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ConstructionContracts

Constructionprofessionalsofallkindsfrequentlyneedlegaladvicethatisstraightforwardas well as authoritative and legally rigorous. Building on the success of two previouseditions,DavidChappellreturnstoprovideanswersto225FAQsfromhisexperienceasSpecialistAdvisortotheRIBA.With50newquestions,andthoroughupdatestoaddresschangestothelawandcontracts,thisisaninvaluablefirstportofcallforanyconstructionlawproblem.

Questions range incontent fromextensionsof time, liquidateddamagesand lossand/orexpense to issues of practical completion, defects, valuation, certificates and payment,architects’instructions,adjudicationandfees.Amongthenewquestionsare:

Isthecontractorboundbyitspriceevenifthereisanerror?

Howdotermsaboutworkinginaspiritoftrustaffectotherclauses?

CanarchitectslosetheirrightstocertifyunderJCT2011contracts?

EveryquestionincludedhasbeenaskedofDavidChappellduringhiscareer,andheuseshis vast experience to provide clear, easy to follow advice in this book. Most wereoriginally asked by architects, but the answers will be of wide interest to everyoneinvolvedinconstruction.

David Chappell is director of David Chappell Consultancy Limited and one-timeProfessor and Senior Research Fellow in Architectural Practice and ManagementResearchattheQueen’sUniversityBelfastandVisitingProfessorofPracticeManagementand Law at the University of Central England in Birmingham. He has written manyarticlesandbooksfortheconstructionindustry,includingRoutledge’sUnderstandingJCTStandardBuildingContracts,nowinits9thedition.Hefrequentlyactsasanadjudicator.

ConstructionContracts

QuestionsandAnswers

Thirdedition

DavidChappell

Firsteditionpublished2006bySponPress

Thiseditionpublished2015byRoutledge2ParkSquare,MiltonPark,Abingdon,OxonOX144RN

andbyRoutledge711ThirdAvenue,NewYork,NY10017

RoutledgeisanimprintoftheTaylor&FrancisGroup,aninformabusiness

©2015DavidChappell

TherightofDavidChappelltobeidentifiedasauthorofthisworkhasbeenassertedbyhim/herinaccordancewithsections77and78oftheCopyright,DesignsandPatentsAct1988.

Allrightsreserved.Nopartofthisbookmaybereprintedorreproducedorutilisedinanyformorbyanyelectronic,mechanical,orothermeans,nowknownorhereafterinvented,includingphotocopyingandrecording,orinanyinformationstorageorretrievalsystem,withoutpermissioninwritingfromthepublishers.

Trademarknotice:Productorcorporatenamesmaybetrademarksorregisteredtrademarks,andareusedonlyforidentificationandexplanationwithoutintenttoinfringe.

BritishLibraryCataloguing-in-PublicationDataAcataloguerecordforthisbookisavailablefromtheBritishLibrary

LibraryofCongressCataloging-in-PublicationDataChappell,David(DavidM.)author.Constructioncontracts:questionsandanswers/DavidChappell.—Thirdedition.p.cm.Includesbibliographicalreferencesandindex.1.Constructioncontracts—GreatBritain.I.Title.KD1641.C479’2015343.4107’869—dc232014035237

ISBN:978-1-138-79551-8(pbk)ISBN:978-1-315-75839-8(ebk)

TypesetinSabonbySwalesandWillisLtd,Exeter,Devon,UK

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Contents

PrefacetotheThirdEditionAbbreviationsusedinthetext

TenderingCan the lowest tenderer legally do anything if its tender is notaccepted?

Thecontractor’s tenderstates that it isopenforacceptance forsixweeks from the date of tender, but the contractor withdraws itafter three weeks citing a suddenly increased workload. Is thecontractor liable to the employer for the additional costs of areplacementcontractor?

Is a contractor bound by its price even if there is an error intendering?

Doesthearchitecthaveanyparticulardutytodrawtheattentionofthecontractortooneroustermsoramendmentsinthecontractatthetimeoftender?

Doesthearchitecthaveadutyofcaretothecontractorwhenissuingtenderinginformation?

Pre-contractissuesTheemployer is inahurry tostartwork. Is thereaproblemin theissueofaletterofintent?

Ifaletterofintentisissuedwithalimitof£20,000,istheemployerobligedtopayahighersumafterallowingacontractortoexceed

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thelimit?Cananarchitectbenegligentforsuggestingaletterofintent?

Canpre-contractminutesformabindingcontract?Hasthecontractoranyremedyif theemployerhassaidduringthetenderperiod that thecontractorcan freelyusecertain facilitiesonsitebutsubsequentlyrefusestoallowit?

Whatdateshouldbeputonabuildingcontract?Cantherebetwoemployersononecontract?

Theemployerrejectedacontractor’stenderandacceptedadifferenttender, but that tendererwent into liquidationbefore startingonsite. The employer then accepted the first tender, but thecontractor said it would have to increase the price. Is thecontractorallowedtodothat?

PossessionofthesiteIf the employer cannot give possession on the due date, can thematter be resolved by the architect giving an instruction topostponetheWorks?

Inarefurbishmentcontract for120housesunderSBC, thebillsofquantitiessaythatthecontractorcantakepossessionof8housesat a time, taking possession of another house every time acompleted house is handed over. Is the contractor entitled topossessionofall120housesatonce?

GeneralcontractualmattersSo-calledpartneringandmanyothercontractscontaintermstotheeffect that the parties will work together in the spirit of trust,fairnessandmutualco-operation.Howfardoesthataffectotherclauses?

Whatdoes‘time-barred’mean?Ifacontractordoesnothaveapropercontractbuthascarriedoutworkforthesamecompanybeforeonawrittencontract,willthetermsofthatwrittencontractapplyagain?

The contractor has nowritten contractwith the employer (A). (A)

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instructed the contractor to do work and 10 asked it to invoicetheir‘sistercompany’(B).Thecontractordidsoand(B)havenotpaiddespitereminders.

Isthecontractorboundtosticktoitspriceifitwasdescribedasan‘estimate’?

Ifaclauseisdeletedfromacontract,isitjustthesameasifithadneverbeenthere?

Iftheemployerwishestobringdirectlyengagedcontractorsontothesite to carry out special work, can the contractor refuseadmittance?

Iftheemployerhaspaidformaterialsonsitewhicharesubsequentlystolen,whoisliable?

IsthereacontractunderSBCifeveryoneactsasthoughthereis?

What if an employer tells the architect he or she does notwant abuildingcontract?

IfacontractisdescribedasGuaranteedMaximumPrice(GMP),isthis themost thecontractorcanreceivenomatterwhatchangesthereareintheproject?

Can a contractor avoid a contract entered into under economicduress?

InDB, if the employerprovidesa site investigation report and theground conditions are found to be different,whopays any extracost?

Thecontractor failed to takeout insuranceagainst its liabilities inregardtoinjuryordamagetopersonsorotherproperty.Doesthatmean that the employer cannot claim against the contractor ifinjuryordamageoccurs?

Whatarethedangersforemployerandcontractorinenteringintoasupplementaryagreement?

Ifacontractormustdosomething‘forthwith’,howquicklyisthat?Whatisareasonabletime?

Warranties,bondsandnovation

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Canawarrantybeeffectivebeforeitissigned?Whatare‘stepinrights’?

JCTcontractsdonotseemtomentionperformancebonds.Whatarethey?

Isanarchitectwhofailstosecureaperformancebondnegligent?Ifthearchitectisnovatedtoacontractorwhosubsequentlygoesintoliquidation,canthearchitectbere-novatedtotheclient?

In the caseofdesignandbuild, can the contractor claim from thearchitectfordesignerrorsinworkdonebeforenovation?

Contractor’sprogrammeIf an architect approves a contractor’s programme, can thecontractor subsequently change the programme without thearchitect’s knowledge, and, if so, can the architect demand anupdate?

UnderSBC,thearchitecthasapprovedthecontractor’sprogramme,which shows completion two months before the contractcompletiondate.Mustthearchitectworktowardsthisnewdate?

Canthearchitectinsistthatthecontractorsubmittheprogrammeinelectronicformat?

Whenacontractorsaysthatitownsthefloat,whatdoesthatmean?

ContractadministrationDoesthecontractorhaveadutytodrawattentiontoanerroronthearchitect’sdrawing?

Under DB, must the employer’s agent approve the contractor’sdrawings?

Whathappensifthecontractorcannotobtainmaterials?Whatpowersdoesaprojectmanagerhaveinrelationtoaproject?

Can certificates and formal AIs be issued if the contract is notsigned?

Is the architect obliged to check the contractor’s setting out ifrequested?

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If the architect finds that there is noperson-in-chargeon site, cantheprojectbehalteduntiltheperson-in-chargeisonsite?

If the employer sacks the architect under MW and appoints anunqualifiedsurveyorascontractadministrator,isthecontractstillvalid?

SBCcontainsaclauseinthebillsofquantitiespreliminarieswhichstates that no certificateswill be issued until the contractor hassuppliedaperformancebond.Workhasbeengoingonsiteforsixweeksandthereisnoperformancebond,butthecontractorsaysthatthearchitectmustcertify.Isthatcorrect?

If there is a clause stating that the partieswillwork together in aspirit of trust, can the employer demand to see all the relevantbooksofthecontractor?

Is it impossible to say that a contractor is failing to proceedregularlyanddiligently?

ArchitectsPlanningpermissionwasobtainedforasmallbuilding.Thebuildingownerwantstopressaheadwithalargerbuildingwithoutfurtherreference to Planning. The architect knows that the PlanningDepartmentwould refuse the largebuildingoutof hand.Shouldthe architect continue to do the drawings and administer thecontractonsite?

If an architect is engaged to apply for planning permission by acertaindate,isthearchitectliableifthatdateismissed?

Arethereanycircumstancesinwhichacontractorcansuccessfullyclaimagainstthearchitect?

Ifthecontractrequiresanarchitectto‘havedueregard’toacodeofpractice,doesthatmeanthearchitectmustcomplywithit?

Whatisthepurposeofanetcontributionclause?

Cananarchitectbeliableforadvisingtheuseofthewrongformofcontract?

Thejobwentovertime.Theemployerandthecontractordidsomekindofdeal.Wheredoesthatleavethearchitect?

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What are the dangers of a construction professional giving acertificateofsatisfactiontothebuildingsociety?

Is the client entitled to all the files belonging to constructionprofessionalsoncompletionoftheproject?

Isthecliententitledtothearchitect’sdrawingsinelectronicformat?Whencanjobfilesbedestroyed?Is an architect liable for the specification of a product which isdefective?

Anarchitecthasbeenappointedforworkonwhichanotherarchitecthasbeenengaged;isthereaproblem?

Beingaskedtousereasonableendeavourssoundslessonerousthanbestendeavours;isthatcorrect?

An architect’s terms of appointment often require ‘co-ordinating’,‘liaising’and‘monitoring’.Theseseemlikewoollyterms;whatdotheyimply?

Architectsareoftencalledupontospecifythekeystaffwhowilldealwithaparticularproject.Towhatextentmaythearchitectchangesuchstaff?

Are there any dangers for the architect if the client wants fulldrawingsbutintendstodealdirectlywithacontractortogettheprojectbuilt?

FeesCan the architect hold onto the signed contract documents if theemployerhasfailedtopayfeesowing?

Isthearchitectentitledtochargeanewclientfullfeesforadesignwhichthearchitecthasalreadypreparedforadifferentclientandforwhichfeeshavebeenpaid?

Canthearchitectclaimextrafeesforlookingatclaims?If the architect charges additional fees for work which has to bedoneasaresultofthecontractor’sbreachofsomeobligation,cantheemployerrecoversuchfeesfromthecontractor?

Canthearchitectclaimanextrafeeifanothercontractorisengaged

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aftertermination?Thearchitectagreedafeeof5percentofthetotalconstructioncost.The contract sumwas £325,000, but it is now only £185,000 atfinalaccountstage.Isthearchitectobligedtoreturnsomefees?

Canthearchitectrecoverinterestonunpaidinvoicesiftheclientcanshowthattheyareincorrect?

Can the architect who is owed fees also recover the cost ofmanagementtimechasingpayment?

DesignCanthearchitectescapeliabilityfordefectivedesignbydelegatingittoasub-contractor?

Ifthearchitectcompletesthedesignbutisaskedtomakechanges,isthatsimply‘designdevelopment’?

Isthecontractorliableforsomethingdoneonitsowninitiative?Ifthecontractoristo‘completethedesign’,doesthatmeanthattheexistingdesigncanbeassumedtobecorrect?

If thearchitect’sdesign is faulty,but thecontractorbuilds itbadly,whoisliable?

Doesthearchitecthaveadutytocontinuecheckingthedesignafterthebuildingiscomplete?

Whoownscopyright—clientorarchitect?If a designer has been paid for producing full drawings for adevelopmentand theclient sells the site, can thenewownerusethedrawingstobuildonthesite?

Whatdoes itmean to take ‘reasonable skill and care’, andhow isthatdifferent fromanobligation toprovidesomething that is ‘fitforpurpose’?

Whydoes a designandbuild contractor usually havea fitness forpurpose obligation, but not under the JCT Design and BuildContract?

Architect’sinstructionsWhatcountsasaninstruction?

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Whatcanbedoneifacontractorrefusestocarryoutaninstructionandrefusestoallowtheemployertosendanothercontractorontothesite?

ShouldAlsbesignedbyanindividualorthefirm?

If theemployergives instructionsonsitedirectly to thecontractor,mustthearchitectthenconfirmthoseinstructionsinwriting?

Does the architect have power to give instructions after practicalcompletion?

What is the position under a JCT traditional contract if thecontractor acts on instructions given directly by themechanicalservicesconsultant?

Does the wording of MW give the architect power to issue aninstructiontopostponetheWorks?

CantheclerkofworksstoptheWorks?

InspectionWhatisthearchitect’ssiteinspectionduty?Whatisthepositionifthecontractorhascoveredupwork?If thearchitect’scontractstipulates inspectionsevery twoweeks, isthearchitect liable ifdefectivework isdonebetween inspectionsandisnotvisiblesubsequently?

Isthereadifferencebetweeninspectingandsupervising?Can the contractor argue that the architect sawwhatwas beingdoneonsiteandmusthaveagreedwithit?Isthearchitectliablefortheclerkofworks’mistakes?Whatisthepositioniftheclerkofworksapprovesdefectivework?

