must come to a decision promptly. The length of time such a party may take before choosing an option will depend upon all the circumstances – for example, the need to take legal advice on the matter. However, if a party waits too long, it may be taken to have affirmed the contract. A repudiatory act in itself is not significant until the innocent party takes action. It has been said that ‘an unaccepted repudiation is a thing writ on water’.851 No particular form is required for the acceptance of repudiation, but it must be clear and unequivocal, so that the repudiating party knows that the innocent party is treating the contract as at an end. It may be that in some instances it is not even necessary for the innocent party to use words. For example, if a client informs the architect that it is repudiating the contract of appointment, and that the architect should not continue to produce drawings and attend site, the architect’s failure to continue the drawings and attend site may be treated as an acceptance of the repudiation if there is no alternative explanation. In cases where the repudiating party takes action to physically prevent the innocent party from continuing the contract, as where an employer locks the site against a contractor, the innocent party in practice may not have the option to affirm the contract. Although the concept of repudiation is simple in theory, there are considerable difficulties in practice. It is not always clear whether there has been a wrongful repudiation, and it is for this reason that most standard form building contracts contain clauses entitling one party to terminate on the happening of specified events. See also: Anticipatory breach of contract; Breach of contract; Damages; Determination; Renunciation.

Rescission The termination or abrogation of a contract by one of the parties. A contract may be rescinded on grounds of misrepresentation, mistake, or fraud (qv). Rescission is effected by taking proceedings to have the contract set aside by the court (as in the case of misrepresentation) or by giving notice to the other party of one’s intention to treat the contract as at an end. The ability to restore the parties to their original positions is an essential precondition to the right to rescind. If it is impossible, the parties are left to their other remedies, e.g. damages. In practical terms the defendant must indemnify the claimant against the obligations created by the contract.852 See also: Restitutio in integrum. 851 852

Howard v. Pickford Tool Co [1951] 1 KB 417 at 421. Boyd & Forrest v. Glasgow Railway [1912] SC (HL) 49.

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Resident architect

Resident architect If frequent or constant inspection of the Works is agreed to be necessary, an architect is sometimes appointed to be resident on the site. The possibility is not expressly referred to in the RIBA Standard Agreement for the Appointment of an Architect (SFA/99 (2004)) (qv). The Conditions of Engagement for the Appointment of an Architect (CE/99 (2004)) refer to site inspectors. The RIBA 2007 edition of the appointment documents (S-Con07-A) does not appear to deal expressly with site inspectors, although clause A4.3.1 possibly fills the gap. Usually, the need for constant inspection can be covered quite adequately by the appointment of a full time clerk of works (qv). A resident architect is normally appointed only if something more than inspection is required, and the architect is called upon to give instructions and possibly issue drawings – in other words, to carry out the functions of the contract administrator on the site. The resident architect must be distinguished from the clerk of works, who has no power to issue instructions, but only the duty to inspect the work. Sometimes a clerk of works is given the authority under a contract to issue directions (qv). However, these tend to have to be backed up by an architect’s instruction.

Respondent The person against whom an appeal (qv) is brought (in litigation) or against whom a claim (qv) is made in arbitration (qv) proceedings. See also: Arbitration; Claimant; Referring party; Responding party.

Responding party In adjudication (qv) proceedings the party who responds to the referral (qv). The equivalent to a defendant in litigation. See also: Referring party.

Response The document submitted to an adjudicator by the responding party (qv) in reply to the referral (qv) from the referring party (qv). It is normally required to be served within seven days. Where the particular adjudication rules do not specify a time within which the response must be submitted, the period is at the discretion of the adjudicator (qv). It has been held under DOM/2, where the contract specifies that the response must be submitted within a stated time period, that the adjudicator has the power to extend such a period.853

Restitutio in integrum Restoration to the original position. Before a contract can be rescinded this principle must be satisfied: The principle of restitutio in integrum does not require that a party should be put back into the same position as before. It means that the party should be put into as good a position as before e.g. if property has been delivered, it must be restored, and the party seeking rescission must be compensated for the money etc. which it has expended as a result of obligations imposed on it by the contract. The court must do what is practically just, even though it cannot restore the parties precisely to the state they were in before the contract.854

See also: Rescission. 853 854

CJP Builders Ltd v. William Verry Ltd [2008] EWHC 2025 (TCC). Erlanger v. New Sombrero Phosphate Co (1878) 46 LJ Ch 425.

466

Restrictions

Restitution An obligation on one party to restore goods, property or money to another. It arises in situations where goods etc. have been transferred by virtue of mistake (qv), illegality or other lack of legal authority, and is intended to avert injustice. See also: Letter of intent; Quantum meruit; Quantum valebat; Quasi-contract.

Restraint of trade Covenants in restraint of trade are basically unenforceable at common law. They may be enforced only if it can be shown that they are reasonable in regard to the parties and to the general public. The courts have said that the ‘doctrine of restraint of trade is one to be applied to factual situations with a broad and flexible rule of reason.’855 Restraint of trade is commonly encountered in regard to employment or partnership agreements where an employer may try to impose on an employee, or the remaining partners impose on a departing partner, terms specifying that, after leaving, the employee or partner will not set up in business within a particular geographical area for a specific period of years. It seems that the courts will not readily accept such covenants if they unreasonably restrict the potential for the employee or partner to earn a living at their chosen profession or trade. An employer cannot use a covenant in restraint of trade merely to protect itself against competition.856 However, reasonable restrictions may be enforced. Wrongful repudiation (qv) by the party seeking to benefit from the covenant, or wrongful dismissal of an employee, will discharge the person giving the covenant from future performance. Breach of a restraint of trade covenant may be restrained by obtaining an injunction, even if the contract contains other remedies. The effect of European Union law must always be considered when dealing with covenants in restraint of trade.

Restricted tendering procedure European Union law severely controls procurement of public contracts, with much complicated legislation. Essentially, a contracting authority has the choice of three procedures for awarding contracts: — open tendering procedure (qv); — restricted tendering procedure; — negotiated tendering procedure (qv). Under the restricted procedure, potential tenderers are invited to express an interest in tendering. A list of tenderers is chosen from the contractors expressing interest and providing details of financial status, experience and technical ability. It is common for the contractors to be asked to complete questionnaires tailored to particular project requirements. The list of tenderers must be no less than five, but must not exceed 20. The principle is that the tenderers must be sufficient in number to ensure genuine competition. The procedure is popular where it is intended to invite tenders for a number of contracts similar in size and scope, because it establishes an approved list.

Restrictions ‘There is, moreover, a general principle applicable to building and engineering contracts that in the absence of any indication to the contrary, a 855 856

Esso Petroleum Co Ltd v. Harper’s Garage (Stourport) Ltd [1968] AC 269 at 332 per Lord Wilberforce. Attwood v. Lamont [1920] 3 KB 571.

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Restrictive covenant contractor is entitled to plan and perform the work as he pleases, provided always that he finishes it by the time fixed in the contract.’857 In practice this principle tends to be hedged by restrictions, which are set out in building contracts in various ways. Sometimes the contract itself stipulates the restrictions, and sometimes they are introduced or attempted to be introduced in the preliminaries (qv) section of the bills of quantities or specification. For some years JCT contracts have included the possibility of restrictions on the contractor’s freedom to plan and perform the contract. The possible restrictions are listed in SBC, DB, IC and ICD clause 5.1.2 in each case, as part of the definition of variations (or ‘Changes’ in the case of DB). However, the contracts recognise that restrictions are in a different category from variations in the work content and quality. The employer is entitled to impose or to vary obligations or restrictions in regard to: — access to or use by the contractor of any specific part of the site; — limitation of the working space; — limitation of the contractor’s working hours the contractor may work; — the specific order of execution or completion of the Works. Although, at first sight, it appears that it is the employer and not the architect who has the power to impose or vary these restrictions, they are included as part of the definition of variations that the architect (except under DB) has the power to instruct. MW and MWD include a somewhat lesser opportunity in clause 3.6.1, which permits the architect to instruct a change to the order or period in which the contractor is to carry out is work. Under SBC clause 3.10.1, DB clause 3.5, IC and ICD clause 3.3.8 the contractor need not comply with such instructions to the extent that it makes reasonable objection. The contractor has no express right of objection under MW or MWD. Where additional restrictions or obligations are included as part of the contract documents (qv) in the preliminaries, care must be taken that there is no conflict between such restrictions and what is contained in the printed form of contract. Under the SBC, DB, IC and ICD contracts (clause 1.3) and MW and MWD (clause 1.2) the printed form will take precedence over other documents. Clause 8.1(d) within the ACA form gives the architect similar powers with regard to access to site, working space and working hours.

Restrictive covenant A negative obligation affecting freehold land, and restraining the doing of some act on or in relation to the land in question, e.g. a prohibition in the title deeds against using the premises other than as a private dwelling. A restrictive covenant is enforceable not merely between the original parties to the agreement but also as between the successors in title to both parties. A restrictive covenant ‘runs with the land’ provided that it exists for the benefit or protection of the land. The burden or liability to be sued on a restrictive covenant binds a subsequent purchaser.858

857

Greater London Council v. Cleveland Bridge & Engineering Co Ltd (1986) 8 Con LR 30 at 39 per Staughton J; upheld on appeal 8 Con LR 44 (CA). 858 Tulk v. Moxhay (1848) 2 Ph 774.

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Retention fund; Retention monies Restrictive covenants can be registered as land charges under s. 10 of the Land Charges Act 1925, and registration amounts to actual notice (qv) of the existence of the covenant to every prospective purchaser. Such covenants remain enforceable indefinitely, and may in practice hinder conversion and development. In some cases outmoded restrictive covenants may be modified by the Lands Tribunal (qv). See also: Covenant.

Retention fund; Retention monies A sum or sums of money held by the employer as safeguard against defective work or materials, or against nonperformance by the contractor. It is a safeguard for the employer against latent defects and the contractor’s possible failure to complete the contract. It is provided for the general protection of the employer.859 The fund is usually expressed as a percentage (normally 3% or 5%) of the work properly executed by the contractor. It is built up by deducting the appropriate percentage from the quantity surveyor’s valuation of work in progress at each interim certificate. SBC clause 4.18.1, IC and ICD clause 4.10 (if the employer is not a local authority), DB clause 4.16.1 and ACA clause 16.4 state the employer’s interest as trustee (without obligation to invest). Not all JCT contracts make provision for retention: e.g. MP, SBC, DB and ACA provide for the employer to set the money aside in a separate bank account. This reflects a requirement of the general law whenever the contract provides that the retention money is to be held in trust.860 The purpose is to safeguard the contractor’s money in the event of the employer becoming insolvent. Therefore the obligation to set trust money aside cannot be overcome by deleting such clauses. The court would simply imply a clause to similar effect.861 JCT contracts also empower the contractor to require the employer to place the retention monies in a separate bank account designated to identify the money therein as held on trust. The account name should make it very clear that it is a designated trust account,862 and should be very clear as to the identity of the beneficiary. It is good practice for the employer to certify the action to the architect. SBC contains an alternative clause (clause 4.19), which provides for the contractor to give a bond to the employer (the ‘Retention Bond’). Where the employer agrees to a bond, retention is not deducted from valuations, but the quantity surveyor must prepare a statement at the date of each certificate. If at any time the amount that would have been deducted as retention exceeds the amount of the bond, either the amount of the bond can be adjusted or the architect may deduct the additional retention in the usual way. Recourse can be had to the retention bond in the same way as to the retention fund. Where there is also a performance bond, and the employer could have recourse to either for a particular default, the employer is to first demand payment through the retention bond. See also: Fiduciary. 859

Townsend v. Stone Toms & Partners (1985) 27 BLR 26. Wates Construction v. Franthom Property (1991) 53 BLR 23; Rayack Construction Ltd v. Lampeter Meat Co Ltd (1979) 12 BLR 30. 861 Wates Construction v. Franthom Property (1991) 53 BLR 23. 862 Bodill & Sons (Contractors) Ltd v. Harmail Singh Mattu [2007] EWHC 2950 (TCC). 860

469

Retention of title

Retention of title This is a complex topic. Many supply contracts contain a clause whereby, until paid for, the seller retains title in the goods or materials. The right to retain title is recognised by statute in s. 19(1) of the Sale of Goods Act 1979, but such clauses have become common in the building industry only over the last 20 years. The purpose of such a clause is to protect the seller in case of the buyer’s insolvency (qv). A typical retention of title clause provides that the seller retains ownership of the goods sold, notwithstanding delivery, until the goods have been paid for, or sometimes until all debts due by the buyer to the seller have been paid. The effectiveness of such clauses was upheld by the Court of Appeal in the Romalpa case (1976)863 and in Clough Mill Ltd v. Geoffrey Martin.864 A retention of title clause is of no real value once the goods have been incorporated into the building, because ownership passes to the employer as soon as they are actually built into the Works.865 Where a material has been mixed with another so that it is impossible to separate, e.g. where sand supplied by a supplier has been mixed with cement and aggregate belonging to the employer, the position is less clear. However, the most convincing analysis is that the supplier and the employer retain property in the respective materials, and they become joint owners as tenants in common in proportion to the value of their goods incorporated.866 In Archivent Sales & Developments Ltd v. Strathclyde Regional Council867 builders’ merchants supplied ventilators to a contractor and delivered them to site. The sale was on terms that ‘until payment of the price in full is received by the company the property and the goods supplied by the company shall not pass to the customer’. A Scottish judge upheld the validity of the clause. SBC clause 2.24, IC and ICD clause 2.17 and DB clause 2.21 provide that where the amount paid to the contractor includes the value of materials and goods on site, they will become the property of the employer. Such clauses are good against the contractor who cannot argue that it retains ownership of such goods or materials, but it is not enough to defeat a retention of title clause in a sub-contract that prevents title in goods passing to the contractor if the contractor has not paid the sub-contractor. In order to get around this problem JCT contracts contain additional provisions in SBC clause 3.9, IC and ICD clause 3.6 and DB clause 3.4. The clauses refer to sub-letting in each case, and set out certain conditions that the contractor must include in any sub-contract. The key provisions are that: — where the contractor has received payment in respect of any materials or goods, they become the property of the employer, and the sub-contractor cannot argue to the contrary; — where the contractor pays the sub-contractor for materials and goods before the employer has paid, they become the property of the contractor. This will not ensure that these terms apply to sub-contractors, but the contractor will be in breach of its contract if it does not incorporate these terms in sub-contracts. The 2005 suite of sub-contracts include these terms. If the contractor fails to incorporate the terms into sub-contracts and if, as a result, 863

Aluminium Industrie Vaassen BV v. Romalpa Aluminium Ltd [1976] 2 All ER 552. [1984] 3 All ER 982. Reynolds v. Ashby [1904] AC 466. 866 John Parris, Effective Retention of Title Clauses, Collins (1986), pp 88–98. 867 (1985) 27 BLR 98. 864 865

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RIBA contracts property does not pass to the employer when payment is made, then the contractor is liable for any loss suffered by the employer. The difficulty is that such things become important, and deficiencies tend to come to light, only when the contractor is in financial difficulty, and when its liabilities to the employer may be of academic interest only. ACA clause 16.2(b) enables the value of goods and materials intended for but not incorporated in the Works to be included in interim certificates where the contract documents expressly provide for such payment, but it excludes the value of goods and materials if the architect is not satisfied that property in them is vested in the contractor. GC/Works/1 makes no provision for the effect of retention of title clauses. See also: Fixture; Incorporation; Ownership of goods and materials.

Rethinking Construction A report published in July 1998 by a committee under the chairmanship of Sir John Egan. As a consequence it is usually called the ‘Egan Report’. It followed from the Latham Report (qv), but looked to achieving better overall cost reduction than envisaged by the Latham Report. Rethinking Construction advocated a performance measurement culture in the construction industry. Key performance indicators have been established so that firms can measure their performance against the performance of other firms and industry standards. The report looked at value for money, and proposed changes in relationships in the industry. In order to progress the aims of the report, the following bodies were established: — The Movement for Innovation. — The Housing Forum. — Government Construction Clients Panel. — The Local Government Task Force.

Revocation The withdrawal of an act already done or promised: for example the revocation of an offer, made at any time before acceptance (qv), or the revocation of a will. It may be by an individual or a company, or it may occur through the operation of law, or by death, or by order of the court. It is common for specially drafted consultant appointment documents to require the consultant to give an irrevocable copyright licence in respect of any drawings, specifications and the like produced for a project. Consultants, quite rightly, resist such clauses, because the right to revoke a licence is very valuable in the case of non-payment of consultant’s fees. SBC at clause 2.41 provides for the contractor to give an irrevocable licence to the employer to use and copy the contractor’s design documents, but this is subject to all monies due and payable under the contract having been paid. A similar provision is included in a number of other JCT contracts, where the contractor undertakes design, e.g. MP.

RIBA contracts An incorrect and outdated method of referring to the standard forms of contract published by the Joint Contracts Tribunal (qv). The title was correct until 1977, when the Royal Institute of British Architects (qv) withdrew its name from the documents, which are now correctly referred to as the JCT Forms. The 2005 editions of these contracts are prepared and issued by the Joint Contracts Tribunal Ltd and published by Sweet & Maxwell. Copyright (qv) in all of the 2005 JCT forms (e.g. SBC, IC, MW and DB) is vested in the Joint Contracts Tribunal Limited. By item B586 of Court Business (5 August 471

RIBA Plan of Work 1977) the judiciary and legal profession were instructed to refer to the ‘JCT Contract’ or ‘the Standard Form of Building Contract’, but the direction was widely ignored for many years. The current SBC derives from a form agreed as long ago as 1893, and agreed by various representative national bodies in 1909, 1931, 1939 and 1963. All were known as ‘the RIBA Contract’ and are so referred to in the contemporary law reports (qv) and textbooks. Since January 2000 electronic copies of the JCT contracts have been available on CD-ROM. Originally referred to as JCT Forms on Disk, the 2005 version is called JCT Contracts Digital Service. Both software packages provide subscribers with the opportunity to access and interrogate the forms using a word search or clause search facility. Each of the forms can be edited, text can be added and clauses deleted or altered to suit the user’s particular requirements and amendments, and then printed off. The forms can also be exchanged electronically between subscribers.

RIBA Plan of Work It is important to have a sequential framework for every complex activity, not least the processes that go together to form construction operations, so that the correct operations can be carried out at the right time and in the right order. In 1964 the RIBA Plan of Work was first published in the RIBA Handbook of Architectural Practice and Management. The intention was to provide a model procedure for the design team. It was never the intention that the Plan of Work would be slavishly followed under all circumstances. The Plan of Work was revised in 1999 as part of the revision of the architects’ appointment documents. Although the revisions were largely cosmetic, they took account of some perceived changes in architectural practice, other professions, the JCT development of multidisciplinary documents and BS 7000 part 4: the Guide to Managing Design in Construction. The Plan was again revised in 2007 with the intention of providing more flexibility to suit different procurement systems. There are many within the construction professions who believe that the revisions are no improvement on the original Plan. The fact that many architects still work to the original Plan has the potential for confusion. The Plan is a useful tool if it is remembered that it is only the basic outline. There are many instances when two or more stages may be combined. The content of stages may interweave, and it is rare, certainly up to stage H, for there to be any definite point at which it can be said that the project is moving from one stage to another. The Plan, in its complete form, indicates the principal tasks for the major participants at the stage when the tasks are usually carried out, and shows the architect’s tasks in two sections: design function and management function. There is no point in the construction parties slavishly following this time schedule. It is more important to assess each project carefully in the light of the Plan, and adjust the Plan to suit. The use of the Plan of Work will not eliminate mistakes, but it should reduce their incidence by ensuring that crucial steps are taken in logical order. Table 3 shows the headings in the 1964 version and the 2007 version of the Plan compared.

Right first time A term used in connection with prime contracting (qv). The idea appears to be that, with appropriate management of the supply chain through detailed design, and involving value engineering and risk management, all 472

Right of light Table 3 Plans of work compared. Stage

Name (original version)

Name (2007 version)

A B C D E F G H J K L M

Inception Feasibility Outline proposals Scheme design Detail design Production information Bills of quantities Tender action Project planning Operations on site Completion Feedback

Appraisal Design brief Concept Design development Technical design Production information F1 and F2 Tender documentation Tender action Mobilisation Construction to practical completion Post practical completion –

construction activities will be right first time. This appears to be an impossible dream, although it cannot be said that the intention to construct correctly and avoid the necessity of putting right defective work is new. Presumably no contractor sets out to construct wrongly first time so as to be able to spend time, effort and money on corrections. See also: Continuous improvement; Supply chain partners; Supply clusters.

Right of light A negative easement (qv) that entitles one owner to prevent its neighbour building so as to obstruct the flow of light through particular windows. The property enjoys the privilege of ‘ancient lights’. In determining whether there has been an actionable interference with a flow of light the test is: How much light is left, and is that sufficient for the comfortable use and enjoyment of the house according to the ordinary requirements of mankind? It is a right to receive a reasonable amount of light and nothing more.868 The test most commonly applied is the ‘forty-five degree’ test: that is, the interference will not be considered a nuisance (qv) if the light can still flow to the window at an angle of 45 degrees from the horizontal. Under s. 2 of the Rights of Light Act 1959 the owner of land over which a right of light might be acquired by the user may now register a land charge by means of a notice identifying the properties, and specifying the size and position of a notional screen. This prevents any right of light being acquired by the adjoining property, and circumvents the cumbersome common law necessity of erecting an actual screen. While the notice is in force the other party may seek cancellation or variation of the registration. An injunction, rather than damages by way of compensation, may be an appropriate remedy where rights of light have been infringed.869 See also: Prescription.

868 869

Colls v. Home & Colonial Stores [1904] AC 179. Regan (Dennis) v. (1) Paul Properties Ltd (2) Lahaise (Peter) (3) Griston (John) [2006] EWCA Civ 1391.

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Right of way

Right of way The right to pass across land belonging to another. The right may be public, in which case any member of the public has the right to use it, or private, when it is an easement (qv) for the benefit of adjoining land. In the latter case only the owner of the land and such people as the owner permits may use it. A public right of way is usually created by an Act of Parliament, or by custom (qv), as access from one public place to another. The Rights of Way Act 1990, which amends Part IX of the Highways Act 1980, is described as ‘An Act to amend the law relating to rights of way and the disturbance and restoration of the surface of land over which rights of way pass; to keep the line of rights of way clear of crops; to enable local authorities to act in connection therewith; and for connected purposes.’ Figure 13 shows examples of public and private rights of way. See also: Access to neighbouring land; Highway; Prescription.

Rights and remedies A phrase found, for example, in SBC, IC, ICD and DB clause 8.3.1, and MW and MWD clause 6.3.1. The rights are the parties’ rights at common law. The remedies are the remedies available to satisfy those rights. It is provided that the rights and obligations expressed in those clauses are without prejudice (qv) to any other rights and remedies that the employer (or contractor) may possess. That is to say, the parties’ common law rights are unaffected. In other words, the fact that the employer and the contractor have been given specific rights of termination under the contract does not preclude them from using their respective common law rights to terminate if they so wish. It has been held that if the termination provisions in a contract are not expressed as being without prejudice to the parties’ common law rights, the contract machinery and the common law rights could only coexist in circumstances where the contractor displayed a clear intention not to be bound by the contract.870 A somewhat later Court of Appeal case took a different view.871 Contractual termination clauses do not depend upon the action on which the termination is grounded being a repudiatory breach of contract. For example, clause 8.5 of SFA/99(2004) allows either party to terminate on reasonable notice by simply stating the grounds. The contract does not say that the grounds must be such as would be adequate to found a termination at common law. The consequences of contractual termination are usually stated in the relevant contract. Where common law termination is concerned as a result of a repudiatory breach (qv), damages can be recovered. See also: Unfair Contract Terms Act 1977.

Riot In the Public Order Act 1986 riot is defined as where 12 or more persons use or threaten unlawful violence for a common purpose, and the conduct of them together is such as would cause a person of reasonable firmness present at the scene to fear for their personal safety. The common purpose may be inferred from the conduct of the persons involved. It is not necessary for a person of reasonable firmness to actually be at the scene of the event. A riot may be committed in a private as well as in a public place. On conviction, a person guilty of riot is liable to imprisonment for a term not exceeding 10 years, or a fine, or both. 870 871

Lockland Builders Ltd v. John Kim Rickwood (1995) 77 BLR 38. Strachen & Henshaw Ltd v. Stein Industrie (UK) Ltd (1998) 87 BLR 52.

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Riot

main road

field

right of way estate road

field

street

servient tenement

dominant tenement

street

public

right of way

private

Figure 13

Rights of way.

It is a term that is used in SBC, IC and ICD, DB clause 6.8, in the definition of ‘specified perils’ (qv), and in ACA clause 11.5 (c), Alternative 2, as a ground for awarding an extension of time. It is also used in the definition of specified perils in MW and MWD clause 1.1. See also: Civil commotion; Civil war; Commotion; Disorder; Insurrection. 475

Risk allocation schedule

Risk allocation schedule A schedule, when used, forming part of the contract under the CE form of contract. It is not anticipated that it will be necessary every time the contract is used, e.g. consultant appointments or the appointment of a contractor for pre-construction services. It will normally be completed when CE forms the building contract. The schedule is identified and included at part 5 of the contract particulars. The purpose of the schedule is to identify and allocate liability for the foreseeable project risks as between the purchaser and supplier. The schedule is to be prepared jointly by the supplier and purchaser. Examples of the types of risk that may be addressed in the schedule are ground conditions, weather, delays with planning, discovery of fossils, and requirements imposed by statutory authorities. The types of risk are endless. Within the schedule the following are to be identified: — A description of the risk. It is important that the description is both specific and clear. — The financial amount included in either the contract sum or target cost to meet the risk. Should the stated amount be exceeded, then the excess will be allocated between the supplier and purchasers in the proportions identified in the schedule (see below). — A time period included in the contract duration to meet the risk for which the supplier will be responsible. Should the period be exceeded, then the additional time will be allocated between the supplier and purchasers in the proportions identified in the schedule (see below). — A proportional allocation of the financial excess above the amount allocated. This could place 100% of the risk with the supplier or purchaser, or it may be split 50/50 or some other percentage, as the parties have agreed. — A proportional allocation of the temporal consequences of the risk above the time allocated in the contract duration. This could place 100% of the risk with the supplier or purchaser, or it may be split 50/50 or some other percentage as the parties have agreed. The guide to the contract includes extensive notes and examples on how to complete the schedule.

Risk management In general terms all the activities involved in identifying, assessing and judging risks, allocating ‘ownership’, taking steps to anticipate, avoid or mitigate risks, and monitoring and reviewing their progress. The term is defined within PPC at appendix 1. It is a structured approach to minimise the impact of risks by identifying and allowing for them at the beginning of the project. Under clause 18.1 the partnering team members are said to know the risks involved in the design, supply and construction of the project, and individually and collectively are to analyse and manage the risk in the most effective way in accordance with clauses 5.1(iii), 12.9 and in accordance with the partnering documents. Under clause 5.1(iii) the client’s representative is to organise and manage the partnering team member to undertake risk management exercises as stated in the partnering documents. The results of such exercises are to be submitted to the client and core group for approval. Under clause 12.9 only those risk contingencies approved by the client can be included within the price framework and guaranteed maximum price, and then only after the constructor and the relevant member of the partnering team have reviewed the relevant risk in accordance with clause 18.1. 476

Risk register Under clause 18.1 risks are to be managed in the most effective way, which is to include: — identifying risks and their likely cost; — eliminating and reducing risk; — insuring risk where affordable and appropriate; — sharing or apportioning risk according to who is best placed to manage that risk. In evaluating how to deal with risks the project team are to undertake appropriate risk management exercises, including the use of a risk register (qv).

Risk register This document is expressly referred to in both the NEC and CE. The document is produced as a management aid, and is not a contract document. Though not expressly stated, it is likely that a register of some form will have to be produced under clause 18.1 of PPC. Within the NEC the term is defined at clause 11.2(14). It is a register of the risks in the contract data (qv) that are notified using the early warning system, and includes actions to be taken to avoid or reduce the risk. An early warning matter is defined at clause 16.1, and is basically a matter that is going to affect prices, delay completion, delay the meeting of key dates, or impair the performance of the Works. The project manager is responsible for adding any matter to the register, and for revising, updating and changing the register. Either the contractor or the project manager can call a risk reduction meeting to consider proposals to avoid or reduce a risk, decide on what action is to be taken and by whom, and whether a risk can be removed from the register. Within CE clause 1 a risk register is simply defined as a register of risk in respect of the project in accordance with clause 5.1 and updated in accordance with clause 5.2. The register is to be prepared jointly by the supplier and purchaser, and should be the product of a significant input from all the project team members. Unlike the NEC, responsibility for preparing, updating and amending the register may be the supplier’s and, if so, the supplier is to be identified in the contract particulars. If it not the supplier, then they are to give whoever is responsible all reasonable assistance. Clause 5.1 expects that an initial risk assessment is undertaken to identify: — the potential risks to the performance of the services or delivery of the project, the occurrence of which are likely to affect the time for completion, cost or quality; — the probability of the risk occurring; — a financial estimate of the likely consequences; — the actions agreed to mitigate, manage or remove each risk, along with identifying an individual responsible for reporting on the progress of the actions agreed. Following this initial assessment, someone (it could be the supplier, and if so then it will be stated in the contract particulars) is allocated responsibility for arranging regular meetings to review and update the risk register, and: — consider any new risks that have arisen since the last review; — consider the steps to be taken to prevent/mitigate previously identified risks; — consider those risks that have successfully been addressed and which can be removed from the register; 477

Romalpa clause — prioritise the remaining risks, and agree an action plan for and identify as necessary an individual responsible for reporting on the risks. The meetings are to be attended by the client and the project participants. In PPC the risk register is defined at appendix 1 as a register set out in or based upon the template included at appendix 7 or otherwise agreed by the team members. The register is to identify and describe the recognised risks and the agreed actions to be taken by the team members. The template has provision for describing the risk, the likelihood of its occurrence, the impact on the project, the partnering team member responsible for the risk management, the agreed risk management action, and the period or deadline for any action to be completed by the project team. Any risk management actions and period or dates for action should be integrated into the partnering or project timetable as appropriate. The risk management actions should comply with the requirements of clause 12.9.

Romalpa clause A retention of title (qv) clause is commonly so called after the case of Aluminium Industrie Vaassen BV v. Romalpa Aluminium Ltd,872 in which the effectiveness of the device was upheld.

872

[1976] 2 All ER 552.

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S Sale of goods Comprehensive statutory provisions regulating the sale of goods are contained in the Sale of Goods Act 1979, which applies throughout the United Kingdom and came into force in January 1980. It replaced the Sale of Goods Act 1893. The Act has been amended by the Sale of Goods (Amendment) Act 1994, the Sale and Supply of Goods Act 1994, and the Sale of Goods (Amendment) Act 1995. The Act applies only to sales of goods, and so has no application to building contracts, which are contracts for work and materials. However, sales of building materials to the contractor and similar transactions are covered by the Act, which implies certain conditions and warranties as to fitness for purpose (qv) and satisfactory quality (qv), the latter replacing the previous concept of ‘merchantable quality’. The Act stipulates that goods are of satisfactory quality ‘if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances’.873 Under the Act, property in the goods passes at the time when the parties intend it to pass. S. 18 of the Act sets out certain presumptions concerning the intentions of the parties. The fact that the price remains unpaid does not affect the transfer of ownership unless the contract provides that property is to pass when the price is paid. In practice, it is now common for the seller to contract on terms that include a retention of title (qv) clause. The parties may agree that property is to pass before the goods are delivered, and indeed in the case of specific goods the presumption is that the parties intend property to pass immediately at the time the contract is made. In general, a ‘non-owner’ cannot transfer title of goods, and nobody can give a better title than they possess.874 This principle has been the cause of practical problems under building contracts, especially as regards off-site goods and materials that have been paid for under the contract by the employer, and of which the contractor is not the owner.875 SBC clause 4.17, IC and ICD clause 4.12 and DB clause 4.15 make provision for the employer to pay for goods and materials stored off-site, but only if the employer has prepared a list of the items and attached it to the bills of quantities. The clauses seek to protect the employer by making provision for a bond, the marking and setting aside of goods, and the provision by the employer of reasonable proof that the property in such items is vested in the contractor. See also: Ownership of goods and materials; Retention of title; Supply of Goods and Services Act 1982.

Sanction Generally, a reaction that indicates approval or disapproval of something, usually conduct, tending to induce conformity with required standards.

873 874 875

S. 14(2A). Bishopsgate Motor Finance Co Ltd v. Transport Brakes Ltd [1949] 1 KB 322. Dawber Williamson Roofing Ltd v. Humberside County Council (1979) 14 BLR 70.

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Satisfactory quality The word may be used in the sense of authorisation, or alternatively for the penalty laid down for contravention of some legal requirement. See also: Approval and satisfaction.

Satisfactory quality Goods sold in the course of business must be of satisfactory quality.876 This is a strict obligation, and applies irrespective of the degree of care taken. S. 14(2A) of the Sale of Goods Act 1979 states that goods are of satisfactory quality ‘if they meet the standard that a reasonable person would regard as satisfactory, taking into account any description of the goods, the price (if relevant) and all other relevant circumstances’. Formerly, goods were to be of ‘merchantable quality’. There is little case law on the topic at present.877 Factors such as whether the goods are described as ‘seconds’, or the price, or the knowledge of the buyer are probably relevant. See also: Sale of goods.

Save harmless A phrase usually, but not exclusively, to be found in a lease, indicating that a party will be relieved from liability for some specified damage or loss. The phrase ‘hold harmless’ is sometimes used with the same meaning. See also: Indemnity clauses.

Schedule 2 quotation Under SBC clause 3.10.2 there is provision for the architect to issue an instruction for a variation to be undertaken in accordance with Schedule 2, and for which the contractor must provide a quotation before carrying out the work. The work subject to such an instruction is expressly stated as not to be carried out until a ‘confirmed acceptance’ or a further instruction is issued under clause 5.3.2. It replaces the ‘clause 13A quotation’ under JCT 98, and is couched in similar terms. The provisions of Schedule 2 are detailed and relatively complex. The principal points are as follows. — The architect issues an instruction under clause 3.10.2, identifying the work to be subject to a Schedule 2 quotation. The architect is to provide sufficient information so as to enable the contractor to provide a quotation in accordance with paragraph 2 in Schedule 2. — The contractor shall within seven days of receipt of the instruction notify the architect whether it considers sufficient information has been provided to enable the preparation of a Schedule 2 quotation. A footnote in Schedule 2 give some indication of what form the information should take. — The contractor has 21 days within which to prepare and submit a quotation, either from the date of receipt of the instruction or from receipt of sufficient information. — The quotation shall include an adjustment to the contract sum for undertaking the Works (including supporting calculations and buildups), an adjustment to the completion date for any additional time required as a consequence of undertaking the Works, an amount in lieu of any loss and/or expense, and a fair and reasonable amount for preparing the quotation. In addition, if specifically requested by the architect, 876

ss. 14(2)–(2C) of the Sale of Goods Act 1979. Britvic Soft Drinks Ltd v. Messer UK Ltd [2002] 2 Lloyd’s Rep 379; Jewson Limited v. Leanne Teresa Boyhan as Personal Representative of the Estate of Thomas Michael Kelly [2003] EWHC Civ 1030. 877

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Schedule of prices it shall include statements on the additional resources required, and a method statement for carrying out the variation. — The contractor submits the quotation to the quantity surveyor, and it is to be open for acceptance for a period of seven days. — If the employer wishes to accept the quotation, then the employer is to notify the contractor accordingly in writing. Immediately upon acceptance by the employer the architect shall confirm the acceptance by the employer (i.e. confirmed acceptance) and the contractor is to carry out the Works. — If the quotation is not accepted then the architect shall either instruct that the variation is not to be carried out or that the work is to be carried out and valued under the valuation rules at section 5. Any entitlement the contractor may have to an extension of time and loss and/or expense would be addressed in accordance with the provisions in the contract. — If the quotation is not accepted then, provided the quotation was prepared on a fair and reasonable basis, the cost of preparing the quotation is to be added to the contract sum. Non-acceptance of a quotation is not in itself to be taken as evidence that the quotation is not fair and reasonable. — Any time periods identified in Schedule 2 are expressly stated as being subject to adjustment upon agreement of the parties. Given the resources involved in preparing and agreeing a quotation, Schedule 2 seems appropriate for significant changes. Although it is relatively common for an architect to ask for a quotation before authorising extra work, anecdotal evidence suggests that the Schedule 2 quotation provisions are seldom followed.

Schedule contract A contract based upon a schedule of prices (qv). Schedule of activities See: Activity schedule. Schedule of basic prices of materials A list of the basic prices of materials from which the contractor has produced its rates. If a fluctuation clause is contained in the contract, the contractor will be required to submit a schedule of basic rates of materials so that adjustment of prices can be carried out. The contractor is usually asked to present estimates to support its rates. Careful checking is necessary, because certain materials have standard prices, and prices vary with the amount required. SBC Schedule 7, fluctuations option B, deals with labour and materials cost and tax fluctuations. Paragraph B.3.1 states that the contract sum is deemed to have been based on the market prices current at the base date (qv) of materials, goods, electricity, fuels and any other solid, liquid or gas necessary for carrying out the Works and the tax payable on disposal of waste.

Schedule of prices Where time is very short, or it is not practicable for some other reason to prepare even bills of approximate quantities, a schedule may be prepared giving descriptions only of the work to be carried out and the materials to be used. The employer may put prices against each item, and require tenderers to state the percentage above or below the given prices for which they would be prepared to carry out the work. Alternatively, tenderers may be asked to put their own prices against the items. 481

Schedule of rates It is extremely difficult to prepare a tender by this method, or to compare tenders received, because contractors normally balance their rates in accordance with the amount of work and materials required. A disadvantage is that there is no overall price for the Works. The system is most commonly used for small contracts, or for contracts for maintenance work, and is also referred to as a schedule of rates (qv). See also: Term contracts.

Schedule of rates Contracts that do not include bills of quantities (qv), but rely on drawings and specifications, often require the contractor to submit a priced specification or a schedule of rates used to arrive at the tender figure. The rates are used to value variations. IC and ICD state in the recitals that, in option (B), the contractor must submit a schedule of rates together with the sum required for carrying out the Works. Oddly, although such a schedule of rates is to be the pricing document referred to in clause 5, it is not a contract document. MW and MWD provide for a schedule of rates as an alternative to a priced specification or priced work schedules. The schedule of rates is expressly stated to be a contract document. The ACA contract makes provision of a schedule of rates as an option at recital C. The phrase ‘schedule of rates’ is used throughout the contract, and is the defined term at recital C, but on the second line of recital C it refers to ‘a schedule of rates and prices’, indicating that the schedule may be more than simply rates. See also: National schedule of rates.