DefectsduringprogressCan the architect stipulate when the contractor must rectifydefectiveworkunderSBC,orcanthecontractorsimplyleaveitalluntiljustbeforepracticalcompletion?Thecontractorincorrectlysetoutaschoolbuilding,butitwasnotdiscovered until the end of the project when floor tiles in the

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corridorwerebeinglaid.Whatshouldbedone?IfasupplierpersuadestheemployertouseaparticularproductintheWorksanditsubsequentlyfails,hastheemployeranyredress?

WhatcanbedoneunderSBC ifa seriousdefectariseswhen theWorksarenearlyfinishedifthecontractordeniesliabilityandtheemployerisdesperatetomovein?If the contractor is liable for a very serious defect, must it dowhatevertheemployerrequirestocorrectit?

DefectsafterpracticalcompletionThe contractor has re-laid a defective floor at the end of therectification period. Can the cost of re-laying the carpet bedeductedfromthefinalaccount?The contractor says that it has no liability under IC for defectsappearingaftertheendoftherectificationperiod.Isthatcorrect?

Arelatentdefectsallthedefectsdiscoveredduringtherectificationperiod?Can the rectification period be extended to deal with defectsdiscoveredandrectifiedattheendoftheperiod?IfthereisaDBcontractandthearchitecthasbeennovatedfromtheemployer to the contractorat tender stage, can the employerask the samearchitect to prepare a list of defects after practicalcompletion?Whatifanarchitect forgetstoissuealistofdefectsat theendoftherectificationperiodunderSBC?

Is there a time limit within which a contractor must remedy alldefectsnotifiedattheendoftherectificationperiod?Must the contractor deal with defects at the convenience of theemployer?

ValuationandpaymentUnderMW,canthecontractorinsistonagreementonpricebeforecarryingoutthework?Is the contractor obliged to stick to a low rate in the bills of

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quantitiesiftheamountofworkissubstantiallyincreased?

Tenders were invited on the basis of a bills of quantities. Aftertendering,thethreelowesttendererswereaskedtopriceabillofreductions.Theoveralllowesttendererwasappointed.DuringtheprogressoftheWorks,thequantitysurveyorwantstovalueusingpricesfromeitherthebillofreductionsorfromtheoriginalbillsofquantities,whicheverislowest.170

UnderSBCWithQuantities,thecontractorputinaveryhighrateforanitemofwhichtherewereonly3inthebillsofquantities.Itwas subsequently found necessary to instruct over 200 of theseitems.Isthequantitysurveyorinordertoreducetheunitrate?Cananarchitectwhodiscoversthatthecontractorismaking300percentprofitonsomegoodsitiscontractedtosupplyunderMWdoanythingaboutit?Whatisthesignificanceofretentionbeingintrust?Isthereaproblemfortheemployerwhoassiststhecontractorbymakinganadvancepayment?

Ifworkisbeingdoneonadayworkbasis,canthetimeclaimedbereduced if the quantity surveyor thinks that the contractor hastakentoolong?Isthecontractorentitledtolossofprofitifworkisomitted?Is it true that a change in the scope ofwork can result in a re-ratingoftheentirebillsofquantities?Can thequantity surveyorbe liable formeasuringworkwhich isdefective?

Underwhatcircumstancesisthecontractorentitledtothecostsofacceleration?What is the effect of agreeing payment ‘in full and finalsettlement’?If the employer and the contractor agree a financial settlement,cantheemployerset-offmoneybecauseofasubsequentdefect?Under DB, the Employer’s Requirements asked for specialacoustic windows which the Contractor’s Proposals did notinclude. The contract is signed. Can the employer insist on the

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specialwindowsatnoextracost?

CertificatesIn SBC, is the contractor entitled to suspend work under theConstructionActifthearchitecthasunder-certified?

Cananarchitectissueanegativecertificate?Cananarchitectwhohasunder-certifiedwithdrawthecertificateand issuea revised certificateor simply issueanother certificatefortheadditionalmoney?Whatshouldthearchitectdoiftheemployersaysthatcertainworkisnottohisorhersatisfaction?Is it true thatarchitectsmaylose theirright tocertifyunderJCT2011contracts?

If the contractor is falling behind programme, is the architectjustified in reducing theamount of preliminaries costs in interimcertificates?Must the architect certify the amount in the quantity surveyor’svaluation?If the architect has made some factual errors on an interimcertificate,istheemployerentitledtorefusepayment?At the contractor’s request, the architect has started issuingcertificateseverytwoweeks.Isthereanythingwrongwiththat?

What is thestatusofacertificate issuedby thequantitysurveyororprojectmanager?UnderIC,ifthetimeforissuingapaylessnoticehasexpiredbutsome serious defects come to light, can the employer set-off thevalueagainsttheamountcertified?Iftheemployerandthecontractoragreethefinalaccount,shouldthearchitectissueafinalcertificateinthatamount?If the contractor fails to provide the final account documentswithin the period specified in the contract after practicalcompletion,whatshouldthearchitectdo?

Whatdoesitmeanto‘issue’acertificate?

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Whatcanacontractordoifthearchitectfailstocertify?If the contractor has signed the final account as agreed, is thearchitectentitledtoreduceitthereafter?

Is the final certificate ever conclusive about workmanship andmaterials?

Sub-contractsMustthearchitectapprovethesub-contractor’s‘shopdrawings’?Under MW, if the contractor is in financial trouble, can theemployerpaythesub-contractorsdirectly?If the architect instructs the contractor to accept a specific sub-contractor’squotation,istheemployerliableifthecontractorfailstopay?

If thecontractorengagesasub-contractorwithout thearchitect’sconsent,canthecontractoravoidhavingtopaythesub-contractorforworkdone?The contractor has gone into liquidation, and the heating sub-contractorsaysitisgoingtoremovealltheloosepipingstoredonsite and take away the radiators fixed in the building.Can it dothat?Cantherebeliquidateddamagesinasub-contract?Is the sub-contractor obliged to work in accordance with theactualprogressofthemaincontractor’sWorks?

Extensionsoftime/AdjustmentofthecompletiondateCanthearchitectignoredelaysifthecontractorhasfailedtogivepropernotice?What is the position if the contractor is delayed by delays inobtainingspecifiedgoodsfromoverseassuppliers?Isanoteintheminutesofasitemeetingsufficientnoticeofdelayfromthecontractor?Istimeoftheessenceinbuildingcontracts?

What,inpractice,are‘concurrentdelays’?

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Howdoestimebecome‘atlarge’?UnderSBC,ifthearchitectgivesaninstructionafterthedatethecontractor should have finished, is the contractor entitled to anextensionoftime,and,ifso,howlong?

If, under SBC, the architect does not receive all the delayinformationrequireduntilaweekbefore thedate forcompletion,must the extension of time still be given before the completiondate?Isthereaneasywaytodecideanextensionoftime?If there is a clause in the contractwhich says that the employerwill remain in residence during alterations to a house, but theemployer in fact moves out, should the improved workingconditions count as a ‘discount’ against any extension of timewhichmightbedue?Can the client legally prevent the architect from giving anextensionoftime?

Mustthearchitectgivethecontractordetailedreasonstoexplaintheextensionoftime?Under SBC, is it permissible for the architect to give a furtherextensionof timeifdocuments fromthecontractorhavenotbeenreceiveduntilaftertheendofthe12weeksreviewperiod?

LiquidateddamagesIs there a time limit for the issue of the certificate of non-completionunderSBCandIC?The employer terminated in the ninth month of a ten-monthcontract. Can the employer deduct liquidated damages from theoriginal contractor until practical completion is achieved byothers?

Can an employer suffering no actual loss still deduct liquidateddamages?If an employer has entered into two separate contracts with thesamecontractor,isitentitledtoset-offliquidateddamagesdueonone contract against payment due to the contractor on the othercontract?

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Why do contractors sometimes say that the employer cannotdeductpenalties?Is it true that where there is a liquidated damages clause, byimplication theremustbeabonusclause in thesameamount forearlycompletion?

InSBC,ifanemployerwantstobeabletorecoveractualdamagesfor late completion, is it sufficient that the liquidated damagesentry in the contract particulars has been filled in as NA (notapplicable)?Does it make sense to include in the contract the way in whichliquidateddamageshavebeencalculated?Can theemployerstillclaim liquidateddamages ifoccupationoftheWorkshasbeentaken?Under SBC, if practical completion is certified with a list ofdefects attached, can the employer deduct liquidated damagesuntil termination (which occurred later due to the contractor’sinsolvency)?

If the employer tells the contractor that liquidated damageswillnotbededucted,canthatdecisionbereversed?

Lossand/orexpenseMust the architect or quantity surveyor consider further lossand/or expense information provided by the contractor after thequantitysurveyorhaspreparedthefinalaccount?Whatexactlyisaglobalclaim?Howcanacontractorclaimfordisruption?

Whyareoverheadsandprofitdifficulttoclaim?Canacontractorclaimforlossofopportunity?Is there such a thing as ‘beneficial occupation’, and is thearchitect obliged to certify practical completion if the employertakespossessionoftheWorks?Whydocontractorsuseformulaeforcalculatingclaims?

What are ‘interest and finance charges’ which the contractor is

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tryingtoclaim?Can a contractor recover the professional fees of a consultantengagedtoprepareaclaim?

Doesthecontractorhaveadutytomitigateitsloss?Is itpermissible toclaimincreasedcostsbyreferencetonationalindices?Thecontractorisdemandingtobepaid‘prelims‘ontheextensionoftime.Howisthatcalculated?Is it true that a contractor cannot make a loss and/or expenseclaimunderMW?

To what extent is a contractor obliged to provide informationrequestedbythearchitectorquantitysurveyorinconnectionwithlossand/orexpense?

SectionalcompletionThe contract is SBC, which includes provision for sections. Theemployerwants torearrange thesections.Can thatbedonewithanarchitect’sinstruction?The contract is SBC in sections. The dates for possession andcompletionhavebeen inserted foreachsection.Section2cannotstartuntilsection1finished.Isittruethatpossessionofsection2must be given on the due date even if it is the contractor’s ownfaultthatsection1isnotfinished?Ifthearchitectgivesanextensionoftimeforsection1andallthesections have dates for possession which depend upon practicalcompletionoftheearliersection,isthearchitectobligedtogiveasimilarextensionoftimeforeachsection?

PracticalcompletionandpartialpossessionIfthearchitecthasissuedacertificateofpracticalcompletionwith150defectiveitemslistedandthecontractorisnotremedyingthemwithinareasonabletime,whatcanbedoneaboutit?Is the contractor entitled to a certificate of practical completionaftertermination?

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Cantheemployertakepartialpossessionofthewholebuildingsothatthearchitectneednotcertifypracticalcompletion?

TerminationThe contractor is running over time. The architect has over-certified. Are there any problems if the employer wishes toterminate?

Termination took place under SBC due to the contractor’sinsolvency. Can the liquidator insist that full payment of anybalanceplusretentionisimmediatelypayable?After termination must the employer invite three tenders tocompletetheWorks?Howcananemployergetridofacontractorwhoseemsincapableofproducinggood-qualitywork?Inwhatcircumstancescananemployerterminateonthegroundsof failure toproceed regularlyanddiligentlyeven if thecontractdoesnotrequirethecontractortodoso?

UnderSBC,isittruethatthecontractorcansimplywalkoffsiteiftheemployerfailstopay?Whatdoes‘repudiation’ofacontractmean?Cannoticeofterminationbesentbyfaxore-mail?Is a contractor’s termination under a JCT contract valid ifaddressedtothearchitectbutcopiedtotheemployer?

DisputesWhatisadisputeordifferenceunderthecontract?Isapersonactingasanexpertwitness immune fromactions fornegligence?Can a mediator be called as a witness about the subject of themediation?Is it acceptable to suggest to the nominating body whom tonominateasadjudicator?

If the contractor does not like the adjudicator who has beennominated,canitabort theprocessandseekthenominationofa

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differentadjudicator?An adjudicator has been appointed whom the employer has notagreed.Whatcantheemployerdoaboutit?

Is it permissible to refer several disputes to adjudication at thesametime?Howimportantarethevarioustimeperiodsinadjudication?Whatexactlyisafailuretoobservetherulesofnaturaljustice?Isthearchitectobligedtorespondtotheadjudicationreferralonbehalfoftheemployerifsorequested?

An adjudicator’s decision has just been received, and it is clearthatthepointsmadehavebeenmisunderstoodandtheadjudicatorhasgotthefactswrong.Canenforcementberesisted?Can an adjudicator use his or her own experience to decide thedispute?Cananadjudicatormakeadecisionaboutaninterimpaymentifitisthefinalaccountvaluewhichisbeingreferred?Istheadjudicatorentitledtoawardinterest?

Can the losing party set-off monies owing against theadjudicator’sorderrequiringpayment?Thecourthasjustruledthattheadjudicator’sdecisionisanullity.Canthelosingpartyrefusetopaytheadjudicator’sfees?Ifthecontractorwantstotakemattersbeyondadjudication,whataretheprosandconsofarbitrationandlitigation?

Tableofcases

Index

PrefacetotheThirdEdition

Manypeoplehavetoldmethatthepreviouseditionsofthisbookhavebeenveryhelpful.Obviously,thatisgoodtohear.Inthenewedition,Ihaveincreasedtheoverallnumberofquestionsto225,achievedbythedeletionofthe25questionswhichseemedleastusefulandtheadditionof50newquestions.Afewoldlegalcaseshavebeenremovedandover45 new ones added. The answers to all the existing questions have been updated asnecessary.

TheRoyalInstituteofBritishArchitects’InformationLinewassetupon1May1995.The idea was that RIBA members could ring in with a problem and be directed to aspecialistadviserwhowouldgive tenor fifteenminutesofcomplimentary, liability-freecommentstopointthearchitectin(hopefully)therightdirection.Ihavebeenaspecialistadviser to the RIBA since the inception of the service andmore recently to the RoyalSocietyofUlsterArchitects,answeringthousandsofquestionsposedbyarchitects.Inmy(nowlong)careerasanarchitectandaconsultant, Ihavealsodealtwithamultitudeofproblemsfromcontractors,sub-contractorsandbuildingowners.

Thisbookincludessomeofthemorecommonquestions,togetherwithafewunusualones and several that address misconceptions. I must emphasise that these are realquestions.TheyarenotquestionsthatIhaveinventedbylookingatwhatthecourtshavedecided and thenmatching a question to the decision. In each case, I have had to seewhether thereisanythinginthedecisionsof thecourts, in legislationor inthecontractsthemselveswhichprovidesananswer.Wherethereisnoreadyanswer,Ihavesaidso,andI have offered a view. I have tried to keep each answer reasonably short whileendeavouring tomake the answer to each question self-contained. This has resulted inoccasional instances where answers overlap slightly when dealing with similar subjectmatter.Forthesakeofsimplicity,ithasbeenassumedthatthecontractadministratorisanarchitect.However,veryoftentheroleofcontractadministrator is takenbymembersofotherdisciplines,andinsuchinstancesthereferencetoanarchitectshouldbetakentobeareferencetoamemberoftheparticulardiscipline.

Someofthequestionswereconcernedwithearlierformsofcontract,buttheyhaveallbeenupdatedasnecessarytorefertothelatest2011seriesofJCTcontracts,i.e.SBC,IC,ICD, MW, MWD and DB. Questions have been included on related topics such asarchitects’ fees, design and disputes. In the four years since the last edition, many

important judgments have been handed down by the courts, and the process ofadjudicationhasdevelopedconsiderably.

Sincethelastedition,JCTandothercontractshavebeenamendedtotakeaccountofthechangestotheHousingGrants,ConstructionandRegenerationAct1996madebyPart8of the Local Democracy, Economic Development and Construction Act 2009. Majorchangesweremadetothepaymentprovisions.

Inwritingthisbook,legallanguagehasbeenavoided,butreferencehasbeenmadetolegal cases, and the relevant citations are given so that anyone interestedmaydo somefurtherreading.Allthesereferenceshavebeenupdated.Afulltableofcasesisincludedatthebackofthebook.

The contractor and sub-contractors are assumed to be corporate bodies and havethereforebeenreferredtoas‘it’throughout.

This book should be useful to architects, project managers, quantity surveyors,contractors,studentsandthosebuildingownerswhowouldliketounderstandmoreabouttheworkingsofbuildingcontracts.

DavidChappellWakefield

December2014

ACA3

AI

CE/99

CIArb

DB

FIDIC

GC/Works/1

GMP

IC

ICD

JCT

JCT63

JCT80

JCT98

MW

MWD

NEC3

RIBA

RICS

SBC

SFA/99

SW/99

Abbreviationsusedinthetext

AssociationofConsultantArchitectsFormofBuildingAgreementThirdEdition

Architect’sInstruction

RIBAConditionsofEngagementfortheAppointmentofanArchitect

CharteredInstituteofArbitrators

JCTDesignandBuildContract

FederationInternationaledesIngenieurs-Conseils

GovernmentContractforBuildingandCivilEngineeringMajorWorks

GuaranteedMaximumPrice

JCTIntermediateBuildingContract2011

JCTIntermediateBuildingContractwithContractor’sDesign2011

JointContractsTribunal

JCTStandardFormofBuildingContract1963Edition

JCTStandardFormofBuildingContract1980Edition

JCTStandardFormofBuildingContract1998Edition

JCTMinorWorksBuildingContract2011

JCTMinorWorksBuildingContractwithContractor’sDesign2011

EngineeringandConstructionContract2013

RoyalInstituteofBritishArchitects

RoyalInstitutionofCharteredSurveyors

JCTStandardBuildingContract2011

RIBAStandardFormofAgreementfortheAppointmentofanArchitect

RIBASmallWorksAppointment

Chapter1

Tendering

1Canthelowesttendererlegallydoanythingifitstenderisnotaccepted?Mostinvitationstotendercontainaprovisothattheemployerdoesnotguaranteetoacceptthe lowest or any tender. It has long been thought that this allowed the employerconsiderablefreedomtoawardthecontractasdesired.Tosomeextentthatiscorrect,butitisnotthewholestory,andemployersshouldtakecarewhentendersareinvitedthattheydonotleavethemselvesopentoactionsforbreachofcontract.

InBlackpool&FyldeAeroClubvBlackpoolBoroughCouncil,1 theCourtofAppealset out the position when tenders are invited. The position is this: The contractor, bysubmitting a tender, enters intowhat can best be described as a little contractwith theemployeronthebasisthattheemployer,inreturnforthecontractorsubmittingatender,willdealwiththetenderinaccordancewiththeproceduresetoutintheinvitation.Atthevery least, the contractor is entitled to expect that each properly submitted tender willreceive proper consideration.An employerwho does not properly consider each tenderwillbeinbreachofcontract.

Unfortunately,itisnotuncommontofindthatanemployerwishestoseeallsubmittedtenders,evenatenderthathasbeensubmittedaftertheclosingdateandtimespecifiedinthe invitation.Whatever thearchitectorquantity surveyormight say, theemployermayinsistonseeingthetender.Ondiscovering,perhaps,thatthelatetenderislowerthantheothers, the employer will almost certainly wish to accept it; after all, that is thecommercialthingtodo.

Ifthistenderisaccepted,theemployerwillbeinbreachofcontractbecausetheotherswere invited to tender on the basis that only tenders submitted before the closing datewouldbeconsidered.Thesubmissionoftenderscreatedasuccessionofcontracts,eachofwhich included that term.Acontractorwho learns that the employer acted inbreachofcontractwouldbeentitledtoclaimdamages.Suchdamageswouldcertainlyembraceallthe contractor’s costs in preparing the tender. If all the tenderers discovered the breach(and if one did, it is reasonably safe to assume that they allwould), the total damagescouldbeconsiderable.

Theremaybeotherstipulationsintheinvitation,forexampleaboutthecourseofactionto be taken if an error is found in the pricing document. Failure to observe thesestipulationswillalsomaketheemployerliabletoanytenderersdisadvantagedasaresult.Quite apart from legal liability, an employerwho indulges in this kind of practicewillsoon find thatnocontractor iswilling to submita tenderon futureprojects. Ina recentcase, an employer received tenderswhichwere invited on the basis that the procedurewould be in accordancewith the principles of the Code of Procedure for Single StageSelectiveTendering1996.Inanefforttoreducetheprice,theemployeraskedthelowesttenderers to reduce their tenders; as a result, a tenderer other than the original lowesttenderer became the lowest and that tender was accepted. The original lowest tenderertook action through the courts, and it was held that the original lowest tenderer wasentitled to recovernotonly its costsof tenderingbut also the lossof theprofit it couldhaveexpectedifithadcarriedouttheproject.2

However,iftheemployerstrictlyobservestherulessetoutintheinvitation,neitherthelowestnoranyothertendererhasgroundsforlegalactionifatenderotherthanthelowest,orevenifnotenderatall,isaccepted.

Architectsandquantitysurveyorswhofindthemselveshavingtodealwithclientswhoshowcompletedisregardforthetenderprocessmustseriouslyconsiderwhethertheycancontinuetoactforsuchclients.Constructionprofessionalsmustconductthemselveswithcompleteintegrity;thisshouldbeanendinitself.Inaddition,professionalswhobecomeassociatedwithdoubtfultenderingpracticeswillacquireanunenviablereputationamongcontractorswithwhomtheywillhavetoworkinthefuture.

2Thecontractor’stenderstatesthatitisopenforacceptanceforsixweeksfromthedateoftender,butthecontractorwithdrawsitafterthreeweekscitingasuddenlyincreasedworkload.Isthecontractorliabletotheemployerfortheadditionalcostsofareplacementcontractor?Theanswertothisquestionistobefoundinthelawofcontract.

Whenacontractorsubmitsatender, it isanoffer tocarryout therequiredworkforacertainsum.Theemployerisfreetoaccepttheoffer,rejectitorattempttonegotiate.Untiltheofferisaccepted,thereisnocontract.Thelawisthatanoffercanbewithdrawnatanytimebeforeitisaccepted,andtherearesomeratherawkwardrulesregardingacceptancebypost.Therefore,innormalcircumstancesthecontractorcanwithdrawthetenderbeforeitisaccepted,and,strictly,noreasonneedbegiven.Thecontractorhasnoliabilityforanyadditionalcostssufferedbytheemployer.

Theposition isdifferent if the employerpays the contractor tokeep the tenderopen.Tendersoftenstatethat‘inconsiderationofapaymentof£1(receiptofwhichisherebyacknowledged)thecontractoragreestokeepthetenderopenforacceptanceforaperiodofxweeksfromthedatehereof’.Thiseffectivelycreatesalittlecontractbetweenemployerand contractor whereby the consideration is the employer’s payment of £1 and thecontractorkeepingthetenderopen.Effectively, theemployerhasboughtanoptionforafewweekstodecidewhetherornottoacceptthecontractor’stender.Asumof£1maynotseem much, but the law does not require that adequate consideration is given. It issufficientiftheconsiderationhassomevalue.Inthiscase,acontractorwhowithdrawsthetenderafterthreeweekswouldbeinbreachofthelittlecontract,andtheemployerwouldprobably be able to bring an action for damages. The damages would likely be theadditionalcostsincurredbytheemployerinengaginganothercontractorforthework.

Manyemployersarenotawarethatthecontractor’sofferisalsobroughttoanendiftheemployer rejects it. An employer cannot reject the offer and subsequently, afterundergoing a change of mind, decide to accept it after all. In that situation, what theemployermaybelievetobeanacceptanceisactuallyanofferonthepartoftheemployerto form a contract on the basis of the contractor’s original offer.No contract is formeduntiltheemployer’sofferisunequivocallyacceptedbythecontractor.

3Isacontractorboundbyitspriceevenifthereisanerrorintendering?It is common for errors to occur in tenders. Itemsmay be priced twice or missed outaltogether.Theextenttowhichacontractormaybeboundbyitserrorwilldependonwhatthetendererandemployerknew.Quantitysurveyorscheckingtendersandpricedbillsareonthelookoutforunder-pricing,andtheywilldrawanyseriousexamplestotheattentionofthetenderer.Thebasicprincipleofcourseisthatonceatenderhasbeenacceptedthetendererisboundbyitsprice.However,thatprinciplecanbeupset.

A good example is demonstrated in the case of Traditional Structures Ltd v H WConstructionLtd.3There,aquestionaroseregardingaseriouserrorinpricingthetenderofasub-contractor.TraditionalStructures(TS)wasasub-contractorrequestedtosubmitaprice to the contractor, H W Construction (HWC), for the supply and installation ofstructuralsteelandroofcladding.HWCweretenderingforanewbusinesscentreat theBirmingham Metropolitan College. Unfortunately, the last line of TS’s tender wasmissing. Insteadofquotingpricesof£37,573.43and£32,365.83, the second figurewasmissing. The office copy TS had on file contained the last line. Therefore, TS wasunaware of the omission. HWC asked TS how long the quotation of £37,573.43 forsteelworkwastoremainopen.

Induecourse,HWC’s tenderwasaccepted,and itnotifiedTSbyaccepting its tenderforsteelworkandroofcladdingbutdidnotstateanyprice.Duringthecourseofthework,when variationswere required, it emerged thatHWCwas looking at £37,573.43 as thepriceforsteelworkandroofcladding,whileTSmaintainedthatitwasentitledtothefull£69,939.26plusthecostofthevariations.HWC’spositionwasthatTSwasboundbyitsoriginaltenderprice.

Thecourtsusuallyworkonthebasisthatthepartieshavemadetheircontractandtheymust livewith it.Thecourtwillonly rectify (orput right) a contract in certain specificinstances; in thiscase, itwouldberequiredforTS toprove that itbelieved thecontractincluded themissingpriceand thatHWCconcluded thecontractwith themissingpricewhile knowing that TS believed it to be included. The court ruled that there was aunilateralmistakeinthecontractwhichallowedthecourttorectifyit.Thejudgesaid:

Ifindthat[thecontractor]willfullyandrecklesslyfailedtoenquireofthe[thesub-contractor]whether thepriceof£37,573.43plusVAT related toboth the structuralsteelworkandthecladdingelementsoftheworkforwhichthe[sub-contractor]wastendering,whichenquiryinmyjudgmentanhonestandreasonablemanwouldhavemadeinthecircumstancesofthiscase.

ThejudgedecidedthatHWC’sbehaviourwas‘unconscionable’inthatitwentbeyondtheboundariesof fairdealing.Thesameprinciplesapplywhenanemployer invites tendersfromcontractors.Anemployerwhotriestogainanadvantagebyacceptingatenderwhichheorsheknows isdefective isactingunlawfully,and thecourtswillact to rectifysuchcontractstoreflectthetruesituation.

4Doesthearchitecthaveanyparticulardutytodrawtheattentionofthecontractortooneroustermsoramendmentsinthecontractatthetimeoftender?If there are onerous or unusual terms or amendments in the contract, the time to bringthemtotheattentionofthecontractorisattenderstagesothatthetermsoramendmentsinquestioncanbe taken intoaccount in thecontractor’s tender. If thearchitectwaitsuntilafter thecontract isexecutedand thecontractorhasbegunor isabout tobeginworkonsite,itwillbetoolate.

The position with regard to onerous terms is fairly straightforward. In general, thecontractorwillbeboundbyallthetermsofthecontractthatwerenotifiedbytheemployerattenderstageor,atanyrate,beforethecontractwasexecuted.Itisusuallysufficientifthe contractor is notified by means of the bills of quantities or specification. The partreferringtothetermsapplyingineachcaseiscalledthe‘preliminaries’.Itisherethatthecontractorisinformedofthecontracttobeusedandofanychangestotheclauses–forexample a change in the period for payment from 14 days to 28 days. It is immaterialwhetherornotthecontractoractuallyreadstheterms,solongastheexistenceofthetermsisknown.

The point about using standard forms of contract or setting out bills of quantities inaccordancewith theStandardMethodofMeasurement is that contractorsknowwhat toexpect.Theyknowwhattheclausessayandwhatwillbeincludedinthebillsofquantitiesandwhere.IftheNationalBuildingSpecificationisused,eventhewordingofthevariousparagraphscanbereasonablyanticipated.