Schedule of work See: Work schedule Scheme An abbreviation used within many of the JCT contracts (e.g. SBC clause 9.2) for the Construction Contracts (England and Wales) Regulations 1998 (SI 1998 No. 649). However, the ‘Scheme’ is subject to two minor qualifications addressing (i) the appointment of the adjudicator, and (ii) the qualifications and experience of the adjudicator under certain given circumstances. This latter qualification relates to dispute or difference concerning the reasonableness of further tests for defective works, e.g. SBC clause 3.18.4 and DB clause 3.13.3, but is not reflected within MW and MWD. See also: Scheme for Construction Contracts

Scheme for Construction Contracts The short name for the Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998 No. 649), which came into force on 1 May 1998. The Scheme is referred to in the Housing Grants, Construction and Regeneration Act 1996 (qv) in ss. 108(5), 108(6), 109(3), 110(3), 111(3), 114(1) and 114(4), and contains clauses reflecting the requirements of the main provisions of the Act regarding adjudication, amounts and intervals of payment, the giving of notices of amounts proposed to be paid, and amounts to be withheld. Where a construction contract does not comply with the requirements of the Act, then the Act provides for the relevant provisions in the Scheme to apply. The Scheme has very detailed adjudication and payment provisions. At the time of writing Parliament is likely to be considering a bill to amend the Act and, dependent on the outcome of the deliberations, the Scheme is likely to undergo consequential changes. 482

Scottish Building Contract Committee

Scott schedule A formal document sometimes used in litigation or arbitration, which sets out the issues in dispute in tabular form. There is no standard form prescribed, but the object is to present the issues in dispute as clearly as possible. It is common for some of the issues to be resolved by the parties when preparing the schedule, leaving the key items, thus simplifying and shortening the hearing. It is good practice for the parties to agree the headings for the various columns in the schedule at an early hearing before the judge or at the preliminary meeting before the arbitrator. The Scott schedule was invented by Mr G A Scott QC about 80 years ago, and is most suited to cases involving a multiplicity of claims where each party is required to set out its case positively item by item, and to answer the other party’s case in the same way. The schedule can be extended to claims between defendants, and to third and subsequent parties. From the completed schedule representative items are selected for trial, so avoiding the necessity of trying all the items. Various examples of a Scott Schedule are set out in Keating on Construction Contracts 8th edn, pp 644–650, and Chappell, Powell-Smith and Sims, Building Contract Claims, 4th edn, p 155.

Scott v. Avery clause A provision in an arbitration clause that has the object of preventing the court from interfering with the arbitration agreement by allowing the parties to bring an action in the courts. Its validity was upheld by the House of Lords in the case of this name in 1856, holding that a party had no right to sue until arbitration had taken place, and that such a condition was not contrary to public policy.878 The typical wording of such a clause would be ‘Arbitration shall be a condition precedent to the commencement of any action at law,’ or ‘The obligation shall be to pay such a sum as may be awarded upon arbitration under this clause.’ Other words may have the same effect. None of the current standard forms of contract contains a Scott v. Avery clause, but where one is included the parties have no right to litigate until arbitration has taken place. Where the parties have agreed that disputes under the contract are to be referred to arbitration, s. 9 of the Arbitration Act 1996 states that either of the parties against whom legal proceedings are brought can apply to the court for a stay of proceedings (qv). The stay will be granted, except in unusual circumstances. Where, exceptionally, a stay is not granted, s. 9(5) states that a provision in the contract that an arbitration award is a condition precedent to the bringing of legal proceedings (i.e. a Scott v. Avery clause) is of no effect in relation to those proceedings. See also: Arbitration.

Scottish Building Contract Committee The Scottish Building Contract Committee (SBCC) was established in 1964 to form closer contacts with bodies in London. The first contract produced by the SBCC incorporated JCT 63. The SBCC became a member of the Joint Contracts Tribunal in 1966. It was registered as a limited company in 2003. Its shareholders are: — Association of Consulting Engineers. — National Specialist Contractors’ Council. 878

Scott v. Avery (1856) 25 LJ Ex 308.

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Seal — Royal Institution of Chartered Surveyors Scotland. — Royal Incorporation of Architects in Scotland. — Scottish Building. — Scottish CASEC. SBCC’s purpose has been defined as to provide adjustment to English conditions of contract to reflect Scottish practice, and to allow for differences in English and Scots law. It is responsible for the adaptation of JCT documents for use in Scotland, and for the drafting of suitable Scottish documentation.

Seal Technically a device affixed on wax, or impressed on a wafer, as a mark of authentication or an expression of consent. It used to be the case that parties to a deed had to put their seal on it before the deed was valid: hence the expression ‘under seal’. Contracts executed as a deed in this way were known as specialty contracts and differed from simple contracts in three main respects: — Under the Limitation Act 1980 the limitation period (qv) is 12 years for a deed as opposed to six years for a simple contract under hand. — Consideration (qv) is not necessary to support promises made under seal. — In theory the parties cannot deny statements of fact contained in a deed, including its recitals (qv). The need for a deed to be sealed was removed in the case of companies by s. 130(1) of the Companies Act 1989, and in the case of individuals by s. 1(1)(b) of the Law of Property (Miscellaneous Provisions) Act 1989. Slightly later provisions in Schedule 4 of the Companies (No. 2) Order (Northern Ireland) 1990 and article 3 of The Law Reform (Miscellaneous Provisions) (Northern Ireland) Order 2005 respectively removed the need for a seal in Northern Ireland. These provisions are now superseded by ss. 44–46 of the Companies Act 2006, which, in this respect, applies to England, Wales and Northern Ireland. The requirements for a deed are as follows — In the case of both company and individual, it must be clear on the face of the document that it is intended to be a deed. — For a corporate body: • the document must state that it is to be executed by the company; and • it must be signed by two directors, or by a director and the company secretary, or signed by a single director in the presence of a witness, who attests the signature. — For an individual: • the deed must be signed by the individual in the presence of a witness, who attests the signature; and • the document must be delivered as a deed by the individual or by a person authorised to do so. All the JCT contracts contain attestation (qv) pages with detailed notes on completion. It is still possible to put a seal on a deed. However, merely attaching a seal will not automatically make a document into a deed. Seals are still used by local authorities (qv), on certificates of various professional bodies, on share certificates, and on probate of a will. See also: Attestation; Locus sigilli.

Sealed offer In proceedings before the Lands Tribunal (qv) about compensation claims for compulsory purchase, the acquiring authority may make an unconditional offer of compensation in a sealed envelope. If the sum eventually 484

Section sum awarded is the same as or less than the amount of the offer, then the claimant does not get its costs. It is the equivalent of a payment into court (qv). The existence of the sealed offer is not disclosed to the Lands Tribunal until it has given its decision. Sealed offers are sometimes used in arbitration (qv). The practice was approved in Tramounta Armadora SA v. Atlantic Shipping Co SA, where it was said that: A sealed offer is the arbitral equivalent of making a payment into court in settlement of the litigation or of particular causes of action in that litigation. Neither the fact, nor the amount, of such a payment into court can be revealed to the judge trying the case until they have given judgment on all matters other than costs. As it is customary for an award to deal at one and the same time both with the parties’ claims and with the question of costs, the existence of a sealed offer has to be brought to the attention of the arbitrator before a decision has been reached. However, it should remain sealed at that stage and it would be wholly improper for the arbitrator to look at it before he has reached a final decision on the matters in dispute other than as to costs, or to revise that decision in the light of the terms of the sealed offer when he sees them.879

There are, in fact, substantial objections to the practice, which are usefully summarised in the Commercial Court Committee Report on Arbitration 1978. The main objection is that ‘the arbitrator, unlike a judge, will know that some offer of settlement has been made, although he will not know how much.’880 An alternative course is to make an open offer,881 on terms that its existence and contents must not be disclosed until the arbitrator has reached a final decision on liability, when it will be drawn to the arbitrator’s attention. It should offer to pay costs up to the time of its receipt, and state whether or not it includes interest. The other party should be given 21 days to accept. The letter of offer should state that it is intended to have the effect of a payment into court. At the end of the hearing the arbitrator should be asked to make an interim award on liability and amount and, without the existence of the offer being disclosed, the arbitrator should be asked to defer consideration of costs until the interim award has been made on the other issues. This procedure is commonly used. An alternative procedure is to make a ‘without prejudice’ (qv) offer, backed up by a deposit of money in the joint names of the parties or their solicitors, and once again to ask the arbitrator to make an interim award on liability and amount. ‘If the claimant in the end has achieved no more than he would have achieved by accepting the offer, the continuance of the arbitration after that date has been a waste of time and money. Prima facie, the claimant should recover his costs up to the date of the offer and should be ordered to pay the respondent’s costs after that date.’882 See also: Calderbank offer; Payment into court.

Section sum A term used within DB, SBC, IC and ICD relating to the value of work included within each section (qv), e.g. DB clause 1 and clause 2.34. The

879

[1978] 2 All ER 870 at 876–877 per Donaldson J. (Cmnd 7284) paras 62–65. 881 This is usually referred to as a ‘Calderbank offer’ (qv). 882 Tramountana Armadora SA v. Atlantic Shipping Co SA [1978] 2 All ER 870 at 877–878 per Donaldson J. 880

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Sections aggregate values of each section should total the contract sum. The purpose of including these sums is that, if partial possession is taken of part of a section, then an adjustment can be made to the liquidated damages relating to that section on a value basis.

Sections The term used in JCT contracts to refer to the parts into which the Works may be divided. This was, and is, often referred to misleadingly as ‘sectional completion’. The JCT had supplements separate to the contracts to be used when it was desired to have the Works executed in sections. A substantial problem with the use of section supplements was the large number of changes that needed to be made to the existing clauses. The supplement was attached to the relevant contract, but trying to read the two together was exceedingly difficult. The 2005 suite of JCT contracts sensibly incorporate the possibility of sections into the contracts. SBC (in all three versions), IC, ICD and DB all have provision for sections, although MW and MWD do not. Where it is desired to have the building carried out in sections, the relevant parts of the recitals (qv) and the contract particulars (qv) must be completed. Important details that must be stated are the dates for possession (qv), dates of completion, and the amount of liquidated damages (qv) for each section. The contractor is under a contractual obligation to complete that section of Works by the completion date or be liable to pay liquidated damages. Where sections are linked or sequential – for example if section 3 cannot begin until section 1 is complete – then instead of fixed dates for possession and completion for section 3, some other indication should be inserted that is flexible enough to move if the date for completion of section 1 is delayed for any reason. For example, one might insert ‘five days after the date of practical completion of section 1’ as the date for possession of section 3. Then the date for completion of section 3 might read ‘12 weeks after the date for possession of this section’. The reason for this approach is that, if fixed dates are inserted, the contractor can insist on gaining possession of the section on the date stated, and failure on the part of the employer to give such possession is a serious breach of contract. It is no excuse for the employer to point to the fact that the contractor is in culpable delay on section 1. If fixed dates are stated, it is no concern of the contractor that there are practical reasons, such as the moving of the occupants from one part of the building to another, that prevent the employer relinquishing possession of section 3 before taking possession of section 1. Although, if the provision is stated in the contract particulars (qv) to apply, the employer may defer possession of section 3 for up to six weeks, this will not address the problem if the delay to section 1 is in excess of six weeks. Even if the deferment power is used, the contractor will become entitled to an extension of time in respect of the deferment and, in principle, to loss and/or expense (qv). In Liberty Mercian Ltd v. Dean & Dyball Construction Ltd 883 the date for possession of the first section was fixed, but the date for each successive section was dependent on the date of practical completion of the previous section.884

883 884

[2008] EWHC 2617 (TCC). [2008] EWHC 2617 (TCC).

486

Seizure and vesting The completion dates for each section were fixed. The result was that, when the contractor was in delay for eight weeks in the first section, for which the architect gave four weeks’ extension of time and four weeks’ extension for each following section, the contractor found itself in four weeks of culpable delay for each section, and for which liquidated damages were recoverable. The court concluded that the provisions were ‘entirely workable’. Care must be taken with liquidated damages. The sum for each section must be individually considered. It is not good enough to simply divide the project liquidated damages for a six-section contract into six equal amounts, because if it could be demonstrated that the loss is different in kind and amount for each section, it is likely that liquidated damages for all sections would be penalties and unenforceable.885 In administering the contract, each section must be dealt with separately for such things as practical completion, extensions of time, and loss and/or expense. However, the sections are not separate contracts, and the contract has just one final certificate. Where practical completion (qv) is to be certified for any section, the section is to be considered separately from the rest, and the certificate is termed a ‘section completion certificate’. Where the last section completion certificate is being issued, many contracts require that a practical completion certificate for the Works must be issued at the same time, e.g. SBC clause 2.30. This is to put beyond all doubt and dispute that practical completion has been achieved for the whole project. It is important to distinguish between sections and partial possession (qv). Although they are entirely different concepts, they are often confused, particularly by architects and employers trying to use the partial possession provisions as a substitute for sectional completion. The use of sections is a considerably more sophisticated concept than partial possession. Where sections are indicated in the contract, the contractor has an obligation to carry out the work in those sections, taking possession and achieving practical completion on the due dates. Partial possession can be achieved only with the consent of the contractor.

Security for costs Within litigation or arbitration the starting point is that the losing party will be ordered to pay a significant portion of the winning party’s costs. Where a party is confident of defending a case they may have concerns that the other party may not be able to pay any costs awarded against it. The safeguard against this is to seek an order from the tribunal for security of costs. This could amount to a payment into court, or to giving to the court a guarantee that funds are available. In court proceedings there are strict conditions that have to be met, and even then the matter rests in the discretion of the court. Within arbitration the matter is addressed at s. 38(3) of the Arbitration Act 1996. In the first instance the parties have to agree that this provision applies and, if so, it gives the tribunal a discretionary authority to order security for costs. This discretion is not to be exercised simply on the basis that a party resides or is based outside the United Kingdom.

Seizure and vesting See: Vesting and seizure. 885

Dunlop Pneumatic Tyre Company Ltd v. New Garage and Motor Company Ltd [1915] All ER 739.

487

Serial contract

Serial contract If it is desired to carry out a number of contracts in succession, this type of contractual approach may be employed. On the basis of the successful tender for the first contract, further contracts are negotiated with the same contractor. To operate properly, all the projects must be similar in construction and type, so that negotiation for future contracts on the basis of the original contract is feasible. It is usual for the employer to make some sort of limited commitment to the successful tenderer for the whole series. However, it is not something that can be legally enforced, because it is always subject to the successful outcome of negotiations. The principal advantages are that only one set of competitive tenders is sought, and that the contractor can use the experience gained on the first contract to improve efficiency thereafter. For maximum benefit to the employer, the basic terms for succeeding contracts in the series should be established when calling for the initial tenders. An intended programme for all contracts in the series should be set down at the outset, if the contractor is to be able to calculate the potential benefits to the full. The system should produce savings for both parties, but it is often difficult to operate in practice. Some of the benefits of serial contracting have been incorporated into partnering (qv).

Service of notices or other documents All the standard forms of contract require the service of notices to comply with certain criteria and procedures. In order to preserve the effect of such notices the employer and contractor must carefully observe the procedure laid down. S. 115 of the Housing Grants, Construction and Regeneration Act 1996 provides that the parties to a construction contract are free to agree on the manner of service of a notice or any other document. The section then lays down default provisions if there is no agreement. SBC, IC, ICD and DB clause 1.7, and MW and MWD clause 1.6 set out how notices are to be served. Essentially, they may be served by any effective means, and there are deeming provisions in that regard. These provisions are stated to be subject to any specific requirements set out within the contractual provisions about service of notice, e.g. SBC clause 8.2.3. This clause stipulates that all notices under clause 8 must be given by actual, special or recorded delivery. ACA deals with notices in clause 23.1 and throughout the contract, particularly as far as timing is concerned. GC/Works/1 deals with notices throughout the contract.

Services In a general sense the word is used to refer to the work to be undertaken by a person, e.g. an architect. The services are usually identified within the appointment documents. For example, the SFA/99 and S-Con-07-A documents have a range of alternative services supplements for use in different circumstances. The standard services are for a fully designed project, but supplements for use with historic buildings, interior design, project management and design and build are among those available. Within CE, ‘Services’ is a defined term at clause 1.1. It means the services, work and goods in the contract particulars to be provided by the supplier. CE is intended to be versatile in its use, in that it may be used for building works or the appointment of a consultant: therefore the word is intended to encompass both works and services. Clause 4.3.1 sets out the supplier’s obligation to carry out, or obtain the carrying out of, the services in accordance with the contract. 488

Set-off

Set-off If A owes B £500 and B owes A £200, and A pays B the balance of £300, A is said to have set off the amount owed by B against the amount owed to B. There are two types of set-off: — Legal or common law set-off: The right to set-off where the claims by each party are liquidated (precisely known) amounts.886 — Equitable set-off: The right to set-off where the claims by each party arise out of the same transaction, or where they are so closely connected that one ought not to be enforced without taking account of the other.887 Set-off can be pleaded as a defence, or to extinguish or reduce a claim in arbitration (qv) or litigation (qv). It cannot be used in adjudication (qv) unless identified as part of the dispute in the notice of adjudication. It is to be distinguished from a counterclaim (qv), although in practice it is sometimes difficult to do so. A counterclaim may give rise to an award of damages in its own right. Set-off must also be distinguished from abatement (qv), with which it is often confused. An abatement is effectively saying that part or whole of the claim was not due, whereas set-off admits it was due, but uses the amount claimed in set-off to reduce it. S. 323 of the Insolvency Act 1986 concerns mutual dealings (qv) in the case of bankruptcy. Rule 4.90 of the Insolvency Rules 1986 deals with mutual dealings in liquidation, and allows set-off between the insolvent and other parties, even if the claims do not arise from the same transaction. Set-off may be excluded by an appropriate contract term and probably by necessary implication.888 A clause excluding set-off is to be found in the Standard Agreement for the Appointment of an Architect 1999 (SFA/99) (qv), clause 5.11. Clause 51 of GC/Works/1(1998) provides an example of a very broad set-off provision, which purports to embrace any contract between the employer (and any member of the employer’s group) and the contractor (and any member of the contractor’s group). It appears that the clause would fall foul of s. 10 of the Unfair Contract Terms Act 1977 (qv). The Housing Grants, Construction and Regeneration Act 1996 (qv) made important changes in the law of set-off so far as construction contracts are concerned. Under s. 111 a party may not withhold payment of any sum due under a construction contract unless it has first given a written notice of withholding. The notice must be given a specified period before the final date for payment (qv). It must specify the amount proposed to be withheld, and the grounds for withholding. If there is more than one ground, each ground must be specified, and the amount attributable to it. All standard form building contracts and terms of engagement comply with this provision and other mandatory provisions in the Act, e.g. SBC clause 4.13.4. Set-off may not as a general rule be made against an adjudicator’s decision, although the general rule is subject to certain complex exceptions. Clearly, the courts will allow set-off against such a decision where the adjudicator had no jurisdiction to make the decision made, or where the adjudicator failed to adhere to procedural rules or to act fairly. Less clear are those cases where there are express words of a contract that override the obligation to comply with an

886

B Hargreaves Ltd v. Action 2000 Ltd (1992) 62 BLR 72. Dole Dried Fruit & Nut Company v. Trustin Kerwood Ltd [1990] 2 Lloyd’s Rep 309. 888 Gilbert-Ash (Northern) Ltd v. Modern Engineering (Bristol) Ltd (1973) 1 BLR 75. 887

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Setting out adjudicator’s decision where the court has found such provisions are effective.889 However, in Ferson Contractors Ltd v. Levolux AT Ltd 890 the court of appeal made it clear that they considered that an adjudicator’s decision should be enforced. Even that, however, has been the subject of an exception, as the court will allow a set-off against an adjudicator’s decision if the right to deduct liquidated damages (qv) followed logically from the decision.891

Setting out The procedure whereby the dimensions of a structure are transferred to the site by means of measuring tapes, theodolites, etc. The principal walls of a building or the position of piles are indicated by pins, lines and profiles. The process calls for great accuracy, and on large and complex Works a specialised setting-out engineer may carry out this part of the work. The employer is responsible for the accuracy of the drawings, and for providing sufficient information to enable setting out to be completed, e.g. the architect under SBC clause 2.10, IC and ICD clause 2.9. However, the architect is not responsible for the accuracy of the setting out itself. That is the contractor’s responsibility. It is good practice for the architect to provide special drawings showing only the outline of the building on the site and such dimensions as are necessary for setting out. Unfortunately, it is not uncommon for drawings to be deficient in some respect, making it necessary for the architect to visit the site and assist the contractor to set out, if only by approving what has been done. Architects should prepare properly dimensioned drawings and thus avoid giving approval to the contractor’s setting out on site, otherwise they run the risk of accepting liability for contractors’ inaccuracies.

Settlement A word that has several different meanings. (1)

Contractually, it is an agreement by parties in dispute to compromise or otherwise put an end to their differences before any court or arbitration hearing takes place. It is always wise for litigants to settle, if possible, rather than run the risk and expense of court proceedings. It is also prudent to embody the terms of the settlement in a written form, e.g. a compromise agreement. Great care must be taken in drafting the terms of a settlement agreement. Too often, such agreements are recorded hurriedly, the parties no doubt anxious to have the matter finished. But unless all the implications are considered, the agreement can give rise to further disputes. For example, employers and contractors often settle their differences by agreement, and simply exchange letters to that effect, often leaving the architect unable to administer the contract properly afterwards. Settlements and their effect on claims against third parties have been the subject of a substantial number of cases through the courts.892

889 Parsons Plastics (Research and Development) Ltd v. Purac Ltd (2002) 93 Con LR 26 and Bovis Lend Lease Ltd v. Triangle Developments Ltd (2002) 86 Con LR 26. 890 86 Con LR 98. 891 Balfour Beatty Construction Ltd v. Serco [2004] EWHC 3336 (TCC). 892 For example, see: The Royal Brompton Hospital National Health Service Trust v. Frederick Alexander Hammond and Others (2001) 66 Con LR 42; Bovis Lend Lease Ltd v. R D Fire Protection Ltd (2003) 89 Con LR 169; Enterprise Oil Ltd v. Strand Insurance Co Ltd [2006] EWHC 58 (Comm).

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Shop drawings (2)

In construction terms, it is the movement of a building in response to alterations in the bearing capacity of the ground. (3) In the general law, it is an arrangement of property in such a way as to create a trust. It is often done by will or by a deed.

Severability To be divided, broken or made separate. This word has been considered in the context of adjudicator’s decisions and their enforcement and it has been held that where separate disputes, by agreement, were referred to adjudication together and some were subject to challenge, the decisions which were unchallenged could be enforced immediately.893 However, the reference is usually made when it is held by a court that an adjudicator has exceeded their authority and a party which has succeeded in the adjudication argues that part of the decision was made within jurisdiction and then seeks to separate that part of the decision which was allegedly made within the adjudicator’s jurisdiction from that which was not.894 Attempts to sever decisions are not always successful and in Cantillon Limited v. Urvasco Limited895 the judge addressed the issue, and offered the following much needed and useful guidance: On the severability issue, I conclude, albeit obiter in the result, as follows: (a)

The first step must be to ascertain what dispute or disputes has or have been referred to adjudication. One needs to see whether in fact or in effect there is in substance only one dispute or two and what any such dispute comprises. (b) It is open to a party to an adjudication agreement as here to seek to refer more than one dispute or difference to an adjudicator. If there is no objection to that by the other party or if the contract permits it, the adjudicator will have to resolve all referred disputes and differences. If there is objection, the adjudicator can only proceed with resolving more than one dispute or difference if the contract permits him to do so. (c) If the decision properly addresses more than one dispute or difference, a successful jurisdictional challenge on that part of the decision which deals with one such dispute or difference will not undermine the validity and enforceability of that part of the decision which deals with the other(s). (d) The same in logic must apply to the case where there is a non-compliance with the rules of natural justice which only affects the disposal of one dispute or difference. (e) There is a proviso to (c) and (d) above which is that, if the decision as drafted is simply not severable in practice, for instance on the wording, or if the breach of the rules of natural justice is so severe or all pervading that the remainder of the decision is tainted, the decision will not be enforced. (f) In all cases where there is a decision on one dispute or difference, and the adjudicator acts, materially, in excess of jurisdiction or in breach of the rules of natural justice, the decision will not be enforced by the Court.

Shop drawings An abbreviation for ‘workshop drawings’. Architect’s and/or engineer’s drawings are often not suitable for the manufacture of certain building components. Special drawings termed ‘shop drawings’ must be produced to enable joinery, steelwork, sheet metalwork etc. to be manufactured or pro-

893

AWG Construction Limited v. Rockingham Motor Speedway Limited [2004] EWHC 888 (TCC). For example see Griffin and Another v. Midas Homes Ltd [2000] 78 Con LR152. 895 [2008] EWHC 282 (TCC) at paragraph 65 per Akenhead J. 894

491

Shortage of labour and materials duced. These drawings are normally the responsibility of the manufacturer, although it may, through the contractor, request the designer’s (e.g. architect’s) approval (qv) of shop drawings before manufacture. The architect is under no obligation to give such approval, provided the architect’s own drawings contain all necessary information. It is usual, however, for the architect to examine any shop drawings submitted, and to make any comments necessary. This acts as a sensible second check. The giving of approval may not, depending on circumstances, remove from the contractor the responsibility of complying with the architect’s drawings. However, it is prudent for the architect to expressly reserve approval, even if the drawings appear to be entirely accurate, as this removes any vestige of doubt about the contractor’s liability. An example of a clause that seeks to ensure that no liability is removed from the contractor in such circumstances is NEC clause 14.1, which states that the project manager’s or supervisor’s acceptance of any communication for the contractor or its work will not vary the contractor’s responsibility for the Works or the design.

Shortage of labour and materials These are grounds for an extension of time under JCT 98 clauses 25.4.10.1 and 25.4.10.2. This is provided that the shortage is of labour or materials that are essential to the proper carrying out of the Works, and that such shortage arose for reasons beyond the control of the contractor and which it could not reasonably have foreseen at the base date (qv). IFC 98 clauses 2.4.10 and 2.4.11 were optional provisions to the same effect. The provisions have been removed from the JCT 2005 suite of contracts. Anecdotal evidence suggests that, in practice, they were commonly deleted by employers.

Shrinkages A term used in some of the standard forms of contract (e.g. MW and MWD clauses 2.10 and 2.11 respectively, and ACA 12.2) to indicate a type of defect that the contractor is liable to make good during the rectification or defects liability period (qv). The normal meaning of ‘shrink’ is to grow smaller in size. It is a characteristic of many materials used in building that they increase or decrease in size depending upon physical factors such as moisture or temperature, or chemical factors such as the reaction that takes place when mixing concrete or plaster. The contractor’s liability for shrinkages is commonly misunderstood, not least by the contractor itself. The contractor is liable to make good only if its workmanship or materials are not in accordance with the contract. For example, if the contract specifies the use of internal timber having a moisture content of 7%, and shrinkage of skirting and architraves is found to have taken place at the end of the rectification period (qv), it may not be the contractor’s liability. The excessive use of central heating may have reduced the moisture content of the timber to 4%, and hence reduced its size. It is a complicated point. It is easy to see that shrinkage has taken place, but not easy to determine the cause. The architect will probably say that the timber brought onto site by the contractor was or was allowed to become of a greater moisture content than specified, and that it was the drying out of the excess moisture that caused the shrinkage. The problem is not made easier by the fact that it is quite difficult to determine moisture content within 2–3% without removing a sample and testing under laboratory conditions. If a great deal of 492

Similar character money is at stake it may be worth the contractor paying to have such a test carried out. If it proves to be correct, and the architect had been withholding money from a certificate on account of the shrinkages, the contractor would have the basis of a sizeable claim at common law, should it wish to pursue the matter. Most contractors are extremely generous in making shrinkages good, probably because of the difficulty of proving the point, and because of the retention money outstanding. The contractor cannot refuse to make good a shrinkage on the grounds that it is impossible to maintain a low moisture content in timber until the building is occupied. It is in fact very difficult, but it is not impossible, and the contractor contracted to do it.

SI An abbreviation for Statutory Instrument (qv). It is also sometimes used as an abbreviation for a site investigation report.

Signature The name or mark of a person in their own writing, i.e. written by the person or by proxy (i.e. a person authorised to act on behalf of another). The form is not prescribed. It may be the full name, or initials, or any combination of the two, and in some cases a signature may be valid if it is made by a mark properly witnessed, by a rubber stamp (not advisable), or by another with proper authority. The adding of a signature is taken as a sign of agreement. It is common for a person in a professional practice to sign correspondence and other documents in the name of another, perhaps a more senior, member of the firm. Sometimes the signature will simply be the name of the firm. All these methods are valid if authorised.896 Many people, particularly those in public life, have an ‘official’ signature in an attempt to differentiate between an ‘autograph’ and their signatures on legal documents. Such attempts will only be effective, however, insofar as the parties likely to be affected are aware of the difference. For example, a bank may be informed that a particular form of signature must be the only form recognised for the drawing of cheques. In Scotland the term ‘signature’ does not include marks, proxy or rubber stamp, except in certain cases authorised by statute.

Similar A word found in many standard contracts meaning ‘alike, but not identical’. See also: Fair valuation.

Similar character A term that is used predominantly within certain JCT contracts, e.g. SBC clause 5.6.1, in connection with the valuation of variations (qv). Where additional or substituted work is of similar character to work described in the bills of quantities (qv), the valuation must be carried out using those rates and prices. If the item is of similar character, the only ground upon which the quantity surveyor can vary the price from that which is set out in the bills is that the conditions are not similar, or that the quantity has significantly changed; otherwise the quantity surveyor must use the price in the bills as it stands. It is often argued that ‘similar conditions’ can only mean ‘identical 896

London County Council v. Vitamins Ltd [1955] 2 All ER 229.

493

Similar conditions conditions’, so that any variation in character, no matter how small, would lead to a change in rates. Plainly, if the draftsperson had intended ‘identical’, it would have been easy to so state. Nevertheless, ‘similar’ must be read in the context of the valuation rules taken together. It is clear that very little change to the character would be needed to render the character of work dissimilar for the purpose of this clause so as to trigger valuation at fair rates and prices. GC/Works/1 clause 42(5) (a) refers to ‘similar work’, which probably means the same as ‘similar character’. See also: Fair valuation; Similar conditions.

Similar conditions When considering the conditions under which the work was to be carried out, it is unnecessary to apply the same strict interpretation to the word ‘similar’. Although the character of an item is precisely defined by its description in the bills of quantities, the conditions under which the item is to be carried out cannot be precisely defined. The question of whether the conditions are similar is left to be judged by criteria that are somewhat vague, and possibly related to the conditions under which the contractor must be deemed to have anticipated that the work would be carried out, compared with those conditions under which the varied work actually was carried out. The conditions referred to in the valuation rules, e.g. SBC 5.6.1.1 or IC and ICD clause 5.3.1.1, are the conditions to be assumed from the express provisions of the bills of quantities, the drawings and other documents. However, the quantity surveyor is not entitled to take into account the background against which the contract was made.897 GC/Works/1 clause 42(5) (a) refers to ‘similar work’, which is not the same as similar conditions, but probably means the same as ‘similar character’. See also: Fair valuation; Similar character.

Simple contract A contract that is not executed as a deed. It may be made or evidenced in writing, and possibly signed or made orally or by conduct. See also: Contract.

Site Not always clearly defined in the contract, but a definition is given at clause l(l) of GC/Works/1 as the land or place described in the contract with any other land agreed by the parties in order to perform the contract. Although ‘site’ is mentioned in SBC clause 2.6.1, it is not capitalised or defined. A clear understanding of the extent of the site is most important for all concerned in the construction process. In the first instance, the surveyor and architect need to know the extent, so as to properly locate the building. Under SFA/99 (2004) clause 3.2 the architect is entitled to rely upon information provided by the client, and this would include information about the extent of the site. A somewhat diluted version of the clause is to be found in S-Con-07-A clause A3.3. Where boundaries (qv) are wrongly given or assumed, the consequences can be disastrous, and might include trespass upon adjoining property. Failure by the employer to give possession (qv) of, and access (qv) to, the site to the contractor is a breach of contract.

897

Wates Construction (South) Ltd v. Bredero Fleet Ltd (1993) 63 BLR 128.

494

Site conditions An adequate definition set prominently in the contract documents (qv) is therefore essential. An example of this is MP, where the site is defined at clause 1 as the area where the project is to be constructed with boundaries described in the requirements. Again, within CE at clause 1 the site is defined as the place where the project is to be constructed and as set out in the contract particulars (qv). Within the NEC clause 11.2(15) defines the site as the area within the boundaries, including the volumes above and below it affected by the Works in the contract. The site information describes the site and its surroundings, and is a document identified within the contract data. See also: Examination of site; Standard Agreement for the Appointment of an Architect (S-Con-07-A); Standard Form of Agreement for the Appointment of an Architect (SFA/99).

Site conditions In the absence of any specific guarantee or definite representations by the employer or the architect about site conditions, the nature of the ground, and related matters, the contractor is not entitled to abandon the contract or claim extra money on discovering the nature of the soil. In addition, under the general law, the contractor has no claim for damages against the employer. The position may be affected by the express terms (qv) of the contract. GC/Works/1 clause 7(l) reiterates the common law rule. It places on the contractor the risk that site and allied conditions may turn out more onerous than it expected, but this is subject to the provisions relating to unforeseeable ground conditions (qv) under which, in specified circumstances, the contractor may be entitled to extra payment. Optional clause 2.6 of ACA gives the contractor a potential right of claim if it encounters ‘adverse ground conditions or artificial obstructions at the Site’ as work progresses. It must notify the architect immediately such conditions are encountered, and the architect must then issue an appropriate instruction. Compliance with such an instruction will rank for payment unless the ground conditions etc. could have been reasonably foreseen by a skilled, experienced and qualified contractor at the date the contract was made. Clause 14 in the MP offers two alternatives in respect of ground conditions. Clause 14.1 places the risk for encountering ground conditions or man-made obstructions that necessitate a change in either the requirements or the proposals with the contractor. However, if clause 14.2 (an appropriate entry in the contract particulars) is said to apply, then if the ground conditions or obstructions were not foreseeable by an experienced and competent contractor, they are to be treated as giving rise to a change. Under SBC, IC and ICD the position is more complex. Where the Standard Method of Measurement (SMM) (qv) is used, the contractor may well have a claim against the employer in respect of certain adverse ground conditions. In C Bryant & Son Ltd v. Birmingham Hospital Saturday Fund898 Bryant contracted to erect a convalescent home. The contract was in RIBA form, with clauses not unlike SBC. The bills of quantities (qv) formed part of the contract; clause 11 of the contract stated ‘the quality and quantity of the work … shall be deemed to be that which is set out in the bills … which … shall be deemed to have been prepared’ in accordance with the then current SMM. 898

[1938] 1 All ER 503.

495

Site manager The SMM required that, where practicable, the nature of the soil should be described, that attention should be drawn to any trial holes, and that excavation in rock should be given separately. The bills referred the contractor to the drawings, a block plan and the site, to satisfy itself of the local conditions and the full nature and extent of the operations. The architect knew that there was rock on site, but it was not shown on the plans or referred to in the bills of quantities. They contained no separate item for excavation of rock. The High Court held that Bryant was entitled to treat the excavation in rock as an extra, and to be paid the extra cost of the excavation plus a fair profit. Where the description of the soil does not comply with the requirements of the present edition of SMM, the contractor may have a similar claim, e.g. SBC clauses 2.13 and 4.1. Other routes may be available to a contractor to avoid liability, for example if there has been a misrepresentation (qv) about the ground conditions, and where the contractor is misled by site information provided by the employer.899 The contractor’s claim under the Misrepresentation Act 1967, as amended, may arise for misrepresentations made by or on behalf of the employer. As a result of the Misrepresentation Act 1967, the remedies which used to be restricted to cases of fraud or recklessness apply to all misrepresentations unless the party who made the representation can prove that it had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true. It is thought that, liability for misrepresentation is unaffected by the general common law rule that the employer does not warrant that the drawings, bills of quantities or specification are accurate or that the site is fit for the Works or that the contractor will be able to construct on the site.900 Case law has established that it is not an easy matter for the employer to disclaim liability and the courts seem prone to impose liability if it is possible to do so. However, in some instances, the position is not entirely clear. It should be noted that it has been held that a contractor is not entitled to rely on a ground investigation report if it was merely referred to on a drawing. The court concluded that it was not incorporated into the contract, but merely noted to identify a source of relevant information for the contractor, and that this was insufficient to override a specific clause in the contract that placed on the contractor the obligation to satisfy itself about the nature of the site and the subsoil.901 A representation given in the bills of quantities, followed by a warning that the information may not be accurate, will not usually be sufficient to protect the employer, because it is a clear intention to circumvent s. 3 of the Misrepresentation Act 1967. It has been held that such a statement may convert the representation into a misrepresentation.902 Therefore a statement that underground objects are shown on an attached drawing, but that the contractor must carry out its own investigations, may not protect the employer if the objects are not of a size and in the positions as shown.

Site manager A term used in ACA clause 5.2 to describe the contractor’s full-time representative on site in charge of the Works. The site manager must be appointed before work starts on site, and the architect’s consent on both the 899

Morrison-Knudsen International v. Commonwealth of Australia (1972) 13 BLR 114. Appleby v. Myers (1867) LR 2 CP 651; Thorn v. London Corporation (1876) 1 App Cases 120. 901 Co-operative Insurance Society v. Henry Boot Scotland Ltd (2002) 84 Con LR 164. 902 Cremdean Properties Ltd v. Nash (1977) 244 EG 547 (CA). 900

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Snagging list appointment and removal or replacement is necessary. Some of the site manager’s duties are described in clause 5.3. The site manager is to attend meetings convened by the architect in connection with the Works, must keep complete and accurate records, and must make these available for inspection by the architect. Like all the contractor’s employees under the ACA form, the site manager must be properly skilled, qualified and experienced. This is a key appointment. Other terms commonly used for this role are person-in-charge, site agent and site foreman. See also: Person-in-charge.

Site materials A defined term within SBC, DB, IC and ICD, and MW and MWD referring to unfixed materials and goods on or adjacent to the Works and intended for incorporation. The term is used within the insurance provisions for the Works, e.g. SBC clause 6.7 option B clause B 3.3, when referring to the replacement or repair of any lost or damaged ‘site materials’ following an inspection by the insurers.