If it is thought desirable to introduce changes to the standard contracts by amendingclausesorevenintroducingnewclauses,itwillusuallybegoodnoticetothecontractorifthey are put in the usual places. The exception is if the change or additional clause isparticularlyonerous.Whatconstitutes‘particularlyonerous’willbedecidedultimatelybyanarbitratororjudge,ortemporarilybyanadjudicator.Norulescanbelaiddownaboutwhat constitutes an onerous change. Questions to be asked might include whether itremovesimportantrightsfromthecontractororintroducessignificantduties,orwhetheritgives theemployersignificantnewrightsorremovessomenormalduties.However, thearchitectandthequantitysurveyormustdotheircombinedbesttoestablishbeforetenderstagewhetheraclauseisonerous.Ifitisdecidedthataclauseisonerous,stepsmustbetakeninthedocumentstogivepropernoticeor,toputitplainly,tobringittotheattentionofthecontractor.Forexample,thechangemustnotbeburiedawayinthesmallprint.Notonlymustitbewherethecontractorwouldnormallyexpecttofindit,butitmustalsobehighlightedinsomeway.Perhapsitshouldbeplacedatthebeginningofthedocumentor,in extreme cases, be referred to in the covering letter inviting tenders. Fifty years ago,LordDenningfamouslysaid,‘SomeclauseswhichIhaveseenwouldneedtobeprintedin red inkon the face of the documentwith a red handpointing to it before the noticecouldbeheldtobesufficient’.4

Ifgenerallyacceptedstandardcontractsarenotused,conditionswhichareprintedonthe back of a letter without any reference to them on the frontmay be held not to be

applicable.5 Inone instance,aquotationwassentbyfaxwithconditionson thereverse,but the reverse of the pagewas not transmitted.A court held that the reference on thequotationtoconditionsonthereversewasnotsufficientnotice.6Ontheotherhand,it isnotnecessarythattheconditionsaresetoutinfullinthedocument,providedthatpropernoticeofthemisgiven.7Thatistheusualsituationwhentermsaresimplyreferredtoinbillsofquantities.Obviously,oneroustermscannotbereferredtointhiswayunlessthecontractorisgivenplentyofopportunitytoinspecttheactualterms.However,itisalwaysadvisabletosetoutoneroustermsinfullinthetenderdocument.

Thedutyofthearchitect,andprobablyofthequantitysurveyor(ortheprojectmanagerifthereisone),isowedtotheemployerandnottothecontractor.Itispartofthatdutytoensurethatthecontractorisawareofallthetermssothatthecontractisproperlybindingonbothparties. If, after the contract hasbeen signedor a tenderhasbeen accepted, anonerousclauseisdiscoveredbythecontractorinthedepthofthetenderdocumentswhereacontractormightnoteasilynoticeit,thechancesarethatitwillnotapply.Itisnottheslightestuseforthearchitectorquantitysurveyortodrawittothecontractor’sattentionatthatstage;itwillnotbeoneofthetermsinthecontract.

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3

4

5

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7

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5Doesthearchitecthaveadutyofcaretothecontractorwhenissuingtenderinginformation?Thearchitectisresponsibleforagreatdeal,ifnotall,oftheinformationwhichgoesouttocontractorsattenderstage.Contractorswillunderstandablyproceedonthebasisthattheinformationsuppliediscorrect.Acontractorwilloftenqueryitemsandthearchitectwillissueclarifications,someofwhichmayseemalmostlikeadvice.Supposetheinformationor clarification is seriously wrong and it leads the contractor to believe that the workrequiredissubstantially less thanturnsout tobethecase.Will thecontractorbeabletoclaimtheeconomiclossfromthearchitect?Usuallyanarchitectowesnodutyofcaretoavoideconomic loss toa tenderingcontractorwhensupplying informationfor tenderingpurposes.

Inorderfortheretobesuchadutyofcare,itwouldhavetobeshownthattherewasacontractbetweenconsultantandtendererorthattherewasagivingofadviceintheformof a negligent misstatement or misrepresentation that the giver knew would be reliedupon.Suchreliancewouldhavetobeadirectcauseofthelosswhichwassuffered,andthelossmusthavebeenforeseeableasaconsequenceofthestatement.Eventhen,allthecircumstanceswouldhave tobeconsideredbeforeadutyofcarecouldbefound. Ithasbeenheldthatifthearchitectincludesadisclaimertotheeffectthatheorsheacceptsnoliabilityforanydocumentexceptforthepurposeforwhichitwascommissionedandthatnoliabilityisacceptedtoanypersonexceptthepersonwhocommissionedthedocument,itwillbeapointertotherebeingnodutyofcare.8

[1990]3AllER25.

J&ADevelopmentsLtdvEdinaManufacturingLtd,ArmouraLtd&Others[2006]NIQB85.

[2010]EWHC1530(TCC).

JSpurlingLtdvBradshaw[1956]1WLR461.

WhitevBlackmore[1972]2QB651.

PoseidonFreightForwardingCoLtdvDaviesTurnerSouthernLtd[1996]2Lloyd’sRep388.

OceanChemicalTransportIncvExnorCraggs(UK)Ltd[2000]1Lloyd’sRep446.

GallifordTryLtdvMottMacDonaldLtdandRowenStructuresLtd(2008)120ConLR1.

Chapter2

Pre-contractissues

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6Theemployerisinahurrytostartwork.Isthereaproblemintheissueofaletterofintent?Itisdifficulttothinkofanyothercauseresponsibleformoredifficultiesanddisputesinconstruction contracts than the employer being in a hurry. The employer’s professionaladvisers should firmlydisabuse the employerof thenotion that constructioncanbeputunderway(successfully)withoutproperpreparation.

Commonly, the architect will try to overcome the problems of a premature start byissuing a letter of intent. Usually, the contractor will have submitted a tender that isreferabletoastandardformofcontract,specificationandpossiblybillsofquantities.Theissue of the letter may be due simply to the fact that the employer cannot wait theadditional fewdaysnecessary for thepreparationandexecutionof a formal contract. Ifthat is the only problem, it can be overcome by a simple letter of acceptance of thecontractor’stenderratherthanaletterofintent.Often,thereissomethingmoresubstantialpreventingtheissueofanacceptanceletter.Itmaybeadelayinobtainingfundingforthewhole project, or perhaps the tender was too high and reduction negotiations are inprogress.

Theideaofaletterofintentisstraightforward.Ittellsthecontractorthattheemployerisnot inaposition toenter intoacontract for theworkbut thatworkcanbeginandbecarriedoutinaccordancewiththedrawingsandspecification;iftheemployerhastostopthework,thecontractorwillbepaidforwhathasbeencarriedout.

Thereareseveralproblemsassociatedwithso-calledlettersofintent:

If the letter isnot carefullydrafted, thecontractor commencingworkmaycreateabinding contract for thewhole of thework on the basis of the contractor’s tender.Simplyputtingthewords‘LetterofIntent’ in the letterheadingdoesnotproducealetterofintent.

Iftheletterisproperlydrafted,itformsasimplecontractonitsownterms,andeitherthe employer or contractor can simply bring the arrangement to an end withoutnotice. This can cause tremendous problems ifwork has been proceeding under aletterofintentuntiltheworkisalmostcomplete.Forthecontractortowalkawayatthat stage isveryexpensive for theemployer.Theemployercannotclaimdamagesfor breach of contract because it cannot be a breach for the contractor to dosomethingwhichtheletterofintentallowsittodo.

Althoughwork done under a letter of intent is commonly valued and paid on thesamebasisas thecontract thatwasenvisaged in the tender, there isnogoldenruleaboutit.Indeed,thecontractorisnormallyentitledtoaquantummeruit,whichmaybevaluedinseveralways.

Sometimestheletterofintentissocarefullydraftedthatbothpartiesareboundbyituntiltheworkiscompleted,althoughthatwasalmostcertainlynottheintention.

Lettersofintentaresometimesreferredtoasunilateralcontracts,or‘if’contracts.Thatis,theyarecontractsformedoncondition:‘Ifyoubuildthiswall,Iwillpayyou£100.’Ifthewallisbuilt,Iamobligedtopaythe£100,butthereisnocontractuntiltheconditionis

fulfilled.Aletterofintentmayconstituteacontinuingoffer:‘Ifyoustartthiswork,wewillpay

youappropriateremuneration.’Again,thereisnoobligationontheotherpartytodothework,andifitisdone,therearenoexpressorimpliedwarrantiesastoitsquality.1

Hall&TawseSouthLtdvIvoryGateLtd2isagoodexampleoftheproblemsthatcanarisewhenprojectsarecommencedusingwhatoneorpossiblybothpartiesthinkofasaletterofintent.

IvoryGateengagedHall&Tawsetocarryoutrefurbishmentandredevelopmentworks.Itwas intended that the contract shouldbe in JCT80 formwithContractor’sDesignedPortionSupplementandheavilyamendedclause19.Thetenderprovidedfortwostages.Inviewof theneed tostartworkonsiteassoonaspossible, IvoryGatesenta letterofintent toHall&Tawseagreeing topay‘all reasonablecostsproperly incurred…as theresult of acting upon this letter up to the date you are notified that you will not beappointed’.Theletterproceededtoexplaintheworkrequiredandevincedanintentiontoenterintoacontractinaspecifiedsum.

AgreementwasnotquicklyreachedandIvoryGatesentafurtherletterofintent.Whatwas envisagedwas thatworkwould commence, contract detailswouldbe finalised andthesignedbuildingcontractwouldbeheldinescrow(asituationwheretheeffectivenessof the contract is subject to a condition being fulfilled). Unfortunately the contractdocuments were never completed. The terms of the second letter of intent were quitedetailed, expressing the intention to enter into a formal contract but, pending that time,instructingthebuildingcontractWorkstocommence,materialstobeorderedandHall&Tawse to act on instructions issued under the terms of the building contract. Previouslettersofintentweresuperseded,andHall&Tawseweretobepaidallreasonablecoststogetherwithafairallowanceforoverheadsandprofitsiftheworksdidnotproceed.Twocopiesoftheletterwereprovided,andHall&Tawseweretosignonecopyandreturnit.Theyneithersignednorreturnedthecopy.

Theproject took aboutninemonths longer thanwasplanned.Liabilitywasdisputed,andthereforethemoneyduetoHall&Tawsewasalsodisputed.Atthetimeofthetrial,theworkwasnearing completion.The judge referred to the second letter of intent as aprovisionalcontractandsaidthatithadbeenmadewhenHall&Tawseacceptedtheoffercontained in itbystartingworkonsite.Thesecond letterof intentenabled thecontractadministratortoissueanyinstructionsprovidedtheinstructionswouldbevalidundertheterms of the contract. The judge held that because no other contract had come intoexistencetosupplanttheprovisionalcontract,themethodofdeterminingtheamountsduetoHall&Tawsewastorefertothebillsofquantitiesthatweretohaveformedpartofthecontract. Themachinery for valuing theworkwas to be found in the JCT 80 contract.Undertheprovisionalcontract,Hall&Tawsewerenotentitledtostopworkatanytime,aswouldhavebeenthecaseunderanormalletterofintent.

Thereweretwosuchlettersissuedinthisinstance:Onewasatrueletterofintent;theotherwasactuallyacontractthatdeterminedtherightsanddutiesoftheparties.Althoughitwasintendedtobeprovisionaluntilapermanentcontractcouldbeexecuted,theabsenceofasubsequentpermanentcontractturnedtheprovisionalcontractintoapermanentone.

Astraightforwardletterofintentwouldhaveentitledthecontractortowalkoffsiteatanytime, and, crucially, it would have entitled the contractor to remuneration on a faircommercialratebasis,whichmighthaveexceededthecontractrates.

ManchesterCabinsLtd vMetropolitanBoroughofBury3 concerned a letter of intentthatwasnotacontract.Tenderswere invitedon thebasisof the JCTStandardFormofBuilding Contract with Contractor’s Design. AlthoughManchester Cabins submitted atender, it did not include the Contractor’s Proposals.Much negotiation took place andManchesterCabinsproducedsomedrawings.Burysentafaxwhichstated:‘Iampleasedto inform you that the Council has accepted your tender for the above in the sum of£41,034.24,subjecttothesatisfactoryexecutionofthecontractdocumentswhichwillbeforwardedtoyouinduecourse.’

Eventually,itwasconfirmedthatthefaxedletterwasindeedauthoritytocommencethenecessary preliminary works ‘subject to the satisfactory execution of the contractdocuments’. Surprisingly, later on the same day that the confirmation was sent, Burywrote to Manchester Cabins suspending work, later stating the Council’s intention towithdrawfromthecontract.Thecourtheldthattherewasnoconcludedcontractbecausethe phrase ‘subject to the satisfactory execution of the contract documents’ had beenincluded in the faxed letter of intent.Although thephrasewouldnot prevent a contractfromcomingintoeffectineverysituation,inviewofthesurroundingcircumstancesitwasclearthattherewasnoagreementinthisinstance.

Startingwork on the basis of a letter of intent or terms incorporated by reference is,therefore,clearlyarecipeforlitigation.ItisfarbetterforanemployerandacontractortoenteratanearlystageintoaformalagreementinthecurrentJCTorotherformacceptedbybothparties.

7Ifaletterofintentisissuedwithalimitof£20,000,istheemployerobligedtopayahighersumafterallowingacontractortoexceedthelimit?Lettersof intentcommonlystipulateamaximumfigure that theemployer ispreparedtopay. That is perfectly understandable. The employer needs to know the extent of anyfinancial liability. Thus the proposed contract summay be severalmillion pounds, but,pendingfinalagreementoncontracttermsandothermatters,theemployermightissuealetter of intent indicating that the contractor may proceed up to a total of £50,000 orwhatever sum is deemed appropriate. The idea is that before the contractor completesworktothatvalue,eitherthecontractisagreedandexecutedortheworkisstopped.

Theproblemisthatoncealetterofintentisissued,bothpartiestendtoforgetwhatitsays and simply get on with the project as though a contract had been signed. Thensomething happens that concentratesminds and there is a dispute.Mowlemplc v StenaLinePortsLtd4isacaseinpoint.Theletterofintentconceptwastakenratherfarbytheissue of some 14 such letters during the course of theWorks. Fortunately, the partiesagreedthateachlettersupersededthepreviousone,otherwisethedisputemighthavebeenlabyrinthine in its complexity.WhenMowlemcommenced thecarryingoutof theworkdescribed in each letter, a small contract was formed by which Stena agreed to payMowlemareasonablesum.Ineachcase,themaximumamountofthissumwasstatedintheletter.

ThelastlettersentbyStenastipulatedamaximumamountof£10millionandadateforcompletion.TheWorkswere not finishedby the duedate, andMowlem’s positionwasthat the work carried out was worth more than £10 million. Mowlem maintained thatStena had allowed it to continue theWorks even though itwas clear that the costwasexceedingtheamountintheletterofintent,andthereforeMowlemoughtnottobeboundbytheamountintheletter,whichshouldnothaveanyeffectoncethesumwasexceeded.Stenacontended that itsprofessionaladvicewas that theworkdonedidnotexceed£10million.

The court had no hesitation in concluding thatMowlemwas entitled to be paid thereasonableamounts itcouldsubstantiateunder the termsof the letterof intent,butsuchamountscouldnotexceed£10millionintotal.Itwouldnotmakecommercialsenseifanagreementtoamaximumsumcouldbesetasidesimplybecausethecontractorcontinuedtoworkaftertheduedateorafterthelimithadbeenreached.