Site overheads A term used within PPC and defined at appendix 1 as agreed ‘site-specific overheads’ distinct from central office overheads (qv) and profit (qv). Clause 12.4 states that the constructor’s profit, central office overheads and site overheads are fixed at the agreed amounts set out in the price framework. They are to form part of the agreed maximum price, subject only to such variation as the client and constructor may agree.

Site Waste Management Plans Regulations 2008 The Regulations are made under the Clean Neighbourhoods and Environment Act 2005. They require that a site waste management plan be prepared and implemented by all clients and principal contractors for all construction projects over £300,000 in value (excluding VAT). A ‘client’ under the Regulations is defined to mean a person who in the course of business seeks or accepts the services of another which may be used in the carrying out of a project for that person; or carries out a project on their own behalf. The plans must record details of the projects, give estimates of the type and quantity of waste generated, and confirm the actual waste types and how they have been dealt with. Projects over £500,000 are subject to more detailed requirements. Failure to produce or implement a plan may result in a substantial fine.

Sit-in An expression of industrial dispute in which people occupy some building or place (usually their place of work) until their demands are satisfied, or until they are forcibly evicted. It is trespass (qv). Although strike (qv) and lock-out (qv) are expressly stated in some contracts as grounds for extension of time (see SBC clause 2.29.11, IC and ICD clause 2.20.11 and DB clause 2.26.10), a ‘sit-in’ is not included.

Snagging list An expression commonly used on site for any list of defects. In an endeavour to be helpful, a clerk of works (qv) may go beyond their duties and provide the contractor with a list of work required to be completed or rectified before, in the opinion of the clerk of works, the Works will be ready for the architect to certify practical completion (qv). The list is, of course, of no 497

Special damage(s) contractual significance, and binds neither the architect nor the contractor. The contractor is under no obligation to take notice of the snagging list, only to fulfil its obligations under the contract. Nevertheless, contractors often welcome such a list, and architects often encourage the clerk of works to prepare such a list before practical completion. There is a danger that the contractor will be persuaded to do more than is necessary, and the architect should not become associated with such a list unless they are prepared to be bound by it. The architect should not mention the clerk of works’ snagging list in any correspondence. The ‘Contractor’s List’ and the ‘Architect’s List’ mentioned in ACA (clause 12.1) are empowered by that contract. They are likely to be referred to indiscriminately on site as snagging lists, as is the list of work notified by the employer to the contractor, under clause 15.4 of the MP form, required to be completed to achieve practical completion. The term is also commonly given to the ‘schedule of defects’ that the architect prepares at the end of the rectification period (qv) under certain of the JCT contracts. Although it is too much to expect that the expression will be obliterated from site conversation, the architect should be meticulous in using the correct terms, so as to avoid confusion. One reason for the perpetuation of the use of this inaccurate term is that a snagging list and its constituent ‘snags’ do not sound as serious as defects. Therefore to say that there are only a few snags to deal with sounds trivial, compared with saying that there are still some defects to rectify or, still worse but more accurately, there are still some breaches of contract to rectify.

Special damage(s) Damage of a kind that the law will not presume in the claimant’s favour, but which must be specifically pleaded and proved at the adjudication, arbitration or litigation proceedings, e.g. interest (qv) on money in some cases, loss of profit, medical expenses. It is contrasted with general damages (qv), which are damages that the law usually presumes will have resulted from the defendant’s act. In order to recover special damages it must be demonstrated that the damage was of the kind that the parties had within their contemplation at the date the contract was entered into. Therefore a cautious person about to enter into a contract may well ensure that the other party is made aware of any particular circumstances that could result, following a breach of contract, in damage being suffered that falls into this category. See also: Damages.

Special knowledge: see Knowledge. Special terms Under clause 28 within PPC, and as defined at appendix 1, any agreed terms amending or supplementing the partnering terms are to be identified as ‘special terms’. Such terms are to be set out in or attached to the partnering agreement or the commencement agreement.

Specialist A person who concentrates on a particular facet of a trade or profession. Thus a lawyer may specialise in property, a surgeon may specialise in cardiovascular disease, or an architect may specialise in the restoration of old buildings. In the context of construction contracts it refers to a person or firm that concentrates on a particular aspect of the construction process, e.g. lift installation, heating or lighting. 498

Specialty contract A person who professes a particular expertise will be held liable if there is a failure to conform to the normal standards of a person professing that particular expertise.903 It will be no defence to show that the person performed to the same standard as the average practitioner in the same field, but without the specialist expertise. Within MP at clause 24 there is provision for the inclusion of a named specialist (qv), which is a defined term in that contract. ‘Specialist’ is also defined with PPC at appendix 1 as a party, including a former consultant by agreement, that provides the constructor or, in certain cases the client, with work, services, goods, materials or equipment as part of the project. Clause 10 within PPC deals with the supply chain, and seeks to require the partnering team members to establish specialist relationships in accordance with specified criteria. Such specialists may be identified within the project partnering agreement, or may be appointed by the constructor following the agreement of the partnering team. Provisions deal with the appointment of a specialist by tender (clause 10.6) or individual selection based on a business case (qv) under clause 10.3. Each proposed specialist contract (qv) is to be prepared by the constructor and approved by the client, and is not to conflict with the partnering documents. Under clause 10.11 the client can appoint a specialist if stated in the project partnering agreement, or if the constructor agrees that to do so is in the best interest of the project. The appointment can be direct by the client, or direct by the client with the intention of a subsequent novation over to the constructor. Pending any such novation the client is responsible for making all payments to the specialist in accordance with the specialist’s payment terms, for its performance, and if necessary for the appointment of a replacement. With the exception of specialists appointed directly by the client the constructor remains responsible for all aspects of the specialist’s work (clause 10.12). The constructor cannot terminate the specialist’s contract without the agreement of the client (clause 10.13).

Specialist contract A term defined within PPC at appendix 1 as a document, not being a partnering document, that governs the appointment of a specialist. Clause 10.9 requires that each specialist contract is to be prepared by the constructor and approved by the client prior to issue by the constructor, and that it shall not conflict with the partnering documents.

Specialist payment terms A defined term within PPC at appendix 1. It refers to a document that sets out the amounts and terms of payment to a specialist, and which is fastened either to the project partnering agreement (qv) or to the joining agreement (qv) so as to form part of the partnering contract (qv) or part of the specialist contract (qv). Under clause 10.11, should the employer appoint a specialist (qv), then it will be responsible for paying the specialist in accordance with its specialist payment terms.

Specialty contract A contract executed as a deed. By s. 1(1)(b) of the Law of Property (Miscellaneous Provisions) Act 1989 there is no longer any legal

903 Sidaway v. Board of Governors of the Bethlem Royal Hospital and the Maudsley Hospital [1985] 7 All ER 643.

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Specific performance requirement for a seal in order to validly execute an instrument as a deed by an individual. Article 3 of The Law Reform (Miscellaneous Provisions) (Northern Ireland) Order 2005 makes similar provision. The requirement for a seal in the case of companies was removed by s. 130 of the Companies Act 1989. In Northern Ireland the need for a seal in the case of companies was removed by Schedule 4 of the Companies (No. 2) Order (Northern Ireland) 1990. S. 44(2)(b) of the Companies Act 2006 came into effect from April 2008, permitting a deed to be executed by one director signing in the presence of a witness who attests the signature. See also: Contract; Deed; Locus sigilli.

Specific performance Where damages (qv) would be inadequate compensation for breach of contract (qv) the contractor may be compelled to perform what it has agreed to do by a decree of specific performance. The court will not grant specific performance of an ordinary building contract, which would, in effect, require supervision by the court.904 However, if a party agrees to lease land and erect buildings on it, it may be granted a decree of specific performance, provided: — the building work is clearly defined by the contract, so that it is clear what is to be done; — the claimant has a substantial interest in the performance of the contract, such that damages would be inadequate compensation for the defendant’s failure to build; — the defendant is in possession of the land. Specific performance is a discretionary remedy, and it is commonly used to compel performance of contracts for the sale, purchase or lease of land.

Specification A document that, together with the drawings, describes in detail the whole of the workmanship and materials to be used in the construction of a building. In contracts that include bills of quantities (qv) as part of the contract documents (qv), what would normally be included with a specification forms a part of the bills of quantities. Where no bills of quantities are included in the contract documents, such as SBC without quantities, IC or ICD, the specification becomes a very important contract document. The ACA form can also be used with a specification. In this case it ought to include preliminaries, as for bills of quantities, and preambles as part of the trade descriptions. The specification must describe: — quality of materials; — quality of workmanship; — assembly; — location. The main body of the document is normally divided into trades or elements of construction, in much the same sequence as they would be built. Where the specification is to be priced, every detail of the work must be described, although not quantified.

904

Hepburn v. Leather (1884) 50 LT 660; Ryan v. Mutual Tontine Westminster Chambers Association [1893] 1 Ch 116.

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Stage payment The National Building Specification, published by RIBA Enterprises Limited, is now available on subscription. New material is issued several times a year in hard copy sheet form for insertion into a ring binder, and also in disk format, providing a comprehensive range of standard clauses to simplify the production of both specifications and bills of quantities. See also: Performance specification.

Specified perils A term found in the insurance provisions of JCT contracts (e.g. SBC clause 6.8). The specified perils are ‘fire, lightning, explosion, storm, flood, escape of water from any water tank, apparatus or pipes, earthquake, aircraft and other aerial devices or articles dropped there from, riot and civil commotion, but excluding Excepted Risks’ (qv). There is a similar definition in the MP, but it does not include the words ‘but excluding Excepted Risks’. The definition is almost identical to the former ‘clause 22 perils’ in JCT 80. The former reference to ‘bursting … of … pipes’ has been changed, and ‘tempest’ has been omitted. It had been held that where a contractor allowed a metal purlin to damage a water pipe, it did not fall under the heading of bursting of pipes, and therefore it was not one of the specified perils.905 It is uncertain how the same case would be decided under the current definition. Under SBC, DB, IC and ICD, and MW and MWD, where the employer is to insure existing property, the obligation is to insure against loss or damage due to specified perils, in contrast to the obligation of employer or contractor to insure new Works against loss or damage due to all risks (qv). The clause is also identified as a relevant event under SBC, DB, IC and ICD and MP giving rise to an entitlement to an extension of time. Within MP the phrase is not used in the insurance clause (i.e. clause 33), but it is identified within the extension of time provisions (i.e. clause 18).

Specify To identify precisely. Speed reply A system of answering letters particularly favoured by busy executives. In essence, the system works as follows. The answer to correspondence is typed or written on the bottom of the letter to which it refers. The letter is then photocopied and the copy sent to the correspondent. The original is sent to file. Advantages are, as the name suggests, speed, efficiency and saving on expense. Disadvantages are that it must be brief, and may not be fully understood by the recipient. The system is said to have originated in South Africa.

SR & O An abbreviation for statutory rules and orders (qv). Stage payment A general term often used to indicate any payment made during the progress of the work. It is more accurately used for payments made at specific stages of work, e.g. dpc level, first floor level, eaves level. This mode of payment is usually confined to relatively small lump sum contracts (qv) without quantities, where a proportion of the total sum is agreed to be paid over in a number of stages. The proportions are fixed, and do not depend upon any remeasurement of work. 905

Computer & Systems Engineering plc v. John Lelliot (Ilford) Ltd (1989) The Times 23 May 1989.

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Stage payment The BPF System (qv) provides for stage payments for consultants (qv) in lump sums, depending upon the stage reached in the design and development process. The BPF System also provides, in effect, for stage payments to contractors, except that the contractor determines the stages and the amount payable in the schedule of activities (qv). GC/Works/1 provides in clause 48 for monthly advances to be paid in accordance with stage payment charts, and this phrase is defined at clause 1 as charts, tables or graphs included with the invitation to tender and specifying the periods and amounts of the advance payments made to the contractor during the performance of the Works. DB provides for stage payments as an alternative to periodic payments. Stage payments are dealt with in clauses 4.9.1 and 4.13. Periodic payments are dealt with in clauses 4.9.2 and 4.14. The method of payment is to be noted in the contract particulars (qv), and where stage payment is chosen there is provision for the stages to be described and the cumulative amount of payment for each stage to be inserted. Care must be taken with the description of each stage. The point at which a stage is said to be complete and thereby trigger a payment is a common source of dispute. The description should leave nothing to be agreed later and, if appropriate, the description can be keyed to a drawing indicating the various stages. More often than might be imagined the stage is described, not in terms of the physical progress of the Works, but in terms of time. For example, the first stage may be ‘four weeks’, the second stage ‘eight weeks’ and so on. This approach is completely misconceived, and has led to a contractor claiming payment for the first and second stages after four and eight weeks respectively, even though virtually no work has been carried out on site. SBC, IC and ICD all give the option of stage payments, but without setting out any particular method of achieving such payments, and in subtly different ways. MW and MWD, unlike their predecessor contracts, make no mention of stage payments. SBC refers to stage payments in clause 4.10, which provides that the amount that is to be stated as due in any interim certificate is to be calculated as set out in the clause, but subject to any agreement about stage payments. The straightforward interpretation of this is that, where the parties agree to stage payments, the interim certificates will still be issued, but calculated on the basis of the stage payments. It is left to the parties to work out how to achieve stage payments, if that is what is desired. A decision about stage payment ought to be reached before execution of the contract, so that the necessary amendment setting out the stages and relative amounts can be attached to the contract documents. IC and ICD deal with stage payments in clause 4.6.1, which starts in the same way as SBC by making the clause subject to agreement about stage payments, but then proceeds to say that the architect shall certify the amount of interim payments. Whereas under SBC the decision to opt for stage payments will simply affect the amount certified, under IC and ICD opting for stage payments appears to remove the architect’s duty to issue interim certificates, leaving the parties to agree how payment is to be made, whether on the application of the contractor or otherwise. The decision to opt for stage payments in SBC, IC or ICD will necessitate careful amendment of other clauses in clause 4. ACA clause 16 Alternative B makes provision for stage payments in accordance with the stage payment schedule. The stage payment schedule is attached at the rear of the contract, and is to include a description of each stage and a 502

Standard Form of Agreement for the Appointment of an Architect (SFA/99) cumulative value for the stages. The footnote to the schedule points out that the cumulative total for the final stage should equal the contract sum. See also: Interim certificates; Interim payment; Payments.

Standard Agreement for the Appointment of an Architect (S-Con07-A) This form was published by the RIBA in August 2007 as the successor to SFA/99. It is said to be suitable for use on the same kinds of project for which architects have formerly used SFA/99. There are other forms of agreement in the same series for various circumstances. This form has been produced in association with the RIAS and the RSAW, but not the RSUA or ACA. The form is available in electronic format. There are substantial notes on its use. Unlike SFA/99, the form is not contained within one cover, but is composed of several documents, which are to be selected and completed as required. The form consists of: — Model letter (ML-A-07). — Memorandum of agreement (MA-S-07-A). — Project data (PD-S-07). — Schedule of role specifications (SS-RS-07). — Schedule of design services (SS-DS-07). — Schedule of fees and expenses (SS-FE-07). — Standard conditions of appointment (CA-S-07-A). There is a selection of alternative services supplements. This form has received criticism, and practitioners appear to find it excessively complex. The use of the present tense throughout is not conducive to clarity, and some features included in SFA/99 are missing from this form. It offers less protection to architects than SFA/99. At the time of writing, this form is undergoing revision. The revised version is expected to be published in 2009 with some of the documents combined to make completion less complicated. It is also expected that the restrictive use of the present tense only will be abandoned in favour of the normal contractual language of obligation, and that some of the key features found in SFA/99 will be reinstated, making this a more acceptable document than its predecessor. See also: ACA Standard Form of Agreement for the Appointment of an Architect (ACA SFA/08); Conditions of Engagement (RIBA); Standard Form of Agreement for the Appointment of an Architect (SFA/99).

Standard Form of Agreement for the Appointment of an Architect (SFA/99) The form produced by the Royal Institute of British Architects in association with the RIAS, RSUA, RSAW and ACA and published by RIBA Publications. The form is suitable for use by architects and their clients in relation to projects of all types, sizes and values. It can be used for partial services at any stages in the work. However, other forms (CE/99 and SW/99) are available for use with medium-sized projects and small projects respectively. The form is developed from SFA/92, and the last update took place in April 2004. It complies with the Housing Grants, Construction and Regeneration Act 1996, but it needs updating in some other respects. There are notes on amendments to make the form suitable for use in Northern Ireland under the law of Northern Ireland, and the form is also usable in Scotland under Scottish law with amendments published by the RIAS. The form, which is contained within one document, consists of: 503

Standard form of contract — Memorandum of agreement — Attestation — Schedule 1 – Project description — Schedule 2 – Services — Schedule 3 – Fees and expenses — Schedule 4 – Other appointments — Conditions of engagement The form offers some protection for the architect, while being a perfectly fair contract so far as the client is concerned. However, all such standard form contracts are liable to fall foul of the Unfair Terms in Consumer Contracts Regulations 1999 (qv) where the contract is with a consumer. It is the architect’s responsibility to read through the form carefully with a consumer and explain all the implications of each part. Among the important features of the form for the architect are the following. — The architect does not warrant that the services will be completed in accordance with the timetable or the budget. — The client agrees to hold other consultants and the contractor, not the architect, responsible for their work. — The client must provide accurate information, and the architect is entitled to rely on it. — If the architect is involved in extra work beyond the architect’s control, additional fees on a time basis are payable. — The ascertainment of contractor’s claims is clearly stated to be a special service. — The client’s rights to set-off amounts against fees due to the architect are excluded. — Where a withholding notice is not given, the amount due is the amount on the architect’s account. — Where the architect is obliged to take legal action to recover amounts due, the client is to indemnify the architect against all costs reasonably incurred. — Interest on late payment is to be in accordance with the Late Payment of Commercial Debts (Interest) Act 1998 (albeit the form wrongly refers to the Regulations) with interest otherwise at 8% over Bank of England base rate. — The architect has the right to revoke the copyright licence in the event the client fails to pay. — There is a net contribution clause (qv). — The architect (as well as the client) has the right to determine performance of the services on reasonable notice. There are service supplements for use in various situations, and supplements for use with design and build (qv) situations. The RIBA published a new form in 2007 (S-Con-07-A). A revised version, simply referred to as RIBA Standard Agreement 2009, is due to be published in 2009. The revised version is likely to be a substantial improvement on the 2007 edition. See also: ACA Standard Form of Agreement for the Appointment of an Architect (ACA SFA/08); Conditions of Engagement (RIBA); Standard Agreement for the Appointment of an Architect (S-Con-07-A).

Standard form of contract A printed form of contract containing standard conditions that are applicable (or can be made applicable by the use of alterna504

Standard Form of Specialist Contract for Project Partnering (SPC 2000) tives) to a wide range of building projects. They are generally preferable to specially drafted contracts, because they are intended to be comprehensive, and avoid most of the pitfalls that surround contractual relations in the building industry. Examples of standard forms are: — the JCT contracts (qv); — the ACA contracts (qv); — GC/Works/1 contracts (qv); — the NEC contract (qv). The JCT contracts, unlike the ACA and GC/Works/1 contracts, are negotiated across all sides of the construction industry, including representatives of employers. Therefore they are not subject to the Unfair Contract Terms Act 1977 (qv), because they do not constitute the employer’s standard written terms of business. Moreover, for the same reason, they do not fall to be construed contra proferentem (qv) against the employer should all other rules of interpretation fail to resolve an ambiguity.

Standard Form of Specialist Contract for Project Partnering (SPC 2000) A form of sub-contract for use with PPC (qv) and entered into by the constructor and a specialist (qv) appointed under PPC. The form was amended in 2004 and again in 2008. It is a bilateral contract that allows the early appointment of a specialist. The document comprises the specialist agreement and the specialist terms. That is: (i) Specialist agreement. (ii) Attestation. (iii) Specialist terms. (1) Specialist works and project. (2) Specialist documents. (3) Communication and organisation. (4) Objectives and targets. (5) Constructor instructions. (6) Specialist timetable. (7) Health and safety, site welfare and employees. (8) Design and process development. (9) Intellectual property. (10) Sub-specialists. (11) Volume supply agreements. (12) Specialist price. (13) Incentives and specialist pre-construction activities. (14) Preconditions. (15) Implementation of specialist works. (16) Quality and environment. (17) Specialist change. (18) Risk management. (19) Insurance and security. (20) Payment. (21) Specialist completion and support. (22) Duty of care and warranties. (23) Specialist KPIs and continuous improvement. (24) Joint initiatives and strategic alliancing. (25) General. 505

Standard Method of Measurement (SMM) (26) Termination. (27) Problem solving and dispute avoidance or resolution. (28) Specialist special terms. Appendix 1 Specialist definitions. Appendix 2: Part 1 – Form of specialist pre-construction agreement. Part 2 – Form of commencement notice. Appendix 3: Part 1 – Insurance of project and site and third party property damage. Part 2 – Third party liability insurance. Part 3 – Professional indemnity / product liability insurance. Part 4 – Insurance – General. Appendix 4: Part 1 – Conciliation. Part 2 – Adjudication. Part 3 – Arbitration (if applicable). Appendix 5 Specialist KPIs and targets. Appendix 6 Project bank account (if applicable). The terms are ‘back to back’ with the provisions within PPC, subject to appropriate amendments. An international version of the sub-contract (i.e. SPC International) is available for use with the international version of PPC (i.e. PPC International).

Standard Method of Measurement (SMM) A document published by the Royal Institution of Chartered Surveyors and the Construction Confederation. Its purpose is to assist all persons connected with the construction industry, by standardising and rationalising procedures for the preparation of bills of quantities (qv) for building construction. It lays down rules governing the extent to which items should be separately identified or quantified in the bills of quantities, or be deemed to be included, or separately referred to, in the description of another item. The current edition is number seven, but the document is revised at regular intervals to effect improvements and take account of developments in the industry. SBC expressly requires, at clause 2.13.1, that the bills of quantities, unless they specifically state otherwise, are to have been prepared in accordance with the SMM. GC/Works/1 clause 3(1), like many other contracts, requires or expects the particular method of measurement to be identified in the bills of quantities. There are other standard methods of measurement available for construction work other than building.

Standing offer Where tenders (qv) are invited for the carrying out of work or the supply of goods or services over a period of time at irregular intervals, the tenderer may make a standing offer. Whether or not it does so would depend on the terms of its offer (qv) and the acceptance (qv). If the tender is to the effect that the contractor will supply e.g. ‘bricks, if and when required between 1 January and 31 December 2010’, this is a standing offer. It is an offer to supply such quantities as may be required. A standing offer may be withdrawn before it is accepted. Acceptance would be the placing of a specific order. Once an order for a specified quantity is placed, the contractor must supply the goods ordered, as the placing of the order amounts to acceptance.906 906

Percival Ltd v. L C C Asylum & Mental Deficiency Committee (1918) 16 LGR 367.

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Statute-barred

Standing orders Rules of procedure that apply in Parliament, local and public authority organisations, etc. Local authority (qv) standing orders may lay down rules that must be observed in the making of contracts and the like, e.g. as to when a performance bond is required, or when a contract must be entered into as a deed. They are internal procedures. For example, a local authority cannot rid itself of an onerous burden assumed under a contract by pleading that the contract is void because it was entered into contrary to a standing order. This situation must be distinguished from that where an authority has entered into a contract ultra vires (qv). S. 135 of the Local Government Act 1972 allows local authorities to contract in any way authorised by standing orders. Contractors dealing with local authorities are not affixed with notice of standing orders, and so are protected if the authority has not complied with standing orders. The provision, however, does not validate an otherwise invalid contract, e.g. if in fact the local authority never consented to contract at all.907

Stare decisis Literally, ‘to stand by things decided’. It refers to the binding force of judicial precedent (qv), and is the basis of all legal argument and decision of the common law in England and other countries. In certain circumstances the judge is bound to stand by the decided cases, although judges often exercise considerable ingenuity in seeking to avoid the application of precedents that they dislike.

Statement of case Refers to documents that were previously referred to as ‘pleadings’ in cases before the courts. The term is also used in the Construction Industry Council Model Adjudication Procedure (qv), fourth edition, when referring to documents to be submitted as part of the referral (qv).

Statement of claim A document in which the plaintiff (now called ‘claimant’) in litigation, or the claimant in arbitration, sets out all the facts and law that form the basis of the case and the remedy sought. It is the first document in what often becomes a very protracted exchange. The document should always be carefully drafted. See also: Referral; Statement of case.

Statute An Act of Parliament (qv). Statute-barred A phrase that refers to the situation where an action cannot be brought successfully because of a lapse of time, even though the cause of action may otherwise be sound. Thus a party may have a claim for breach of contract for which the other party has no real defence. However, the defendant may be able to argue that the action is barred through a lapse of time (six years from the breach in simple contracts and 12 years in the case of a deed). Such actions are said to be ‘statute-barred’ because of the time limits on actions imposed by the Limitation Act 1980 in England and Wales.

907 North-West Leicestershire District Council v. East Midlands Housing Association Ltd [1981] 3 All ER 364.

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Statutory demand In Scotland the limitation periods are different, and subject to the Prescription and Limitation (Scotland) Act 1973 as amended. Prescription under Scottish law is the establishment or definition of a right or the termination of an obligation through the lapse of time. See also: Limitation of actions; Simple contract; Specialty contract.

Statutory demand A term used in winding-up (qv) proceedings for a demand, made in accordance with s. 123(1)(a) of the Insolvency Act 1986 and Insolvency Rules 1986 rr4.4–4.6, which must be in writing and made on a company for payment of a debt. It must be dated and signed by the creditor, or by a person stating that they are authorised to make the demand on behalf of the creditor. The demand must state the amount of the debt, and the way in which it has arisen (for example as payment for goods ordered and delivered). Amounts such as interest not previously notified must be separately identified and calculated up to the date of the demand. An essential part of the demand is a statement that, if the debtor does not comply with the demand in 21 days, the creditor may start winding-up proceedings. The demand must also say what methods of compliance are acceptable. A failure by the creditor to pay the amount or to compound the debt is evidence of inability of the company to pay its debts.

Statutory duty, Breach of Many statutes impose duties on individuals to either do something or not do something, and the statute itself may provide the only remedy (qv). In other cases, for example, the Factories Act 1961 and related statutes impose general statutory duties in respect of classes of people, such as employees. Breach of statutory duty in this sense can give rise to a claim for damages in tort (qv) when, as a result of a breach of the statutory duty, a person is injured.908 It is a question of interpretation whether the statute gives a special remedy, or whether it coexists with an existing common law remedy, e.g. an action for damages for negligence. In some cases the statutory duty is merely enforceable by sanctions of the criminal law. For example, the Health & Safety at Work etc. Act 1974 imposes general duties on employers, employees, and others, but s. 47 of the Act makes it clear that such duties do not generally confer any right of civil action: i.e. if there is a breach of the Act’s provisions, the injured person cannot bring a claim for damages for breach of the broken duty. Statutory duties may be absolute (qv), but this is unusual. Breach of the Building Regulations does not, it seems, give rise to absolute liability.909 Claims for damages for breach of statutory duty are very common, and it is probable that the duty to comply with statutory requirements overrides even an express contractual obligation.910 The requirement to comply with the CDM Regulations 2007 is included in all JCT contracts. The result of this is that a failure to comply with the Regulations on the part of either employer or con-

908

Quinn v. J W Green (Painters) Ltd [1965] 3 All ER 785. Perry v. Tendring District Council (1985) 3 Con LR 74; Kimbell v. Hart District Council (1987) 9 Con LR 118. 910 Street v. Sibbabridge Ltd (1980) Unreported. 909

508

Statutory undertakers tractor may give rise to a claim for breach of contract rather than breach of statutory duty, although the breach of contract is actually founded on the breach of statutory duty.

Statutory Instruments The most important class of subordinate or delegated legislation. For the most part they are regulations made by a Secretary of State for particular purposes, e.g. the Scheme for Construction Contracts (England and Wales) Regulations 1998. They have the force of law. See also: Scheme for Construction Contracts.

Statutory requirements Under most standard forms there is an express provision requiring the contractor to comply with all the relevant statutory obligations, e.g. DB clause 2.1 and MP clause 11. Within most of the JCT contracts ‘statutory requirements’ is defined. For example, within MP it is defined at clause 1 as any Act of Parliament, instrument, rule or order made under Act of Parliament, regulation or by-law of any local authority or statutory undertaker having jurisdiction of the project or with whose systems the project will be connected, and any enforceable directive of the European Union. The definition with DB, SBC and IC and ICD is similar, although the precise wording is different.

Statutory rules and orders Regulations that were formerly made by the King in Council, government departments and other authorities. In 1948 they were superseded by statutory instruments (qv).

Statutory undertakers Organisations such as water, gas and electricity companies that are authorised by statute to construct and operate public utility undertakings. They derive their powers from statute, either directly or from previous authorities undertaking the function by virtue of statutory instruments (qv). Although their powers are extensive, they are not absolute, and constraints are placed upon the exercise of such powers. Failure to observe these constraints can lead to complaints being laid before the appropriate minister, or to an action for damages (qv) or an injunction being pursued in the courts. Statutory undertakers may be involved in a building contract, either in performance of their statutory obligations or as contractors or sub-contractors. When performing their statutory obligations they are not liable in contract,911 although they may be liable in tort (qv). Most standard building contracts draw a distinction between statutory undertakers performing their statutory duties as such and those cases where they are acting as contractors. This is reflected within the definition included within most of the JCT contracts, at clause 1 e.g. DB, SBC and IC, as well as within, for example, SBC clause 3.7.3, and the distinction will also be relevant in claims (qv) situations. ACA similarly draws a clear distinction between the activities of statutory undertakers performing works in pursuance of their statutory obligations and merely working directly under contract for the employer.

911

Clegg Parkinson & Co v. Earby Gas Co [1896] 1 QB 56; Willmore v. S E Electricity Board [1957] 2 Lloyd’s Rep 375.

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Stay of proceedings The High Court gave an important judgment in a case concerned with whether statutory undertakers were the equivalent of what are now known as ‘Employer’s Persons’ under clause 2.7 of SBC but which were then called ‘artists and tradesmen’.912 The point was important in regard to the clauses permitting extension of time (qv) and loss and/or expense (qv). The High Court held, on the facts, that the statutory undertakers were within the phrase ‘artists and tradesmen’ because they were performing their work by virtue of a contract with the employer and not under statutory authority. The practical result was that, on the facts, the contractor was entitled both to an extension of time and to recover loss and/or expense. The judge said: If the employers contract with statutory undertakers, they can provide for what is to happen if the undertakers are guilty of delay, just as they can so provide if they employ an artist or tradesman, and it is just that they should bear this risk, which they have had the opportunity of safeguarding themselves against. If, however, without having a contract, undertakers, using their statutory powers to fulfil their statutory obligations, came on the scene and hindered the Works and caused delay, then the consequential loss would be one like force majeure which can be laid at the door of neither party.913

It is therefore important to determine in which capacity the statutory undertakers are carrying out work. In another case it was held that a strike by workers employed by statutory undertakers engaged by the employer to execute work not forming part of the contract Works was not covered by the contractual extension of time clause.914 See also: Act of Parliament.

Stay of proceedings The courts have very wide powers concerning whether or not to put a stop – temporary or permanent – to proceedings brought before them, as part of their inherent jurisdiction. Specific powers are also conferred on them by statute. So far as building contracts are concerned, the most important practical example is the provisions contained in s. 9 of the Arbitration Act 1996, which permit a party to an arbitration agreement to apply to the court for a stay of legal proceedings. The court has little if any discretion in the matter, and must grant a stay unless it is satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed. The 2005 suite of JCT contracts defaults to litigation if no dispute resolution procedure is noted in the contract particulars (qv). In order to make arbitration the procedure under the contract, it must be clearly specified. It is also possible to include by agreement a mandatory adjudication provision within a contract, and the courts have granted a stay of proceedings while the parties referred their dispute to adjudication. The ad hoc clause read: ‘Any dispute, question or difference arising under or in connection with the subcontract shall, in the first instance, be submitted to adjudication in accordance with … and thereafter to the exclusive jurisdiction of the English courts…’915. See also: Act of Parliament; Arbitration. 912

Henry Boot Construction Ltd v. Central Lancashire New Town Development Corporation (1980) 15 BLR 1. Henry Boot Construction Ltd v. Central Lancashire New Town Development Corporation (1980) 15 BLR 1 at 19 per Judge Edgar Fay. 914 Boskalis Westminster Construction Ltd v. Liverpool City Council (1983) 24 BLR 83. 915 DGT Steel and Cladding Limited v. Cubitt Building and Interiors Limited (2007) 116 Con LR 118. 913

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Strict liability

Step in rights A clause often included in a warranty (qv), and sometimes in other contracts, that gives a named party the right to step in and replace one of the parties to the agreement. An example is where an architect enters into an appointment with a client to perform architectural services, and where the architect is required to execute a warranty in favour of the funder of the project. The warranty usually contains a clause that enables the funder to take the place of the client in the appointment. The circumstances are set out in the clause. Normally, it is when matters arise that enable the architect to terminate the appointment or to treat it as repudiated. There is usually a provision in the clause that requires the architect to notify the funder if the architect intends to terminate the appointment for any reason. The funder then has a specified number of days within which to decide whether to take over the appointment. Although the funder may seek as long as 28 days within which to decide or act, this is not a reasonable period for an architect to wait. If the funder decides to step in, the architect must accept the funder’s instructions as though they were the client’s, and the architect is entitled to accept such instructions to the exclusion of the client. It is essential that the client is one of the parties to such a warranty, to show that the client agrees to the stepin procedure and agrees that the architect can treat the funder as client. There are usually other provisions to make sure that the architect is not disadvantaged by the change, and the funder should guarantee any fees owed. A similar provision may also be included within warranties between the contractor and funder, e.g. JCT Contractor Collateral Warranty for a Funder (Cwa/F) clause 6. The process is sometimes used to allow a funder to step in and replace the employer in a building contract where the employer ceases to act for any reason. The process can be used for any contract, but it is essential that all the affected parties are parties to the contract that contains the step-in clause. Although stepin clauses are not usually lengthy, they can be complex, and as for any other contract clause appropriate advice should be sought before such a clause is accepted.

Strict liability Liability irrespective of fault, an example of which arises under the rule in Rylands v. Fletcher (1868).916 Negligence need not be proved where things likely to cause damage are kept on property. The rule is: A person who for his own purposes brings onto his land and collects and keeps there anything likely to do mischief if it escapes, must keep it at his peril and, if he does not do so, is prima facie answerable for all the damage which is the natural consequence of its escape.917

The following points should be noted. — The rule applies only to a ‘non-natural use of land’, e.g. blasting operations, demolition operations, water in a reservoir. It does not apply to things naturally on land, or to the use of water, etc. for ordinary domestic purposes. — There must be an escape from the land. — Liability is strict but not absolute (qv), although it arises independently of either negligence (qv) or nuisance (qv). 916 917

Rylands v. Fletcher (1868) LR 1 Exch 256. Rylands v. Fletcher (1866) LR 1 Exch 256 at 279 per Blackburn J.

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Strike —

Various defences are available, e.g. act of God (qv), that the damage was caused by the claimant’s own act or default, that the escape was due to a third party, or that the activity was authorised by statute.

Strike A simultaneous withdrawal of labour by the whole or a major part of an employer’s workforce (‘employer’ used in the general sense). In many forms of building contract it is expressly stated as a ground for extension of time, e.g. SBC, IC and ICD clause 2.29.11, and DB clause 2.26.10. ACA does not refer to strikes, but it is thought that an extension might be given under the head of force majeure (qv).

Sub-contract A contract made between a main contractor and another contractor for part of the works that the main contractor has already contracted to carry under a contract with the employer. Such other contractor is referred to as a sub-contractor (qv). In order for there to be a sub-contract there must be a contract to which the sub-contract is subordinate. Sometimes an employer may express a wish not to appoint a contractor, and that all the Works are to be carried out by sub-contractors. This is an entirely wrong use of the term. What such an employer really means is that a separate contractor will be engaged for each major operation or element of the Works, e.g. groundworks, each contractor being the subject of a separate contract with the employer. See also: Assignment; Domestic sub-contractor; Named sub-contractors and suppliers; Nominated sub-contractors; Sub-letting.

Sub-contractor A person or firm to whom part of the main contract Works is sub-let. Under the NEC a term defined at clause 11.2(17) as a person who has contracted with the contractor to construct part of the Works, provide a necessary service for the Works, or supply plant and materials that the person has designed specifically for the Works. The provisions governing sub-contracting are set out at clause 26. See also: Assignment; Sub-letting.

Subject to contract In general, the use of the phrase ‘subject to contract’ indicates an intention not to be bound. There is no enforceable obligation until the contract (usually a formal document) is made. This is commonly the case in contracts for the sale of land. However, where the parties are agreed on the terms of the contract, and acceptance is made subject to the execution of a formal document, it is a question of interpretation (qv) for the courts to decide whether or not there is a concluded contract.918 See also: Acceptance; Conditional contract; Contract; Offer.

Sub-letting A term referring to the act of a contractor entering into a sub-contract (qv) with a sub-contractor (qv) to carry out part of the main contract Works. It is equivalent to ‘sub-contracting’. 918

Branca v. Cobarro [1947] 2 All ER 101.

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Substituted sub-contractor

Subrogation The substitution of one person or thing for another. Someone who discharges a liability on another’s behalf is, in general terms, put in the place of that other person for the purpose of obtaining relief against any other person who is liable. The most important practical example arises in the field of insurance, where an insurer who compensates a policyholder for loss is entitled to stand in the policyholder’s shoes and recover from the person who caused the loss. The principle of joint name policies in JCT contracts is precisely to avoid the dangers posed by subrogation. The effect of a clause such as SBC clause 6.9 is to avoid subrogation affecting sub-contractors. A construction professional taking a post as an employee should check with the prospective employer that the office professional indemnity insurance contains a waiver (qv) of subrogation in respect of all employees. In the absence of such a waiver, an insurance company may be able to pay out on a claim from the company and then seek to recover the amount from the employee who was negligent. The fact that this does not happen often perhaps owes more to the inability of most employees to pay such a claim than to anything else. See also: Joint names policy.

Substantial completion Under an ordinary lump sum contract (qv), provided the contractor has substantially performed its work, it will be entitled to recover the contract price, less a deduction in respect of defects.919 The nature of any defects must be taken into account, as well as the proportion between the cost of rectifying them and the contract price.920 Substantial completion means complete in all major particulars, and should be contrasted with ‘practical completion’ (qv). The form of contract that comes nearest to requiring substantial completion is GC/Works/1, clause 34. The work is to be carried out and completed to the satisfaction of the project manager. It is clear that the project manager may accept a lesser state of completion than that envisaged in the JCT forms. However, substantial completion implies that only very minor items will be outstanding. See also: Performance.

Substantially To a considerable degree, not trivial. Substituted contract A substituted contract arises where there is a novation (qv), and a new contract is substituted for the original contract. If the substituted contract incorporates or refers to the original contract, the two will generally be read together,921 but the liabilities of the parties are always a question of interpretation.

Substituted sub-contractor The term was used in JCT 98 clause 35.18.1.1 to refer to a sub-contractor nominated to take the place of a nominated subcontractor (qv) who failed to carry out remedial work. ACA clause 9.6 makes provision for the situation where the contractor is unable, for any reason beyond its control, to enter into a sub-contract with a named sub-contractor

919

Hoenig v. Isaacs [1952] 2 All ER 176. Bolton v. Mahadeva [1972] 1 WLR 1009. 921 A Vigers Sons & Co Ltd v. Swindell [1939] 3 All ER 590. 920

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Suitability for purpose (qv) or supplier. The contractor is given the duty to select another person to carry out the work or supply the materials, which must be of equivalent standard and quality. The contractor is not entitled to any damage, loss and/or expense or any extension of time in complying with the provisions of this clause. Similar though not identical provisions exist within other contracts, e.g. MP clause 24.8 and PPC clause 10.13, where the contractor is responsible for the appointment of a replacement consultant or specialist, although the employer has certain rights of objection, and the contractor may be limited in its choice.

Suitability for purpose Under s. l4 of the Sale of Goods Act 1979 there is an implied condition that goods are reasonably fit for the purpose required in circumstances where the buyer is relying on the seller’s skill and judgement. Under the Unfair Contract Terms Act 1977 (qv) this, and other terms implied by the Act, can be excluded only to a limited extent. As regards building work generally, it is now settled law that, in the absence of some express term removing liability, ‘the builder will do his work in a good and workmanlike manner; that he will supply good and proper materials; and that (the completed structure) will be reasonably fit for [the purpose required]’.922 Where contractors and sub-contractors undertake to design (qv) the whole or part of a structure, in the absence of a clear contractual indication to the contrary it is implied that they undertake to design a structure that is reasonably suitable for the purpose made known to them.923 This obligation will be implied in the absence of a clear contractual indication to the contrary. It is to be equated with the statutory obligation of a seller of goods. Many design and build contracts (qv) modify this liability so that it severely restricts that otherwise onerous obligation: DB clause 2.17.1 is an example, and cuts down the obligation severely. Such a clause is, in effect, a plain exemption clause. Within the guide to the MP form it recognises that given the growth of different forms of procurement, and it gives the example of PFI projects, that fitness for the purpose is of increasing importance. It therefore offers within the guide alternative wording for clause 11.3 should a fitness for the purpose obligation be required. See also: Exemption (exception or exclusion) clause; Supply of Goods and Services Act 1982.

Sum due A term used in the Housing Grants, Construction and Regeneration Act 1996 (qv) in ss. 110 and 111. It refers to the amount of money that is payable to a party under the terms of a construction contract (qv). S. 111(1) states that a party to a construction contract may not withhold payment ‘of a sum due under the contract’ unless a withholding notice has been issued. Therefore, where no withholding notice is served, the sum due must be paid. The actual amount of the sum due in any particular instance is the source of much disagreement. It has been held that, where the amount payable to the contractor is stated in architect’s certificates, the amount certified is the sum due.924 Although there are no architect’s certificates to be issued under WCD 922

Hancock v. B W Brazier (Anerley) Ltd [1966] 2 All ER 901 at 913 per Lord Denning MR. Independent Broadcasting Authority v. EMI Electronics Ltd & BICC Construction (1980) 14 BLR 1. 924 Rupert Morgan Building Services (LLC) Ltd v. David Jervis and Harriett Jervis [2004] BLR 18. 923

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Sum due 98, the contract expressly provides in clause 30.3.5 that, in the absence of a withholding notice under clause 30.3.3, the amount stated in the contractor’s application must be paid. (DB has removed that provision.) These are clearly decided positions. The disagreement arises where a party has submitted an invoice or application for payment, and where the contract does not provide for certificates, nor for any other specific method of establishing the sum due. In such cases there are arguments, backed by authority, that in the absence of a withholding notice the amount claimed must be paid. However, there are contrary arguments, also backed by authority, that in the absence of a withholding notice the payer is still entitled to refuse payment by showing that the sum claimed is not actually due. One authority to the effect that, in the absence of a notice of withholding, the sum demanded by the contractor is due and must be paid is as follows: Emphasising the words ‘payment of a sum due…’ in section 111(1), Counsel for CCL argued that the section only applies where the monies are in fact due, and that this requires the court to consider whether the sum demanded by the contractor is irrecoverable (in whole or in part) because of its defective performance of the contract. But the clear intent of sections 110(2) and section 111 is to preclude the employer (in the absence of a withholding notice with specified content) from contending that all or part of the sum demanded by the contractor is not in fact due. If the work is defective, the employer retains the right to recover damages for breach of contract in subsequent litigation or arbitration, and can obtain a provisional order to the same effect by adjudication under section 108 of the Act. That does not however alter the position that by virtue of section 111 the employer is obliged to pay forthwith without deduction. Absent a withholding notice, the rule is ‘pay now, litigate later’. Indeed, any other construction of sections 110 and 111 would rob them of all practical significance. Given the absence of a withholding notice in the present case, section 111 therefore requires CCL to pay the £9,702.47 without deduction regardless of any defence which might otherwise have existed by reason of the alleged defects in the Works. The crossclaim and/or abatement thus provides no basis on which it can properly be disputed that the £9,702.47 is due and payable, GAL must therefore be regarded as a creditor of the company with locus standi to present a winding-up petition.925

The contrary view, that the sum claimed is not automatically the sum actually due, is supported by the following strong judicial opinion: In my opinion, the absence of a timeous notice of intention to withhold payment does not relieve the party making the claim of the ordinary burden of showing that he is entitled under the contract to receive the payment he claims. It remains incumbent on the claimant to demonstrate, if the point is disputed, that the sum claimed is contractually due. If he can do that, he is protected, by the absence of a section 111 notice, from any attempt on the part of the other party to withhold all or part of the sum which is due on the basis that some separate ground justifying that course exists. It is no doubt right, as the adjudicator pointed out, that, if the section did require a notice of intention to withhold payment as the foundation for a dispute as to whether the sum claimed was due under the contract, it would be relatively straightforward for the party disputing the claim to give such a notice. But that consideration does not in my view justify ignoring the fact that the section is expressed as applying to 925

Re A Company (1299 of 2001) LR 79 www.adjudication.co.uk/cases/company.htm. 15 May 2001. See also: Millers Specialist Joinery v. Nobles (2001) No. 103553, Salford CC (TCC) 64/00; Whiteways Contractors (Sussex) Ltd v. Impressa Castelli Construction (UK) Ltd (2000) 75 Con LR 92.

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Summary judgment the case where an attempt is made to withhold a sum due under the contract, and not as applying to an attempt to dispute that the sum claimed is due under the contract. Nor, in my view, is there merit in the adjudicator’s concern that acceptance of the defenders’ construction of section 111 would render the 1996 Act largely ineffective. I see no difficulty for an adjudicator in reaching a provisional determination of a dispute as to whether the sum claimed is due under the contract. That is what, on the adjudicator’s own view of the section, the adjudicator would require to do if the party disputing the claim on the basis that the sum claimed was not due under the contract gave a notice of intention to withhold payment on that ground. In my opinion, therefore, the adjudicator erred in holding that the pursuers were relieved, by the defenders’ failure to give a timeous notice of intention to withhold payment, of the need to show that the sums claimed were due under the contract.926

Under SFA/99 (2004) and CE/99 (2004) clause 5.12 the amount in the architect’s invoice is the sum due if no withholding notice is served. S-Con-07-A clause B1.1 of CA-S-07-A is to the same effect.

Summary judgment A procedure through the court system by which a claimant can issue an application to obtain judgment summarily without going to trial. Provided the court is satisfied that the defendant has no real prospect of success if the matter goes to a full trial, the claimant will get judgment forthwith, together with costs. It is not the function of the court to try the issue, but to decide whether the defence is other than frivolous. It is a useful and generally quick way of obtaining judgment for the price of goods or services supplied. The usual defence is that the goods or services were defective.

Summons A document used in the court procedure requiring a person to attend court for a particular reason, e.g. to obtain directions or orders, or to give evidence.

Superintending officer A term used in GC/Works/1 (edition 2) to indicate the person who supervised the work, and there abbreviated to SO. They were very roughly in the same position as the architect or contract administrator under the JCT or ACA forms of contract. Clause 1(2) stated that they were to be designated in the abstract of particulars (qv), and the SO may well have been an architect or an engineer. The SO’s duties in relation to the contract were set out within the body of the contract. GC/Works/1 (edition 3) introduced the term ‘project manager’ (PM) (qv) to describe the person carrying out the function of the superintending officer. The term is still used in GC/Works/1.

Supervising officer A term formerly used in the local authorities editions of the JCT forms and IFC 84. Its purpose was to enable an official in the local authority, who may not have been an architect, to act in that capacity in relation to the contract. The title ‘architect’ is legally protected,927 and the appropriate chief officer may have been a chartered surveyor or engineer, or member of the Chartered Institute of Building. The term ‘supervising officer’ did not appear 926

S L Timber Systems Ltd v. Carillion Construction Ltd (2001) 85 Con LR 79. See also: Woods Hardwick Ltd v. Chiltern Air Conditioning Ltd [2001] BLR 23; VHE Construction plc v. RBSTB Trust Co Ltd [2000] BLR 187. 927 The Architects Act 1997.

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Supervisor in the local authorities editions of JCT 98, nor in IFC 98. In both cases the term was replaced by ‘contract administrator’. This was probably because of the growing acceptance that the administrator of the contract had no supervisory duties. SBC, IC, ICD, MW and MWD all use ‘contract administrator’ as an alternative to ‘architect’. Oddly, ‘supervising officer’ is still used in ACA. Where the administrator of the contract is not an architect, the name may be inserted in recital E, alternative 2, as supervising officer. See also: Architects Registration Board; Supervision of Works.

Supervision of Works Supervision implies constant inspection and direction. In building contracts that duty lies principally with the contractor, which will normally carry out this duty through its site agent or foreman. It is not the responsibility of the architect under the terms of any standard form, and not a service identified under the provisions of SFA/99, CE/99 or S-Con-07-A. It is often said, wrongly, that the architect is responsible for design and supervision. This is to confuse supervision with inspection. Supervision is clearly a more onerous obligation than inspection, and one that can only be carried out by someone who has control over the workforce. In Brown & Brown v. Gilbert Scott & Payne it was said: In my judgment the [architect] had a duty to inspect the works of the [contractor] and that the use of the word ‘supervision’ does not enlarge his duty in any way. As was said in evidence by one of the experts, ‘supervision’ was the word which used to appear in the RIBA Form of Engagement but in more recent editions this is replaced by the obligation to ‘inspect’.928

A better view was stated in a later case: The older forms of contract required the architect to ‘supervise’. The more recent contracts, including the contract in this case, require the architect to ‘visit the Works to inspect the progress and quality of the Works’. It seems to me that inspection is a lesser responsibility than supervision.929

See also: Inspection of the Works; Inspector.

Supervisor A person who supervises, i.e. who directs or oversees the Works. Under the BPF System (qv) the supervisor is the firm or person responsible for monitoring that the Works are built in accordance with the contract documents (qv). Under that system the supervisor may be an architect, engineer, building surveyor, clerk of works (qv) or similar. The supervisor’s main responsibility is to monitor the contractor’s design, construction, commissioning and maintenance of the project, ensuring that the workmanship and materials are up to contract standard. The NEC identifies a role for a supervisor who is appointed by the employer. Basically, the role of the supervisor under this contract is to check that the Works have been constructed, on behalf of the employer, in accordance with the contract documents. The guidance notes to the contract compare the role to a resident architect or engineer. In some situations it may be appropriate for 928 929

(1992) 35 Con LR 120 at 129 per Mr Recorder Cole. Consarc Design Ltd v. Hutch Investments Ltd (2002) 84 Con LR 36 at 41 per Judge Bowsher.

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Supplier a clerk of works to undertake the role. However, the supervisor does have significant contractual duties or responsibilities in connection with defects, e.g. testing, correcting defects. The supervisor is responsible for issuing the defects certificate, which does affect certain of the parties’ obligations.

Supplier A person or firm undertaking the supply of goods or materials to a contract. The supplier’s contract is with the main contractor. It should contain appropriate clauses to enable the contractor to recover from the supplier if late supply of goods or materials renders the contractor liable for liquidated damages. All too often supply is on the supplier’s terms, which will be drafted to protect the supplier in such instances. Within CE the supplier is defined at clause 1 as the party to the contract so identified therein. The supplier is the person providing the services (qv) under the agreement, which includes workmanship and materials as well as services and goods. This contract is drafted to cover a multitude of situations, e.g. main contract, sub-contract and the appointment of a consultant. Therefore the supplier could be an architect, a contractor, a sub-contractor or the supplier of materials, depending on the circumstances within which it is to be used. The recipient of the services under this contract is called the ‘purchaser’. See also: Nominated suppliers.

Supplier’s margin A term used within the CE form of contract at clause 7.10, and defined at clause 1. It is the amount or percentage in Part 7 of the contract particulars as representing the supplier’s profit, central office overheads and administrative costs to include head office and other costs including accounting, human resources, legal, marketing, administration and commercial services, certain insurances, rent, utilities and certain other property costs, finance costs, licences, royalties and other fees. Provision exists within Part 7 of the contract particulars to identify the supplier’s margin either as a lump sum or as a percentage. In addition, how much is to be paid to the contractor, and when, is to be scheduled against specific events or dates. There are two payment options under this contract: target cost and lump sum. Clause 7.10 relates to the target cost option, and sets out how the supplier’s margin is to be paid, and when it can be subject to adjustment. If the margin is expressed as a percentage then it will automatically be subject to adjustment.

Supply chain A term used in CE when referring to the supplier’s supply chain, identified in table B of Part 4 of the contract particulars. They are the persons who will be responsible for providing the important elements of the services, together with any additional individuals or organisations engaged by the supplier during the period of the contract. Under clause 4.16 the supplier is to endeavour to work with and fully involve the members of its supply chain. It is to organise and take part in project planning and value engineering workshops involving the relevant members of the supply chain at appropriate stages of the project. — The supplier, when engaging members of its supply chain, is to use the CE form of contract or engage them on the basis of an agreement that fully reflects the CE terms. — When the CE is not used, then the supplier is to provide a copy of the proposed agreement to the purchaser. 518

Supply of Goods and Services Act 1982 —

The supplier acknowledges that imposing more onerous terms on members of the supply chain is to be avoided. — The supplier is not to replace any member of the supply chain identified within Part 4 of the contract particulars without the approval of the purchaser. Any replacement is to be suitably qualified to perform the relevant role. The phrase is also used in PPC to refer to the appointment of specialists under clause 10.

Supply chain partners A term used in connection with prime contracting (qv). It refers to the long-term supply relationships that are at the heart of successful prime contracting. The supply of goods and services is a key component of the system. The idea is to produce an environment in which the supply team gains an increased share of the market. Such long-term relationships have the aim of improving value in what the supply team deliver over a period of time. It is not simply addressed on a project-by-project basis. One of the aims of prime contracting is to allow profit and overhead recovery margins to increase in conjunction with the improvement to the underlying benefit to the client. See also: Continuous improvement; Right first time; Supply clusters.

Supply clusters A term used in connection with prime contracting (qv). Broadly, it is a cluster or group of suppliers. A supply cluster designs and delivers a particular part of the project, e.g. mechanical and electrical services. There are no standard clusters. Each one is formed as and when required in connection with a specific project. It is likely that a cluster will involve designers, subcontractors, materials suppliers and component suppliers, working together with the aim of delivering the best value. Each cluster is intended to have, as a leader, a long-term supply partner of the prime contractor. See also: Continuous improvement; Right first time; Supply chain partners.

Supply of Goods and Services Act 1982 Broadly speaking, this Act introduces statutory implied terms (qv) in contracts for the supply of goods and services. It applies, among other things, to contracts for work and materials, hire, and exchange or barter, as well as services. Contracts for the sale of goods, and for hire purchase, are covered by other legislation. Part I of the Act deals with the supply of goods, and its provisions affect building contracts, e.g. as regards materials supplied in the execution of the Works. Sections 1 to 5 cover ‘transfer of goods’, and extend to contracts for work and materials. Hire of goods is covered by sections 6 to 10, and these provisions are important in the case of plant hired in by contractors. Part II of the Act deals with the supply of services, which include professional services. Where the supplier is acting in the course of business there is an implied term that it will carry out the service with reasonable care and skill, an obligation that is already implied at common law. Under s. 15, where no price is fixed for the service there is an implied term that a reasonable charge will be paid. Various exemption orders have been made excluding particular categories from the effect of Part II of the Act, e.g. arbitrators. The Act seems unlikely to have any great impact in the field of building contracts, and to a large extent 519

Support, right of it merely gives statutory effect to obligations that were already implied by the general law. See also: Quantum meruit; Sale of goods; Unfair Contract Terms Act 1977.

Support, right of An easement (qv) whereby the owner of one house has the right to have it supported by the adjoining house belonging to their neighbour.930 However, even where a right of support exists, the adjoining owner against whom the right is claimed (the ‘servient owner’) is under no obligation to maintain their property in such a state of repair that it gives support to the adjoining owner’s property.931 In order to make a claim physical damage must have occurred, and the mere likelihood of future damage will not found a claim.932 Where a right of support exists, the adjoining owner must provide equivalent support if the original support is removed. Without such a right or privilege there is no liability on an adjoining owner if it demolishes its property, although there might well be a claim in negligence (qv) if the demolition was undertaken in such a way that damage occurred to the neighbour’s property. There is no natural right of support. The general rules may be affected and modified in the case of party walls. Even if there is a right of support, there is no right to weatherproofing, and the right to have one’s house protected against the weather cannot exist as an easement.933 Some of the effects of this rule are circumvented by sections 29, 29A, 29B and 29C of the Public Health Act 1961: under those provisions a local authority may serve a notice on any person who has begun or who intends to begin demolitions etc., requiring such person (among other things) to: — shore up any building adjacent to the building to which the notice relates; — weatherproof any surfaces of an adjacent building that are exposed by the demolition; — repair and make good any damage to an adjacent building caused by the demolition, or by the negligent act or omission of the person engaged in it. The recipient of such a notice may appeal, on the grounds that the adjoining owner ought to pay or contribute towards the expense of weatherproofing the exposed surfaces. These provisions do not apply where the building to be demolished is less than 1,750 cubic feet. See also: Party Wall Act 1996.

Surety A person who agrees to be responsible to a third party for the debts or default of another. See also: Bond; Guarantee; Indemnity clauses.

Surplus A word used within the CE Project Team Agreement. This agreement has a pain/gain provision whereby the project team share any saving or excesses in respect to the actual cost of the project versus the target cost. The members of the project team share the surplus or deficit in proportion to their share identi930

Dalton v. Angus (1881) 6 App Cas 740. Bond v. Nottingham Corporation [1940] 2 All ER 12. 932 Midland Bank v. Bardgrove Property Services (1992) 60 BLR 1. 933 Phipps v. Pears [1964] 2 All ER 35. 931

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Suspension fied within the project team agreement. Each party can place a limit on the extent of their liability or benefit. Clause 3.10 sets out how any surplus is to be calculated: i.e. there will be a surplus if the project final cost is less than the project target cost. The difference is then shared between the team members in the prearranged manner. If the final costs exceed the project target costs then there will be a deficit.

Survey The careful inspection and recording of something. Thus a survey of land or buildings may involve taking and recording measurements, and making notes about condition. In a wider sense it will involve inspections and testing, and the taking of samples and cores. Geotechnical surveys report on the ground conditions of a site by using boreholes and reference to geological maps.

Suspension The employer has no power to direct suspension of work under a building contract unless there is an express term in the contract to that effect. Neither the JCT nor the ACA standard form confers any such express power of suspension on the employer or the architect. However, with the exception of MW and MWD, all the JCT forms empower the architect to issue instructions in regard to the postponement of any work to be executed under the contract, e.g. SBC clause 3.15, IC and ICD clause 3.12. The exercise of this power of postponement can amount, in effect, to suspension. Under GC/Works/1 clause 40(2)(g) the project manager has a general power to order suspension of the whole or part of the Works. ACA clause 11.8 gives the architect power to ‘postpone the dates shown on the Time Schedule for the Taking-Over of the Works’. The contractor has no power at common law to suspend the Works for lack of payment.934 To do so would amount to a breach of contract. However, merely ‘going slow’ will not amount to suspension giving rise to a breach of contract under JCT terms.935 Under s. 112 of the Housing Grants, Construction and Regeneration Act 1996, where there is a construction contract, if the contractor is not paid and there is no effective withholding notice (qv) issued, the contractor may suspend performance after giving at least seven days’ written notice to the employer, stating the grounds for such suspension (although this period can be increased through express provision in the contract). This provision is included within the JCT contracts, e.g. SBC clause 4.14, IC, ICD and DB clause 4.11, and MW and MWD clause 4.7. ACA contains no such provision, but this does not prevent a contractor relying on s. 112 of the Act. SBC clause 3.22.1 requires the contractor to cease work after the discovery of any archaeological or other object of related interest, if continuing work would cause danger to the object or cause difficulties with excavation. GC/ Works/1 clause 32(3) is to similar effect. The requirement in ACA clause 14 that the contractor must not disturb or damage the object might well bring work to a halt, and amount to valid suspension under the contract. All the JCT contracts provide for termination (qv) after a period of suspension. SBC, IC, ICD and DB clause 8.1.1 and MW and MWD clause 6.4.4.4 934 Lubenham Fidelities and Investment Company v. South Pembrokeshire District Council (1986) 6 Con LR 85. 935 J M Hill & Sons Ltd v. London Borough of Camden (1980) 18 BLR 31.

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Suspension permit the employer to terminate the contractor’s employment under the contract if, without reasonable cause, the contractor wholly or substantially suspends the Works. No period of suspension is specified, but the contractor must cease the suspension within the period stated in the default notice (14 days in the case of SBC, IC, ICD and DB, and seven days in the case of MW and MWD). SBC, IC, ICD and DB clause 8.9.2, and MW and MWD clause 6.8.2 allow the contractor to terminate its employment under the contract if the Works are suspended for a continuous period of a length, which is to be stated in the contract particulars (qv), by reason of certain instructions or any impediment (qv), prevention (qv) or default of the employer. The contractor must first give a 14-day written notice. SBC, IC, ICD and DB clause 8.11 and MW and MWD clause 6.10 allow either party to terminate the contractor’s employment under the contract if the Works are suspended for a continuous period, of a length that is to be stated in the contract particulars, by reason of force majeure (qv), certain instructions issued as a result of negligence or default of a statutory undertaker (qv), loss or damage caused by a specified peril (qv), civil commotion, the use or threat of terrorism, or the exercise by the UK government of any statutory power that affects the Works. ACA provides in clause 20.1 for termination of the contractor’s employment if the contractor without reasonable cause substantially suspends the Works. No period of suspension is specified, but the contractor must cease the suspension within 10 working days of service of a default notice from the employer. Clause 21 provides for termination by either party if the contractor is prevented or delayed from executing the Works for a period of 60 consecutive working days due to force majeure, loss or damage by fire, lightning, etc. or hostilities. GC/Works/1 clause 58(1)(a) allows the contractor to determine if it has suspended under clause 52 for a continuous period of 30 days and given 14 days’ notice thereafter. Under clause 58(3)(e) the contractor may determine if the whole or substantially the whole of the Works has been suspended for a continuous period of 182 days owing to certain instructions or any of the matters referred to in clause 46(1)(a), (b) or (c) dealing with prolongation and disruption. See also: Postponement.

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T Taking-over The phrase is used within ACA, e.g. clauses 11 and 12, but is not expressly defined. In effect, taking-over amounts to the employer taking back possession of the site – or a part of the site – from the contractor. The consequences of the employer taking over the Works or a part of the Works are identified throughout the contract, e.g. clause 11.3 (damages for delay). The date for taking-over is identified within the time schedule (qv). Takingover occurs on the date identified within the taking-over certificate issued by the architect. The phrase is also used in NEC at clause 35, and has the same meaning, i.e. the employer taking possession of the Works or a part of the Works. The employer need not take over the Works prior to the completion date if this is so stated in the contract data. Otherwise the employer takes over no later than two weeks following completion. The project manager certifies the date when the employer took over the Works, and this certification is to be undertaken within one week of the date the employer took over the Works. See also: Completion date; Practical completion.

Target cost Target cost is a term used to describe a contract in which the contractor is paid its prime cost (qv), but if this exceeds or falls short of an agreed target the difference is shared between contractor and employer in pre-agreed proportions. This gives the contractor an incentive to complete the work economically and efficiently, but there is a danger that, if the target cost is exceeded, the contractor may seek to recover its resultant loss by placing responsibility on the employer and claiming accordingly. The target cost may be part of the tender submitted by the successful contractor, or it may be negotiated between employer and contractor. The target cost is usually subject to adjustment for matters for which the employer is liable, e.g. variations, or costs associated with delay. A serious disadvantage is that the employer does not know, when the project starts, what the final cost will be. To some extent this could be said of any contract, but in the case of a fixed price contract at least extra costs are usually the result of actions or inactions of the employer. On the other hand, the employer will know that the contractor has an interest in keeping costs down, and it is possible to operate a target cost alongside a guaranteed maximum price. Target cost is available under the NEC ‘Option C: Target contract with activity schedule’ and ‘Option D: Target contract with bill of quantities’. A target cost option is also available under CE clauses 7.2 to 7.15, and defined at clause 1.1 as the sum stated in the contract particulars for the performance of services subject to revision under section 5 and clauses 7.14 and 7.15. Under this contract the option is available in conjunction with a guaranteed maximum price above which the contractor carries all costs. In the BPF System (qv) this term is used to describe the amount that the client (qv) expects to pay for the design and construction of the completed building. The target cost includes all fees, costs of investigations, and the forecast tender price (qv). It is not a term of art, nor does it appear in the BPF edition of the ACA Form of Building Agreement (qv). See also: Cost reimbursement contract. 523

Taxation of costs

Taxation of costs A term formerly used to refer to the process of going through and reducing as necessary the bill of costs of a solicitor. It has nothing to do with the taxes imposed by HM Revenue & Customs. Under the Civil Procedure Rules (qv) it has been replaced by the term ‘costs assessment’, which amounts to much the same thing. It is commonly referred to by its old name. In the case of arbitration proceedings, where the arbitrator is charged with determining costs under the Arbitration Act 1996, the process is governed by s. 63 of the Act. Under this Act it is clearly presumed that the arbitrator will tax or assess costs. They will usually be assessed on the ‘standard’ basis, where a reasonable amount is allowed, and doubts are resolved in favour of the paying party, as opposed to the ‘indemnity’ basis, where doubts are resolved in favour of the receiving party. In practice, parties generally tend to agree the level of costs to be paid in order to avoid the additional costs of having the arbitrator or court carry out a costs assessment or the arbitrator decide the costs, as such actions become actions in their own right, and may lead to the issue of the costs of the costs hearing.

Technology and Construction Court (TCC) The court previously known as the Official Referees’ Court. The name was changed on 1 October 1998 in order to indicate more clearly the type of case dealt with in this court. At the same time various organisational improvements were made. The majority of the cases heard are construction-related disputes. Practice Note 60 of the Civil Procedure Rules (qv) lists the type of claims heard by the court as: — building or other construction disputes, including enforcement of adjudicators’ decisions under the Housing Grants, Construction and Regeneration Act 1996; — engineering disputes; — by and against engineers, architects, surveyors, accountants and other specialised advisers relating to the services they provide; — by and against local authorities relating to their statutory duties concerning the development of land or the construction of buildings; — relating to the design, supply and installation of computers, computer software and related network systems; — relating to the quality of goods sold or hired, and work done, materials supplied or services rendered; — between landlord and tenant for breach of a repairing covenant; — between neighbours, owners and occupiers of land in trespass, nuisance etc.; — relating to the environment; — arising out of fires; — involving taking of accounts where these are complicated; — challenges to arbitrators’ decisions in construction and engineering disputes, including applications for permission to appeal and appeals. Many of these cases are lengthy and complex, and involve highly technical issues as well as difficult points of law. Long cases are often divided into subtrials. Many cases of significance are finally decided by the Technology and Construction Court. All important judgments by the Technology and Construction Court affecting the building industry are now reported regularly in Construction Law Reports, edited by Michael Furmston and Keating Chambers and published six times a year by Lexis Nexis. See also: Technology and Construction Court (TCC) – Judge of. 524

Tender

Technology and Construction Court (TCC) – Judge of These are specialist judges who deal with claims involving technically complex issues. Most of their work involves construction industry disputes. There are currently six judges based in London, and others elsewhere in the country.

Tender An offer (qv) by a contractor, usually in competition, which if accepted without any material qualification by the employer will form a binding contract. The architect usually invites a number of contractors to tender, on a form specially provided for the purpose. Codes of practice for tendering procedures are available. The contractors have a stated time in which to prepare their tenders, and a date and time by which these must be deposited with the employer or their agent, e.g. the architect. Tenders must be returned in unmarked envelopes. Sometimes a priced bill of quantities (qv) must also be provided in a separate envelope, so that it can be returned unopened if the tender is unsuccessful. There is a proviso commonly included in invitations to tender to the effect that the employer is not obliged to accept the lowest, or indeed any, tender. This gives the employer some room for manoeuvre in awarding the contract. However, there are serious dangers, which should not be overlooked. The Court of Appeal has considered the matter when tenders are invited: But where … tenders are solicited from selected parties all of them known to the invitor, and where an [invitor’s] invitation prescribes a clear, orderly and familiar procedure (draft contract conditions available for inspection and plainly not open to negotiation, a prescribed common form of tender, the supply of envelopes designed to preserve the absolute anonymity of tenderers and clearly to identify the tender in question, and an absolute deadline) the invitee is in my judgment protected at least to this extent: if he submits a conforming tender before the deadline he is entitled, not as a matter of mere expectation but of contractual right, to be sure that his tender will after the deadline be opened and considered in conjunction with all other conforming tenders or at least that his tender will be considered if others are.936

An employer may sometimes wish to see a tender that has been submitted late, even though this is contrary to most tendering regimes. If it is lower than the others, an employer may be tempted to accept it, late or not. The reality is, it is at least possible that, as soon as the date for tendering has passed, the tenderers could swap details of their respective tenders. A dishonest tenderer could take advantage of this to put in the lowest tender, albeit late. It is not suggested that late tenders are submitted dishonestly. Most will be simply submitted late in error. But the employer should be aware of the risks. If a late tender is accepted, the employer will be in breach of contract if, as is normal, the other tenderers were invited to tender on the basis that only a tender submitted before the closing date would be considered. A contractor who learns that the employer acted in breach of contract would be entitled to claim damages, which would certainly include all the contractor’s costs in the preparation of the tender. Failure to observe any other stipulation in the invitation to tender may make the employer liable to any tenderers who have been disadvantaged as a consequence. 936

Blackpool & Fylde Aero Club v. Blackpool Borough Council [1990] 1 WLR 1195 at 1199 per Bingham LJ. See also Pratt Contractors Ltd v. Transit New Zealand [2003] UKPC 83 Privy Council, on the topic of considering tenders.

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Term contract An employer, having received tenders, may ask the lowest tenderers to reduce their prices, and a tenderer other than the original lowest tenderer may then become lowest. In a recent case the invitation stated that the procedure would be in accordance with the principles of the Code of Procedure for Single Stage Selective Tendering 1996, but the revised tender was accepted. It was held that the original lowest tenderer was entitled to recover its costs of tendering, together with loss of the profit it could have expected if it carried out the project.937 Where the employer observes the rules set out in the invitation, neither the lowest nor any other tenderer has grounds for legal action if a tenderer other than the lowest, or even no tenderer at all, is accepted. The Court of Appeal has held that a professional, whether architect, project manager or other, who induces a contractor to tender in reliance on misstatements from the professional, could become liable to the contractor if it could be demonstrated that the contractor relied on the misstatements.938 Contracts for works within the public sector must be invited in accordance with the Public Contracts Regulations 2006. A failure to follow the relevant regulations could have a significant impact on a public sector employer. However, the regulations do not apply where the estimated value (excluding VAT) of the contract is less than the threshold stated within the directive and regulations. The threshold for a construction contract is c5,278,000, and different thresholds apply for both public services and public supply contracts. See also: Code of Practice for the Selection of Main Contractors; Invitation to tender.

Term contract Used when services may be required over a period of time at irregular intervals by bodies with significant building stocks, e.g. local authorities and universities. The chief characteristics of term contracts are that the contractor undertakes to: — carry out a particular category of work (e.g. plumbing, general repairs, street light maintenance) within maximum and minimum individual job values; — do the work for a particular time period; — do the work within a particular geographical area; — do the work at a particular rate. The approach finds its most useful application in maintenance work, where the general scope of work and the geographical area may be known, but the precise jobs that have to be carried out are not known until the need arises. The contractor agrees to a schedule of prices (qv), which are applicable for the duration of the contract. It requires a good deal of experience to decide upon the correct rate for each item of work, because some items may be seldom required. The theory is that the contractor will even out its gains and losses over the contract period. Competitive tendering is used to select the successful contractor. Advantages are that contractors gain familiarity with the property, and lower costs can be achieved than by attempting to secure tenders for each job as it

937 938

J & A Developments Ltd v. Edina Manufacturing Ltd, Armoura Ltd and Others [2006] NIQB 85. J Jarvis and Sons Ltd v. Castle Wharf Developments and Others [2001] 1 Lloyd’s Rep 308.

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Termination arises. The employer does not usually warrant that the contractor will be asked to do any particular amount of, or indeed any, work during the currency of the contract. The provisions for termination are often quite complicated. Variations of this system are the JCT Measured Term Contract 2006, where the contractor has the opportunity of measuring the work before tendering; the Measured Term Contract Based on Schedules of Rates (GC/Works/7); the Specialist Term Contract (GC/Works/8), where quotations, rather than a schedule of prices, are used for such things as lift maintenance, window cleaning, etc.; and Daywork Term Contracts, where the jobs are small and the pricing arrangements are somewhat more complex. See also: National Schedule of Rates.

Term of the contract A provision or stipulation in a contract describing some aspect of the agreement. It may be express (qv) (written down), implied (qv) (included by the action of common law or statute) or incorporated (referred to in the contract as being part of it). For example, SBC clause 2.5 is an express term of that contract dealing with the employer’s right to defer possession of the site for a limited period. Important terms are generally known as ‘conditions’ (qv) and less important terms as ‘warranties’ (qv). See also: Incorporation of documents; Variation of contract.

Termination Bringing something to an end. The 2005 suite of JCT contracts and ACA have sensibly adopted this term to refer to the bringing to an end of the employment of the contractor under the terms of the contract. In earlier JCT contracts the less obvious term ‘determination’ (qv) was used. JCT contracts deal with termination under SBC, IC and ICD, and DB at clause 8, and MW and MWD at clause 6. ACA 3 deals with termination under clauses 20 to 22 inclusive. Although referred to as ‘determination’, GC/Works/1 deals with termination under clauses 56 to 58A inclusive. In most instances termination cannot take place until an initial warning notice has been issued and a period of time elapsed. Care must be taken to comply strictly with all the details of the provisions. Thus for example if, as can happen, under SBC if the actual termination notice (rather than the default notice) is given by the architect, it will not be valid. It has to be given by the employer. Under the NEC clause 90.1 a party wishing to terminate has to notify the project manager, giving reasons for the termination. The project manager must promptly issue a termination certificate to both parties if the reasons given comply with or are equivalent to those set out at clause 91.1. Certain of the standard forms of contract include grounds permitting termination that would not be sufficient to terminate at common law, e.g. a failure by the contractor to proceed regularly and diligently. It is important for a party seeking to terminate not only to strictly follow the administrative procedures within the relevant clause but also to ensure that the grounds for termination are valid. It would be prudent to seek legal advice prior to termination, as an incorrect termination could put a party in breach of contract.939

939

Lubenham Fidelities & Investments Co Ltd v. South Pembrokeshire District Council and Wigley Fox Partnership (1986) 6 Con LR 85.

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Terrorism cover

Terrorism cover This is the insurance provided by a joint names policy for physical loss or damage to work executed, site materials or to an existing structure as a result of terrorism. In many of the JCT contracts ‘terrorism cover’ is defined, e.g. SBC clause 6.8 and MP clause 1. JCT contracts provide for what is to happen if insurers give notification that terrorism cover will cease to be available under SBC, IC, ICD and DB at clause 6.10. Essentially, the employer has the options of continuing the Works without such cover or of terminating the contractor’s employment under the contract. In the event of such termination the contractor would not be entitled to any loss and/or damage suffered as a result.

Thereupon A word used in some contract clauses. It means ‘immediately after that’. For example, IC and ICD clause 2.25 states that if the employer takes possession of part of the Works, the architect will ‘thereupon’ issue a written statement to the contractor. See also: Forthwith; Immediately.

Things A word used and defined within GC/Works/1. At clause 1 it is said to comprise ‘Things for incorporation’, meaning goods and materials intended to form a part of the completed Works. There are also ‘Things not for incorporation’, meaning goods and materials provided or used to facilitate execution of the Works but not for incorporation in them. Examples of where the word is used are clauses 30 (vesting), clause 31 (quality) and clause 8 (insurance).

Third party Any person who is not a party to a contract between two or more other parties. In accordance with the doctrine of privity of contract (qv) it used to be the case that a contract between two parties gave no rights to third parties, i.e. those who were not a party to the contract. That position has been substantially modified by the Contracts (Rights of Third Parties) Act 1999 (qv). The Act provides that a third party may have rights under a contract if the contract expressly provides for such rights, or purports to give such rights, and the third party is referred to specifically or by class of persons. Such rights may be, and commonly are, excluded by an express term in the contract, e.g. IC and ICD clause 1.6. SBC clauses 7A and 7B expressly provide for certain limited rights to purchasers, tenants and funders, as do the CE and MP forms.

Time at large Time is said to be at large when there is no specific date for the completion of the contract, and in the absence of an express term as to the completion date (qv) the contractor’s common law obligation is then to complete within a reasonable time (qv). What is a reasonable time is a question of fact, depending on all the terms of the contract and the surrounding circumstances. Time is not normally of the essence in building contracts.940 This is clearly the case where the contract itself provides, as do all the standard form contracts, for extension of time and liquidated damages for delay.941 Under the normal standard form contracts, time could possibly become at large because:

940 941

Lucas v. Godwin (1937) 132 ER 595. Lamprell v. Billericay Union (1849) 154 ER 850.