Fromthis it is tobeconcludedthat lettersof intent, likeothercontractualdocuments,meanwhattheysay.Usually,ifthecontractorisworkingtoaletterofintentthatspecifies,say,£20,000asthelimit,thisfigurewillbeexceededatthecontractor’speril.Ofcourse,thatissubjecttotheusualoverridingprovisothateachsetoffactsmustbeconsideredonitsownmerits.Where themaximumis lowand theeventualsumwouldbemany timesthat amount, itmaybe held that a contractorwho substantially exceeded themaximumwouldbeentitledtopaymentonthebasisoftheclearagreementofbothpartiestoignorethelimitandcontinuetheWorks, thefailuretoissuearevisedletterof intent,orevenaformalcontractbeinganoversight.Itissuggestedthatthiswouldparticularlybethecase

ifthecontractorhadactuallyreceivedpaymentabovethemaximumamount.

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8Cananarchitectbenegligentforsuggestingaletterofintent?Thestraightansweristhatitalldependsoncircumstances,butthearchitectmaybeliableiftheadvicetousealetterofintentresultsinadditionalcostsfortheemployer.InTrusteesof Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd,5 a disputearoseoutofacontractbetweentheTrustandKier(thecontractors).TurnerandTownsend(TT)weretheprojectmanagers.ItwasintendedthatthecontractwouldbeaJCTDesignandBuild Contract. In the event, the project was completedmuch later than expected.TherewasaformalmediationbetweentheTrustandKierwhichresultedinanagreementthattheTrustwouldgetnoliquidateddamagesandKierwouldgetnoadditionalpayment.

Theprojecthadbeencarriedoutunderaseriesoflettersofintent.Nobuildingcontracthadbeenexecuted,andthereforetherewerenoliquidateddamagesapplicable.TheTrustbroughtanactionagainstTTforprofessionalnegligence,alleging that theyshouldhaveprocuredtheexecutionofacontract.Iftheyhaddoneso,Kierwouldhavebeenliableforliquidateddamages.

Althoughitwasthelowest tenderer,Kier’stenderwashigherthantheTrust’sbudget,and lengthy discussionswere held in order to reduce the contract sum. It soon becameclearthatthediscussionswouldoverruntheexpectedpre-Christmasstartdate,andaletterofintentwasissuedforworkuptoastipulatedsum.Nofewerthansevenfurtherlettersofintent were issued. It was only at the mediation after the project was complete that acontract was finally signed on agreed terms which excluded the right to liquidateddamages.ThetrustsuedTTfornegligence.

TTdeniedliabilitybutalsosaidthatitsliabilitywaslimitedunderaclausestating,‘innoeventshallourliabilityexceedthefeespaidtousor£1millionwhicheveristheless’.The trust argued that it never signedTT’s terms of appointment and the clause did notapply.

Thecourtexaminedseveralissuesofgeneralinteresttoarchitects,anditsconclusionswereasfollows:

AmongTT’sdutiesasprojectmanagerwasfacilitatingtheprocurementofabuildingcontract.TThadnoabsolutedutytoprocurethecontract,andinthecircumstancesofthe situation itwas notwrong to startwork under a letter of intent.However, TTshould have advised the Trust of the dangers of a letter of intent compared to anexecutedcontract.Thiswasparticularlymarkedwithregardtoliquidateddamages.

TTshouldhaveadvisedtheTrusttotakefirmactiontoobtaintheexecutionbyKierofthecontract.Thisshouldhavebeendone,atlatest,atthetimeofthefourthletterofintent.

ItwasnegligentofTTtobelievethatthelettersofintentgaverisetoanentitlementtoliquidateddamages.

The letters of intent, which were all similar in wording, were in effect smallcontracts.Theypaved theway fora formalcontract toapply retrospectively to theWorks,buttheyexpresslystatedthattheprovisionsoftheformalcontractwouldnot

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applyuntilitwasexecuted.Itwas argued that theremayhavebeenan implied contract on thebasis thatKier,afterthelettersofintenthadexpired,madeapplicationforanextensionoftimeunderthe termsof theunsigned contract.Therewasno implied contract in this instance,because

thelettersofintenthadallbeenissuedonthebasisthattheyweresubjecttoaformalcontractbeingexecuted;foranimpliedcontracttoariseinthesecircumstanceswouldbeexceptional.

therewasnodoubtthatthepartieshadcontractedonthebasisofthelettersofintentonly.

therewasneveratimewhenthepartiessuggestedthattherewasnoneedforaformalsignedcontract.

ThelimitationclauseinTT’stermsofappointmentwasunreasonableand,therefore,contrary to theUnfairTerms inConstructionContracts 1977.This conclusionwasreached because the appointment said that TT had the obligation to take outprofessional indemnity insurance to a level of £10 million. Yet after taking intoaccountfeesalreadypaid,theclausepurportedtolimitliabilityto£111,321.

The court decided that, if pressed, therewas a two thirds chance thatKierwould havesignedthecontract,andtherewasthepossibilitythatKiermighthavebeensuccessfulinarguingthattheliquidateddamageswereinfactapenalty.Thelikelylevelofsettlementbetween theTrust andKier if thecontracthadbeen signedwas£340,000,ofwhich theTrustshouldrecover£226,667fromTT.AgainstthiswassetsomeunpaidfeestowhichTTweredueinthesumof£37,167.

Inthiscase, thecourtfoundthat theadviceto issuetheinitial letterof intentwasnotnegligent;itwastheadvicetocontinueissuingfurtherletterswhichwaswrong.Althoughthere are timeswhena letter of intent is justified, those times shouldbe fewanda lastresort.

9Canpre-contractminutesformabindingcontract?

Thisquestionwas considered in a recent case6 concerningwhether a contract hadbeenentered into between a contractor and sub-contractor. As is common practice, thecontractor had arranged a meeting with the sub-contractor to go through a pro-formaagendaandagreeallthebasics.Themeetingdulytookplaceandthecontractorproduceda set ofminuteswhich confirmedwhat hadbeen agreed.Prior to themeeting, the sub-contractor had already submitted a price and priced part of the bills of quantities. Thecontractorissuedaletterinstructingthesub-contractortoproceedandsayingthataformalsub-contract would be prepared. The sub-contractor neither signed the letter nor thecontractor’sofficialorderwhichfollowedsomedayslater.

The court’s view was that there was a contract on terms agreed at the meeting andconfirmedintheminutesbecauseall theessential termsofthecontracthadbeenagreedbetweenthepartiesatthattime.However,becauseneitherpartyhadframeditsargumentsinthatway,thecourtwasunabletomakethatdecision.Thecourtthereforedecidedthattheagreedtermsconstitutedanofferwhichwasacceptedbythecontractorwhenitsentitsletter instructing commencement, and the reference to the preparation of a formal sub-contractmadenodifference.

Whetheranagreementwasinwritingwasanimportantquestionifacontractwastobebroughtwithin theHousingGrants,ConstructionandRegenerationAct1996.However,part 8 of the Local Democracy, Economic Development and Construction Act 2009removedtherequirementthatthe1996Actappliedonlytoagreementsinwriting.ThathasbeenthepositionsinceOctober2011.

10Hasthecontractoranyremedyiftheemployerhassaidduringthetenderperiodthatthecontractorcanfreelyusecertainfacilitiesonsitebutsubsequentlyrefusestoallowit?Theanswertothisquestionisnotasstraightforwardasmightatfirstappear.Itiscommonforanemployer tohave inserted in thepreliminariessectionof thebillsofquantitiesorthe specification that the contractor canusevarious facilitieson site, suchaswater andelectricity.Sometimes there isnothing in thecontractdocuments,but theemployerwillagreetosuchuseafterthecontractorarrivesonsite.ThatoftenhappensifthecontractoriscarryingoutWorkstotheemployer’sownhouse.

Iftheuseoffacilitiesisstatedinthepreliminaries,itwillbecomeatermofthecontractwhen the contractor’s tender is accepted.Therefore, if the employer does notmake thefacilitiesavailable,itwillbeabreachofcontractforwhichthecontractorwillbeentitledtodamagestocompensateitforthecostofobtainingsimilarfacilitiesbyothermeans.

Iftheemployertellsthecontractor,duringthetenderperiodbutbeforetheyenterintoacontract,thatheorsheintendstomakethefacilitiesavailabletothecontractor,failuretodosowillnotmaketheemployer liablefordamages,because itwas justastatementofintention.Thatisthecaseeventhoughtheknowledgethatfreewaterandelectricitywereavailablemighthavebeenakeyfactorinconvincingacontractortoenterintothecontractat a particular price. The reason is that the employer’s statement of intention is not arepresentation.Arepresentationmustbeastatementoffact.Iftherepresentation(suchasthat the ground is solid rock) is wrong (it is actually made ground), it is amisrepresentation, and if the contractor entered into a contract in reliance on it, theemployerwouldbeliablefordamages.7

Itisarguablethatiftheemployersaidthatwaterwasfreelyavailableonsite,itwouldbeastatementoffactandactionableifwrong,butitwoulddependuponwhatbothpartiesunderstood by the statement. Even if worded as a fact, the contractor would usuallyunderstandthattheemployerwassayingthatheorshewouldmakethewateravailable;againastatementofintention.

Iftheemployersimplytellsthecontractorthatitcanusevariousfacilitiesfreeofchargewhenthecontractorarrivesonsite, theemployercanwithdrawthefacilitiesatanytimewithoutanyliabilitybecausetheofferisjustagratuitousaction.

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11Whatdateshouldbeputonabuildingcontract?Thedatetobeputonabuildingcontractisthedatethecontractisexecuted.Thecontractisexecutedwhenthelastpersonwhomustsignhassigned.

In practice, a building contract is usually prepared by the employer’s professionaladvisers, normally by either the architect or the quantity surveyor. Ideally, it should beprepared by the architect because the architect is the person who is going to have toadministerit.

Clearly, it is always advisable for the contract to be executed before the contractorcommencesonsite.Theconsequencesoffailuretoenterintoabindingcontracthavebeenexploredinquestion6.Thequestionoftenariseswhetheracontract that isnotexecuteduntilhalfwaythroughtheconstructionofaprojectappliesonlytothepartoftheprojectwhichisconstructedafterthedateofthesignature.Thissometimescausestheemployertohave the contract backdated to a date no later than the date of possession. This is badpracticeforseveralreasons:

Itisstatingsomethingthatisfalse;thisistobeavoidedinanycircumstances.

Circumstancesmaywell arise laterwhen itwill be important to know the date onwhichthepartiesexecutedthecontract.Forexample,theemployerorthecontractormay subsequently bring arguments about the date for possession, and it may beuseful for the other party to be able to show that the contractwas signed by bothpartiesmanymonthsafterpossessionandthatanydifficultiescouldhavebeenraisedatthatpoint–indeed,thateitherpartycouldhaverefusedtosign.

Itisunnecessarybecauseabuildingcontractwillberetrospectivetocoverthewholeofitssubjectmatter.8Essentially,thatisbecausetheparties,evenifsigningafterpartofthecontractWorkshavebeencompleted,aresigninganagreementtopayforandtocarryoutandcompletethewholeoftheWorks.Therefore,thecontractmustapplytowhathasbeendoneaswellaswhatisyettobedone.Theremaybeastinginthetailhereif,forexample,thecontractorhasfailedtocomplywiththerequirementsofthecontractinsomeoftheworkalreadycarriedout,perhapsbecausethecontractorharboured the idea that the contract would never be signed and, when signingsubsequently,forgottheearliernon-compliance.

12Cantherebetwoemployersononecontract?Itispresumedthat‘twoemployers’meanstwoentirelyseparatepersonsorcompanies.Forexample, two friends may jointly buy an old barn and intend to convert it into twodwellingsfor their families.Theymaywish to, jointly,engage thearchitectand, jointly,enterintoacontractwiththecontractor.Theymayreason,withsomejustification,thatifarchitect and contractor can be sure of doing both dwellings, there may be financialeconomiesofscale.

Thestraightanswertothequestionis‘Yes’.However,thereareconsiderabledifficultiesinvolved.Thearchitectwill require instructions fromtheclients,and thecontractorwillrequire instructions from the architect during the progress of theWorks. Therefore, theclientsmustagreeabouteverything.Whowillberesponsibleforpaying?Someonemustactuallysignthecheques.Willajointaccountbesetupandwillbothclientshavetosigneachcheque?Whatiftheclientsdisagree?Towhomwillthearchitectsendfeeaccounts?Willbothclients’namesbeinsertedinthebuildingcontractas‘Employer’?Whatifoneoftheclientswishestospendmoremoneythantheother?Musttherebeseparateaccountswithinboththearchitect’sengagementandthebuildingcontract?Whatisthepositionifthetwofriendshaveaspectacularfallingout?

Mostofthesequestionssuggestawfulsituations,possiblyresultinginnightmarishlegalproceedings.The architectmight have a disputewithonlyoneof the employers but beobligedtotakeactionagainstbothbecausethe‘Employer’inthetermsofengagementisidentifiedbytwonames.

Anarchitectoracontractorwhoagrees tocontractonthisbasisprobablyhasadeathwish–certainlyaninsolvencywish.Although,likeagoodmanyotherrecipesfordisaster,havingtwoemployersononecontractcanbedone,itisnotagoodidea.Afarbetteridea–infacttheonlysensibleideafromthearchitect’sandcontractor’spointsofview–isforthetwopersonstoenterintoacontractbetweenthemselveswhichsetsouthowtheywilldoeverythingconnectedwiththeproject.Mostimportantly,thecontractwillsaywhichofthepersonswillbeenteredintothetermsofengagementandactasclient.Itwillalsosaythatthissamepersonwillbeenteredintothebuildingcontractasthe‘Employer’.Inthatway,botharchitectandcontractorwillhaveonepointofcontactand,toputitbluntly,onepersontosueifthingsgowrong.Howthetwopersonsarrangetheirownliabilitiesistheiraffair,butitisnotsomethingthatneedconcernthearchitectandthecontractor.

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13Theemployerrejectedacontractor’stenderandacceptedadifferenttender,butthattendererwentintoliquidationbeforestartingonsite.Theemployerthenacceptedthefirsttender,butthecontractorsaiditwouldhavetoincreasetheprice.Isthecontractorallowedtodothat?In law,acontractor’s tender isanoffercapableofbeingacceptedby theemployer.Theoffercancometoanendbylapseof time,forexampleifseveralmonthsgobyandthecontractorhearsnothing.Alternatively,thecontractorcanwithdrawitstenderatanytimeunless it has already been accepted or unless the employer has paid something for thecontractor to keep the tender open for a specified period. If the employerwrites to thecontractor rejecting the tender, that also brings the offer to an end. In this instance,therefore,whentheemployerrejected thecontractor’s tender, thatoffercametoanend.After the liquidation of the chosen contractor, the employer could not accept the firstcontractor’s tender because it was no longer open for acceptance. Not only is thecontractorentitledto increaseitsprice, itcanrefusetodotheprojectatall,andthere isnothing that the employer can do about it. Even if the employer failed to notify theunsuccessfulcontractors, theacceptanceofone tenderwould imply that theotherswererejected.

BritishSteelCorporationvClevelandBridgeCompany[1984]1AllER504.

(1997)62ConLR117.

(1997)unreported.

[2004]EWHC2206(TCC).

(2012)144ConLR115.

CubittBuildingandInteriorsLtdvRichardsonRoofing(Industrial)Ltd[2008]EWHC1020(TCC).

MisrepresentationAct1967.

TamesideMBCvBarlowSecuritiesGroupServicesLtd[2001]BLR113;AtlasCeiling&PartitionCompanyLtdvCrowngateEstates(2002)18ConstLJ49.

Chapter3

Possessionofthesite

14Iftheemployercannotgivepossessionontheduedate,canthematterberesolvedbythearchitectgivinganinstructiontopostponetheWorks?Iftheemployerfailstogivepossessionofthesiteonthedatenamedinthecontract,itisabreachofcontract, and if the failure lastsanysignificant time, it isabreachofamajorterm of the contract (repudiation), because without possession the contractor cannotexecutetheWorks.Allstandardformcontractsprovideforaspecificdateforpossession.Failuretogivepossessionisabreachnotonlyoftheexpresstermsofacontractbutalsoofthetermthatwouldbeimpliedatcommonlawintheabsenceofanexpressterm.

Because default in giving possession is a breach of a major term of the contract, aprotractedfailuretogivepossession,andsubsequentacceptancebythecontractoroftheemployer’sbreach,mayentitlethecontractortoaccepttherepudiationandtocommenceanactionfordamages,whichwouldincludethelossoftheprofitthatitwouldotherwisehave earned.1Most contractors would balk at taking such drastic action, but theymayclaimdamagesatcommonlawforanylossactuallyincurred.2

Architects sometimes try to overcome a failure on the part of the employer to givepossessionby issuingapostponement instructionunder thecontract.Forexample,SBCclause3.15allowsthearchitectorcontractadministratortoissueinstructionsinregardtothepostponementofanyworkwhichis tobeexecutedunderthecontract.However,thepowertopostponeisnotthesameasthepowertodeferpossessionofthesite.Althoughthearchitectmayissueaninstructiontopostponealltheworkonsiteuntilfurthernotice,thecontractor is still entitled tobe inpossessionof the site from thedateofpossessionstatedinthecontract.Postponementiswhenthecontractorisonthesiteandincontrolofitbutisdoingnocontractwork.

Intheeventthattheemployercannotgivepossession,thecorrectprocedureisfortheemployer to formally defer possession (e.g. under clause 2.5 of SBC) if the contractparticulars indicate thatpowertodeferapplies.Thecontractenvisagesonlyamaximumsix weeks deferment period. Obviously, the employer may opt to amend the contractparticularssothatalongerperiodapplies,buttherewillprobablybeapenaltyintermsofahigher tenderprice.If thedefermentclause isoperated, thecontractor isentitled toanappropriateextensionof timeand reimbursement forwhatever lossand/orexpensemayhavebeensuffered.Inpractice,whereanarchitectattemptstodeferpossessionbyissuinga postponement instruction, the contractorwill often accept the instruction as deferringpossession because the contract makes provision for extension of time and loss and/orexpense followingpostponement.Moreover, if the suspensionofwork lasts longer thanthe period specified in the contract particulars against clause 8.9.2, the contractor isentitledtotakestepstoterminateitsemploymentunderthecontract.

15Inarefurbishmentcontractfor120housesunderSBC,thebillsofquantitiessaythatthecontractorcantakepossessionof8housesatatime,takingpossessionofanotherhouseeverytimeacompletedhouseishandedover.Isthecontractorentitledtopossessionofall120housesatonce?Thereisanimpliedtermineverybuildingcontractthattheemployerwillgivepossessionofthesitetothecontractorwithinareasonabletime.ThismeansthatthecontractormusthavepossessioninsufficienttimetoenablethecompletionoftheWorkstobeachievedbythe contract date for completion. For example, under the terms of SBC, clause 2.4stipulatesthatthecontractormustbegivenpossessiononthedatesetoutinthecontractparticulars.

If the employer fails to give possession on the date stated, it is a serious breach ofcontract.If,assometimeshappens,thereisnoexpresstermdealingwiththetopic,atermwould be implied and the failure would be a breach of such a term. Failure to givepossession is a breach of such a crucial term that if the failure is continued for asubstantial period, it may amount to repudiation on the part of the employer. If thecontractor accepts such a breach, an action for damages may be started, which wouldenable the contractor to recover the loss of the profit that would otherwise have beenearned.Generally,contractorsarenoteagertotreatthebreachasrepudiation,butsimplyasabreachofcontractforwhichtheycanclaimdamagesforanylossactuallyincurred.3SBCcontains provision in clause 4.23 that allows the contractor to recover such lossesthrough the contract mechanism (clause 4.24.5) and hopefully avoids the difficultiesresulting from accepted repudiation. However, it should be noted that the contractprovisions do not displace the contractor’s right to use common law remedies if soinclined.

The position envisaged in the question is still quite common, particularly in localauthorityhousingcontracts,anditwaswellstatedasfollows:

Taken literally theprovisionsas to thegivingofpossessionmust I thinkmean thatunless it isqualifiedbysomeotherwords theobligationof theemployer is togivepossessionofallthehouseson[thedateforpossession].Havingregardtothenatureofwhatwastobedonethatwouldnotmakeverygoodsense,butifthatistheplainmeaningtobegiventothewordsImustsoconstruethem.4

Thiswasacasewhere the right topossessionhadbeenqualified in theappendix to theJCT63formofcontract.InordertoachievepossessioninpartsunderSBC,itisnecessaryto complete the contract particulars accordingly. Possession as described cannot beachievedbyanythinginthebillsofquantities;clause1.3makesclearthatnothinginthebillscanoverrideormodifywhatisintheprintedcontract.ThisisaclausepeculiartoJCTcontractsthatstillcatchesouttheunwary.

Part of the judgment in London Borough of Hounslow v Twickenham GardenDevelopments Ltd5 has helped to give rise to the myth that a contractor can be given

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possessionofthesiteinparts.Thecourtreferredtosuchpossession,occupationanduse‘as is necessary’ to allow the contractor to carry out the contract.Because thiswas notsomethingthatthecourthadtodecide,thestatementdoesnothavebindingforce.

Theideathatacontractorisentitledonlyto‘sufficientpossession’andthat,therefore,the employer need give only that degree of possession that is necessary to enable thecontractor to carry outwork ismisconceived. In any event, the contractor is entitled toplanthecarryingoutofthewholeoftheWorksinanywayitpleases.

Although it is not binding authority, the commentary in one of the Building LawReportssetsouttheposition:

Englishstandardformsofcontract,suchastheJCTForm,proceedapparentlyonthebasisthattheobligationtogivepossessionofthesiteisfundamentalinthesensethatthecontractor is tohaveexclusivepossessionof the site. It appears that this is thereason why specific provision is made in the JCT Form for the employer to beentitled to bring others on the site to work concurrently with the contractor forotherwisetodosowouldbeabreachofthecontract.

This isaneminentlysensibleview.AlthoughanearlierJCTformofcontractwasunderconsideration,theviewisequallyvalidinthecontextofSBC.Inanothercase,undertheJCT 63 form, although the employerswere contractually obliged to give the contractorpossessionofthesite,theycouldnotdoso.Thiswasduetoaman,awomanandtheirdogoccupyingthenorth-eastcornerofthesitebysquattinginanoldmotorcarwithvariouspackingcasesattachedandthewholethingprotectedbyastockade.Althoughthepreciseperiodwasindispute,itseemstohavebeenabout19daysbeforethesitewasclearedandthe contractor could actually get possession of the whole site. The court held that theemployerswereobviouslyinbreachoftheobligationtogivepossessiononthecontractualdate.Thecontractorcouldenterontothesite,butitwasunabletoremovetheoccupantsand their rubbishand thebreachwas therefore thecauseof significantdisruption to thecontractor’sprogramme.

Inanothercase,itwasheldthatthephrase‘possessionofthesite’meantpossessionofthewholesite.Theemployer,ingivingpossessioninparts,wasinbreachofcontract,andthecontractorwasentitledtodamages.6

Theiteminthebillsofquantitiescannotoverridewhatisintheprintedcontract(clause1.3),andthecontractoriscorrectinrequestingpossessionofallthehousesonthedateofpossessionbecausethatiswhatthepossessionclause(2.4)states.

WraightLtdvPH&THoldingsLtd(1968)13BLR27.

LondonBoroughofHounslowvTwickenhamGardenDevelopmentsLtd(1970)7BLR81.

LondonBoroughofHounslowvTwickenhamGardenDevelopmentsLtd(1970)7BLR81.

WhittalBuildersvChester-Le-StreetDistrictCouncil(1985)11ConLR40(thefirstcase).

(1970)7BLR81.

WhittalBuildersvChester-Le-StreetDistrictCouncil(1987)40BLR82(thesecondcase).

Chapter4

Generalcontractualmatters

16So-calledpartneringandmanyothercontractscontaintermstotheeffectthatthepartieswillworktogetherinthespiritoftrust,fairnessandmutualco-operation.Howfardoesthataffectotherclauses?Inpartneringcontracts there isoftena termreferring to fairnessorgood faith.A recentcasedealtwiththeACAStandardFormofContractforTermPartneringwhichhadbeenadaptedby theparties.Clause1.1 stated that ‘thePartneringTeammembers shallworktogetherinthespiritoftrust,fairnessandmutualco-operationforthebenefitoftheTermProgramme’. Clause 2.1 stated in part that they should establish and develop theirrelationshipswiththeobjectofachieving‘trust,fairness,mutualco-operation,dedicationtoagreedcommongoalsandanunderstandingofeachothers’expectationsandvalues’.Towhat extent, if at all, do clauses like thesemodify theway inwhich other clauses areoperated?

These clauseswere considered inTSGBuildingServicesplc vSouthAngliaHousingLtd.1SouthAngliaterminatedthecontract,andthequestionwaswhetherthetwoclausespartly quoted abovemodified South Anglia’s right to terminate. In particular, did theymeanthatSouthAngliamustoperatetheterminationclausereasonablyoringoodfaith?TSGarguedthattheclausesresultedinanimpliedtermofgoodfaithonthepartofSouthAnglia.ThecourtheldthattheclausesdidnotrequireSouthAngliatoactreasonablyinterminatingnorwasthereanyimpliedtermofgoodfaith.Theterminationprovisionswereclearandeitherpartycouldterminateforanyreason.ItshouldbenotedthatJCTcontractsincludeanexpressprovision that terminationnoticesmustnotbegivenunreasonablyorvexatiously.

The question often arises about whether partnering contracts impose particularobligationsonthepartieswhichaffectthenormalinterpretationofcontractclauses.ThereisasimilarclauseintheSupplementalProvisions(paragraph1)ofthe2011JCTcontractsrequiringcollaborativeworking‘ingoodfaithandinaspiritoftrustandrespect’.Itseemsthatthecourtsarereluctanttogoveryfaringivingeffecttosuchclausesiftheclausesareclearinthemselves.

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17Whatdoes‘time-barred’mean?Ifaparticularaction is time-barred, itmeans that the timeprescribedforcarrying itouthas expired. For example, it is possible to have a time-bar clausewhich states that noextension of timewill be given unless a notice of delay is submitted by the contractorwithin14daysofthedelayingevent.Therefore,ifnonoticehasbeensubmittedwithinthe14 days, the contractor’s claim for an extension of time is said to be time-barred. Ofcourse, that is just anexample, and theremaybeother factors tobe taken intoaccountwhenconsideringtheentitlementtoanextensionoftime.

Usually, time-barredreferenceshavetodowiththeeffectof theLimitationAct1980.TheActsetsout the timelimitsfor thebringingofvariouskindsofaction.Inbrief, thefollowingarethemostimportantperiodsinconstructionwork:

Foractionsinsimplecontract:6yearsfromthedateofthebreachofcontract.

Foractionsindeed:12yearsfromthedateofthebreach.

Foractionsintort,suchasnegligence:6yearsfromthedatewhenthecauseofactionaccrues(e.g.whenphysicaldamageoccurs).

Forlatentdamage:either6yearsfromthedateonwhichthedamageoccurredor3yearsfromthedatewhenthepartywishingtoclaimfirstknewabouttheimportantfacts.Anactioncannotbebroughtmorethan15yearsafterthedateofthenegligentact.Thisisusuallycalledthe‘longstop’,anditapplieswhetherornottheimportantfactswereknownwithinthe15yearsandwhetherornotdamageoccurs.

ItisimportanttounderstandthatexpiryoftheperiodsintheLimitationAct1980doesnotprevent a party suing, but once the relevant period has expired it is for the party beingsued to raise the expiry of the limitation period as a complete defence. Therefore, if adefendantforsomereasonomitstoraisesuchadefenceandpaysupafterthelimitationperiod has expired, the payment is valid. It should be noted in cases of fraudulentconcealment (i.e. deliberate concealment of defects) that the limitation period does notbegintorununtilthefraudisdiscoveredorcouldhavebeendiscoveredwithreasonablediligence.2

18Ifacontractordoesnothaveapropercontractbuthascarriedoutworkforthesamecompanybeforeonawrittencontract,willthetermsofthatwrittencontractapplyagain?The short answer to that question is ‘No’. This is a common question and a frequentmisunderstanding.Peoplewhoaskthisquestionareprobablythinkingofsomethingcalled‘acourseofdealing’.Asthenameimplies,acourseofdealingdoesnotinvolvejustonepreviousoccasiononwhichthepartieshavecontractedtogether.Wherepartieshavedealtwitheachotherusing thesame terms inasubstantialnumberofpreviouscontractsofaparticular typeand theyenter intoanotheragreementabout the samekindof thingsbutomit to includereference to the terms, thepreviouslyagreed termsmaybe incorporatedintotheirlatestagreement.3

Despitethecommonlyheldview,thesituationisquiteuncommon,andthecourtswillnotholdthatthereisacourseofdealingunlessalltheevidencepointstothatconclusion.For example, the courts may hold that there is a course of dealing if a contractor hasboughtsuppliesofacertaintypeofbrickfromthesamesupplieroverthecourseofafewyearsandiftherehavebeenadozensimilartransactionsalwaysusingthesametermsandconditions, but both parties failed to complete the necessary paperwork on the lastoccasion.However,apartyisnotentitledtorelyonacontractusedononlytwoorthreepreviousoccasionsasgoverningthepartiesinasubsequenttransaction.