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Time bar clause — the contractor has been delayed by the act or default of the employer, or those for whom the employer is responsible in law, and there is no contractual provision to cover the situation; — the architect fails properly to grant an extension of time under the contract, although there is provision to do so. If the architect operates the contract properly, time will seldom become at large under any of the standard form contracts in common use. If it does, then, as indicated, the contractor’s obligation is to complete within a reasonable time, and the employer then forfeits any right to liquidated damages (qv).942 The subject is extremely complex, especially where the architect awards extensions of time after completion of the Works. It is a question of interpretation whether the architect is entitled to do so. Some contracts (e.g., SBC, IC, ICD and ACA) give the architect specific powers to do so. The general rule, however, is that any extensions of time (qv) must be awarded properly, and in accordance with the express contract provisions, and a failure so to do will result in the completion date becoming at large.943 See also: Essence of the contract.

Time bar clause A time bar clause is one that requires a party to undertake certain specified steps, e.g. carry out an act, or provide a notice or information or the like, within a specified period. Should the steps not be undertaken within the period then the party is deprived of a right or benefit, e.g. an extension of time or payment. An example of such a clause is included within the NEC at 61.3. It deals with compensation events, and states that if the contractor does not notify a compensation event within eight weeks of becoming aware of the event, it is not entitled to changes in prices, completion date or key date, unless the project manager failed to carry out an obligation to notify the event. Within the guidance notes it states that the aim of the clause is to prevent having to deal with compensation events long after the event. A failure by the contractor to give timely notice would prevent the contractor from claiming any compensation. The application of this clause is dependent upon the project manager failing to give a notice when one should have been given. A time bar clause was included within a JCT PWQ 1980 form of contract with ad hoc amendments in City Inn Ltd v. Shepherd Construction Limited.944 Clause 13.8 specified certain procedures to be followed by the contractor if an architect’s instruction was likely to delay completion. If the procedures were not followed then it could impact upon the contractor’s entitlement to an extension of time. The contractor had to submit, within 10 working days of the instruction, estimates of delay and additional costs. The court upheld the validity of the clause, although it did limit the clause’s application to the work content of an instruction, and not to when an instruction was issued late. Where a time bar clause requires a claim to be made within a specified time and in a particular form or manner, then it would seem that compliance with both requirements must be met for the claim to succeed.945

942

Wells v. Army & Navy Co-operative Society Ltd (1902) 86 LT 764. Fernbrook Trading Co Ltd v. Taggart [1979] 1 NZLR 556. 944 [2007] CSOH 190. See also: Steria Ltd v. Sigma Wireless Communications Ltd (2007) 118 Con LR 177. 945 Waterfront Shipping Co Ltd v. Trafigura AG subnom The Sabrrewing [2007] EWHC 2482 (Comm). 943

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Time of the essence

Time of the essence This is where time is so fundamental to the performance of an obligation under the contract (e.g. goods must be delivered by a specific date) that a breach of that obligation would discharge the other party from their obligations under the contract.946 Where one party is responsible for an unreasonable delay, it is possible for the other party to give notice, making time of the essence.947 When constructing such notice it must be clear and reasonable.948 The party giving the notice should: — ensure that any existing breaches are clearly identified and correctly supported; — be careful in identifying a reasonable period within which obligations must be met; and — state that the contract is likely to be terminated if the date is not met. The phrase rarely applies to construction contracts, which normally include extension of time and liquidated damages clauses.

Time schedule An appendix (qv) to the ACA contract (and BPF variant). It is broadly equivalent to the contract particulars (qv) in JCT contracts and to the abstract of particulars (qv) in GC/Works/1. A number of variables are to be inserted in the schedule. There are two alternatives: — Alternative 1 is for use where there is to be no possession of the site in parts or completion by sections. The following insertions are to be made: The date for possession of the site by the contractor (i.e. clause 11.1). • the date for taking-over of the Works and commencement of the maintenance period (i.e. clause 11.1); • the rate of liquidated damages per week or other period (unless unliquidated damages apply) (i.e. clause 11.3); • the length of the maintenance period (i.e. clause 12.2) — Alternative 2 is for use where possession of the site is to be given in parts, or the Works are to be completed in sections. The following insertions are to be made. • A description of each section as noted on a plan (to be attached to the contract), together with the relevant date for possession of each section (i.e. clause 11.1), is to be shown in the first schedule. • A description of each section, along with the date for taking-over (qv) each section of the Works, is to be shown on the second schedule (i.e. clause 11.1). • The rate of liquidated damages per week or other period for each section (unless unliquidated damages apply) is to be shown in the second schedule. • The length of the maintenance period for each section is to be shown in the second schedule. There is a further table for the issue of information (i.e. clause 2.1) that forms part of the time schedule and which applies to both alternative 1 and alternative 2. This table, if used, identifies what information either the architect or the contractor is to supply to the other, and by what dates, in accordance with the

946 947 948

United Scientific Holdings Ltd v. Burnley Council [1978] AC 904. United Scientific Holdings Ltd v. Burnley Council [1978] AC 904. Shawton Engineering Ltd v. DGP International Limited and Another [2005] EWCA Civ 1359.

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Treasure trove clause 2.1 alternative chosen. If alternative 2 applies, then under clause 2.1 the architect must supply the contractor, in addition to a copy of the contract documents, those drawings or details identified in the contract as having to be provided by the dates shown in the time schedule. In addition there is a stage payment schedule, which is not a part of the time schedule appendix. The payment schedule is necessary should alternative B stage payments be chosen, i.e. clause 16.1B. See also: Practical completion.

Title The right to ownership of property, or the legal connection between a person and a right. The word is most commonly used in connection with land, but can apply to all categories of property. A title is said to be original where the person entitled does not derive the right from any predecessor, e.g. copyright. It is derivative where it is derived from someone else, e.g. by gift, purchase, inheritance or judgment of the court.

Tort A civil wrong other than a breach of contract or a breach of trust, or other merely equitable obligation, which gives rise to an action for unliquidated damages at common law.949 Literally the word is French for ‘wrong’. The essential point is that it is a breach of a civil duty imposed by the law generally. The most significant tort today is negligence (qv), but other torts include nuisance (qv), trespass (qv) and defamation (qv).

Tortfeasor A person who commits a tort (qv). Trade custom/trade usage See: Custom. Trade discount A discount that is allowed by suppliers to members of the industry. Thus a building contractor will be able to purchase, say, timber at a price considerably below that at which it is available to members of the public. It is not the same as cash discount (qv).

Treasure trove Gold or silver coin, plate, bullion or other valuable items hidden in a house or in the earth or other secret place, the true owner being unknown and undiscoverable. Treasure trove belongs to the Crown. If the property is merely lost or abandoned it is not treasure trove, and the finder acquires a possessory right to it. The finder of treasure trove must report the finding to the coroner for the area, and an inquest will be held to establish whether or not the objects found are treasure trove. If they are, the Crown awards their market value to the finder. In building contracts there is usually a specific clause dealing with objects found on site. SBC clause 3.22 provides that, as between the contractor and the employer, ‘all fossils, antiquities’ and anything that is either ‘of interest or value’, found on the site or during excavation, are the property of the employer. The clause does not expressly state whether the object should be interesting in any particular way, but it is thought that the reference to an object being ‘of

949

Jones M A and Dugdale A M (2008) Clerk and Lindsell on Torts, 19th edition, Sweet & Maxwell.

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Trespass interest’ must be read in the context of the clause as a whole, which is referring to antiquities and fossils. GC/Works/1 clause 32(3) and ACA clause 14 provide to much the same effect, but none of those clauses can adversely affect the rights of third parties. See also: Antiquities; Fossils.

Trespass A category of the law of tort (qv). There are several types of trespass, but trespass to land is of most concern to the construction industry. If a person enters upon, remains upon or allows anything to come into contact with the land of another, that person is committing trespass. For there to be a cause of action, the person bringing the action must be in possession of the land, and the trespass must be a positive action: for example, allowing tree roots to encroach on neighbouring property is not trespass but nuisance. Trespass may take place under the land (e.g. foundations), on the surface of the land (e.g. fences and buildings generally), or in the air space for a reasonable height over the land (e.g. crane jibs, but not aircraft flying over). In order to bring an action for trespass, there is no necessity to prove damage. Remedies are to take action for damages (if any) and/or an injunction (qv) to prevent continuance. Another remedy that must be exercised with care is forcible eviction if the trespasser has refused to leave peacefully. Occupiers and non-occupiers have certain obligations to trespassers, and in particular children who trespass. Contractors should always be aware that they have obligations towards child trespassers that are higher than those owed to other trespassers. A contractor undertaking work under a contract is said to have a licence (qv) to be upon the site of the Works. The contractor may become a trespasser if it remains on the land or leaves materials there after its work is finished, or after its employment has been terminated. See also: Access to neighbouring land; Occupier’s liability.

Trust The holding of property by one person for the benefit of another. The property is vested legally in one or more trustees, who administer it on behalf of others. The law relating to trusts is set out in a number of Acts of Parliament. Trusts were the creation of equity (qv). See also: Fiduciary; Trustee.

Trustee A person who holds property on trust for another. The prime duty of a trustee is to carry out the terms of the trust, and preserve the safety of the trust property. The appointment and powers of a trustee are governed by the Trustee Acts of 1925 and 2000. Trustees must use the utmost diligence in discharging their duties, and in the exercise of any discretion they must act honestly and use such diligence as a prudent person of business would exercise in dealing with their own affairs. A trustee may be liable for breach of trust, and may personally have to make good any losses suffered by the trust property.

Trustee in bankruptcy A person who takes charge of all assets of a person who is declared bankrupt, and in whom the bankrupt’s property vests. The general functions of a trustee in bankruptcy are specified in s. 305(2) of the Insolvency Act 1986 – that is, to access, realise and distribute the bankrupt’s estate in accordance with the Act. This involves a number of duties: 532

Turnkey contract — to gather in all the bankrupt’s discoverable assets; — to investigate and decide the creditor’s claims; — to distribute the proceeds of the assets according to the statutory order of preference. See also: Bankruptcy; Insolvency.

Turnkey contract The term sometimes used to describe a contract where the contractor is responsible for both design and construction. It is a form of design and build contract (qv), but one in which the contractor is responsible for everything, including fit-out and furnishing, so that all the employer has to do, when told that the project is complete, is to ‘turn the key’ to open the building. There are many categories of design and build contracts, and a turnkey contract is a more elaborate form of package deal contract (qv). Turnkey contracts are usually large industrial projects. Although in common use, the term has no precise legal meaning,950 and its use is best avoided. The alleged advantages of such contracts are project cost, coordination and speed. Against this must be set the substantial disadvantages that the client loses control over quality, and is sometimes deprived of an impartial third-party check. ‘Package deal’ contracts are most suitable for specialist engineering fields, where companies possessing highly developed expertise may offer such proposals as the only access to that expertise.

950

Cable (1956) Ltd v. Hutcherson Brothers Pty Ltd (1969) 43 ALJR 321.

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U Uberrimae fidei Of the utmost good faith. This expression is applied to a group of contracts where, contrary to the general rule, the party with knowledge of material facts must make full disclosure of those facts. Failure to do so makes the contract voidable (qv). Building contracts are not contracts uberrimae fidei, nor are contracts for the sale of goods. The requirement of utmost good faith applies to contracts of guarantee (qv), insurance (qv), partnership (qv) and certain others. If a contract is one of uberrimae fidei the party with special knowledge must disclose to the other every material fact and circumstance that might influence the other party in deciding whether or not to enter into the contract. Therefore the insurance policies required under a building contract are subject to the principle of utmost good faith. This is one of the reasons why, under the early use and occupation provisions within certain standard form contracts (e.g. SBC clause 2.6), the insurers have to be notified and confirm their acceptance that such use and occupation would not prejudice the insurance cover. Occupation by the employer would be a material fact of which the insurers should have knowledge so that they can re-evaluate the risk as necessary. See also: Good faith; Misrepresentation.

Ultra vires Beyond the powers. An act in excess of the authority conferred on a person or body, whether by statute or otherwise. The doctrine is largely important in relation to the acts or contracts of local and other public authorities and companies. For example, local authorities may act ultra vires if they act in bad faith, or exercise their powers for some unauthorised purpose.951 An architect will act ultra vires if they act outside the terms of the appointment, or in excess of the powers conferred by the building contract. The employer is not liable to the contractor for acts of the architect that are not within the scope of the architect’s actual or apparent authority, although the architect may be personally liable for breach of warranty of authority (qv) or otherwise. The position under JCT terms has been aptly summarised: An architect’s ultra vires acts do not saddle the employer with liability. The architect is not the employer’s agent in that respect. He has no authority to vary the contract. Confronted with such acts, the parties may either acquiesce in which case the contract may be pro tanto varied and the acts cannot be complained of, or a party may protest and ignore them. But he cannot saddle the employer with responsibility for them.952

See also: Agency.

Uncertainty A court may find that a contract (qv) or deed is void because it is unclear about the intentions of the parties. Certainty of terms is an essential 951 Hazell v. Hammersmith & Fulham London Borough Council [1992] 2AC 1; Kleinwort Benson Ltd v. Lincoln City Council [1999] 2AC 349. 952 Stockport Metropolitan Borough Council v. O’Reilly [1978] Lloyd’s Rep. 595 at 601 per Judge Edgar Fay.

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Unfair Contract Terms Act 1977 requirement if there is to be a valid contract.953 However, the courts do not expect that contracts drafted for commercial purposes by businessmen will be worded with absolute precision. A court will be reluctant to void such an agreement if the parties have acted and are acting upon it. See also: Interpretation of contracts.

Undertaking In broad terms, this is a promise by one person to do something or to forebear from doing something. It is often given to a court in order to persuade the court not to make a particular order. For example, a person may give an undertaking to the court not to harass another, to avoid having the court issue a restraining order. The undertaking will be recorded, and signed by the person giving the undertaking. Breach of an undertaking to the court amounts to contempt of court, and may result in imprisonment. In the context of construction, undertakings might be given to preserve trees or old buildings, or to restore structures accidentally damaged.

Unfair Contract Terms Act 1977 This statute, which came into force on 1 February 1978, imposes limits on the extent to which ‘civil liability for breach of contract, or for negligence or other breach of duty, can be avoided by means of contract terms and otherwise’. It deals with limitation of liability in contract and in tort. It does not outlaw unfair contract terms, as is often supposed, and it is not confined to contracts. An important distinction is drawn between those who deal as consumers, i.e. private individuals, and those who are in business. The criteria for avoiding liability are more stringent for a businessman dealing with a consumer than for a businessman dealing with another businessman. The main provisions are as follows. — Liability for death or injury caused by negligence can never be excluded by any term in the contract, or by any notice (for example, displayed on a building site). Negligence includes both the tort of negligence (qv) and situations in contract where one party has a duty to behave with reasonable care and skill.954 Thus a notice displayed on a building site disclaiming responsibility for injury, howsoever caused, will be totally ineffective if the injury to a visitor is caused through the contractor’s negligence. — Under s. 2(2) any other loss or damage due to negligence can be excluded only if it satisfies the Act’s requirement of reasonableness (see below). As a result of the Occupier’s Liability Act 1984 it is possible that the statutory duty of care owed by an occupier to visitors can be excluded altogether by means of an appropriately worded notice in the case of other entrants, e.g. trespassers. — If one party deals as a consumer, or not as a consumer but on the other party’s written standard terms of business (qv), the other party cannot: • exclude or restrict its liability in respect of any breach of contract, or • claim to be entitled to do something substantially different from that which it contracted to do, or to do nothing at all, unless the provision satisfies the reasonableness test.

953 954

Bushwall Properties Ltd v. Vortex Properties Ltd [1976] 1 WLR 591. s. 2(1).

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Unfair Contract Terms Act 1977 This is so, no matter what terms are included in the contract.955 This is an extremely important provision, since it will affect any contract in the construction industry if one party can be said to be using its own written standard terms of business. The supply of goods is a common example where suppliers often have printed conditions. It is thought that the only main contract conditions to escape the provisions of the Act are the JCT and ICE forms, because they are negotiated between all sides of industry.956 Even these forms may fall under the Act if and insofar as they are amended by the employer to suit its special requirements. They would then become the employer’s written standard terms of business, with all that involves. For example, if an employer inserted a clause in SBC clause 4.23 to the effect that the employer would not be liable for any claim for loss or expense above £25,000, it is doubtful that the court would support the employer if the contractor could prove that the employer had caused it £50,000 damage. Similarly, if a contractor attempted to show that a term in its standard terms of business allowed it to substitute an inferior material for what it had originally priced (say softwood in place of hardwood), it might be unsuccessful under this Act. In each case, it is necessary to examine the facts. S. 6 is also important in a construction context. No exemption clause can exclude liability in respect of claims brought under s. l2 of the Sale of Goods Act 1979 (as to the title of the seller of the goods) and corresponding provisions in hire purchase contracts. Implied terms as regards description, sample or quality can be excluded only if reasonable. In consumer transactions the terms cannot be excluded at all. S. 7 is similar to s. 6, but deals with transactions that do not fall under the Sale of Goods Act or hire purchase. S. 8 excludes all attempts to limit or avoid liability for misrepresentation (qv). S. 10 makes any term in a contract ineffective if it attempts to exclude liability on another contract. Although it is not thought that the point has been tested in the courts, it appears that GC/Works/1 clause 51, which attempts to give the employer power to deduct monies owing on the contract from any sums due on any other contract, may be such a term, because the recovery under one contract of sums due under another contract may have the effect of excluding liability on the other contract, particularly if otherwise the sums would be irrecoverable. The reasonableness test is important. It has to be applied at the time the contract was made or, in the case of an excluding notice, when the liability arose. S. 11 and Schedule 2 of the Act deal with reasonableness. Schedule 2 lays down the guidelines. The court is required only to have regard to the guidelines, and they are not intended to be exhaustive. The burden of proof lies on the party who claims that a term is reasonable. The points in the guidelines that are to be taken into account are: — the strength of the bargaining positions of the parties relative to each other, taking into account (among other things) alternative means by which the requirement could have been met; — whether the customer was induced to agree to the exemption clause, or could have made a contract with someone else omitting the term in question;

955 956

s. 3. Tersons Ltd v. Stevenage Development Corporation (1963) 5 BLR 54.

536

Unfair Terms in Consumer Contracts Regulations 1999 —

whether the customer knew or ought reasonably to have known of the term; — where the exemption clause operates only after non-compliance with a particular condition, whether at the time of the contract it was reasonable to expect that compliance would be practicable; — whether the goods were manufactured, processed or adapted to the special order of the customer. S. 11(4) also provides added guidelines in the case of a party seeking to limit its liability to a specified sum. Regard must be had to the resources the party could expect to be available to it to meet the liability, and the extent to which it could obtain insurance cover. The Act does not apply to international transactions, or to certain types of contract, e.g. insurance. It does include at s. 13 provision that prevents people evading or contracting out of its requirements. For example, attempts to evade the Act by limiting remedies, or restricting rules of evidence or procedure, are specifically prevented, although agreements to submit disputes to arbitration (qv) are expressly excluded from this section. However, it is thought that contractual provisions that make it more difficult for one of the parties to seek adjudication or arbitration may fall into this category. Thus, although a term requiring a party initiating adjudication to be responsible for the costs of both parties, win or lose, has been held to be valid, it is not thought that the court was referred to this section of the Act.957 The Act is of great importance to the construction industry, relying as it does upon a mass of contracts, sub-contracts and standard conditions. The Act attempts to make people shoulder and not evade their responsibilities unless it is reasonable to do so. There have been a number of reported cases on the Act that have amplified the guidelines for satisfying the Act’s requirement of reasonableness.958

Unfair Terms in Consumer Contracts Regulations 1999 These came into force on 1 October 1999, and revoked the 1994 Regulations. The Regulations apply to contracts between a consumer and a supplier of goods or services. For the purposes of the regulations ‘consumers’ are natural persons acting for purposes outside their trade, business or profession. An unfair term is not binding on the consumer, but if the remainder of the contract is capable of continuing without the unfair term, it will continue to bind the parties. A term that is not individually negotiated will be regarded as unfair if it causes significant imbalance in the parties’ rights, to the detriment of the consumer.959 A term that has been drafted in advance will always be considered as not having been individually negotiated. If a supplier claims that a term was individually negotiated, it is for the supplier to show that it was. Unfairness shall be assessed taking into account all the circumstances. Schedule 2 of the Regulations contains an indicative and non-exhaustive list of terms that may be regarded as unfair. 957

Bridgeway Construction Ltd v. Tolent Construction (2000) CILL 1662. Philips Products Ltd v. Hyland [1987] 1 WLR 659; Smith v. Eric S Bush [1990] 1AC 831; AEG (UK) Ltd v. Logic Resource Ltd [1996] CLC 265. 959 Mylcrist Builders Limited v. Mrs G Buck [2008] EWHC 2172 (TCC). In this case an arbitration clause was held to be unfair pursuant to the Regulations. 958

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Unforeseeable ground conditions There is also a provision that all written contracts must be in plain, intelligible language. Generally, if there is doubt about the meaning of a term, the interpretation most favourable to the consumer is adopted. There have been a number of cases through the courts concerned with the effect of the Regulations on building contracts.960 The position of the adjudication clause under IFC 98 has been admirably summarised as follows: (1)

The terms were not individually negotiated, but were couched in plain and intelligible language. (2) The terms were decided upon by [the consumer’s] agents who gave objective advice as to the existence and effect of the adjudication clause before he proffered and entered into the contract. [The contractor] did no more than accept the contract terms offered and had no reasonable need to draw to [the consumer’s] attention the potential pitfalls to be found in the adjudication clause and in its operation during the course of the work. The clause did not, therefore, contravene the requirement of good faith. (3) The clause did not, if considered at the time of making the contract, constitute a significant imbalance as to [the consumer’s] rights. (4) The clause does not significantly exclude or hinder the consumer’s right to take legal action or other legal remedy or restrict the evidence available to him.961

The withholding notice provisions within the JCT Minor Works 1998 edition have been held to be unfair under the Regulations,962 and not binding on the consumer employer. These Regulations are important for consultants who are engaged by consumers, e.g. on work to domestic dwellings. Some standard forms of appointment make reference to the Regulations. An example is the Concise Agreement for the appointment of an Architect (C-Con-07-A) published by the RIBA where in the ‘Notes on use and completion’ (Notes-C-07) it states that it is essential to explain the conditions and letter of appointment to the client, to make notes of any discussions and amendments, and to copy the notes to the client.

Unforeseeable ground conditions Clause 7(1) within GC/Works/1 addresses conditions affecting the Works, and lists some eight matters of which the contractor is deemed to have satisfied itself in relation to the site. However, clause 7(2) qualifies this where bills of quantities are used, and any information that should have been included in accordance with the given method of measurement. The contractor is to notify the project manager, under clause 7(3), should it encounter ground conditions that it did not know of, or could not reasonably have foreseen, given the information available. The notice is to inform the project manager of the conditions, and of the action the contractor intends to take.

960

See: Bryen & Langley Ltd v. Martin Rodney Boston [2005] All ER (D) 507; Allen Wilson Shopfitters v. Buckingham (2005) 102 Con LR 154. 961 Westminster Building Co Ltd v. Beckingham (2004) 20 Const LJ T145 at T154 per Judge Thornton. 962 Steve Domsalla (t/a Domsalla Building Services) v. Kenneth Dyason (2006) 112 Con LR 95.

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Unincorporated association Should the project manager agree that the ground conditions encountered were not known or foreseeable then they should certify them as ‘unforeseeable ground conditions’. Clause 1 ‘Unforeseeable ground conditions’ is said to mean such ground conditions as certified by the project manager in accordance with clause 7. If, as a consequence of the certified unforeseen ground conditions, the contractor undertakes additional work, or is unable to carry out work, then this is to be valued in accordance with clause 42 (valuation of variations), and the contract sum adjusted accordingly. Encountering certified unforeseeable ground conditions is a ground for an entitlement to an extension of time under clause 36(2)(d) and expense under clause 46(10)(b).

Unincorporated association A group of people not incorporated, under Royal charter or statute, and which has no legal existence independent of the members of the association. Common examples are partnerships (qv) and some members’ clubs. While partners may sue and be sued in the name of the firm, most other unincorporated associations cannot be so sued. Usually, the better procedure is by way of a representative action, when one (or more) of the individuals concerned is authorised to appear on behalf of the group as a whole. A judgment against representative defendants is binding on them all. See also: Capacity to contract.

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V Valuation In a general sense the estimation by a person of a thing’s worth, or the price set on a thing. Within standard form contracts the word is generally used in two contexts. The first relates to a valuation of work carried out and completed by the contractor for the purposes of interim payments. The second relates to the valuation of variations or changes. Typically the quantity surveyor (qv) arrives at the value (qv) of the work carried out by the contractor that ought to be included in the next certificate, e.g. SBC clause 4.11. This type of valuation is normally carried out not earlier than seven days before the due date of the certificate. It tends to involve visiting site and, by visual inspection and/or measurement (qv), checking that the work has been carried out. In many cases the contractor will submit a detailed application, and some contracts make provision for this, e.g. SBC clause 4.12. Under SBC, and IC and ICD, the submission of a valuation by the quantity surveyor or an application by the contractor is not a condition precedent to a contractor receiving payment, e.g. SBC clauses 4.11 and 4.12. Although usually carried out by the quantity surveyor, other contracts envisage that it will be undertaken by the contract administrator, e.g. MW, MWD and NEC. Under DB the contractor is required to make applications on the dates stated in the contract particulars, i.e. clause 4.9: therefore the contractor undertakes the valuation of the work carried out in the first instance. This is also the case with the MP form. What is to be taken into account when undertaking a valuation is usually identified within the contract, e.g. IC and ICD clause 4.7, and NEC clause 50.2. All standard form contracts provide a mechanism for the valuation of variations by either the contractor administrator or the quantity surveyor. And some contracts (e.g. IC and ICD clause 5.2) expressly state what would otherwise be the case, that the employer and contractor are at liberty to agree the valuation of a variation should they so wish, thereby removing the responsibility from the contract administrator or quantity surveyor. SBC clause 5.6, IC and ICD 5.3, MW and MWD clause 3.6, DB clause 5.4, ACA clause 20, NEC clause 63 and GC/Works/1 clauses 41, 42 and 43 set out rules for valuation. The general scheme of most standard form contracts is that work that is the same as work for which rates (qv) already exist in a pricing document will be valued at the same rates. Where the work is similar (qv), but the amount or conditions are changed, the rates in the pricing document are to be used as a basis to be adjusted to take account of the differences. Where there are no rates that can be used, because the work is different from any of the rated work in the pricing document, the valuer must work out a rate based on fair rates and prices, or by some other method such as daywork (qv). Under DB it seems that the valuation of variations is to be carried out, in the first instance, by the contractor in accordance with clauses 5.4 to 5.7, and submitted as part of its application for payment. The NEC does not approach the valuation of variations using the rates and prices in the contract documents. Variations or changes are categorised as compensation events, and the aim – although not necessarily achieved – is to recompense the contractor for its forecast costs or actual costs, depending on whether the variation work has been completed or not. In practice, where 540

Value there are a significant number of changes or variations the NEC procedure can be very difficult to operate. The Housing Grants, Construction and Regeneration Act 1996 (qv) in s. 110(1) requires that every construction contract must provide an adequate mechanism for determining the payments due under the contract. If such a mechanism is not provided, the payments will be calculated in accordance with the Scheme for Construction Contracts (qv). Paragraph 2(2) of the scheme sets out the rules governing how the valuation is to be undertaken. See also: Fair valuation; Similar character; Similar conditions.

Value The meaning of ‘value’ for interim valuations has to be viewed within the context of the particular contractual framework. SBC clause 4.16.1.1, for example, refers to the value of the work that is ‘properly executed’ by the contractor. In considering the meaning of those words in an earlier JCT contract, the court said: If meaning is to be given to the words, ‘work properly executed’, in [the certification clause], I cannot see how the architect can avoid the requirement to exclude work, which is not properly executed, from the value of the work for which he recommends his employer to make payment on account, and if work is defective and unacceptable as it then stands, it must in my view, be classified as work not properly executed until the defect has been remedied. I do not accept that the words, ‘work not properly executed’, can include work not then properly executed but which it is expected, however confidently, that the contractor will remedy in due course.963

This appears entirely fair and reasonable, and is the system most commonly followed in practice. Therefore the value in accordance with the provisions in the contract may not reflect the contractor’s actual costs, or for that matter the value of all the work the contractor has undertaken. A further example would be varied work completed but not covered by an appropriate instruction. This should generally not be included in the value, e.g. IC and ICD 5.2.1. It has been argued, very convincingly, that the above system does not represent the value of the work to the employer. From the employer’s viewpoint the value of the work done by the contractor is the value of the whole contract less the cost of completing the work with the aid of another contractor (which would include additional professional fees) if the first contractor went into liquidation immediately after the issue of the certificate. This view is not supported by the contractual framework in the standard forms of contract. Should this approach be put into effect it would result in a negative amount being certified or identified for payment during the early stages of a contract. Contractors argue that the retention fund is designed to take care of that sort of eventuality, but the retention fund as provided in most modern contracts is quite insufficient to cover the additional cost involved in the finishing of a contract by another contractor. Although there are difficulties in operating this system, not least the method of evaluating the cost of completion and the likely high cost of tenders, it does have the merit of assuring the employer of adequate funds if the worst happened. However, it is difficult to see how it would work in practice.

963

Sutcliffe v. Chippendale & Edmondson (1971) 18 BLR 149 at 166 per Judge Stabb.

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Value Added Tax (VAT)

Value Added Tax (VAT) A tax on purchases, charged by the seller or purveyor and in turn payable by the seller to HM Revenue & Customs at the end of the three-monthly periods in which the invoice was rendered. This is a matter of great importance to businesses, because it often means that they have to pay the tax before it has been collected. Firms use various methods to overcome the problems, such as submitting a statement of the amount due and sending out a VAT receipt only on receipt of payment including VAT. Although this may be possible in the case of professional appointments, it is not possible in the context of a building contract. Recovery of money noted in a statement may not be as easy in the case of non-payment as where a proper invoice has been submitted. The position under the Housing Grants, Construction and Regeneration Act 1996 (qv) is also unclear. In some instances, dependent upon the level of turnover, it may be possible to pay VAT only on receipt of payment. The legal position on such matters is liable to change, and the advice of accountants or specialist VAT lawyers is necessary. JCT contracts used to include substantial supplementary clauses dealing with VAT, but the latest JCT contracts have reverted to a simple clause (e.g. SBC clause 4.6) confirming that the contract sum (qv) is exclusive of VAT, that the employer must pay the appropriate VAT in addition, and stating the position where supply of goods and services to the employer after the base date (qv) becomes exempt from VAT. VAT can be very complicated, and the regulations are subject to revision on a regular basis. If a contractor submits a quotation without a VAT registration number, and no indication of whether the amount in the quotation is inclusive or exclusive of VAT, the contract may be for a sum that is inclusive of VAT. A Court has held: The quotation made no reference to VAT whatsoever. It was intended to be a competitive offer in respect of work to a single house made to [the defendant] who happened to be a businessman in the EEC country but who might have had no business experience whatsoever. The plaintiffs had had no previous dealings with the defendant. It was perfectly proper for the plaintiffs to submit an inclusive offer, and in my view there is no reason why the defendant should not regard it as such.964

If both parties are in the construction industry, the custom is that prices are deemed to be exclusive of VAT.965 The Court of Appeal has settled the position that, although there is a term implied by custom for contracts among the building trade that a price quoted for building work was exclusive of VAT, that implication did not apply to contracts with consumers, and the inclusion or exclusion of VAT depended on the terms of such contracts.966 Should arbitration be the chosen tribunal for the resolution of disputes under the building contract, then any disputes or differences concerning VAT tend to be excluded from that tribunal to the extent that legislation provides for another method of resolving such disputes or differences, e.g. DB article 8.

Value cost contract A type of contract in which the contractor is paid only a fee that fluctuates depending upon the actual cost of work, as compared with a 964

Franks & Collingwood v. Gates (1983) 1 Con LR 21 at 24 per Judge Newey. Tony Cox (Dismantlers) Ltd v. Jim 5 Ltd (1997) 13 Const. LJ 209. 966 Lancaster v. Bird (1989) The Times, 9 March 1999. 965

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Variation of contract valuation made on the basis of an agreed schedule of prices (qv). The fee is increased or reduced depending upon the contractor’s success or failure in meeting the agreed valuation. The cost of the work is paid directly by the employer. A serious disadvantage is the complex accounting and measurement procedures required. The value cost contract can be useful where a continuous programme of work is involved and time is at a premium. See also: Cost reimbursement contract; Management contract; Prime cost.

Value engineering (VE) The process of analysing a building and its elements in terms of function in order to eliminate unnecessary costs and improve the value. It is sometimes known as ‘value analysis’ or ‘value planning’. It is a term defined at appendix 1 of PPC. It is said to be a ‘structured system’ to review design, supply and construction in order to identify scope for improvement, including reduced capital costs and whole life costs, improved buildability and function. The lead designer, under clause 8, at each stage of the design development is to amend the design as necessary to adopt the results of any value engineering exercise undertaken in accordance with clause 5.1(iii). Changes to the design are to include input from the design team members, and the results of any value engineering exercise are to be approved by the client following core group consultation. Under clause 5.1(iii) the client’s representative is to organise and monitor the input of the partnering team members into the value engineering exercises for submission to the client and core group for approval. The requirement and details for these exercises would be stated in the partnering documents. See also: Project management.

Value management A management technique for the purpose of measuring and controlling the progress of a construction project and its impact on value with regard to life cycle cost analysis (qv). It is a structured problem-solving process, which is often coupled with risk management. The term is also used to refer to motivational management of people. The term is defined at appendix 1 of PPC as a flexible but structured management approach that is intended to solve the client’s needs while also achieving best value. Under clause 5.1(iii) the client’s representative is to organise and monitor the input of the partnering team members into the value management exercises for submission to the client and core group for approval. The requirement and details for the exercises would be stated in the partnering documents. See also: Facilities management; Project management.

Variation of contract A change to the terms of a contract after the date of its execution. This is to be distinguished from a change or variation under the terms of the contract, e.g. SBC clause 3.10.1 or ACA clause 8.1. A change to the terms of a contract can be achieved only with the agreement of both parties to the contract, and it is sensible to record the variation in the form of a document signed by both parties. However, a document that the law requires to be in writing can only be varied in writing. In order for the variation to be effective, the usual view is that the variation agreement must itself be a valid contract, complete with consideration (qv), unless the agreement is executed as a deed. It is not necessary for a contract executed as a deed to be varied by 543

Variation of price another deed. It can be varied exactly as a simple contract (qv) would be varied.967 Care should be taken to distinguish this term from variation of work (qv) or services.

Variation of price See: Fluctuations. Variation of work Alterations, additions or omissions in the quality, quantity and sometimes the design of work. Variations may also refer to alterations, additions or omissions in the quality or quantity of materials, or to working hours and work space. Some contracts include a definition of what amounts to a variation under that particular contract, e.g. SBC, IC and ICD clause 5.1. Under DB at clause 5.1 such variations are called ‘changes’. See also: Instructions.

Variation order An outdated term, still commonly used to describe an architect’s instruction (qv) requiring additions, omissions or alterations to the quality, quantity and sometimes to the design of the Works. See also: Variation of work.

Vesting and seizure The majority of building contracts contain clauses dealing with the ownership of materials and/or plant. Some contracts also contain an express provision dealing with seizure (sometimes called ‘vesting and seizure’) of materials and plant, usually on termination of the contract, or in the case of forfeiture (qv). For example, GC/Works/1 clause 30, which is headed ‘Vesting’, is a vesting and seizure clause. Clause 30(1) transfers ownership of the Works and things on site connected to the contract that the contractor can transfer to the employer although, under clause 30(3), risk remains with the contractor. The object of this provision (and similar provisions in other contracts) is to improve the employer’s position in the event of failure by the contractor to complete the contract. This is particularly so in cases where that failure is caused by the contractor’s insolvency (qv). It transfers the property in both plant and materials to the employer, and is effective to defeat claims made by the contractor’s trustee in bankruptcy (qv), liquidator (qv) etc. until the contract is completed. However, although clause 30(1) provides that the Works etc. ‘shall become the property of and vest in the Employer’, so far as things that will eventually be moved from site are concerned, the transfer is only temporary, and so property will re-vest in the contractor on completion and removal from site with the permission of the project manager. Furthermore, if the plant etc. is owned by third parties, the clause cannot be effective against the third party owner, whatever the intention may be. Each such clause must be interpreted strictly and on its wording, against the background of the general law. See also: Nemo dat quod non habet; Title; Vesting clause.

Vesting clause A clause in a contract that deals with the transfer of property in goods and materials (qv), e.g. SBC clauses 2.24 and 2.25. Such a clause can be 967

S. 44 Supreme Court of Judicature (Consolidation) Act 1925 (15 & 16 Geo 5 c 49).

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Vicarious performance effective only between the parties to the actual contract, and cannot affect the rights of third parties, such as suppliers. The Contracts (Rights of Third Parties) Act 1998 is unlikely to have any application here unless the provisions of the clause are being relied upon as a defence to a third party claim. The effect of a vesting clause depends on its terms, and also on the general law relating to the passing of property (qv). Even if the vesting clause is effective to transfer property in unfixed materials brought on site to the employer, this is qualified by the contractor’s right to use the materials for the purpose of the Works.968 See also: Nemo dat quod non habet; Privity of contract; Title.

Vexatiously With an ulterior motive to oppress or annoy.969 It is always wrong to take action vexatiously, and in litigation may cause an action to be dismissed. SBC, IC, ICD and DB clause 8.2.1 is one of many examples in the standard forms that contain an express prohibition on vexatious action. In that instance, a notice of termination may not be given vexatiously. SBC clause 3.21 prohibits the vexatious issue of an instruction to exclude a person from the Works.