19Thecontractorhasnowrittencontractwiththeemployer(A).(A)instructedthecontractortodoworkandaskedittoinvoicetheir‘sistercompany’(B).Thecontractordidsoand(B)havenotpaiddespitereminders.Thisissueisintwopartsthatarenotnecessarilyconnected.

Itisalwaysamistakenottohaveawrittencontract.Oralcontractsdependuponeitherthepartiesagreeingonwhattheysaidorthepresenceofreliablewitnesses.Itshouldsetalarmbellsringingwhenapersonasksforworktobedoneorservicestobeperformedyetisunwillingtoenterintoapropercontract.Thefactthatthereisnowrittencontractmaysuggestthatthereisnocontractatall.

Theremaybewhatissometimesreferredtoasaquasi-contract,or,moreaccurately,aclaim in restitution. In this sort of situation, the claim arises when one party givesinstructionstoanothertocarryoutworkorperformservices,knowingthattheotherpartycarries out that kind of work or performs those services for a charge. In thosecircumstances,thelawmayholdthatthereisanimpliedpromisetopay.4

Thesecondandmoreimportantpartofthequestionconcernstheidentityofthepayingparty.Whether there is a contract entered into orally by the parties or whether we aredealingwithasimplepromisetopay,therewillbealegalobligationthat,insimpleterms,amountstothecontractordoingworkfor(A)and(A)havingalegalobligationtopaythecontractorinreturn.

Although the contractor would normally expect to invoice (A) for the work, in thisinstance(A)hasintroducedanewelementbyaskingthecontractortoinvoice(B).Despitethe fact that (A)hasdescribed (B) as a ‘sister company’, if both are limited companiestheyareseparatelegalentities.Therefore,(B)canquiteproperlyrefusetopaybecauseithas no obligation to pay the contractor under a contract or even a quasi-contract.Therefore, the contractorhasnogrounds for any legal actionagainst (B) to recover theunpaidcharges.Unfortunately, legalactionagainst(A)fortheunpaidinvoiceswouldbeequallyfruitlessbecausetheinvoiceswereneversentto(A)and(A)hasnoobligationtopayaninvoiceaddressedandsenttoanotherparty.

Sadly,thissituationisnotatallrare.Thesituationisdifferentiftheobligationtopayhas been properly assigned to (B) with a written agreement to the assignment by allparties, but assignment in these circumstances is not thenorm.A letter from (A) to thecontractordirectingthatinvoicesshouldbesentto(B)willnotassistthecontractor,unlessitunequivocallystatesthatafailuretopayonthepartof(B)willbemadegoodby(A).

Usually, the contractor’s only remedy is to re-invoice (A) with the whole amountowing, wait the prescribed period, and then, if not paid, take legal action for recoveryagainst (A).Obviously, thecontractorcannot recover intereston latepaymentunder theLatePayment ofCommercialDebts (Interest)Act 1998 for the full period, because theinvoice will be the first it has sent to the correct party. A recurring problem that isfundamental to the resolution of most disputes in the construction industry concernswhetherornotabindingcontracthasbeenenteredintoinagivensituationand,ifso,in

whatterms.Unlesstherightsanddutiesofthepartiescanbepinpointedwithreasonableaccuracy, it is impossible to say whether they have or have not complied with theirobligations.

StentFoundationLtdvTarmacConstruction(Contracts)Ltd5isanexampleofthiskindofproblem.ItisalsoofinterestbecauseitconcernedtheJCTManagementContract.Atthe time the problem arose, themanagement contractorwasWimpeyConstructionLtd,laterbecomingTarmac.TheemployerwasafirmcalledWigginsWatersideLtd.Stentwasthe prospectiveworks contractor. Stentwas certainly employed to carry out foundationworks–thequestionwas,bywhom?Thereasonwhythequestioncamebeforethecourtwas that Stent had a large claim for the cost of dealing with ground conditions, butWigginswasinreceivership.

Under the JCTManagement Contract, there is generally no difficulty that theworkscontractor is in contract with the management contractor under the terms of the JCTWorksContract.Inthisinstance,however,thepositionwascloudedbecausetendershadbeeninvitedandaletterofintentsenttoStentbytheemployerbeforetheappointmentofWimpeyasmanagementcontractor.Wimpey,althoughnotformallyappointed,hadbeeninvolvedinthefoundationworkscontractortenderingprocessandconfirmedtoStentthatitwouldbeincontractwithWiggins.

Representatives ofWiggins continued sending instructions to Stent.A key documentwas probably a letter of instruction to Stent stating that theywere to startwork on thefoundationsundertheletterofintentbutthatStentmustenterintoaWorksContractwithWimpey.From thenon,Stent andWimpeyacted as thoughaWorksContract hadbeenconcludedbetweenthem,butWimpeystated,quitereasonably,thatitcouldnotenterintoaWorksContractuntiltheformalitiesoftheManagementContractwithWigginshadbeencompleted.Inthemeantime,WimpeycontinuedtoprocessapplicationsforpaymentfromStent as though theWorksContractwas in place. In fact, noWorksContractwas everformally executed, despite Wimpey having executed the Management Contract withWiggins.

ThejudgeheldthatabindingcontractcameintoexistencebetweenWimpeyandStentwhenWimpeyentered into theManagementContractwithWiggins.WimpeyandStenthad been agreed about all the important terms of their contract before then, and thecontractwasdependentonlyontheexecutionoftheManagementContract.

ThejudgerejectedasuggestionbyStentthatWimpeywereestopped(prevented)fromdenyingtheexistenceofacontractjustbecauseWimpeyhadactedinallwaysasthoughaWorksContracthadbeenexecuted.HesaidthatWimpeymighthaveactedinthiswayintheexpectationofacontractbeingagreed,whichwouldthen,ofcourse,beretrospective.Thatisaveryimportantpointtoremember.Ithaslongbeenaconstructionindustrymyththatifbothpartiesactasthoughtherewereacontract,therereallywillbeacontract.Itisatruismtosaythateverycasedependsuponitsownparticularfacts;inconsideringwhetherthere is a contract in any particular instance, there is no doubt that every facet of theconduct of the parties has to be considered. Acting in accordance with a supposedcontract’s termsmayreinforce theconclusionthat there isabindingcontract,but itwillnotusuallybeconclusivewithoutotherevidence.

20Isthecontractorboundtosticktoitspriceifitwasdescribedasan‘estimate’?Whenacontractorsubmitsanestimate,itislikelythatitisintendedtobeanapproximateorprobablecost.Nevertheless,iftheestimateissubmittedbythepersonableandreadytocarryoutthework,itmayverywellbetreatedasafirmoffertodothework,whichwillbeconvertedintoabindingcontractifacceptedbythepersontowhomitisoffered.6 Inthosecircumstances,thecontractorwouldbeobligedtosticktoitsprice.

Thissituationmaybecontrastedwithanestimatepreparedbyaquantitysurveyororanarchitectforthepurposeofindicatingtoaclientthelikelycostofaproject.Thereisneveranyquestionoftheestimatebeingaccepted,becauseneitherthequantitysurveyornorthearchitect is actually saying that theywould construct the project for that price. Awisecontractor will probably refer to its price as a rough estimate or a very approximateestimate in order tomake absolutely sure that the recipient of the offer knows that thefigureisnotintendedtobeaccurate.

21Ifaclauseisdeletedfromacontract,isitjustthesameasifithadneverbeenthere?Thecourtshavesometimesansweredthatquestionintheaffirmativeandsometimesinthenegative.

Logicsuggeststhatifthepartiestoacontracthavedeletedaclause,theyhavedonesobecause theydonotwish it toapply.Therefore,onemight think, thecontractshouldbetreatedasthoughtheclausewasneverthere,withwhateverconsequencesmayflowfromthatassumption.However,inMottramConsultantsLtdvBernardSunley&SonsLtd7theHouseofLordsheldthatinconstruing(interpreting)aprintedcontract,acourtisentitledto lookatdeletedwordsaspartof the surroundingcircumstances, in lightofwhich thecourtmustconstruewhathasbeenleftin.Theclauseinquestionallowedset-offagainstcertifiedsums.Onthatbasis,thecontractingpartiesmusthavedirectedtheirmindstothequestionofset-offanddecidedthattheyshouldnotbeallowed.

However,inWatesConstruction(London)LtdvFranthomPropertyLtd,8theCourtofAppealdecidedthatifaclausehadbeenstruckoutitshouldbethesameasifithadneverbeenincluded,andthecourtwasnotentitledtotakeaccountofthedeletedwords.Inthatcase,thecontractorappliedtohavetheretentionmoneykeptinaseparateaccount,buttherelevantclausehadbeenstruckout.Thecourtsaidthatindealingwithacontractthathadnoprovisionforseparatingretentionmoney intoadesignatedbankaccount, theywouldorderittobedoneasamatteroflawrelatingtotrustmoney.

Amorerecentdecisionattemptstodrawthetwoviewstogether.9Iftheremainderofthecontractisunambiguous,thedeletionshouldbetreatedasifithadneverbeenthereatall.Ifthecontractisambiguous,however,itispermittedtolookatthedeletedwordsifdoingsowill shed light on themeaning of the otherwords.But any consideration of deletedwords must be done with care because the reason for the deletion cannot be known.Indeed,itmayhavebeenamistake.

22Iftheemployerwishestobringdirectlyengagedcontractorsontothesitetocarryoutspecialwork,canthecontractorrefuseadmittance?OnceacontractorhasenteredintoacontracttocarryoutconstructionWorks,thereisanimpliedtermthat thecontractormusthavesufficientpossessionof thesite toenabletheWorks to be carried out. In normal circumstances, the contractorwould expect to haveexclusivepossessionofthesite,certainlywherestandardformcontractssuchastheJCT2011suiteisconcerned.Therefore,unlessthereisanexpressterminthecontractwhichallowstheemployertobringdirectlyengagedcontractorsontosite,theemployer’sactionwouldbeviewedasanactofgrossinterference.Thecontractorhasabetterrighttobeonthesitethananyoneotherthantheemployer.Therefore,itisdoubtfulthatthecontractorcouldactuallypreventtheemployerfrombringingothercontractorsontositeiftheywereproperlyauthorisedbytheemployer.However,dependingontheprecisewordingof thecontract,thecontractorwouldbelikelytohaveagoodclaimforadditionalmoneyeitheraslossand/orexpense,orpossiblyasdamagesatcommonlaw.

Some JCT contracts make provision for work being carried out by directly engagedcontractors.Forexample,SBCclause2.7referstoworkcarriedoutbytheemployerorbyanyoftheemployer’spersons.Delaycausedbysuchworkbeingundertakencouldresultin the contractor being entitled to an extension of time (clause 2.29.7) and loss and/orexpense (clause4.24.5).Thereare twosituationscoveredbyclause2.7: In the first, theemployer has included informationwithin the relevant contract documents enabling thecontractortoknowwhatitisproposedthatthedirectlyemployedcontractorsaretodo;inthesecond,suchinformationisnotincluded.Iftheinformationisincluded,thecontractormustallowtheworktobecarriedoutbytheemployer’sdirectlyengagedcontractors.Ifthere is no such information, the work may only be carried out with the contractor’spermission.

23Iftheemployerhaspaidformaterialsonsitewhicharesubsequentlystolen,whoisliable?Thisquestiondependsontheconditionsofcontract.SBCclause2.24(ICandICDclause2.17is tosimilareffect)puts thematterveryclearly. Itprovides that if thearchitecthascertifiedthevalueofmaterialsonsiteandtheemployerhaspaidforthem,thematerialsbecome the property of the employer but the contractor remains responsible for loss ordamage to them.However, this provision ismade subject to insurance options B or Cwhere they apply. Therefore, if they do not apply, the contractor is responsible forreplacingstolenmaterialsatnoadditionalcosttotheemployer.WhereoptionB(allrisksinsuranceoftheWorksbytheemployer)orC(insuranceofexistingstructuresandWorksinorextensions tosuchstructures)applies, theemployer is responsible for insuranceofmaterialsonsiteand theclaimfor thecostofstolenmaterials is tobemadeagainst theemployer’sinsurance.

It will sometimes be argued that the contractor is liable even if the employer isresponsible for the insurance, because there is a clause in the bills of quantitieswhichstatesthatthecontractorisresponsiblefortakingallavailablemeasurestosecurethesite.Unfortunately,suchaclausewillnotbeeffectivetooverruleclause2.24,becauseclause1.3providesthatnothinginthebillsofquantitiescanoverrideormodifyanythingintheprinted contract form. Therefore, it seems that even if the contractor is in breach ofobligationstosecurethesitesothatmaterialsarestolen,thecontractorwillbeliableforthecostofreplacementonlyifitisinsuringunderoptionA.

24IsthereacontractunderSBCifeveryoneactsasthoughthereis?Thisquestionhasbeen touchedonelsewhere.Manyof theproblemsin theconstructionindustrywouldbeavoidedifthepartiesconcernedensuredthattherewasaproperwrittencontractinplaceandsignedbybothpartiesbeforeworkbeganonsite.Anythingelse isaskingfortrouble.

Partiestobuildingcontractsseemstrangelyreluctanttosettlealltheformalitiesbeforework begins. Despite all the evidence to the contrary, there is a firm belief that theformalitiesofalegallybindingcontractwillnotbeaproblemonceconstructionstartsonsite. Experience shows that this is a misguided view. In answer to queries about theexistenceofa formallyexecutedcontract,anarchitectwilloftensay that thepartiesdidnotgetaroundtoactuallysigningthecontract,‘buteveryoneactedasthoughthecontracthadbeensigned’.

In A Monk Building and Civil Engineering Ltd v Norwich Union Life InsuranceSociety,10theexistenceorotherwiseofabindingcontractwasinissue.Essentially,Monkclaimedthattherewasnocontractandthattheywere,therefore,entitledtobepaidonaquantummeruitbasis.Norwicharguedthattherewasacontract,andMonkwereentitledonlytothecontractualsum.Itwasoriginallyintendedthatthecontractwouldbeexecutedasadeedbeforeworkcommenced.DraftcontractswerescrutinisedbyMonk,whichmadevarious amendments. Eventually, a letter of intent was issued to Monk on behalf ofNorwich.Monkmadevariousamendmentstotheletter,signedandreturnedit,andmadearrangementstostartworkwithoutprejudicetotheunresolvedcontractualposition.Atthetimeofstartingwork,thereweremanyitemsstillunresolved.TheprojectmanagerswrotetoMonkshortlyafterworkcommencedwithwhatwaslaterdescribedasanoffer,whichitwasallegedMonkacceptedbycontinuingwork.