Vicarious liability The liability of one person for the wrongs done by another. The liability generally arises in tort (qv). The most common examples are the liability of an employer for the actions of an employee, and that of a principal for the actions of an agent. Whether an employer is liable for an employee is determined by the degree of control exercised. An employer will be liable even for acts of an employee that have not been authorised if the acts can be regarded as methods of doing acts for which the employee is authorised.970 There will be no liability, however, in the case of employees acting outside the course of their employment, or of agents acting outside the scope of their authority. In general, the employer is not vicariously liable for the wrongful actions of an independent contractor. However, it is possible that an employer may become responsible or liable for persons who are directly employed by another, but who become ‘temporary employees’ of the employer, given the level of control exercised over them by the employer:971 for example, this could apply to agency staff employed by a contractor. Moreover, an employer is liable for the actions of an independent contractor if the employer is negligent in selecting the contractor, where there is a breach of an absolute statutory duty, and in certain other limited cases, e.g. where the contractor’s work involves operations on the highway (qv) and injury is caused. See also: Agency; Master.

Vicarious performance Performance of a contractual obligation by or through another person, e.g. performance of part of a contractual obligation by a subcontractor (qv). English law draws a distinction between assigning duties and engaging someone else vicariously to perform them. Vicarious performance is generally permitted, except when the nature of the contract calls for personal 968

Bennet and White (Calgary) Ltd v. Municipal District of Sugar City No 5 [1951] AC 786. John Jarvis Ltd v. Rockdale Housing Association Ltd (1986) 10 Con LR 51. 970 Century Insurance Co Ltd v. Northern Ireland Road Transport Board [1942] 1 All ER 491. 971 Hawley (David Phillips) v. (1) Luminar Leisure plc (2) ASE Security Ltd (3) Mann (David Preston) (as nominated underwriter for Faraday Underwriting Limited) (2005) CILL 2196. 969

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Vis major performance, which is not usually the case with building contracts, although it would be so in a case where the personality of the builder was important. In most standard forms a contractor has to obtain the written consent of the architect prior to sub-letting a part of the Works, e.g. SBC clause 3.7, MW and MWD 3.3 and ACA clause 9.2. Such provisions offer some control to prevent a contractor sub-letting a part of the Works that the employer expected to be undertaken by the contractor, given its particular expertise. Vicarious performance is not likely to be permitted in the case of construction professionals, who have probably been chosen by their clients as a result of personal attributes. Vicarious performance is effective to discharge the contractor’s duties only if it is strictly in accordance with the terms of the contract. If the vicarious performance falls below the prescribed contractual standard, the original contractor is liable. This concept is largely important in the context of sub-contracting (qv) and sub-letting. Most standard forms of contract deal with this matter expressly, and such clauses prohibit vicarious performance of the whole or part of the Works unless with the written consent of the architect or the employer.

Vis major Irresistible force, whether of nature or act of man. It can be equated with force majeure (qv), and covers any overpowering force, such as exceptional storms, earthquakes, riotous mobs and armed forces. It is an excuse for damage done or loss of property, and is one of the excepted perils (qv) in certain insurance policies. See also: Act of God.

Vitiate To make invalid. The word was used, for example, in JCT 98 clause 13.2.5 and IFC 98 clause 3.6 to indicate that the variations stated will not invalidate the contract. Its use is retained in SBC clause 3.14.5 to the same effect. MW and MWD state the same thing in clause 3.6, although they use the word ‘invalidate’ instead of ‘vitiate’. No action expressly allowed under the terms of a contract can invalidate that contract, and the various standard forms appear simply to be needlessly stating the common law position. ACA does not include a similar statement.

Void and voidable ‘Void’ means of no legal effect or a nullity. Thus an illegal contract (qv) is void ab initio (from the start) and cannot create any rights or obligations. A contract for an immoral purpose, e.g. to build a brothel, would be void at common law on grounds of public policy. In some cases the innocent party may be entitled to recover money paid or property transferred under a void contract, usually by way of quantum meruit (qv).972 ‘Voidable’, in contrast, means that the transaction is valid until one party exercises the right of rescission (qv), e.g. in the case of fraud (qv) or misrepresentation (qv). For example, a contract of partnership (qv) made by a minor is voidable at the minor’s option.

972

Craven-Ellis v. Canons Ltd [1936] 2 All ER 1066.

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Voucher

Void contract A strange term, because strictly either there is a contract or it is void (qv). Although one might be excused for believing that a void contract is of no effect, that is by no means certain. In some instances action can be taken under a void contract by an innocent party.973

Volume supply agreement A term that is defined at appendix 1 of PPC. It is an agreement under which materials, goods or equipment are offered on preferential terms. The preferential terms may be as to price, availability, warranty, maintenance or otherwise. Under clause 11, if any partnering team member has entered or intends to enter into a volume supply agreement that may be of benefit to the project, they are to notify the client’s representative, including brief particulars of the agreement. The client’s representative and the core group are to review the appropriateness of the agreement to the project, and make recommendations to the client and the constructor. Where the agreement is approved by the client and the constructor, then the constructor is to enter into a specialist contract adopting the prices and terms of the volume supply agreement. The constructor is responsible for the relevant specialist.

Voucher A document that is evidence of something. SBC clause 5.7 requires vouchers specifying the time spent daily upon the work, workmen’s names, etc. to be presented to the architect for verification. That type of voucher is commonly known as a ‘daywork sheet’. Other examples are DB clause 5.5, and IC and ICD clause 5.4. ACA clause 16.1A refers to the documents, vouchers and receipts necessary for computing the total amount due to the contractor.

973

Mason v. Clarke [1955] AC 778.

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W Waiver The relinquishment of a right or remedy. It may be express, by a written statement (e.g. a letter) to that effect, or implied, by inaction in enforcing a right. Care must be taken to avoid the latter situation, which may easily arise on a building contract if the contractor commits a breach for which there is a clear remedy, and the employer takes no advantage of the remedy. For example, if the contractor sub-lets part of the Works without seeking the architect’s consent in accordance with SBC clause 3.7.1, the architect must immediately take action. An architect who does nothing may be said to have waived the right to object. It has been held that although an architect cannot commit the owner to changes in the building contract that relate to matters of substance, an architect can in respect of matters of administration or procedure under a JCT contract dispense with the need for strict adherence.974 A waiver needs no consideration (qv), and therefore it is possible for a party to withdraw it after suitable notice. But a waiver may be permanent if the party receiving the benefit is led to believe that the right will never be enforced.975 Waiver is often confused with estoppel (qv). Waiver relates to intention (not to enforce a right), whereas estoppel relates to fact, and depends upon the beneficiary altering its position, to its detriment. A waiver may be given by a building control authority in connection with satisfaction of the requirements of the Building Regulations (qv). It is normally termed a ‘dispensation’ or ‘relaxation’. Its effect is to remove the requirement to comply with the particular regulation to which it relates. The Secretary of State may also give a general waiver in certain circumstances.

War Open, armed conflict between two or more nations or states, with the object of satisfying a claim. The outbreak of war makes all commerce between British subjects and alien enemies illegal. Any contract with an enemy alien is automatically dissolved by the outbreak of war, and even in other cases war may well cause frustration (qv) of the contract. The JCT 2005 suite of contracts no longer make express provision addressing war or hostilities. ACA clause 11.5 Alternative 2 makes war or hostilities (qv) a ground for extension of time. It is also a ground for termination of the contractor’s employment under clause 21(c) if the contractor is prevented or delayed from executing the Works for 60 consecutive days. A notice from one party to the other is all that is required. GC/Works/1 makes no specific provision for war, but under clause 58A(1) either the employer or the contractor may determine the contract in the event that the whole or substantially the whole of the Works are suspended for a continuous period of 182 days as a result of various circumstances, which might well include war. See also: Force majeure; Frustration; Hostilities.

974 975

City Inn Limited v. Shepherd Construction Limited [2007] CSOH 190 at paragraph 148. Brikom Investments Ltd v. Carr [1979] 2 All ER 753.

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Warranty

Warranty A subsidiary or minor term in a contract, breach of which entitles the other to damages (qv) but not to repudiate the contract. It should be contrasted with a condition (qv), which is a term going to the root of a contract. It is for the court to decide whether a contract term is a warranty or a condition. In Thomas Feather & Co (Bradford) Ltd v. Keighley Corporation,976 for example, a clause in a building contract forbidding sub-letting without the employer’s consent was held to be a warranty as opposed to a condition. The court takes account of all the circumstances, including the intentions of the parties. A warranty (strictly a collateral warranty) is also the name commonly given to a document often required by building owners from construction professionals, contractors and sub-contractors and expressly referred to in some contracts e.g. SBC clause 7. They might be asked to enter into a warranty in favour of a financial institution that is financing the employer, future leaseholders, a prospective buyer, or just about anyone who might conceivably have any interest in the development. The purpose of a warranty is to establish a contractual relationship where no such relationship would otherwise exist. Although such agreements have been around for some time, it is only during relatively recent times that they have assumed real significance. At one time it was assumed that, if a party who had no contractual relationship with the architect, engineer or contractor was affected by some action of the architect, the party had a remedy in tort. The position is now changed. Rights of action in contract and tort have moved further apart, and the courts have made it clear that they no longer consider tortious remedies suitable for what are basically breaches of obligations as to quality. Therefore, where a subsequent purchaser of property requires the possibility of making a claim against the contractor, any sub-contractor or any member of the design team in appropriate circumstances, that purchaser must require the developer to make it a condition of appointment that such parties enter into warranties or duty of care agreements in favour of the purchaser. A party entering into a warranty or duty of care agreement is taking on at least the same, and in some circumstances a greater, liability to the third party as that owed to the other party to the original contract. It is a contract that is normally executed as a deed. Therefore, technically, no consideration is required. However, it is not unusual to have a recital that acknowledges payment of £1. Even though the £1 is not actually paid, a party is estopped from denying that it was paid. When the potential value of the warranty to the beneficiary and the potential liability of the warrantor are taken into account, the consideration for entering into a warranty ought to be a substantial sum. In practice, market forces tend to determine such issues. In professional consultant warranties there should be a clause that simply states that the consultant will exercise reasonable skill and care in the performance of its duties, and it should contain a proviso that the warranty imposes no greater liability on the consultant than the liability already owed to the client under the appointment. An architect often undertakes that certain materials have not and will not be specified in the project. In any event, an architect must avoid at all costs any clauses that include an obligation to ‘ensure’ that certain materials will not be used in the building. 976

(1953) 52 LGR 30.

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Warranty of authority, Breach of It is common for warranties to include ‘step in’ rights (qv) giving the beneficiary the right to take over the contract to which the warranty is collateral. Sometimes certain notices have to be given by the beneficiary of the warranty. This is common where the beneficiary is a funder, who may wish for the protection of being able to complete the project if the client defaults on the funding agreement. The notices may be given by the beneficiary to a consultant or the contractor as the case may be. In such circumstances a consultant is often required to agree that they will accept instructions solely from the third party in regard to the completion of the development under the same terms as those of the original appointment. Warranties often include a clause protecting the designer’s copyright (qv) in the documents provided, but allowing the company to use them for the purposes of the development, advertisement, letting, etc. Where the copyright licence is said to be irrevocable, it cannot be revoked, even if the architect is not paid. An invariable feature of warranties is the right of the beneficiary to assign them to another person. This is achieved by the insertion of a suitable clause. In the absence of a clause permitting assignment without the warrantor’s consent, there would be no ordinary right to assign. A few basic principles: — A party does not have an inherent right to receive a warranty. — A party can demand a warranty only if it is stated in the building contract or the consultant’s appointment that the contractor or consultant will give a warranty. — If it is so stated, the contractor or consultant cannot be forced to give a warranty in any particular terms. — It is only if it is stated in the main contract or terms of appointment that the contractor or consultant is required to give a warranty, and if the terms of the warranty are reproduced in the main contract or terms of appointment that the contractor or the consultant is obliged to give a warranty in those specific terms. Should the contractor or consultant have issues with the form of warranty, then these should be addressed prior to entering into the building contract or appointment as appropriate. See also: Collateral contract/Collateral warranty; Negligence.

Warranty of authority, Breach of Although the general rule of agency (qv) is that the agent is not liable personally to the third party, this is subject to an important exception. If the agent exceeds its actual authority and the third party suffers damage as a result, the agent will be liable to the third party for breach of warranty of authority.977 The damages recoverable will be in accordance with the usual rule for contractual damages. It is essential to show that the third party relied upon the agent’s representation. A third party who knew that the agent was lacking authority would have no cause of action. The architect’s implied authority to bind the principal (the employer) is limited, but clearly architects who exceed their authority are liable to the contractor in damages.978 977 978

Yonge v. Toynbee [1910] 1 KB 215. Randall v. Trimen (1856) 139 ER 1580.

550

Withholding notice

Wayleave A right of way (qv) over, under or through land for such things as a pipeline or an electric transmission line, or for carrying goods across the land. The word is often used as a synonym for an ordinary right of way, whether on foot, with vehicles or otherwise. There are many statutory undertakers (qv) who may apply to the appropriate Minister for a compulsory wayleave over land where the owner refuses consent. A wayleave is a kind of easement (qv).

Weather This can be a very important influence on the rate of progress of a project. Some contracts are more generous than others in giving the architect power to award extensions of time for delays caused by weather conditions. In the absence of such a provision bad weather is at the contractor’s risk, unless it is of such magnitude as to amount to force majeure (qv). Although SBC clause 2.29.8, IC and ICD clause 2.20.8 and DB clause 2.26.7 permit extension of time (qv) only if weather conditions are exceptionally adverse, MW clause 2.7 and MWD clause 2.8 allow the architect to give an extension of time for grounds that are simply ‘beyond the control of the Contractor’. This can be interpreted as meaning any kind of adverse weather that delays the progress of the Works, even if not exceptional. The NEC form identifies weather as a compensation event at clause 60.1(13). The operation of the provision, though not complicated, is very involved to implement, as it tries to introduce objective criteria. It is likely that it will be operated only on large projects. It requires weather measurements to be taken at site or at a location nearby, e.g. an independent weather station. These are compared with weather data obtained from a specified independent authority, e.g. the Meteorological Office. The readings are taken monthly. The types of reading taken can be specified, e.g. rainfall, wind speed. The location for the measurements and sources of information, reading, etc. are set out in the contract data part 1. If the weather that occurred was of a frequency less than 1 in every 10 years then it amounts to a compensation event for the period for which it fell into this category. ACA and MP forms do not include weather conditions – exceptional or otherwise – as a ground for extension of time. GC/Works/1 expressly excludes weather conditions as a ground for extension of time. See also: Adverse weather conditions.

Winding-up The process by which a limited company (qv) is brought to an end. The same term is used to describe the operation of putting an end to a partnership (qv), although it is more usually termed a ‘dissolution’. Under the Insolvency Act 1986 there are two types of winding-up: — compulsory – by order of the court; — voluntary – either a members’ or a creditors’ winding-up. A voluntary winding-up may also be effected under the supervision of the court. The winding-up of a limited company is one of the situations defined as insolvency, and a ground on which the contractor’s employment may be terminated, under SBC, IC, ICD, MW, MWD, DB and MP. It is also grounds for termination under ACA and NEC, and determination under GC/Works/1.

Withholding notice A notice introduced under s. 111 of the Housing Grants, Construction and Regeneration Act 1996 (qv). A party to a construction con551

Without prejudice tract (qv) may not withhold any part or the whole of a payment due under the contract unless a written notice has been given to the party expecting payment. In order for the notice to be effective, it must be given no later than the period prescribed in the contract before the final date for payment. It must also specify the amount proposed to be withheld, and the ground for doing so. If there is more than one ground, the notice must state the grounds, and the amount attributable to each ground. The period prescribed in the Scheme for Construction Contracts (qv) is seven days before the final date for payment, and this is the period that will apply if the contracting parties have not agreed any other period. The withholding provision is reflected in all standard form construction contracts, e.g. within SBC clauses 4.13.4 and 4.15.4, IC and ICD clauses 4.8.3 and 4.14.3, MW and MWD clauses 4.6.2 and 4.8.3, DB clauses 4.10.4 and 4.12.9 and ACA 3 clause 16.6, where in each case the period is five days. Under NEC clause Y2.3, MP clause 29.2 and GC/Works/1 clause 50A(2) the period is seven days, like the provision in the Scheme. Often, specially drafted contracts will state the period as only one day, in order to give the paying party the maximum time in which to issue the withholding notice. See also: Sum due.

Without prejudice A phrase used in correspondence or discussions seeking to negotiate a compromise and settle a dispute. Statements made ‘without prejudice’ for the purpose of settling a dispute cannot be given in evidence without the consent of both parties. The courts may imply consent if a party, wishing to rely upon the privilege (qv), seeks simultaneously to reveal part of the document that is to their advantage. The basis of the privilege is to be found in an implied agreement that is arrived at as a result of marking the letter ‘without prejudice’.979 It is important to note that ‘without prejudice’ statements and discussions will be privileged only if there is a dispute, and an attempt to negotiate or settle or compromise it.980 Consultants, employers and contractors alike must beware of heading letters ‘without prejudice’ indiscriminately, in the mistaken assumption that it gives them the opportunity to write whatever they wish with impunity. It is the substance of the letter that is important, not the form. It is unfortunately common to see letters so headed, but which do not contain any offer to settle. Conversely, it is not always necessary for a letter to be headed ‘without prejudice’ for it to be privileged. It will often be enough if it attempts to settle or compromise a dispute, and a court will treat it accordingly. In arbitration proceedings a ‘without prejudice’ offer can never be referred to by either party at any stage of the proceedings, because it is in the public interest that there should be a procedure whereby the parties can discuss their differences freely and frankly, and make offers of settlement, without fear of being embarrassed by these exchanges if they do not lead to settlement.981

979 980 981

Rabin v. Mendoza & Co [1954] 1 All ER 247. Scheering Corporation v. Cipla Limited and Another [2004] EWHC (Pat). Tramountana Armadora SA v. Atlantic Shipping Co SA [1978] 2 All ER 870.

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Work schedule Letters written ‘without prejudice’ that do not result in agreement cannot therefore be looked at by the court even on the question of costs, unless both parties consent.982 Limited exceptions to that general rule were considered in a case where it was held that an offer of settlement, made before trial of an action and containing a ‘without prejudice’ letter that expressly reserved the right to bring the letter to the notice of the judge on the issue of costs after judgment, is admissible without the consent of the parties, but only in a case where what is in issue is something more than a simple money claim, in respect of which a payment into court (qv) is appropriate.983 In Rush & Tompkins Ltd v. Greater London Council984 the House of Lords held that ‘without prejudice’ privilege is not lost once settlement is reached. Therefore third parties are not entitled to discovery of ‘without prejudice’ material that might affect their claim. The phrase ‘without prejudice’ is also used in SBC clause 4.26 to mean that the foregoing provisions are not to affect the contractor’s common law rights, which are preserved. See also: Calderbank offer; Sealed offer.

Witness A person who has seen or who can give first-hand evidence of an event, or one who gives evidence (qv) in arbitration or litigation of events or facts within the witness’s own knowledge. This kind of witness is often known as a witness to facts, in contrast to an expert witness (qv), who is expected to give an expert opinion about the facts. Thus most people would be capable of giving evidence that they had seen a wall fall down, and the time and date when the occurrence had been observed. However, only a person expert in the field would be required to give a view about the cause of the collapse. That is a relatively simple example, and in practice there are instances where the distinction between fact and opinion is not that clear.985 Therefore a witness to facts may give evidence about their opinion if such opinion or belief is the issue at trial. A person who attests to the genuineness of a signature, etc. is also described as a witness. See also: Attestation; Evidence; Oaths and affirmations.

Work and materials contract Building contracts are contracts for work and materials, which means that they are not subject to the provisions of the Sale of Goods Act 1979 (qv).986 The distinction between contracts for the sale of goods and those for work and materials was formerly more important than it is today, and there is a large volume of case law on the topic, much of which is confusing. See also: Cost reimbursement contract.

Work schedule A term used in IC, ICD, MW and MWD. It is not defined in MW and MWD and, although it is included in the definitions clause 1.1 of IC and ICD, the definition merely points the reader to the relevant recitals. In these contracts the work schedule may be priced and used for the valuation of variations (qv). 982

Computer Machinery Co Ltd v. Drescher [1983] 3 All ER 153. Cutts v. Head [1984] 1 All ER 597. 984 [1988] 3 All ER 18. 985 Sherrard v. Jacob [1965] NI 151. 986 Rotherham Metropolitan Borough Council v. Frank Haslam Milan and Co Ltd (1996) 59 Con LR 33. 983

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Workforce In its broader sense a work schedule is a list of all the work (and usually materials) necessary to construct a particular building. It can be composed of quite large elements of work, or it may be so precise and detailed that it is similar to a bill of quantities (qv). A danger in its use with the JCT contracts is that a contractor may mistake it for a bill of quantities in which all the items can be priced and then added together to form the contract sum (qv). That is rarely the case with a schedule of work, which is usually used and to be read with a set of drawings. Occasionally, a contractor will be asked to give a price only on a schedule of work.

Workforce The people controlled by the main contractor on site, including directly employed operatives and sub-contractors, but not usually persons employed directly by the employer, e.g. SBC clause 2.7 and referred to as ‘Employer’s Persons’ (qv).

Working day A term used in PPC, and defined as ‘Monday to Friday inclusive but not including any public holiday’. Periods such as those for payment within clause 20 are specified in ‘working days’: e.g. in clause 20.6 a withholding notice is to be given no later than ‘(2) Working Days’ before the final date for payment. The term ‘working days’ is used within ACA, although it is not defined.

Working drawings A term referring to the drawings that the contractor will use to construct the Works. Sometimes they are also referred to as ‘construction drawings’. They will be accurately dimensioned, and together with the specification (qv) or bills of quantities (qv) will contain all the information the contractor requires. In practice, schedules and tables may be included in the term. Usually, most of the working drawings will be produced by the architect or architectural technologists, but they are also commonly produced by structural steel or mechanical sub-contractors, or by suppliers. In the case of suppliers, the drawings are usually referred to as ‘shop drawings’ (qv). The RIBA Plan of Work (qv) now substitutes two stages – E: Technical design and F: Production information F1 and F2 – for what used to be, and often still is, called the working drawing stage of the designer’s work. See also: Details; Drawings.

Workmanship Skill in carrying out a task. Building contracts commonly use the word to differentiate between the tangible things – goods and materials – and the work done on or with them to produce the finished building. Thus SBC clause 2.3.1 refers to the kinds and standards of materials, and clause 2.3.2 deals with the standards of workmanship. In the absence of an express term to the contrary, the contractor is under an obligation at common law to carry out its work in a good and workmanlike manner. Express terms of the contract sometimes impose a higher obligation. SBC clause 3.19 is headed ‘Workmanship not in accordance with the Contract’, but it refers to a failure on the part of the contractor to carry out the work in a proper and ‘workmanlike manner’. The heading is misleading, because there is clearly a difference between workmanship and the carrying out of work in a workmanlike manner. The latter is closely linked to questions of health and safety. Workmanship is concerned with the permanent Works, but 554

Works contractor workmanlike manner refers to the way in which the Works are to be carried out. A concrete floor in its finished state is a matter of workmanship. However, the process of preparing and fixing formwork, and mixing and pouring the concrete, may or may not be accomplished in a workmanlike manner.

Workpeople SBC Schedule 7, fluctuations options, defines the term ‘workpeople’ in option A, paragraph A.11.3 and in option B, paragraph B.12.3 as being people whose wages and other payments are regulated by the rules of the Construction Industry Joint Council or other wage-fixing body for building industry trades. Labour-only sub-contractors are not workpeople for the purposes of this provision.987

Works The operation on site required to produce a building or structure. The term includes not only the building itself at various stages of construction but also all ancillary works necessary, such as scaffolding, site huts and temporary roads, even though they may not form part of the finished structure. Most building contracts draw a distinction between ‘the Works’ and ‘work’. Thus, under SBC, ‘the Works’ are defined in clause 1.1 as what is described briefly in the first recital and more particularly shown, described or referred to in the contract documents (qv), including the contractor’s designed portion (qv) work if applicable. However, ‘work’ as referred to in clause 5.1 means one of the constituent parts of the Works. Thus clause 5.1.1.3 refers to the removal from site of ‘any work executed or materials or goods brought thereon’. A curious feature of the definition is that it expressly includes any changes made in accordance with the contract. The changes referred to must be the variations defined in clause 5 of the contract. Therefore the Works, as defined, are not fully known, but subject to alterations, additions and/or omissions to the quality or quantity of the work, goods or materials. It is not clear why it was thought necessary to define the Works in this way rather than have them as a fixed entity like the contract sum (qv). Indeed, this leads to what might be a problem in certain circumstances, because article 1 of SBC requires the contractor to carry out the Works in accordance with the contract documents, and article 2 states that the employer must pay the contract sum or such other sum as may become payable under the contract. Strictly, it can no longer be said that the contract sum is the price for the Works, but only that the contract sum is the price for the unchanged Works. The difficulty is that the term for the employer’s consideration (contract sum) is precisely defined, and the term is unchangeable, whereas the term for the contractor’s consideration (the Works) is loosely defined and, even when subject to change, is referred to in the same way. Although a careful reading of the contract makes the position clear, there is potential for misunderstandings and disputes. The provisions of IC and ICD are to similar effect, but MW and MWD do not contain a specific definition of the Works other than the description in the first recital.

Works contractor A contractor engaged by a management contractor to carry out a specific parcel of work as part of a larger project. The term is used in 987

J Murphy & Sons Ltd v. London Borough of Southwark (1982) 22 BLR 41.

555

Writ connection with management contracting. JCT produced a works contract in 2008 – Management Works Contract Conditions (MCWK/C) – and there is a warranty document between works contractor and employer – Management Works Contractor/Employer Agreement (MCWK/E). It is the job of the management contractor to advise the professional team about the best way to break down the total work in the project into suitable work packages. Works contractors are superficially in the same position as sub-contractors (qv) under a traditional contract, but the management contract contains valuable protections for the management contractor in the case of defaults on the part of the works contractors. See also: Management contract.

Writ A term that is still frequently used, but which is generally out of date. It referred to an order issued in the name of the Queen requiring the performance of an act. In most cases actions in the High Court were commenced by a writ of summons, generally referred to merely as a ‘writ’. The term remains in use under the Civil Procedure Rules, but applies only to specific types of writ, such as a writ of possession in connection to land, or a writ of habeas corpus in the case of wrongful imprisonment.

Writing Many building contracts require certificates, notices, instructions, etc. to be given in writing, e.g. ACA clause 23. 1. This requirement is satisfied by any process that represents the words in visible form, and includes handwriting, typewriting and printing, although a particular contract may distinguish writing from printing. As a noun, ‘writing’ means a document produced in permanent form, as contrasted with oral communication. Schedule 1 of s. 5 of the Interpretation Act 1978 defines writing as including typing, printing, lithography, photography and other modes of representing or reproducing words in visible form. A faxed document has been held to be a notice in writing when it is printed out by the recipient.988 A notice served by email has been held to be in writing and valid for the purposes of the Arbitration Act 1996.989 Certain contracts are required to be in writing, e.g. assignments of copyright (qv), or to be evidenced in writing, e.g. contracts for the sale of land. S. 107 of the Housing Grants, Construction and Regeneration Act 1996 requires that a construction contract must be in writing for the provisions of the Act to apply. It then defines what amounts to an agreement in writing, and appears to give ‘in writing’ a broad definition. However, the courts have interpreted the provision strictly, in that all the material provisions of a contract have to be in, or evidenced in, writing for the Act to apply.990 That position has been succinctly put as follows: The principle of law which I derive from the majority judgments in RJT is this: an agreement is only evidenced in writing for the purposes of section 107, subsections

988

Construction Partnership UK Ltd v. Leek Developments [2006] EWHC B8 (TCC). Bernuth Lines Ltd v. High Seas Shipping Ltd (2006) 1 Lloyd’s Rep 537. 990 RJT Consulting Engineers Ltd v. DM Engineering (Northern Ireland) Ltd [2002] BLR 217; Mott MacDonald Ltd v. London & Regional Properties Ltd (2007) 113 Con LR 33; Redworth Construction Limited v. Brookdale Healthcare Ltd (2006) 110 Con LR 77. 989

556

Written standard terms of business (2), (3) and (4), if all the express terms of that agreement are recorded in writing. It is not sufficient to show that all terms material to the issues under adjudication have been recorded in writing.991

If the parties have entered into a contract that includes an express adjudication clause, and the contract is later subject to change agreed by the parties orally (not recorded in writing), then this it would seem will not undermine the application of the adjudication provisions992 on the premise that all the material terms are not in writing. This is premised on the ground that the adjudication is contractual and not statutory. See also: Notices.

Written standard terms of business A term used in s. 3(1) of the Unfair Contract Terms Act 1977 (qv). A party contracting on its own written standard terms of business is at a disadvantage under the Act.993 The term is not defined in the Act, but it obviously refers to the kind of printed terms that are commonly found on the reverse of quotations. It also refers to any kind of written contract that is offered by one party (not being a consumer (qv)) to another. JCT and ICE contracts are not thought to be caught by the Act, because they are freely negotiated between all sides of industry. But such contracts may still be caught by the Act where it can be shown that a party had a practice of using such contracts and it could be said that the party had adopted the terms as its own.994

991

Trustees of the Stratfield Saye Estate v. AHL Construction Ltd [2004] EWHC 3286 (TCC) at paragraph 47 per Jackson J. 992 Treasure & Son Ltd v. Martin Dawes [2007] EWHC 2420 (TCC). 993 Pegler Ltd v. Wang (UK) Ltd (2000) 70 Con LR 68. 994 British Fermentation Products v. Compair Reavell Ltd (1999) 66 Con LR 1.

557

Y Year A period of 12 calendar months or 365 consecutive days in non-leap years or 366 days in leap years. From 1 January 1753 in England the year has commenced on 1 January. The regal year commences on the accession of the Sovereign. The income tax year runs from 6 April to 5 April, and the government financial year runs from 1 April to 31 March. The accounting year of limited companies (qv) runs from any date convenient to the company.

558

Z Z clauses A phrase sometimes used to refer to the additional conditions or clauses included within the NEC by the employer. The reason for this is that the conditions are included under ‘Option Z: Additional conditions of contract’, which is optional. The guidance notes state that additional conditions should only be used when ‘absolutely necessary to accommodate special needs’. The example given is to accommodate the specific needs of undertaking Works in a particular country. Any additional clauses need to be checked to ensure they are consistent with the NEC conditions.

Zero activity An expression used in programming. It is an activity with zero duration: that is, it has no left-over time, and is not a milestone. Its purpose is to designate the logic of when an activity should take place, but that the period of the activity is not currently known.

559

BIBLIOGRAPHY Beale, H.G. et al. (2008) Chitty on Contracts, 30th edn. Sweet & Maxwell. Bernstein, R., Tackaberry, J. and Marriot, A. (2003) Bernstein’s Handbook of Arbitration and Dispute Resolution Practice, 4th edn. Sweet & Maxwell. Carnell, N. (2005) Causation and Delay in Construction Disputes, 2nd edn. Blackwell Publishing. Chappell, D. (2006) Contractual Correspondence for Architects and Project Managers, 4th edn. Blackwell Publishing. Chappell, D. (2006) The JCT Intermediate Building Contracts 2005, 3rd edn. Blackwell Publishing. Chappell, D. (2006) The JCT Minor Works Building Contracts 2005, 4th edn. Blackwell Publishing. Chappell, D. (2007) The JCT Design and Build Contract, 3rd edn. Blackwell Publishing. Chappell, D. (2007) Understanding JCT Standard Building Contracts, 8th edn. Taylor & Francis. Chappell, D. and Willis, A. (2005) The Architect in Practice, 9th edn. Blackwell Publishing. Chappell, D., Powell-Smith, V. and Sims, J. (2005) Building Contract Claims, 4th edn. Blackwell Publishing. Eggleston, B. (2008) Liquidated Damages and Extensions of Time, 3rd edn. Blackwell Publishing. Furmston, M. P. (2006) Powell-Smith & Furmston’s Building Contract Casebook, 4th edn. Blackwell Publishing. Greenstreet, R., Chappell, D. and Dunn, M. (2002) Legal and Contractual Procedures for Architects, 5th edn. Architectural Press. Harris, B., Plantrose, R. and Tecks, J. (2007) The Arbitration Act 1996, 4th edn. Blackwell Publishing. Jones, M. A. and Dugdale, A. M. (2008) Clerk and Lindsell on Torts, 19th edn. Sweet & Maxwell. Jones, N. F. (1998) Set-Off and Adjudication in the Construction Industry, 2nd edn. Blackwell Science. Keane, P. J. and Caletka, A. F. (2008) Delay Analysis in Construction Contracts. Wiley-Blackwell. Lewison, K. (2007) Interpretation of Contracts, 4th edn. Sweet & Maxwell. Lupton, S. (2002) Architect’s Handbook of Practice Management, 7th edn. RIBA Publishing. Murdoch, J. and Hughes, W. (2007) Construction Contracts Law and Management, 4th edn. Taylor & Francis. Parris, J. (1982) Retention of Title on the Sale of Goods. Granada. Powell, A., Stewart, R. et al. (2008) Jackson & Powell on Professional Liability, 6th edn. Sweet & Maxwell. Ramsey, V. and Furst, S. (2008) Keating on Construction Contracts, 8th edn. Sweet & Maxwell. Reiss, G. (2007) Project Management Demystified, 3rd edn. Taylor & Francis. Riches, J. L. and Dancaster, C. (2004) Construction Adjudication, 2nd edn. Blackwell Publishing. 560

Bibliography Turnbull, C. (2007) McRoberts on Scottish Building Contracts, 2nd edn. Blackwell Publishing. Walker, A. (1996) Project Management in Construction, 3rd edn. Blackwell Science. Wallace, I. N. D. (1995) Hudson’s Building and Engineering Contracts, 11th edn. Sweet & Maxwell.

561

TABLE OF CASES

The following abbreviations of reports are used: AC, App Cas ALJR All ER B & Ad B&S BCL Beav BLM BLR BURR C&P CA CB Ch, Ch D CILL CLC CLD CMLR Co Rep Com Cas Con LR Con LYB Const LJ CP CPD CS CSIH CSOH De GM & G DLR ECR EG EGLR ER EWCA EWHC Ex, Exch, Ex D F&F FSR H&C HKEC HL ICR JP

Law reports, Appeal Cases Australian Law Journal Reports All England Law Reports Barnwall and Adolphus’s Reports Best and Smith’s Reports Building and Construction Law Beavan’s Reports Building Law Monthly Building Law Reports Burrow Carrington & Payne’s Reports Court of Appeal Common Bench Reports Law Reports, Chancery Cases/Division Construction Industry Law Letter Commercial Law Cases Construction Law Digest Common Market Law Reports Coke’s Reports Commercial Cases Construction Law Reports Construction Law Yearbook Construction Law Journal Common Pleas The Law Reports, Common Pleas Division Scottish Court of Session Decisions Scottish Court of Session Decisions, Inner House Scottish Court of Session Decisions, Outer House De Gex, Macnaghten and Gordon’s Reports, Chancery Dominion Law Reports European Court Reports Estates Gazette Cases Estates Gazette Law Reports English Reports England & Wales Court of Appeal England & Wales High Court Law Reports, Exchequer Cases/Division Foster & Finlayson’s Nisi Prius Reports Fleet Street Reports Hurlstone and Coltman’s Exchequer Reports Hong Kong Electronic Cases House of Lords Industrial Cases Reports Justice of the Peace & Local Government Review 562

Table of Cases KB LGR LJ Ch LJ Ex LJQB Lloyd’s Rep LR LT M&W My & Cr NE NI NIQB NSWLR NY NZLR P & CR PC PD QB QBD RVR SC (HL) Sc LR SCR SJ SLT TCLR Term Rep TLR UKPC WLR WR

Law Reports, King’s Bench Local Government Reports Law Journal Reports, Chancery Law Journal Reports, Exchequer Law Journal Queen’s Bench Lloyds’ Reports Law Reports Law Times Reports Meeson and Welsby’s Exchequer Reports Mylne and Craig’s Chancery Reports North Eastern Reports Northern Ireland Reports Northern Ireland Queen’s Bench Reports New South Wales Law Reports New York Court of Appeal New Zealand Law Reports Planning and Compensation Reports Privy Council Law Reports, Probate Division Law Reports, Queen’s Bench The Law Reports, Queen’s Bench Division Rating and Valuation Reporter Session Cases, House of Lords Scots Law Reports Supreme Court Reports Solicitor’s Journal Scots Law Times Technology and Construction Law Reports Term Reports (Durnford and East) Times Law Reports Privy Council Decisions Weekly Law Reports Weekly Reporter

A & D Maintenance and Construction Ltd v. Pagehurst Construction Services Ltd (1999) 16 Const LJ 199. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Abbott and Another v. Will Gannon & Smith Ltd (2005) 103 Con LR 92 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307 Adam Opel GmbH (1) Renault SA (2) v. Mitras Automotive (UK) Ltd [2007] All ER (D) 272. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Adcock’s Trustees v. Bridge RDC (1911) 75 JP 241. . . . . . . . . . . . . . . . . . . . . . 309 AEG (UK) Ltd v. Logic Resource Ltd [1996] CLC 265. . . . . . . . . . . . . . . . . . . 537 A-G v. Sheffield Gas Consumers Co (1853) 3 De GM & G 304. . . . . . . . . . . . . 373 Alan Jackson v. Marley Davenport Ltd [2004] EWCA Civ 1225. . . . . . . . . . . . 197 Alexiadi v. Robinson (1861) 2 F&F 679. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 Alfred McAlpine Capital Projects Ltd v. Tilebox Ltd [2005] BLR 271. . . 329, 402 Alfred McAlpine Construction Limited v. Forum Architects (a firm) and Others [2002] BLR 378. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Alfred McAlpine Homes North Ltd v. Property and Land Contractors Ltd (1995) 76 BLR 65. . . . . . . . . . . . . . . . . . . . . . . . . . . 46, 162, 216, 333, 383 563

Table of Cases Allen Wilson Shopfitters v. Anthony Buckingham (2005) 102 Con LR 154. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241, 316, 538 Alliance & Leicester Building Society v. Ghahremani [1992] 32 RVR 198. . . . . 170 Aluminium Industrie Vaassen BV v. Romalpa Aluminium Ltd [1976] 2 All ER 552. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470, 478 AMEC Building Contracts Ltd v. Cadmus Investments Co Ltd (1997) 13 Const LJ 50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217, 380, 383 Amec Civil Engineering v. Secretary of State for Transport [2004] EWHC 2339 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Amec Civil Engineering Ltd v. Secretary of State for Transport [2005] BLR 227 CA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 American Airlines Inc v. Hope [1974] 2 Lloyd’s Rep. 301.. . . . . . . . . . . . . . . . . 455 American Cyanamid Co v. Ethicon Ltd [1975] AC 396.. . . . . . . . . . . . . . . . . . . 257 AMF International Ltd v. Magnet Bowling Ltd [1968] 2 All ER 789. . . . . . . . 377 Anns v. London Borough of Merton [1977] 2 All ER 492. . . . . . . . . . . . . . 72, 363 Appleby v. Myers (1867) LR 2 CP 651. . . . . . . . . . . . . . . . . . . . . 193, 212, 221, 496 Archivent Sales & Developments Ltd v. Strathclyde Regional Council (1985) 27 BLR 98. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 Argyropoulos & Pappa v. Chain Compania Naviera SA (1990) 7-CLD-05-01. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 Ariston SRL v. Charley Records Ltd (1990) The Independent 13 April 1990. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403 Ascon Contracting v. Alfred McAlpine Construction Isle of Man (1999) 16 Const LJ 316. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 212 Ashdown v. Samuel Williams & Sons Ltd [1957] 1 All ER 35. . . . . . . . . . . . . . 378 Ashville Investments Ltd v. Elmer Contractors Ltd (1987) 37 BLR 55. . . . . . . 41 Astilleros Canarios SA v. Cape Hatteras Shipping (1981) Unreported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Atlas Express Ltd v. Kafco (Importers and Distributors) Ltd [1989] 1 All ER 641. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Attorney General v. Times Newspapers Ltd [2001] EWCA Civ 97. . . . . . . . . . 106 Attwood v. Lamont [1920] 3 KB 571. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467 Aughton Ltd v. M F Kent Services Ltd (1991) 57 BLR 1. . . . . . . . . . . . . . . 41, 252 Austin Hall Building Ltd v. Buckland Securities Ltd (2001) 17 Const LJ 325. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244, 314, 432 Aveat Heating Ltd v. Jerram Falkus Construction Ltd (2007) 113 Con LR 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142, 457 AWG Construction Limited v. Rockingham Motor Speedway Limited [2004] EWHC 888 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491 Bacal Construction (Midlands) Ltd v. Northampton Development Corporation (1976) 8 BLR 88. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balfour Beatty Civil Engineering v. Technical and General Guarantee Co Ltd [2000] CLC 252. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balfour Beatty Construction Ltd v. Serco [2004] EWHC 3336 (TCC). . . . . . . . Banco de Portugal v. Waterlow & Sons Ltd [1932] AC 452. . . . . . . . . . . . . . . . Barclays Bank plc v. Fairclough Building Ltd (No. 2) (1995) 76 BLR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Barnes (A L) Ltd v. Time Talk (UK) Ltd [2003] EWCA Civ 402. . . . . . . . . . . Barque Quilpé Ltd v. Brown [1904] 2 KB 264. . . . . . . . . . . . . . . . . . . . . . . . . . . Basildon District Council v. J E Lesser Properties (1987) 8 Con LR 89. . . . . . 564

93 61 490 353 127 120 424 156

Table of Cases Bath & North East Somerset District Council v. Mowlem plc (2004) 100 Con LR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257, 327 Baxall Securities Ltd and Another v. Sheard Walsaw Partnership (a firm) and Others [2002] 83 Con LR 164. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 Beaufort Developments (NI) Ltd v. Gilbert-Ash NI Ltd (1998) 88 BLR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 39, 341 Beechwood Developments Company v. Stuart Mitchell [2001] Sc LR 725. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216, 383 Behzadi v. Shaftsbury Hotels Ltd [1992] Ch 1. . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Bell (A) & Son (Paddington) Ltd v. CBF Residential Care and Housing Association (1990) 46 BLR 102. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 Bell Scaffolding (Aust) Pty Ltd v. Rekon Limited and Alba Hire & Sales Ltd [2006] EWHC 2656 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Bennet and White (Calgary) Ltd v. Municipal District of Sugar City No. 5 [1951] AC 786. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545 Beoco Ltd v. Alfa Laval Co Ltd and Studley Engineering Ltd (1992) 66 BLR 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 Bernuth Lines Ltd v. High Seas Shipping Ltd (2006) 1 Lloyd’s Rep 537. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 371, 556 Beswick v. Beswick [1968] AC 58. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431 BFI Group of Companies Ltd v. DCB Integration Systems Ltd (1987) CILL 348.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55, 325 Bickerton (T A) & Son Ltd v. North West Metropolitan Regional Hospital Board [1970] 1 All ER 1039. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380 Billyack v. Leyland Construction Co Ltd [1968] 1 All ER 783. . . . . . . . . . . . . . 453 Birmingham City Council v. Paddison Construction [2008] EWHC 2254 TCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Bishopsgate Motor Finance Co Ltd v. Transport Brakes Ltd [1949] 1 KB 322. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479 Blackpool & Fylde Aero Club v. Blackpool Borough Council [1990] 1 WLR 1195. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89, 525 Blair v. Osborne & Tomkins (a firm) and Another (1970) 10 BLR 96. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152, 320 Blue Circle Industries Plc v. Holland Dredging Company (UK) (1987) 37 BLR 40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263 Blythe v. Birmingham Waterworks Co (1856) 11 Ex 781. . . . . . . . . . . . . . . . . . 73 Bodill & Sons (Contractors) Ltd v. Harmail Singh Mattu [2007] EWHC 2950 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203, 313, 469 Bolam v. Friern Hospital Management Committee [1957] 2 All ER 118. . . 73, 156 (1) Bole, Mr Alexander John McMinn (2) Miss Stephanie Van Deen Haak v. Huntsbuild Ltd and Richard Money (t/a Richard Money Associates) [2009] EWHC 483 (TCC). Bolton v. Mahadeva [1972] 1 WLR 1009. . . . . . . . . . . . . . . . . . . . . . . . . . . 186, 513 Bond v. Nottingham Corporation [1940] 2 All ER 12. . . . . . . . . . . . . . . . . . . . . 520 Boskalis Westminster Construction Ltd v. Liverpool City Council (1983) 24 BLR 83. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510 Bothma and Another (t/a DAB Builders) v. Mayhaven Healthcare Ltd (2007) 114 Con LR 131. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Bouygues (UK) Limited v. Dahl-Jensen (UK) Limited (2000) 73 Con LR 135 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 242, 300 Bovis Lend Lease Ltd v. R D Fire Protection Ltd (2003) 89 Con LR 169. . . . 490 565

Table of Cases Bovis Lend Lease Ltd v. Triangle Developments Ltd (2002) 86 Con LR 26. . . 490 Bowmer & Kirkland Ltd v. Wilson Bowden Properties Ltd (1996) 80 BLR 131. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156, 200, 264 Boyd & Forrest v. Glasgow Railway [1912] SC (HL) 49. . . . . . . . . . . . . . . . . . . 465 BP Refinery (Westernport) v. Shire of Hastings [1979] ALJR 20. . . . . . . . . . . . 247 Bramall & Ogden Ltd v. Sheffield City Council (1983) 1 Con LR 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29, 31, 119, 327 Branca v. Cobarro [1947] 2 All ER 101. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512 Brazier v. Skipton Rock Co Ltd [1962] 1 All ER 955. . . . . . . . . . . . . . . . . . . . . 97 Bremer Handelsgesellscaft MBH v. Vanden Avenne-Izegem PVBA [1978] 2 Lloyd’s Rep 109.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 Bridgeway Construction Ltd v. Tolent Construction (2000) CILL 1662.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133, 537 Brightside Kilpatrick Engineering Services v. Mitchell Construction (1973) Ltd (1975) 1 BLR 64. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252 Brikom Investments Ltd v. Carr [1979] 2 All ER 753. . . . . . . . . . . . . . . . . . . . . 548 British Crane Hire Corporation Ltd v. Ipswich Plant Hire Ltd [1974] 1 All ER 1059. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252 British Fermentation Products v. Compair Reavell Ltd (1999) 66 Con LR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557 British Russian Gazette & Trade Outlook Ltd v. Associated Newspapers Ltd [1933] 2 KB 616. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 British Steel Corporation v. Cleveland Bridge & Engineering Co Ltd (1981) 24 BLR 94. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318, 448 British Telecommunications plc v. James Thompson & Sons (Engineers) Ltd (1998) 61 Con LR 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 British Westinghouse v. Underground Railways Company [1912] AC 673. . . . 353 Britvic Soft Drinks Ltd v. Messer UK Ltd [2002] 2 Lloyd’s Rep 379. . . . . . . . 480 Brodie v. Cardiff Corporation [1919] AC 337. . . . . . . . . . . . . . . . . . . . . . . . . . . 284 Brown v. IRC [1964] 3 All ER 119. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 Brown and Brown v. Gilbert Scott and Payne (1992) 35 Con LR 120. . . . 261, 517 Brown (C G A) v. Carr and Another [2006] EWCA Civ 785. . . . . . . . . . . . . . . 156 Brown (Tim) (as trustee in bankruptcy of the estate of Jane Elizabeth Rice) v. (1) Rice (Stephen) (2) Patel (Smita); and ADR Group (as intervener) [2007] EWHC 625 (Ch) 2467.. . . . . . . . . . . . . . . . . . . . . . . . 345 Brunswick Construction Ltd v. Nowlan (1975) 21 BLR 27.. . . . . . . . . . . . . . . . 156 Bryant (C) & Son Ltd v. Birmingham Hospital Saturday Fund [1938] 1 All ER 503. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193, 495–6 Bryen & Langley Ltd v. Martin Rodney Boston [2005] All ER (D) 507. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538 Burden (R B) Ltd v. Swansea Corporation [1957] 3 All ER 243. . . . . . . . . 47, 376 Bushwall Properties Ltd v. Vortex Properties Ltd [1976] 1 WLR 591. . . . . . . . 535 Bywaters v. Curnick (1906) HBC, 4th edn, vol 2, p 393. . . . . . . . . . . . . . . . . . . 62 C&B Scene Concept Design Limited v. Isobar Limited (2002) 82 Con LR 154. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Cable & Wireless plc v. IBM United Kingdom Ltd [2002] 2 All ER (Comm) 1041. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 Cable (1956) Ltd v. Hutcherson Brothers Pty Ltd (1969) 43 ALJR 321. . . . . . 533 Calderbank v. Calderbank [1975] 3 All ER 333. . . . . . . . . . . . . . . . . . . . . . . . . . 70 566

Table of Cases Cantillon Limited v. Urvasco Limited [2008] EWHC 282 (TCC). . . . . . . . . . . . 491 Cantrell and Another v. Wright & Fuller Ltd (2003) 91 Con LR 97. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 77, 78, 128, 254, 286 Caparo Industries v. Dickman [1990] 1 All ER 568. . . . . . . . . . . . . . . . . . . . . . . 365 Capes v. Ball (1873) LR 8 Exch 186. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Capital Structures plc v. Time & Tide Construction Ltd [2006] EWHC 591 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 176 Carillion Construction Ltd v. Devonport Royal Dockyard [2003] BLR 79. . . . 216 Carillion Construction Ltd v. Devonport Royal Dockyard Ltd (2005) 104 Con LR 1 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275, 361 Carillion Construction Ltd v. Felix (UK) Ltd [2001] BLR 1. . . . . . . . . . . . . . . 176 Cartwright v. MacCormack [1963] 1 WLR 18. . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Catalina v. Norma (1938) 82 SJ 698. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Century Insurance Co Ltd v. Northern Ireland Road Transport Board [1942] 1 All ER 491. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545 Chandris v. Isbrandtsen-Moller Co Inc [1951] 2 All ER 613. . . . . . . . . . . . . . . 179 Chaplin v. Hicks [1911] 2 KB 786. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372 Chatenay v. The Brazilian Submarine Telegraph Company Ltd [1989] 1 QB 79. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Cheltan Pty Ltd v. Stanton [2001] 122 Con LR 110. . . . . . . . . . . . . . . . . . . . . . 417 Chichester Joinery Ltd v. John Mowlem & Co plc (1987) 42 BLR 100. . . . . . . 134 Chiemgauer Membran und Zeltbau GmbH v. New Millennium Experience Company (2000) CILL 1741. . . . . . . . . . . . . . . . . . . . . . . . . . . . 334 Chinney Construction Co Ltd v. Po Kwong Marble Factory Ltd [2005] 3 HKEC 1042. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 City Axis Ltd v. Daniel P Jackson (1998) 64 Con LR 84. . . . . . . 35, 151, 354, 383 City Inn Limited v. Shepherd Construction Limited [2007] CSOH 190. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34, 102, 172, 529, 548 City of Manchester v. Fram Gerrard Ltd (1974) 6 BLR 70. . . . . . . . . . . . . . . . 146 CJP Builders Ltd v. William Verry Ltd [2008] EWHC 2025 (TCC). . . . . . . . . . 466 Clegg Parkinson & Co v. Earby Gas Co [1896] 1 QB 56. . . . . . . . . . . . . . . . . . . 509 Close Invoice Finance Ltd v. Belmont Bleaching and Dyeing Company Ltd [2003] All ER (D) 304. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Clough Mill Ltd v. Geoffrey Martin [1984] 3 All ER 982. . . . . . . . . . . . . . . . . . 470 Clusky (trading as Damian Construction) v. Chamberlain (1994) April BLM 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 Clydebank Engineering Co v. Don Jose Yzquierdo y Castenada [1905] AC 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 Coal Authority (The) v. (1) FW Davidson (2) WE Davidson [2008] EWHC 2180 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Colbart v. H Kumar (1992) 59 BLR 89. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 Collingwood v. Home & Colonial Stores Ltd [1936] 3 All ER 200.. . . . . . . . . . 254 Collins (Contractors) Limited v. Baltic Management (1994) Limited (2004) 99 Con LR 1 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167, 169 Colls v. Home & Colonial Stores [1904] AC 179. . . . . . . . . . . . . . . . . . . . . . . . . 473 Columbus v. Clowes [1903] 1 KB 244. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 Commission v. Denmark (C-243/89) [1993] ECR I-3353. . . . . . . . . . . . . . . . . . . 355 Commission v. Netherlands (C-359/93) [1996] 1 CMLR 477. . . . . . . . . . . . . . . 187 Computer & Systems Engineering plc v. John Lelliot (Ilford) Ltd (1989) The Times, 23 May 1989. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501 567

Table of Cases Computer Machinery Co Ltd v. Drescher [1983] 3 All ER 153. . . . . . . . . . . . . 553 Connex South Eastern Ltd v. M J Building Services Group plc (2004) 95 Con LR 43. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 Connex South Eastern Ltd v. M J Building Services Group plc (2005) 100 Con LR 16 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 Consarc Design Ltd v. Hutch Investments Ltd (2002) 84 Con LR 36. . . . . . . . 517 Construction Partnership UK Ltd v. Leek Developments Ltd [2006] EWHC B8 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 371, 556 Convent Hospital Ltd v. Eberlin & Partners (1988) 14 Con LR 1. . . . . . . . . . . 219 Co-operative Insurance Society Ltd v. Henry Boot Scotland Ltd (2002) 84 Con LR 164. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125, 126, 157, 251, 496 Co-operative Retail Services Ltd v. Taylor Young Partnership Ltd [2002] 1 All ER (Comm) 918. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297, 367 Corby Group Litigation v. Corby Borough Council [2007] EWHC 3174 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 Cornfoot v. Royal Exchange Assurance Corporation [1904] 2 KB 40. . . . . . . . 141 Cory Ltd v. City of London Corporation [1951] 2 All ER 85. . . . . . . 247, 276, 424 Costain Ltd (1) O’Rourke Civil Engineering Limited (2) Bachey Soletanche Limited Emcor Drake & Scull Group Plc (3) v. (1) Bechtel Limited (2) Mr Fady Bassily [2005] EWHC 1018 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185, 246 County & District Properties Ltd v. C Jenner & Son Ltd (1976) 3 BLR 41.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253 County & District Properties Ltd v. John Laing Construction Ltd (1982) 23 BLR 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47, 446 Courtney & Fairbairn Ltd v. Tolaini Brothers (Hotels) Ltd (1974) 2 BLR 100. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Cowlin Construction Limited v. CFW Architects (a firm) [2003] BLR 241. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300 Craven-Ellis v. Canons Ltd [1936] 2 All ER 1066. . . . . . . . . . . . . . . . . . . . . . . . 546 Cremdean Properties Ltd v. Nash (1977) 244 EG 547 (CA). . . . . . . . . . . . 231, 496 Crest Nicholson (Eastern) Ltd v. Mr and Mrs Western (2008) 119 Con LR 18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360 Crosby & Sons Ltd v. Portland UDC (1967) 5 BLR 121. . . . . . . . . . . . . . 187, 228 Croudace Construction Ltd v. Cawoods Concrete Products Ltd (1978) 8 BLR 20.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Croudace Construction Ltd v. London Borough of Lambeth (1986) 6 Con LR 70. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26, 78 Crown Estates Commissioners v. John Mowlem & Co Ltd (1994) 70 BLR 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37, 101, 207, 399, 453 Crowshaw v. Pritchard and Renwick (1899) 16 TLR 45. . . . . . . . . . . . . . . 139, 190 Cruden Construction Ltd v. Commission for the New Towns (1994) 75 BLR 134. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Curtis v. Chemical Cleaning Co Ltd [1951] 1 All ER 837. . . . . . . . . . . . . . . . . . 251 Cutter v. Powell (1795) 6 Term Rep 320.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Cutts v. Head [1984] 1 All ER 597. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553 D & C Builders Ltd v. Rees [1965] 3 All ER 837. . . . . . . . . . . . . . . . . . . . . . 13, 176 D & F Estates Ltd v. Church Commissioners for England (1988) 15 Con LR 35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312, 363 Dalton v. Angus (1881) 6 App Cas 740. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520 568

Table of Cases Damond Lock Grabowski v. Laing Investments (Bracknell) Ltd (1992) 60 BLR 112. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Darlington Borough Council v. Wiltshier Northern Ltd [1995] 1 WLR. 68 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Davies (A) & Co (Shopfitters) Ltd v. William Old Ltd (1969) 67 LGR 395. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 246 Davis Contractors Ltd v. Fareham UDC [1956] AC 696. . . . . . . . . . . . . . 220, 433 Dawber Williamson Roofing Ltd v. Humberside County Council (1979) 14 BLR 70. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384, 479 De Bussche v. Alt (1878) 8 Ch D 286. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Decoma UK Ltd (formerly known as Conix UK Ltd) v. Haden Drysys International Limited [2005] 103 Con LR 1. . . . . . . . . . . . . . . . . . . . . . . . . 195 Deepak Fertilisers v. ICI [1998] 2 LR 139. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Deko Scotland Limited v. Edinburgh Royal Joint Venture and Others [2003] Scot CS 113. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Dennis v. White & Co [1917] AC 479. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299 Dent v. Bennett (1839) 4 My & Cr 269. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Department of National Heritage v. Steenson Varming Mucahy (1998) 60 Con LR 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Department of the Environment v. Thomas Bates & Sons Ltd (1990) 50 BLR 61. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Derby v. Weldon (No. 2) [1989] 1 All ER 1002. . . . . . . . . . . . . . . . . . . . . . . . . . 220 Derby & Co Ltd v. Weldon (No. 9) [1991] 1 WLR 652. . . . . . . . . . . . . . . . . . . 170 Derry v. Peek (1889) 14 App Cas 337. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 DGT Steel and Cladding Limited v. Cubitt Building and Interiors Limited (2007) 116 Con LR 118. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510 Diamond Build Limited v. Clapham Park Homes Ltd [2008] EWHC 1439 (TCC) case no. HT0869. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Discain Project Services Ltd v. Opecprime Developments Ltd [2000] BLR 402. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Discain Project Services Ltd v. Opecprime Developments Ltd (No. 2) [2001] BLR 285. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 District of Surrey v. Carroll-Hatch and Associates Ltd (1979) 10 DLR (3d) 218. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 Dodd Properties v. Canterbury City Council [1980] 1 WLR 433. . . . . . . . . . . . 353 Dole Dried Fruit & Nut Company v. Trustin Kerwood Ltd [1990] 2 Lloyd’s Rep 309.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489 Donoghue v. Stevenson [1932] AC 562. . . . . . . . . . . . . . . . . . . . . . 72, 215, 362, 364 Douglas (R M) Construction Ltd v. CED Building Services (1985) 3 Con LR 124. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84, 454 Douglas Harper v. Interchange Group Ltd [2007] EWHC 1834. . . . . . . . . . . . . 195 DPP v. Turner [1974] AC 357. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 DSND Subsea v. Petroleum Geo-Services [2000] BLR 531. . . . . . . . . . . . . . . . . 176 Duchess of Argyll v. Beuselinck [1972] 2 Lloyd’s Rep 172. . . . . . . . . . . . . . . . . 454 Dudley Corporation v. Parsons & Morrin Ltd, 8 April 1959, CA Unreported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Dugdale v. Kraft Foods [1976] 1 WLR 1288. . . . . . . . . . . . . . . . . . . . . . . . . . . . 304 Duncan v. Topham (1849) 8 CB 225. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Dunlop & Ranken Ltd v. Hendall Steel Structures Ltd (1957) 3 All ER 344. . . 223 Dunlop Pneumatic Tyre Co Ltd v. New Garage & Motor Co Ltd [1915] All ER 739. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327, 487 569

Table of Cases Durtnell (R) & Sons Ltd v. Kaduna Ltd (2003) 19 Const LJ T115. . . . . . . . . . 168 Eames London Estates Ltd v. North Hertfordshire District Council (1980) 18 BLR 50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194, 260 East Ham Borough Council v. Bernard Sunley & Sons Ltd [1965] 3 All ER 619. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78, 261, 353 Edmund Nuttall Ltd v. R G Carter Ltd [2002] BLR 312. . . . . . . . . . . . . . . . . . 168 Edwards v. National Coal Board [1949] 1 KB 704. . . . . . . . . . . . . . . . . . . . . . . 455 Elanay Contracts Limited v. The Vestry [2001] BLR 33. . . . . . . . . . . . . . . . . . . 244 Elitestone Ltd v. Morris [1997] 1 WLR 687. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Emson Eastern Ltd (in Receivership) v. E M E Developments (1991) 26 Con LR 57. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97, 417, 418 English Industrial Estates Corporation Ltd v. George Wimpey & Co. Ltd (1972) 7 BLR 122. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29, 122, 284, 388 Enterprise Oil Ltd v. Strand Insurance Co Ltd [2006] EWHC 58 (Comm). . . . 490 Epping Electrical Company Ltd v. Briggs and Another [2007] BLR 126. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111, 457 Equitable Debenture Assets Corporation Ltd v. William Moss Group Ltd and Others (1984) 2 Con LR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . 147, 296 ERDC Group Limited v. Brunel University (2006) 109 Con LR 114.. . . . 315, 317 Erlanger v. New Sombrero Phosphate Co (1878) 46 LJ Ch 425. . . . . . . . . . . . . 466 Esso Petroleum Co Ltd v. Harper’s Garage (Stourport) Ltd [1968] AC 269. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467 Esso Petroleum Ltd v. Mardon [1976] 1 Lloyd’s Rep. 305. . . . . . . . . . . . . . . . . 365 Exxonmobil Sales and Supply Corporation v. Texaco Ltd [2003] EWHC 1964. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Fairclough Building Ltd v. Rhuddlan Borough Council (1985) 30 BLR 26. . . 464 Fairfield-Mabey Ltd v. Shell UK (1989) 45 BLR 113. . . . . . . . . . . . . . . . . . . . . 102 Fairweather (H) Ltd v. Asden Securities Ltd (1979) 12 BLR 40. . . . . . . . . . . . . 221 Fairweather (H) Ltd v. London Borough of Wandsworth (1987) 39 BLR 106. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83, 172 Fenton v. Thorley [1903] AC 443. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Fernbrook Trading Co Ltd v. Taggart [1979] 1 NZLR 556. . . . . . . . . . . . . . . . 529 Ferson Contractors Ltd v. Levolux AT Ltd (2003) 86 Con LR 98 (CA). . . . . . 490 Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd [1943] AC 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449 Finnegan (J F) & Son Ltd v. Sheffield City Council (1989) 43 BLR 124. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181, 243, 383 First National Securities Ltd v. Jones [1978] 2 All ER 221. . . . . . . . . . . . . . . . . 333 Fletcher v. Minister of Town and Country Planning [1947] 2 All ER 496. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Foley v. Classique Coaches Ltd [1934] 2 KB 1.. . . . . . . . . . . . . . . . . . . . . . . . . . 26 Forsikringsaktieselskapet Vesta v. Butcher [1989] AC 852. . . . . . . . . . . . . . . . . 127 Forsyth v. Ruxley Electronics and Construction Ltd and Others (1995) 73 BLR 1 (HL). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343 Franks & Collingwood v. Gates (1983) 1 Con LR 21. . . . . . . . . . . . . . . . . . . . . 542 Freeman & Son v. Hensler (1900) 64 JP 260. . . . . . . . . . . . . . . . . . . . . . . . 411, 412 G D Construction (St Albans) Ltd v. Scottish & Newcastle plc [2003] BLR 131. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 570

Table of Cases Galliford Try Infrastructure Ltd v. Mott MacDonald Ltd and Rowen Structures Ltd [2008] EWHC 1570 (TCC). . . . . . . . . . . . . . . . . . . . 365 Galoo Ltd & Others v. Bright Grahame Murray TLR 14 January 1994. . . . . . 102 Garnac Grain Co Inc v. Faure & Fairclough [1968] AC 1130. . . . . . . . . . . . . . 353 General Surety and Guarantee Co Ltd v. Francis Parker Ltd (1977) 6 BLR 16.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 George Barker (Transport) Ltd v. Eynon [1974] 1 All ER 900. . . . . . . . . . . . . . 144 George E Taylor & Co Ltd v. G Percy Trentham Ltd (1980) 16 BLR 15. . . . . 369 George Fischer Holdings Ltd v. Multi Design Consultants Ltd and Davis Langdon & Everest (1998) 61 Con LR 85. . . . . . . . . . . . . . . . . . . . . . . . . . 261 Gilbert-Ash (Northern) Ltd v. Modern Engineering (Bristol) Ltd (1973) 1 BLR 75.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489 Glasgow Airport Limited v. Messrs Kirkham & Bradford (2007) CSIH 47. . . 94 Gleeson v. Hillingdon London Borough (1970) 215 EG 165. . . . 29, 284, 403, 429 Glen v. The Church Wardens & Overseers of the Parish of Fulham (1884) 14 QBD 328. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286 Glencot Developments & Design Co Ltd v. Ben Barrett & Son (Contractors) Limited (2001) 80 Con LR 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Glenlion Construction Ltd v. The Guinness Trust (1987) 39 BLR 89. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140, 213, 255, 341 Glynn v. Margetson [1893] AC 351.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284 Goldman v. Hargrave [1967] 2 All ER 989.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 Goodwin & Sons Ltd v. Fawcett (1965) Unreported. . . . . . . . . . . . . . . . . . . . . . 371 Goss v. Nugent (1833) 5 B & Ad 58. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 GPN (In Receivership) v. O2 (UK) Ltd [2004] EWHC 2494 (TCC). . . . . . . . . 25 Great Atlantic Insurance Co v. Home Insurance Co (1981) 2 All ER 485.. . . . 430 Great Eastern Hotel Co Ltd v. (1) John Laing Co Ltd (2) Laing C onstruction plc (2005) 99 Con LR 45. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Great Peace Shipping Limited v. Tsavliris (International) Limited (2002) CILL 1943.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352 Greater London Council v. Cleveland Bridge & Engineering Co Ltd (1986) 8 Con LR 30 and 8 Con LR 44 (CA). . . . . . . . . . . . . . . . . . . . 459, 468 Greater London Council v. Ryarsh Brick Co Ltd (1985) 4 Con LR 85. . . . . . . 93 Greater Nottingham Co-operative Society v. Cementation Piling and Foundation Ltd (1988) QB 71. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 Greaves & Co (Contractors) Ltd v. Baynham, Meikle & Partners (1975) 4 BLR 56.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 Greenock Corporation v. Caledonian Railway Co [1917] AC 556. . . . . . . . . . . 13 Griffin and Another v. Midas Homes Ltd [2000] 78 Con LR 152. . . . . . . . . . . 491 H G Construction Limited v. Ashwell Homes (East Anglia) Ltd (2007) 112 Con LR 128. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Hadley v. Baxendale (1854) 9 Ex 341. . . . . . 215, 273, 275, 304, 327, 334, 343, 462 Halifax Life Limited v. The Equitable Life Assurance Society [2007] EWHC 503. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Halsey v. Milton Keynes General NHS Trust; Steel v. (1) Joy (2) Halliday [2004] EWCA Civ 576. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345 Hampshire County Council v. Stanley Hugh Leach Ltd (1991) 8-CLD-07-12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 Hancock v. B W Brazier (Anerley) Ltd [1966] 2 All ER 901. . . . . . . . . 96, 247, 514 571

Table of Cases Hargreaves (B) Ltd v. Action 2000 Ltd (1992) 62 BLR 72. . . . . . . . . . . . . . . . . 489 Harmon v. House of Commons (1999) 67 Con LR 1. . . . . . . . . . . . . . . . . . . . . 89 Harris Calnan Construction Co Limited v. Ridgewood (Kensington) Ltd [2007] EWHC 2738 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Harrison (M) & Co (Leeds) Ltd v. Leeds City Council (1980) 14 BLR 118. . . 414 Hart Investments Ltd v. Fidler & Another (2006) 109 Con LR 67.. . . . . . . . . . 457 Harvey v. Facey [1893] AC 552. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Harvey Shopfitters Ltd v. ADI Ltd (2003) 91 Con LR 71. . . . . . . . . . . . . . . . . 315 Hasham v. Zenab [1960] AC 316.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Hawley (David Phillips) v. (1) Luminar Leisure plc (2) ASE Security Ltd (3) Mann (David Preston) (as nominated underwriter for Faraday Underwriting Limited) (2005) CILL 2196. . . . . . . . . . . . . . . . . . . 545 Hayter v. Nelson [1990] 8 Lloyd’s Rep 265. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Hazell v. Hammersmith & Fulham London Borough Council [1992] 2 AC 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534 Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] AC 465. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73, 177, 364, 365, 447 Hellenic Steel Co v. Svolmar Shipping Co (The Komninos S) [1991] 1 Lloyd’s Rep 370.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Helstan Securities Ltd v. Hertfordshire County Council (1978) 20 BLR 70. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Henderson v. Merrett Syndicates Ltd [1995] 2 AC 145. . . . . . . . . . . . . 73, 364, 365 Henry Boot (Construction) Ltd v. Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Henry Boot Construction Ltd v. Alstom Combined Cycles Ltd [1999] BLR 123. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Henry Boot Construction Ltd v. Central Lancashire New Town Development Corporation Ltd (1980) 15 BLR 1. . . . . . . . . . . . . . 45, 179, 510 Henthorn v. Fraser [1892] 2 Ch 27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Hepburn v. Leather (1884) 50 LT 660. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Herbert Construction UK Ltd v. Atlantic Estates plc (1993) 70 BLR 46.. . . . . 55 Herkules Piling v. Tilbury Construction Limited (1992) 61 BLR 107. . . . . . . . 48 Heyman v. Darwins Ltd [1942] AC 356. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 Hick v. Raymond & Reid [1893] AC 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454 Hickman & Co v. Roberts [1913] AC 229. . . . . . . . . . . . . . . . . . . . . . . . . . 57, 377 Hill v. Chief Constable of West Yorkshire (1989) AC 53. . . . . . . . . . . . . . . . . . 365 Hill (J M) & Sons Ltd v. London Borough of Camden (1980) 18 BLR 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371, 521 Hiscox Syndicates Ltd and Another v. The Pinnacle Ltd (2008) EWHC 145 (Ch). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Hoenig v. Isaacs [1952] 2 All ER 176. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404, 513 Holbeach Plant Hire Ltd v. Anglian Water Authority (1989) 14 Con LR 101. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209, 273, 275 Holland v. Hodgson (1872) LR 7 CP 328.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Holland, Hannen & Cubitt (Northern) Ltd v. Welsh Health Technical Services Organisation and Others (1981) 18 BLR 80. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231, 414, 462 Holme v. Brunskill (1878) 3 QBD 495. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Holme v. Guppy [1838] 150 ER 1195. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199, 238 Homburg Houtimport BV v. Argrosin Ltd [2003] 2 WLR 711. . . . . . . . . . . . . . 284 Homer Burgess Ltd. v. Chinx (Annan) Ltd [2000] BLR 124. . . . . . . . . . . . . . . . 242 572

Table of Cases Hong Huat Developments Co (Pte) Ltd v. Hiap Hong & Co Pte Ltd (2000) 82 Con LR 89. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Hong Kong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 Hough and Another v. Annear and Another (2007) 119 Con LR 57. . . . . . . . . 396 How Engineering Services v. Lindner Ceilings Partitions (the first judgment) 17 May 1995, Unreported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 How Engineering Services Limited v. Lindner Ceilings Floors Partitions plc [1999] 2 All ER (Comm). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46, 351 Howard v. Pickford Tool Co [1951] 1 KB 417. . . . . . . . . . . . . . . . . . . . . . . . . . . 465 Howard Marine & Dredging Co Ltd v. A Ogden & Sons (Excavations) Ltd (1977) 9 BLR 34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352 Hunter v. Fitzroy Robinson & Partners (1978) 10 BLR 84. . . . . . . . . . . . . . . . . 130 Hurst v. Leeming [2002] EWHC 1051.. . . . . . . . . . . . . . . . . . . . . . . . . 133, 345, 346 Hurst Stores and Interiors Ltd v. M L Europe Property Ltd (2004) 94 Con LR 66. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352 Hyde v. Wrench (1840) 3 Beav 334. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Hydraulic Engineering Co Ltd v. McHaffie (1879) 4 QBD 670. . . . . . . . . . . . . 471 Hydrocarbons Great Britain Ltd v. Cammell Laird Shipbuilders Ltd and Automotive Products plc (1991) 53 BLR 84. . . . . . . . . . . . . . . . . . . . . . . . . 80 IBM UK v. Rockware Glass (1980) FSR 335. . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Imperial Tobacco Co v. Parsley [1936] 2 All ER 515.. . . . . . . . . . . . . . . . . . . . . 403 Impresa Castelli SpA v. Cola Holdings Ltd (2002) 87 Con LR 123. . . 55, 174, 388 Independent Broadcasting Authority v. EMI Electronics Ltd and BICC Construction Ltd (1980) 14 BLR 1. . . . . . . . . . . . . . . . . . . . . . . 211, 514 Interfoto Picture Library Ltd v. Stilletto Visual Programmes Ltd [1989] 1 QB 433. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 All ER 98. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201, 284 Investors in Industry Commercial Properties v. Bedfordshire District Council (1985) 5 Con LR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 Ives (E R) Investment Ltd v. High [1967] 1 All ER 504. . . . . . . . . . . . . . . . . . . 13 J & A Developments Ltd v. Edina Manufacturing Ltd, Armoura Ltd and Others [2006] NIQB 85. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89, 526 Jacobs v. Morton and Partners (1994) 72 BLR 92. . . . . . . . . . . . . . . . . . . . . . . . 152 Jardine Engineering v. Shiizu (High Court of Hong Kong) (1992) 63 BLR 98. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 Jarvis (J) and Sons Ltd v. Castle Wharf Developments & Others [2001] 1 Lloyd’s Rep 308.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526 Jarvis (J) & Sons Ltd v. Westminster Corporation (1970) 7 BLR 64. . . . . . . . . 417 Jarvis (John) Ltd v. Rockdale Housing Association Ltd (1986) 10 Con LR 51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545 JDM Accord Ltd v. Secretary of State for the Environment, Food & Rural Affairs (2004) 93 Con LR 133.. . . . . . . . . . . . . . . . . . . . . . . . . . 20, 143 Jeancharm Ltd (t/a Beaver International) v. Barnet Football Club Ltd (2003) 92 Con LR 26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327, 403 Jewson Limited v. Leanne Teresa Boyhan as Personal Representatives of the Estate of Thomas Michael Kelly [2003] EWHC Civ 1030. . . . . . . . 480 573

Table of Cases John Doyle Construction Limited v. Laing Management (Scotland) Ltd (2002) 85 Con LR 98.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32, 228, 334 John Doyle Construction Limited v. Laing Management (Scotland) Ltd [2004] CS 141 (11 June 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . 33, 34, 172 John F Hunt Demolition Ltd v. ASME Engineering Ltd (2007) 114 Con LR 105. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 John Holland Construction & Engineering Pty Ltd v. Kvaerner RJ Brown Pty Ltd (1996) 82 BLR 81. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 John L Haley Ltd v. Dumfries and Galloway Regional Council (1988) 39 GWD 1599. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 John Mowlem & Co v. Eagle Star and Others (1995) 44 Con LR 134. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56, 185 Jones (on behalf of the Architects Registration Board of the United Kingdom) v. Ronald Baden Hellard (1998) 14 Const LJ 299. . . . . . . . . . . 43 Joseph Constantine Steamship Line v. Imperial Smelting Corporation Ltd [1942] AC 154. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Junior Books Ltd v. The Veitchi Co Ltd (1982) 21 BLR 66. . . . . . . . . . . . . . . . 362 Kajima UK Engineering Ltd v. Underwriter Insurance Co Limited [2008] 122 Con LR 121. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434 Kaye (P & M) Ltd v. Hosier & Dickinson Ltd [1972] 1 All ER 121.. . . . . 101, 417 Kemble v. Farren [1829] All ER 641. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402 Kensington, Chelsea and Westminster Area Health Authority v. Wettern Composites Ltd and Others (1984) 31 BLR 57. . . . . . . . . . . . . . . . . . 85, 261 Kier Regional Ltd (t/a Wallis) v. City and General (Holborn) Ltd [2006] BLR 315. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 Kijowski v. New Capital Properties Ltd (1989) 15 Con LR 1.. . . . . . . . . . . . . . 218 Killby & Gayford Ltd v. Selincourt Ltd (1973) 3 BLR 106. . . . . . . . . . . . . . . . 250 Kimbell v. Hart District Council (1987) 9 Con LR 118.. . . . . . . . . . . . . . . . . . . 508 Kingston-upon-Hull Corporation v. Harding [1892] 2 QB 494. . . . . . . . . . . . . . 305 Kleinwort Benson Ltd v. Lincoln City Council [1999] 2 AC 349. . . . . . . . 188, 533 Koch Hightex GmbH v. New Millenium Experience Company Ltd [1999] EWCA Civ 983. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 Koufos v. C Czarnikow Ltd (The Heron II) [1969] 1 AC 350. . . . . . . . . . . . . . 215 Lafarge (Aggregates) Ltd v. London Borough of Newham [2005] EWHC 1337 (Comm). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lakeman v. Mountstephen (1874) LR 7 HL 17. . . . . . . . . . . . . . . . . . . . . . . . . . Lamprell v. Billericay Union (1849) 154 ER 850. . . . . . . . . . . . . . . . . . . . . . . . . Lancaster v. Bird (1989) The Times, 9 March 1999. . . . . . . . . . . . . . . . . . . . . . . Langstane Housing Association Ltd v. Riverside Construction (Aberdeen) Ltd and Others [2009] CSOH 52. . . . . . . . . . . . . . . . . . . . . . . . Lanphier v. Phipos (1838) 8 C & P 475. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Laserbore v. Morrison Biggs Wall (1993) CILL 896. . . . . . . . . . . . . . . . . . . . . . Latimer v. AEC Ltd [1953] AC 643. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Law v. Llewellyn [1906] 1 KB 487.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lawson v. Wallsey Local Board (1883) 48 LT 507. . . . . . . . . . . . . . . . . . . . . . . Lebaupin v. Crispin [1920] 2 KB 714. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leedsford Ltd v. City of Bradford (1956) 24 BLR 45. . . . . . . . . . . . . . . . . . . . . Lee-Parker v. Izzet [1972] 2 All ER 800. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574

141 232 528 542 367 453 449 362 298 449 214 187 105

Table of Cases Leigh v. Jack (1879) 5 Ex D 264. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Les Affréteurs Réunis v. Leopold Walford [1919] AC 801. . . . . . . . . . . . . . . . . 248 Leslie v. Metropolitan Asylums Board (1901) 68 JP 86. . . . . . . . . . . . . . . . . . . . 62 Levy v. Assicurazioni Generali [1940] AC 791. . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Leyland Shipping Company Limited v. Norwich Union Fire Insurance Society Limited [1918] AC 350. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 Liberty Mercian Ltd v. Dean & Dyball Construction Ltd [2008] EWHC 2617 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486 Linden Gardens Trust Ltd v. Lenesta Sludge Disposals Ltd – see St Martins Property Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48, 50 Lindsay Petroleum Co v. Hurd (1874) LR 5 PC 221. . . . . . . . . . . . . . . . . . . . . . 305 Lintest Builders Ltd v. Roberts (1980) 10 BLR 120.. . . . . . . . . . . . . . . . . . . . . . 13 Lion Laboratories Ltd v. Evans [1984] 2 All ER 417. . . . . . . . . . . . . . . . . . . . . 106 Liverpool City Council v. Irwin [1977] AC 239. . . . . . . . . . . . . . . . . . . . . . 248, 326 Locabail (UK) Ltd v. Bayfield Properties Ltd [2000] QB 451. . . . . . . . . . . . . . . 57 Lockland Builders Ltd v. John Kim Rickwood (1995) 77 BLR 38. . . . . . . . . . . 474 London and South Western Railway v. Cyril Flower (1875–76) 1 CPD 77. . . . 227 London Borough of Camden v. Thomas McInerney & Sons Ltd (1986) 9 Con LR 99. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78, 286 London Borough of Hillingdon v. Cutler [1967] 2 All ER 361. . . . . . . . . . . . . . 217 London Borough of Hounslow v. Twickenham Garden Developments Ltd (1971) 7 BLR 81. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319, 412 London Borough of Lewisham v. Shepherd Hill Civil Engineering 30 July 2001, Unreported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 London Borough of Merton v. Stanley Hugh Leach Ltd (1985) 32 BLR 51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 95, 128, 166, 249, 452 London, Chatham & Dover Railway Co v. South Eastern Railway Co (1893) AC 429. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 London County Council v. Vitamins Ltd [1955] 2 All ER 229. . . . . . . . . . . . . . 493 London Underground Limited v. Citylink Telecommunications Limited [2007] EWHC 1749 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 LRE Engineering Services Ltd v. Otto Simon Carves Ltd (1981) 24 BLR 127. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Lubenham Fidelities & Investments Co Ltd v. South Pembrokeshire District Council and Wigley Fox Partnership (1986) 6 Con LR 85. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76, 521, 527 Lucas v. Godwin (1937) 132 ER 595. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 528 Luxor (Eastbourne) Ltd v. Cooper [1941] AC 108.. . . . . . . . . . . . . . . . . . . 128, 247 Lynch v. Thorne [1956] 1 All ER 744. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126, 147 Mackay v. Dick (1881) 6 App Cas 251. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Makers UK Limited v. The Mayor and Burgesses of Camden London Borough Council [2008] EWHC 1836 (TCC). . . . . . . . . . . . . . . . . . . . . . . . 19 Makin (J & J) Ltd v. London & North Eastern Railway Co [1943] 1 All ER 645. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Mareva Compania Naviera SA v. International Bulkcarriers SA (1975) 2 Lloyd’s Rep 509. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 Mariner International Hotels Limited Sino Land Company v. Atlas Limited Hang Lung Group Limited (formerly known as Hang Lung Development Company Limited) FACV No. 3 of 2006. . . . . . . . . . . . . . . 416 575

Table of Cases Marshall v. Harland & Wolff Ltd [1972] ICR 101. . . . . . . . . . . . . . . . . . . . . . . . 245 Maryon v. Carter (1830) 4 C&P 295. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Mason v. Clarke [1955] AC 778. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 547 Matsoukis v. Priestman & Co [1915] 1 KB 681. . . . . . . . . . . . . . . . . . . . . . . . . . 214 Matthew Hall Ortech Ltd v. Tarmac Roadstone Ltd (1997) 87 BLR 96. . . . . . 207 Maymac Environmental Services Limited v. Faraday Building Services Limited [2000] 75 Con LR 101. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 McAlpine PPS Pipeline Systems Joint Venture v. Transco (2004) 96 Con LR 69. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300 McConkey v. AMEC plc (1990) 27 Con LR 88. . . . . . . . . . . . . . . . . . . . . . . . . . 239 McCutcheon v. David McBrayne Ltd [1964] WLR 125. . . . . . . . . . . . . . . . . . . 135 McGlinn (Ian) v. (1) Waltham Construction Ltd (2) Huw Thomas Associates (3) D J Hartigan & Associates Ltd [2005] 102 Con LR 40. . . . 133 McGlinn v. Waltham Contractors Ltd and Others (No. 3) (2007) 111 Con LR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 McKenzie v. Potts and Dobson Chapman (1995) 50 Con LR 40. . . . . . . . . . . . 261 McMaster University v. Wilchar Construction (1971) 22 DLR (3d) 9. . . . . . . . 352 McNicholas Construction (Holdings) Ltd v. Endemol UK plc [2003] EWHC 2472 (Ch). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Melachrino v. Nicholl & Knight [1920] 1 KB 693. . . . . . . . . . . . . . . . . . . . . . . . 353 Mellows Archital Ltd v. Bell Projects Ltd (1997) 87 BLR 26. . . . . . . . . . . . . . . 1 Metropolitan Water Board v. Dick, Kerr & Co Ltd [1918] AC 119. . . . . . . . . . 221 Midland Bank v. Bardgrove Property Services (1992) 60 BLR 1. . . . . . . . . . . . 520 Midland Expressway Ltd v. Carillion Construction Ltd (2006) 107 Con LR 235. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443 Midland Land Reclamation Ltd and Another v. Warren Energy Ltd (1997) EWHC 375 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Mifflin Construction Ltd v. Netto Food Stores Ltd, 26 October 1993, Unreported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Millar’s Machinery Co Ltd v. David Way & Son (1934) 40 Com Cas 204. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Miller v. London County Council (1934) 151 LT 425. . . . . . . . . . . . . . . . . . . . . 98 Miller v. Minister of Pensions [1947] 2 All ER 372. . . . . . . . . . . . . . . . . . . . . . . 53 Millers Specialist Joinery v. Nobles (2001) No. 103553, Salford CC (TCC) 64/00. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515 Ministry of Defence v. Scott Wilson Kirkpatrick and Dean & Dyball Construction [2000] BLR 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264 Minter (F G) Ltd v. Welsh Health Technical Services Organisation (1980) 13 BLR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162, 209, 275, 333 Mirant Asia-Pacific Construction (Hong Kong) Ltd v. (1) Ove Arup and Partners International Limited (2) Ove Arup and Partners Hong Kong Limited [2007] EWHC 918 TCC. . . . . . . . . . . . . . . . . . . . . . . . . 138, 212 Modern Buildings (Wales) Ltd v. Limmer & Trinidad Co Ltd [1975] 2 All ER 549. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 Mohamed v. Alaga & Co [1999] 3 All ER 699. . . . . . . . . . . . . . . . . . . . . . . . . . . 245 Moloney v. Lambeth Borough Council (1966) 64 LGR 440. . . . . . . . . . . . . . . . 377 Mona Oil Equipment Co v. Rhodesia Railways [1949] 2 All ER 1014.. . . . . . . 128 Moody v. Ellis (1983) 26 BLR 39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429 Moorcock (The) (1889) 14 PD 64. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 Moresk Cleaners Ltd v. Thomas Henwood Hicks (1966) 4 BLR 50. . . . . . . . . 155 Morris v. Jones and Others [2002] EWCA Civ 1790. . . . . . . . . . . . . . . . . . . . . . 351 576

Table of Cases Morrison-Knudson International Co Inc v. Commonwealth of Australia (1972) 13 BLR 114. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 Moss v. Smith (1977) 76 LGR 284. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 Motherwell Bridge Construction Limited v. Micafil Vakuumtecchnik (2002) 81 Con LR 44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Mott MacDonald Ltd v. London & Regional Properties Ltd (2007) 113 Con LR 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556 Mount Carmel Investments Ltd v. Smee and Another [1988] EGCS 99. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 22 Mowlem plc (formerly John Mowlem and Co plc) v. Newton Street Ltd [2003] 89 Con LR 153. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 Mowlem plc (trading as Mowlem Marine) v. Stena Line Ports Limited [2004] EWHC 2206 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Muirhead v. Industrial Tank Specialities Ltd (1986) 3 WLR 993. . . . . . . . . . . . 362 Murphy v. Brentwood District Council (1990) 50 BLR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72, 73, 177, 258, 261, 308, 363 Murphy (J) & Sons Ltd v. Johnston Precast Ltd (formerly Johnston Pipes Ltd) [2008] EWHC 3024.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 Murphy (J) & Sons Ltd v. London Borough of Southwark (1982) 22 BLR 41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555 Myers v. Sarl (1860) 3 E & E 306. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 Mylcrist Builders Limited v. Mrs G Buck [2008] EWHC 2172 (TCC). . . . . . . . 537 National Coal Board v. William Neill & Son [1984] 1 All ER 555. . . . . . . 36, 453 National Justice Compania Naviera SA v. Prudential Assurance Company Ltd (Ikarian Reefer) [1993] 2 Lloyd’s Rep 68. . . . . . . . . . . . . . . 197 Neodox Ltd v. Borough of Swinton & Pendlebury (1958) 5 BLR 34. . . . . . . . . 255 Neville (H W) (Sunblest) Ltd v. Wm Press & Sons Ltd (1981) 20 BLR 78. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155, 417, 418 New Islington and Hackney Housing Association Ltd v. Pollard Thomas and Edwards Ltd [2001] BLR 74. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263, 419 Nigel Witham Ltd v. (1) Robert Leslie Smith (2) Jacqueline Isaacs (No. 2) [2008] EWHC 12 TCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Nikko Hotels (UK) Ltd v. MEPC plc [1991] 2 EGLR 103. . . . . . . . . . . . . . . . . 300 Northern Developments (Cumbria) Ltd v. J & J Nichol [2000] BLR 158. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19, 133 Northern Regional Health Authority v. Derek Crouch Construction Ltd (1984) 26 BLR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 North-West Leicestershire District Council v. East Midlands Housing Association Ltd [1981] 3 All ER 364. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 North West Metropolitan Regional Hospital Board v. T A Bickerton & Son Ltd [1970] 1 All ER 1039. . . . . . . . . . . . . . . . . . . . . . . . . . . . 369, 380, 463 Norwest Holst Construction Ltd v. Co-operative Wholesale Society Ltd, 17 February 1998, Unreported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383 Nottingham Building Society v. Eurodynamics plc [1995] FSR 605. . . . . . . . . . 464 Nye Saunders & Partners v. Alan E Bristow (1987) 17 Con LR 73. . . . . . 191, 365 Oldschool v. Gleeson (Construction) Ltd (1976) 4 BLR 103. . . . . . . . . . . . . . . 148 Olley v. Marlborough Court Ltd [1949] 1 All ER 127. . . . . . . . . . . . . . . . . . . . . 251 OTV Birwelco Limited v. Technical & General Guarantee Company Limited [2002] 84 Con LR 117. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 577

Table of Cases Overseas Tankship (UK) v. Morts Dock and Engineering Co (The Wagon Mound) [1961] AC 388. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462 Owen Pell Ltd v. Bindi (London) Ltd [2008] EWHC 1420 (TCC). . . . . . . . . . . 195 Oxford Architects Partnership (The) v. The Cheltenham Ladies College [2006] EWHC 3156 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323 Pacific Associates Inc v. Baxter (1988) 16 Con LR 90. . . . . . . . . . . . . . . . . 24, 447 Paddington Churches Housing Association v. Technical & General Guarantee Co Ltd [1999] BLR 244. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Page v. Llandaff Rural District Council (1901) HBC, 4th edn, vol 2, p 316. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Parkinson v. College of Ambulance Ltd [1925] 2 KB 1. . . . . . . . . . . . . . . . . . . . 245 Parkinson (Sir Lindsay) & Co Ltd v. Commissioner of Works [1950] 1 All ER 208. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448 Parsons v. Sovereign Bank of Canada [1911] AC 160. . . . . . . . . . . . . . . . . . . . . 144 Parsons (H) (Livestock) Ltd v. Uttley Ingham & Co Ltd [1978] 1 All ER 525. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343 Parsons Plastics (Research and Development) Ltd v. Purac Ltd (2002) 93 Con LR 26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490 Partenreederei MS Karen Oltmann v. Scarsdale Shipping Co (The Karen Oltmann) [1976] 2 Lloyd’s Rep 708. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 Partington & Son (Builders) Ltd v. Tameside Metropolitan Borough Council (1985) 5 Con LR 99. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Paul Thomas Construction Ltd v. Hyland [2000] ADR LR 03/08. . . . . . . . . . . 420 Peak Construction (Liverpool) Ltd v. McKinney Foundations Ltd (1970) 1 BLR 111. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119, 154, 199, 243, 322 Pearce & High v. John P Baxter and Mrs A Baxter [1999] BLR 101. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35, 149, 151 Pearson (S) & Son Ltd v. Dublin Corporation [1907] AC 351. . . . . . . . . . 218, 219 Pegler Ltd v. Wang (UK) Ltd (2000) 70 Con LR 68. . . . . . . . . . . . . . . . . . . . . . 557 Penwith District Council v. V P Developments Ltd [1999] EWHC Technology 231 (21 May). . . . . . . . . . . . . . . . . . . . . . . . . . . . 58, 204, 254, 447 Perar BV v. General Surety & Guarantee Co Ltd (1994) 66 BLR 72. . . . . . . . . 147 Percival Ltd v. LCC Asylum & Mental Deficiency Committee (1918) 16 LGR 367. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506 Percy Bilton Ltd v. Greater London Council (1982) 20 BLR 1. . . . . 173, 329, 464 Percy (G) Trentham Ltd v. Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 27 Perry v. Tendring District Council (1985) 3 Con LR 74. . . . . . . . . . . . . . . . . . . 508 Peter Pan Manufacturing Corporation v. Corsets Silhouette Ltd [1963] 3 All ER 402. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 Philips Products Ltd v. Hyland [1987] 1 WLR 659. . . . . . . . . . . . . . . . . . . . . . . 537 Phipps v. Pears [1964] 2 All ER 35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520 Photo Production Ltd v. Securicor Transport Ltd [1980] AC 827. . . 103, 161, 222 Pillar (R C) & Son v. The Camber (Portsmouth) Ltd (2007) 115 Con LR 102. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376 Pinnels Case (1602) 5 Co Rep 117a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Pioneer Shipping v. BTP Tioxide [1982] AC 724. . . . . . . . . . . . . . . . . . . . . . . . . 109 Pirelli General Cable Works Ltd v. Oscar Faber & Partners (1983) 21 BLR 99. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307–8, 323 578

Table of Cases Porter v. Tottenham Urban District Council [1915] 1 KB 776. . . . . . . . . . . . . . 276 Pozzolanic Lytag v. Bryan Hobson Associates (1999) 15 Const LJ 135. . . . . . . 272 Pratt Contractors Ltd v. Transit New Zealand [2003] UKPC 83 Privy Counci. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525 Premium Nafta Products Limited and Others v. Fili Shipping Company Limited and Others [2007] 4 All ER 951. . . . . . . . . . . . 26, 40, 41, 44, 249, 546 Prenn v. Simmonds [1971] 1 WLR 1381. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 President of India v. La Pintada Compania Navegacion SA [1984] 2 All ER 773. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 President of India v. Lips Maritime Corporation [1987] 3 All ER 110. . . . . . . . 275 Pride Valley Foods Ltd v. Hall and Partners (Contract Management) Ltd (2000) 16 Const LJ 424. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438 Proforce Recruit Limited v. Rugby Group Limited [2007] EWHC 1621 (QB). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 Qualcast (Wolverhampton) Ltd v. Haynes [1959] 2 All ER 38. . . . . . . . . . . . . . 451 Quality Street Properties (Trading) Limited v. Elmwood (Glasgow) Limited (2002) CILL 1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258 Quinn v. J W Green (Painters) Ltd [1965] 3 All ER 785. . . . . . . . . . . . . . . . . . . 508 R v. Bow Street Metropolitan Stipendiary Magistrate ex p. Pinochet Ugarte (No. 2) [2000] 1 AC 119. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Rabin v. Mendoza & Co [1954] 1 All ER 247. . . . . . . . . . . . . . . . . . . . . . . . . . . 552 Randall v. Trimen (1856) 139 ER 1580. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550 Ranger v. Great Western Rail Co [1854] All ER 321. . . . . . . . . . . . . . . . . . . . . 402 Rapid Building Group Ltd v. Ealing Family Housing Association Ltd (1984) 1 Con LR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Rayack Construction Ltd v. Lampeter Meat Co Ltd (1979) 12 BLR 30. . . . . . 469 Re A Company (1299 of 2001) LR 79 www.adjudication.co.uk/cases/ company.htm 15 May 2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515 Re Bayley-Worthington & Cohen’s Contract [1909] 1 Ch 648. . . . . . . . . . . . . . 146 Re Cawley & Co Ltd (1889) 42 Ch D 209. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Re Cosslett (Contractors) Ltd, Clark, Administrator of Cosslett (Contractors) Ltd in Administration v. Mid Glamorgan County Council [1996] 4 All ER 46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 Re Cosslett (Contractors) Ltd, Clark, Administrator of Cosslett (Contractors) Ltd in Administration v. Mid Glamorgan County Council [1997] 4 All ER 115 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 Re Tout and Finch Ltd [1954] 1 All ER 127. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Reading v. Attorney General [1951] AC 507. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Reardon Smith Line Ltd v. Yngvar Hansen-Tangen [1976] WLR 989. . . . . . . . 201 Redworth Construction Limited v. Brookdale Healthcare Ltd (2006) 110 Con LR 77. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556 Reed Executive plc (1) Reed Solutions plc (2) v. (1) Reed Business Information Ltd (2) Reed Elsevier (UK) Ltd (3) Totaljobs.com [2002] EWHC 1015 (Ch). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345 Rees & Kirby Ltd v. Swansea City Council (1983) 25 BLR 129. . . . . 26, 206, 254 Rees & Kirby Ltd v. Swansea City Council (1985) 5 Con LR 34 (CA). . . . . . . 209 Regan (Dennis) v. (1) Paul Properties Ltd (2) Lahaise (Peter) (3) Griston (John) [2006] EWCA Civ 1391. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 579

Table of Cases Reynolds v. Ashby [1904] AC 466. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 Rhodia International Holdings Ltd and Another v. Huntsman International LLC [2007] EWHC 292. . . . . . . . . . . . . . . . . . . . . . . . . . 56, 453 Richard Roberts v. Douglas Smith Stimson (1988) 46 BLR 50. . . . . . . . . . . . . 56 Rickards v. Oppenheim [1950] 1 KB 616. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 RJT Consulting Engineers Ltd v. DM Engineering (Northern Ireland) Ltd [2002] BLR 217. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216, 556 Robert Cunningham Catherine Good Gelande Corporation Limited v. Collett and Farmer [2006] EWHC 1771 (TCC). . . . . . . . . . . . . . . . . . . . . . 317 Roberts v. Brett (1865) 11 HLC 337. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 Roberts v. Dorman Long & Co Ltd [1953] 2 All ER 428. . . . . . . . . . . . . . . . . . 52 Robertson v. French (1803) 102 ER 779.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429 Robinson v. Harman (1848) 1 Ex 850.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 Roche Products Ltd v. Freeman Process Systems (1996) 80 BLR 102. . . . 41, 252 Rogers v. Whitely [1892] AC 118. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 Rolls Razor Ltd v. Cox [1967] 1 All ER 397. . . . . . . . . . . . . . . . . . . . . . . . . . . . 356 Rotherham Metropolitan Borough Council v. Frank Haslam Milan & Co Ltd (1996) 59 Con LR 33.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 126, 553 Royal Brompton Hospital NHS Trust v. Hammond and Others (2001) 66 Con LR 42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490 Royal Brompton Hospital NHS Trust v. Hammond and Others (No. 7) (2001) 76 Con LR 148. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103, 197 Royal Brompton Hospital NHS Trust v. Hammond and Others (No. 3) (2002) 81 Con LR 1 HL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Royal Brompton Hospital NHS Trust v. Hammond and Others [2002] 88 Con LR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 Rudgwick Clay Works Ltd v. Baker (1984) Unreported. . . . . . . . . . . . . . . . . . . 21 Rupert Morgan Building Services (LLC) Ltd v. David Jervis and Harriett Jervis [2004] BLR 18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278, 514 Rush & Tompkins v. Greater London Council [1988] 3 All ER 18. . . . . . . . . . 553 Rutter v. Charles Sharpe & Co Ltd [1979] 1 WLR 1429. . . . . . . . . . . . . . . . . . . 455 Ruttle Plant Hire Limited v. Secretary of State for the Environment, Food & Rural Affairs [2009] EWCA Civ 97. . . . . . . . . . . . . . . . . . . . . . . . 307 Ryan v. Mutual Tontine Westminster Chambers Association [1893] 1 Ch 116. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Ryeford Homes Ltd v. Sevenoaks District Council (1989) 16 Con LR 75. . . . . 364 Rylands v. Fletcher (1868) LR 1 Exch 256. . . . . . . . . . . . . . . . . . . . . . 254, 318, 511 S L Timber Systems Ltd v. Carillion Construction Ltd (2001) 85 Con LR 79. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375, Sahib Foods Ltd v. Paskin Kyriakides Sans (a firm) (2003) 93 Con LR 1. . . . . St Andrews Bay Development Ltd v. HBG Management Ltd and Mrs Janey Milligan [2003] Scot CS 103. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . St Martins Corporation Ltd v. Sir Robert McAlpine & Sons Ltd [1994] AC 85 HL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . St Martins Property Corporation Ltd and St Martins Property Investments Ltd v. Sir Robert McAlpine & Sons Ltd and Linden Gardens Trust Ltd v. Lenesta Sludge Disposals Ltd, McLaughlin & Harvey PLC, and Ashwell Construction Company Ltd (1992) 57 BLR 57 CA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Saint Line Ltd v. Richardsons, Westgarth & Co Ltd [1940] 2 KB 99.. . . . . . . . 580

516 127 217 48

50 107

Table of Cases Salford Corporation v. Lever (1891) 63 LT 658. . . . . . . . . . . . . . . . . . . . . . . . . . 131 Saltman Engineering Co Ltd v. Campbell Engineering Co Ltd [1963] 3 All ER 413. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 Sansom v. Metcalfe Hambleton [1998] 26 EG 154 at 156. . . . . . . . . . . . . . . . . . 454 Saunders v. Edwards [1987] 1 WLR 1116. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245 Sayers v. International Drilling Co NV [1971] 1 WLR 1176. . . . . . . . . . . . . . . . 312 Scheering Corporation v. Cipla Limited and Another [2004] EWHC (Pat). . . . 552 Scheldebouw BV v. St James Homes (Grosvenor Dock) Ltd (2006) 105 Con LR 90. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 Scott v. Avery (1856) 25 LJ Ex 308. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483 Scott v. London & St Catherine’s Docks Co (1865) 3 H & C 596. . . . . . . . . . . 12 Serck Controls Limited v. Drake & Scull Engineering Limited (2000) 73 Con LR 100. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Shanklin Pier Ltd v. Detel Products Ltd [1951] 2 All ER 471.. . . . . . . . . . . . . . 93 Shawton Engineering Ltd v. DGP International Limited and Another [2005] EWCA Civ 1359. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530 Sheffield District Railway Co v. Great Central Railway Co (1911) 27 TLR 451. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Sherrard v. Jacob [1965] NI 151. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553 Shirlaw v. Southern Foundries (1926) Ltd [1939] 2 KB 206. . . . . . . . . . . . . . . . 248 Sidaway v. Board of Governors of the Bethlem Royal Hospital and the Maudsley Hospital [1985] 7 All ER 643. . . . . . . . . . . . . . . . . . . . . . . . . . . . 499 Skanska Construction (Regions) Ltd v. Anglo-Amsterdam Corporation Ltd (2002) 84 Con LR 100. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388 Smith v. Eric S Bush [1990] 1 AC 831. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365, 537 Smith v. Leech Brain & Co Ltd [1961] 3 All ER 1159. . . . . . . . . . . . . . . . . . . . . 215 Smith v. South Wales Switchgear Ltd (1978) 8 BLR 1. . . . . . . . . . . . . . . . . . . . 251 Solle v. Butcher [1950] 1 KB 671. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352 Spartan Steel & Alloys Ltd v. Martin & Co (Contractors) Ltd [1971] 3 All ER 557. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362 Spring v. Guardian Assurance PLC and Others (1994) 3 All ER 129. . . . . . . . 146 Spurling (J) Ltd v. Bradshaw [1956] 1 WLR 461. . . . . . . . . . . . . . . . . . . . . . . . . 135 Stanor Electric Ltd v. R Mansell Ltd (1988) CILL 399.. . . . . . . . . . . . . . . . . . . 403 Steel v. (1) Joy (2) Halliday [2004] EXCA Civ 1576. . . . . . . . . . . . . . . . . . . . . . 345 Stent Foundations v. Carillion (2001) 78 Con LR 188. . . . . . . . . . . . . . . . . . . . 315 Steria Ltd v. Sigma Wireless Communications Ltd (2007) 118 Con LR 177. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82, 102, 104, 351, 529 Steve Domsalla (t/a Domsalla Building Services) v. Kenneth Dyason (2006) 112 Con LR 95. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538 Stevenson Jordan & Harrison v. Macdonald & Evans (1952) 1 TLR 101. . . . . 253 Stilk v. Myrick (1809) 2 Camp 317. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Stockport Metropolitan Borough Council v. O’Reilly [1978] 1 Lloyd’s Rep 595. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 534 Stocznia Gdanska SA v. Latvian Shipping Company (No. 2) [2002] 2 Lloyds’s Rep 436. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Stovin-Bradford v. Volpoint Properties Ltd and Another [1971] 3 All ER 570. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Strachen & Henshaw Ltd v. Stein Industrie (UK) Ltd (1998) 87 BLR 52. . . . . 474 Straume (A) (UK) Ltd v. Bradlor Developments Ltd [2000] 2 TCLR 409. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314, 432 Street v. Sibbabridge Ltd (1980) Unreported. . . . . . . . . . . . . . . . . . . . . . . . 68, 508 581

Table of Cases Sturges v. Bridgman (1879) 11 Ch D 582. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 Subraniam v. Public Prosecutor [1956] 1 WLR 965. . . . . . . . . . . . . . . . . . . . . . . 237 Suisse Atlantique Société d’Armement Maritime SA v. NV Rotterdamsche Kolen Centrale [1966] 2 All ER 61. . . . . . . . . . . . . . . . . . . 222 Sumpter v. Hedges [1898] 1 QB 673. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Sunley & Co Ltd v. Cunard White Star Ltd [1940] 1 KB 740. . . . . . . . . . . . . . . 226 Sunrock Aircraft Corporation v. Scandinavian Airlines Systems Denmark-Norway-Sweden [2007] EWHC Civ 882.. . . . . . . . . . . . . . . . . . . 195 Surefire Systems Ltd v. Guardian ECL Ltd [2005] EWHC 1860 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Sutcliffe v. Chippendale & Edmondson (1971) 18 BLR 149. . . . . . . . . . . . . . . . 541 Sutcliffe v. Thackrah [1974] 1 All ER 319. . . . . . . . . . . . . . . . . . . . . . . . . . 24, 280 Sweatfield Ltd v. Hathaway Roofing Ltd (1997) CILL 1235. . . . . . . . . . . . . . . 381 Symonds v. Lloyd (1859) 141 ER 622. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139, 247 Tai Hing Cotton Mill Ltd v. Kamsing Knitting Factory [1978] 1 All ER 515. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 Tai Hing Cotton Mill Ltd v. Liu Chong Hing Bank Ltd [1986] AC 80. . . . . . . 364 Tate & Lyle Food Distribution Ltd v. Greater London Council [1982] 1 WLR 149. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178, 180, 243, 273 Taylor Woodrow Holdings Ltd (2) George Wimpey Southern Counties Ltd v. Barnes & Elliott Ltd [2006] BLR 377. . . . . . . . . . . . . . . . . . . . . . . . . 74 Team Management Services plc v. Kier Management and Design Ltd (1993) 63 BLR 76. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75, 386 Technotrade Ltd v. Larkstore Ltd [2006] EWCA Civ 1079.. . . . . . . . . . . . . . . . 48 Temloc Ltd v. Errill Properties Ltd (1987) 12 Con LR 109. . . . . . . . . . . . . . . . 326 Tersons Ltd v. Stevenage Development Corporation (1963) 5 BLR 54. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118, 327, 536 Test Valley Borough Council v. Greater London Council (1979) 13 BLR 63. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96, 147, 247 Thomas Feather & Co (Bradford) Ltd v. Keighley Corporation (1953) 52 LGR 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549 Thomas Saunders Partnership v. Harvey (1989) 30 Con LR 103. . . . . . . . . . . . 365 Thorn v. London Corporation (1876) 1 App Cases 120. . . . . . . . . . . . . . . . . . . 496 Token Construction Co Ltd v. Charlton Estates Ltd (1973) 2 BLR 3. . . . . . . . 77 Tolhurst v. Associated Portland Cement Manufacturers (1900) Ltd [1903] AC 414. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49, 68 Tony Cox (Dismantlers) Ltd v. Jim 5 Ltd (1997) 13 Const LJ 209. . . . . . . . . . 542 Townsend v. Stone Toms & Partners (1985) 27 BLR 26. . . . . . . . . . . . . . . 280, 549 Trafalgar House Construction (Regions) Ltd v. General Surety and Guarantee Co Ltd (1995) 73 BLR 32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Tramountana Armadora SA v. Atlantic Shipping Co SA [1978] 2 All ER 870. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485, 552 Treasure & Son Ltd v. Martin Dawes [2007] EWHC 2420 (TCC). . . 263, 419, 557 Tredegar v. Harwood [1929] AC 72. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 Trendtex Trading Corporation v. Crédit Suisse [1982] AC 679. . . . . . . . . . . . . 48 Trollope & Colls Ltd v. North West Metropolitan Regional Hospital Board (1973) 9 BLR 60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Trustees (The) of Stokes Pension Fund v. Western Power Distribution (South West) Plc [2005] BLR 497. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 582

Table of Cases Trustees of the Stratfield Saye Estate v. AHL Construction Ltd [2004] EWHC 3286 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tulk v. Moxhay (1848) 2 Ph 774. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Turriff v. Welsh National Water Development Authority (1979) 1994 Con LYB 122. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Turriff Construction Ltd v. Regalia Knitting Mills Ltd (1971) 9 BLR 20. . . . . Tweddle v. Atkinson (1861) 1 B & S 393. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tyco Fire & Integrated Solutions (UK) Ltd v. Rolls-Royce Motor Cars Ltd [2007] EWHC 3159 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

241 468 248 317 431 297

UGS Finance Ltd v. National Mortgage Bank of Greece [1964] 1 Lloyd’s Rep 438. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 United Scientific Holdings Ltd v. Burnley Council [1978] AC 904. . . . . . . . . . . 530 Universal Tankships of Monrovia v. International Transport Workers Federation [1982] 2 All ER 67. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Vascroft (Contractors) Ltd v. Seeboard plc (1996) 52 Con LR 1. . . . . . . . 31, 411 Veritas Shipping Corporation v. Anglo-American Cement Ltd [1966] 1 Lloyd’s Rep 76. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Verlest v. Motor Union Insurance Co Ltd [1925] 2 KB 137. . . . . . . . . . . . . . . . 47 VHE Construction plc v. RBSTB Trust Co Ltd [2000] BLR 187. . . . . . . . . . . . 516 Victor Stanley Hawkins v. Pender Bros Pty Ltd (1994) 10 BCL 111. . . . . . . . . 56 Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd [1949] 1 All ER 997 (CA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215, 303, 334, 343, 462 Victoria University of Manchester v. Hugh Wilson and Lewis Womersley (1984) 2 Con LR 43. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147, 309 Vigers (A) Sons & Co Ltd v. Swindell [1939] 3 All ER 590. . . . . . . . . . . . . . . . 513 Viking Grain Storage Ltd v. T H White Installations Ltd (1985) 13 BLR 103. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211, 405 Voaden v. Champion [2002] 1 Lloyd’s Rep 623. . . . . . . . . . . . . . . . . . . . . . . . . . 56 Vonlynn Holdings Ltd v. Patrick Flaherty Contracts Ltd, 26 January 1988, Unreported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380 Wadsworth v. Lydall [1981] 2 All ER 401 CA. . . . . . . . . . . . . . . . . . . . . . . . . . . 273 Wallis’s Cayton Bay Holiday Camp Ltd v. Shell-Mex & BP Ltd [1974] 3 All ER 575. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Walter Lawrence v. Commercial Union Properties (1984) 4 Con LR 37. . . . . . 22 Walters v. Whessoe Ltd and Shell Refining Co Ltd (1996) 6 BLR 23. . . . . . . . 253 Waterfront Shipping Co Ltd v. Trafigura AG subnom The Sabrrewing [2007] EWHC 2482 (Comm). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529 Wates Construction (London) Ltd v. Franthom Property Ltd (1991) 53 BLR 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203, 386, 469 Wates Construction (South) Ltd v. Bredero Fleet Ltd (1993) 63 BLR 128. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202, 494 Watford Electrics Ltd v. Sanderson CFL Ltd [2001] EWCA Civ 317. . . . . . . . 97 Watson Building Services Ltd v. Harrison (2001) SLT 846. . . . . . . . . . . . . . . . . 352 Webster v. Cecil (1861) 30 Beav 60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Weld-Blundell v. Stevens [1920] AC 956. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Wellington Corporation v. Lower Hutt Corporation [1904] AC 773. . . . . . . . . 17 Wells v. Army & Navy Co-operative Society Ltd (1902) 86 LT 764. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178, 257, 349, 529 583

Table of Cases West Faulkner v. London Borough of Newham (1995) 11 Const LJ 157 CA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459 West London Railway v. London and NW Railway (1853) 11 CB 327. . . . . . . 177 Westminster Building Co Ltd v. Andrew Beckingham (2004) 20 Const LJ T145. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316, 538 Westminster Corporation v. J Jarvis & Co Ltd [1969] 1 WLR 1448 (CA). . . . . 155 Wharf Properties Ltd v. Eric Cumine Associates (No. 2) (1991) 52 BLR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163, 333 Wheat v. E Lacon & Co Ltd [1966] AC 552.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 Whiteways Contractors (Sussex) Ltd v. Impressa Castelli Construction (UK) Ltd (2000) 75 Con LR 92.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515 Whittal Builders Co Ltd v. Chester-le-Street District Council (1985) 11 Con LR 40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243, 333, 412 William Hill Organisation Ltd v. Bernard Sunley & Sons Ltd (1982) 22 BLR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 William Lacey (Hounslow) Ltd v. Davis [1957] 2 All ER 712. . . . . . . . . . . . . . 90 William Tomkinson v. Parochial Church Council of St Michael (1990) 6 Const LJ 319. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35, 150, 456 William Verry Limited v. North West London Communal Mikvah [2004] EWHC 1300 (TCC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 300 Williams v. Roffey Brothers & Nicholls (Contractors) Ltd [1990] 2 WLR 1153. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Williams v. Wallis & Cox [1914] 2 KB 478. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 Willment Brothers Ltd v. North-West Thames Regional Health Authority (1984) 26 BLR 51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357 Willmore v. S E Electricity Board [1957] 2 Lloyd’s Rep 375. . . . . . . . . . . . . . . . 509 Wilsher v. Essex Area Health Authority [1987] QB 730. . . . . . . . . . . . . . . . . . . 454 Wimpey Construction UK Ltd v. Poole (1984) 27 BLR 58.. . . . . . . . . . . . . . . . 74 Wong Lai Ying v. Chinachem Investment Co Ltd (1979) 13 BLR 81. . . . . . . . 220 Woodar Investment Development Ltd v. Wimpey Construction UK Ltd [1980] 1 All ER 571. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162, 251 Woods Hardwick Ltd v. Chiltern Air Conditioning Ltd [2001] BLR 23. . . . . . 516 Woolwich Equitable BS v. LRC [1993] AC 70. . . . . . . . . . . . . . . . . . . . . . . . . . . 448 Worboys v. Acme Investments Ltd [1969] 4 BLR 133. . . . . . . . . . . . . . . . . . . . . 454 Worlock v. SAWS & Rushmoor Borough Council (1981) 20 BLR 94. . . . . . . . 218 Worlock v. SAWS & Rushmoor Borough Council (1982) 22 BLR 66 CA. . . . 73 Wraight Ltd v. P H & T (Holdings) Ltd (1968) 13 BLR 26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162, 333, 334, 343, 411 Yates (AE) Trenchless Solutions Limited v. Black and Veatch Limited [2008] EWHC 3183. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yonge v. Toynbee [1910] 1KB 215. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yorkshire Dale Steamship v. Minister of War Transport [1942] 2 All ER 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yorkshire Water Authority v. Sir Robert McAlpine and Son (Northern) Ltd (1985) 32 BLR 114. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Young & Marten Ltd v. McManus Childs Ltd (1969) 9 BLR 77. . . . . . . . . . . .

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