Discussion continued during the progress of the Works, but without agreement onseveralterms.Butthroughouttheproject,bothMonkandtheprojectmanagersreliedonvariouscontractprovisions.

Thecourt held that therewasnoconcludedcontractbetween theparties.Theprojectmanagers had no actual or ostensible authority to negotiate a contract on behalf ofNorwich, but only authority to issue the letter of intent. Importantly, there was noagreement of all necessary terms. The court said that it was irrelevant that Monk hadreliedoncontractualprovisionsduringtheprogressoftheWorks.

Althoughthereliancebybothpartiesoncontracttermsmight,insomecircumstances,indicate that both parties had accepted that theywere bound by the contract, that is anassumptionwhich canbe overturnedby other factors.Key factors arewhere, as in thisinstance,thereisnoevidenceofacceptanceofthecontractandthereisclearevidencethatimportanttermsremainunagreed.

25Whatifanemployertellsthearchitectheorshedoesnotwantabuildingcontract?Thisquestioncropsupmoreoftenthanmightbeimagined.Itsometimesoccursbecauseacontractor is used to doing relatively small projects, such as a new driveway, someadditional paving or plastering a room, and suddenly the opportunity arises to tackle alarger project such as a kitchen extensionwith a bedroomover.The contractormay bequiteconfidentthatitcandothejobbutnervousaboutanykindofformaldocumentonthe basis that it binds its performance. At other times, the contractor may have donevarious jobs for the employer without any kind of contract, and the employer cannotunderstandwhyacontractisrequiredjustbecauseanarchitectisinvolved.Theremayalsobeasuspicionthatusingacontractwillcostmore.

Itmustbeexplainedtotheemployer(andtothecontractor,ifnecessary)thatacontractwill protect the interests of both parties; for example, by stipulatingwhat the employermust pay andwhat the contractormust do.Moreover, the architect’s powers anddutiesdependonwhatthecontractsays.Thearchitecthasnopowertovisitsitetoinspect,giveinstructionsorcertifypaymentunlessthereisacontractwhichdealswiththeseandotherpowersandduties.

Eveniftheemployerandcontractorproceededwithoutexecutingawrittenagreement,therewouldalmostcertainlybeanoralcontractinplace.Itisunlikelythattheemployerwillhaveagreedtoletthecontractorcommencewithoutfirstagreeingwhatitisallgoingtocost.Thetroublewithanoralcontractisthatthereisrarelyanywitnessandthepartiestend to forget exactly what they said or revise their memories with hindsight. So theemployermaysaytoadelayedcontractor,‘YousaidyouwouldbefinishedbytheendofAugust’, towhichthecontractormayrespond,‘No,Isaid thatIwouldtry,but itwoulddependonmysuppliers/sub-contractors/weather/etc.’.Insuchasituation,aproperwrittencontract,evenifjustasimpleone,willremovethatkindofargument.

26IfacontractisdescribedasGuaranteedMaximumPrice(GMP),isthisthemostthecontractorcanreceivenomatterwhatchangesthereareintheproject?When a guaranteed maximum price contract is used, employers often believe that thecontractor isgivinganabsoluteguarantee that themaximumpricestated in thecontractwillnotbeexceedednomatterwhatthecircumstances.Thisimpressionisunderstandablebecause the name and sometimes the way in which such contracts are marketed aremisleading.Suchcontractsarealmostinvariablyenteredintoonadesignandbuildbasis,which placesmost responsibility on the contractor in any event.However, it should beunderstoodthatiftheemployerisresponsibleforextracosts,suchasvariations,theGMPwillbeadjustedaccordinglyandinevitablyinanupwardsdirection.

The price under such contracts is neither guaranteed nor maximum. There is nostandardGMPformofcontract,andmostaredraftedasrequired.Somecontractorshavetheirownformsofcontractforthispurpose.Theintentionistoplacealltheriskwiththecontractor (regarding, for example, ground conditions, services,weather and changes inlegislation), except for instances where the employer requires variations or where theemployer carries out some act of prevention which results in loss and/or expense.Contractors are sometimes required to take responsibility for all information supplied,includingitsaccuracy,andtheriskcanbesignificant.11Whilesuchcontractsareusuallyquiteeffectiveinsecuringgreatercertaintyaboutthemaximumfinalcostoftheprojectforthe employer, theymust not be viewed as putting an absolute limit on the constructioncost.

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27Canacontractoravoidacontractenteredintoundereconomicduress?The straight answer to this question is ‘Yes’. Themore important question is ‘What iseconomicduress?’;unlessacontractorcanrecogniseit,thefirstquestionisacademic.

Inpractice,economicduressisnotcommon.Thelawrecognisesthattherearecertainformsofpressurethatmaybeappliedtoapartywhichdonotamounttoaphysicalthreattoapersonnortodamagetogoods,butwhichmayallowtheinnocentpartytothrowoffthe contract. That kind of pressurewill often be applied to obtain better termswhen acontractalreadyexists.12

A typical scenario was demonstrated in Atlas Express Ltd v Kafco (Importers andDistributors)Ltd.13Atlaswasawell-knownparcelcarrier.ItenteredintoacontractwithKafco,abasketwareimporter,tocarryparcelsatanagreedrate.Thecontract,whichwasrecorded by telex, was crucial to Kafco because it had just entered into a contract tosupplybasketwaretoalargenumberofWoolworthstores.Afterafewweeks,thecarrier’srepresentativedecidedthattheagreedratewasnotviablefortheircompany.Atlasknewthat Kafco was contracted toWoolworth, which would sue and cease trading with theimportersifdeliverieswerenotmade.Atlasthereforewrotesuggestingthattheagreementbeupdatedandrefusedtocarryanyfurthergoodsuntilafreshagreementwassigned.

Kafco protested, but it had no real option but to sign the new agreement. However,when invoices arrived, Kafco paid only the sums calculated in accordance with theoriginalagreement.Atlastooklegalactiontorecoverthebalance.IndecidinginfavourofKafco, the court pointed out that no person could insist on a settlement procured byintimidation. Economic duress was recognised in English law, and in this instance itvoidedKafco’sconsenttothesecondagreement.Inaddition,Atlashadnotprovidedanyconsiderationfortherevisedagreement,andconsiderationisvitalfortheestablishmentofacontractorthevariationofanexistingcontract.

Acontract is essentiallyentered intoon thebasisof theexerciseof freewillbybothparties. Ithas longbeenestablished thatphysicalviolenceor the threatof it inorder toinduce a contractwillmake that contract void, or at least voidable at the option of thethreatenedparty.Economicpressurecanbeasdifficulttowithstandasphysicalviolence.

Ithasbeenheldthatthefollowingfactors(whichmustbedistinguishedfromtheroughandtumbleofthepressureofnormalcommercialbargaining)mustbetakenintoaccountbyacourtindeterminingwhethertherehasbeeneconomicduress:

whethertherehasbeenanactualorthreatenedbreachofcontract;

whetherornotthepersonallegedlyexertingthepressurehasactedingoodfaith;

whetherthevictimhasanyrealisticpracticalalternativebuttosubmittothepressure;

whetherthevictimprotestedatthetime;and

whetherthevictimaffirmedorsoughttorelyontheexistingcontract.14

Economic duress is thewielding of economic sanctions to induce a contract. There are

many instances in the construction industry where contractors or sub-contractors arepersuaded tomakesavingsorcarryoutadditionalwork incircumstances thatborderoneconomicduress.

28InDB,iftheemployerprovidesasiteinvestigationreportandthegroundconditionsarefoundtobedifferent,whopaysanyextracost?Under the provisions of DB, the Employer’s Requirements set out the criteria that thecontractor must satisfy in preparing the Contractor’s Proposals. That the Contractor’sProposals are a response to the Employer’s Requirements ismade clear by the secondrecital.The contractor is likely to be able to found a claim against the employer if siteconditionsarenotasassumedintheEmployer’sRequirements.15

Iftheemployermakesastatementoffactintendingthatthecontractorwillactuponit,itisa‘representation’.Suchstatementsareoftenmadeintenderdocuments.Manyofthestatements made by the employer within the Employer’s Requirements will berepresentations, and the contractor will use the information in compiling its tender.Typically,thiswillincludeinformationaboutthesiteandgroundconditions.Ifanyofthestatements of fact are incorrect, they will probably amount to misrepresentations. Amisrepresentationisofnoimportanceunlessitismadepartofthecontractorifitwasaninducementtothecontractortoenterintothecontract.Insuchcases,thecontractormaywellhaveaclaimfordamages,attheleast.Thepreciseremediesavailabledependuponwhetherthemisrepresentationisfraudulent,negligent,innocentorunderstatute.

Theremediesusedtoberestrictedtocasesoffraudorrecklessness,butasaresultoftheMisrepresentationAct1967, theynowapply toallmisrepresentations.Theonus lieswiththepartywhomadetherepresentationtoprovereasonablegroundforbelievingandactualbelief,up to the time thecontractwasmade, that thefacts representedwere true.Section 3 of the Act restricts the employer’s power to exclude liability formisrepresentation.

It follows that a contractor may have a claim for misrepresentations about siteconditions made during pre-contractual negotiations. Under the Misrepresentation Act1967, itmay claim for damages for negligentmisrepresentations or breach ofwarrantyarisingoutofrepresentationsmadeorwarrantiesgivenbyoronbehalfoftheemployer.16However, the efficacy of all claims depends upon circumstances. In anAustralian case(Morrison-KnudsenInternationalCoIncvCommonwealthofAustralia17),thecontractorclaimedthatinformationprovidedatpre-tenderstage‘astothesoilanditscontentsatthesite… was false, inaccurate and misleading… The clays at the site, contrary to theinformation, contained large quantities of cobbles’. There was a trial of a preliminaryissue, and itwas concluded that thebasic information in the site document appeared tohavebeentheresultofagreatdealoftechnicaleffortonthepartofadepartmentofthedefendant.Itwasinformationthattheplaintiffshadneitherthetimenortheopportunitytoobtainforthemselves,anditmightbedoubtedwhethertheycouldhavebeenexpectedtoobtainitbytheirowneffortsintheirroleasatenderer.Butitwascrucialinformationforthepurposeofdecidingtheworktobecarriedout.

Arepresentationfollowedbyawarningthattheinformationgivenmaynotbeaccuratewill not usually be sufficient to protect the employer, because it is a clear attempt tocircumventsection3oftheAct.Indeed,suchastatementmayconverttherepresentation

intoamisrepresentation.18

Amisrepresentationmayalsoamount to a collateralwarranty.For example, inBacalConstruction(Midland)LtdvNorthamptonDevelopmentCorporation,19whichinvolvedadesignandbuildcontract,thecontractorwasinstructedtodesignfoundationsonthebasisthatthesoilconditionswouldbeassetoutinboreholedataprovidedbytheemployer.TheCourtofAppealheldthattherewasacollateralwarrantythatthegroundconditionswouldbe in accordance with the basis on which Bacal had been instructed to design thefoundationsandthattheywereentitledtodamagesforitsbreach.

However,caremustbetakenbecauseithasbeenheldthatacontractorinadesignandbuildsituationisnotentitledtorelyonagroundinvestigationreportthatismadeknownto the contractor simply by a reference to it on a drawing. It was held not to beincorporatedintothecontractbutnotedsimplytoidentifyasourceofrelevantinformationfor thecontractor. In thecourt’sview, thatwasnotsufficient tooverrideaclause in thecontractthatplacedonthecontractortheobligationtosatisfyitselfaboutthenatureofthesite and the subsoil. In addition, the judge made the following thought-provokingobservation:

Thenatureofagroundinvestigationreportissuchthatitisunlikely,itseemstome,thatpartiestoacontractwouldwishtoincorporateitintoacontractbetweenthem.Allitcanshowiswhatwastheresultofparticularsoilinvestigations.Ifpartiesdidinfactseekto incorporateagroundinvestigationreport intoacontractbetweenthem,difficultiescouldariseastowhatwastheeffectinlawofsodoing.Ifonehasregardtothetermsofthe[siteinvestigation]report,andinparticulartothosetwopartsofthenarrativeinwhichthereisareferencetogroundwater,itreallyisimpossibletosay thatanydefiniteorpositivestatementofanaturesuchascouldamount toanysortofcontractual termwasmade.Rather, theinformationgivenwashedgedaboutwith qualifications as to the accuracy and reliability of what was shown by theinvestigationsundertaken.20

Quiteso.Nevertheless,employerscontinuetoincludesiteinvestigationreportsaspartofthecontractinformationgiventothecontractorbeforetenderingtakesplace.

29Thecontractorfailedtotakeoutinsuranceagainstitsliabilitiesinregardtoinjuryordamagetopersonsorotherproperty.Doesthatmeanthattheemployercannotclaimagainstthecontractorifinjuryordamageoccurs?Thereisagreatdealofmisunderstandingaboutthistopic.Liabilityandinsuranceisoftenconfused.Itshouldalwaysberememberedthatthefunctionofinsuranceunderabuildingcontract is to providemoney if the contractor (usually, but sometimes the employer) isfoundliableforsomething.

SBCgroupstheliabilityandinsuranceclausesinsection6.Clauses6.1and6.2describethe extent of the contractor’s liability for personal injury or death or for damage toproperty (other than theWorks). These clauses set out the circumstances in which thecontractor will be liable. Clause 6.4 requires the contractor to take out and maintaininsurance against the liabilities in clauses 6.1 and 6.2. Therefore, if the contractor isnegligent in carrying out the Works and, as a result of the negligence, the adjoiningbuildingsuffersseverecracking,theadjoiningownerwillprobablyclaimthecostofrepairfromtheemployer.Inturn,theemployerwillclaimagainstthenegligentcontractor.Thecontractorwillpasstheclaimontoitsinsurers,whichwilldecidewhethertopay,fighttheclaimortrytonegotiateasettlement.Havingpassedontheclaim,thecontractorwillbeable to relax, knowing that themerits of the claim and any financial consequences arebeingdealtwithelsewhere.

Thisprocesshasbecomesocommonthat if theinsurersrefusetopayforanyreason,theemployerorarchitectmaythinkthatitistheendofthestory.Nothingcouldbefurtherfromthetruth.Thetruepositionisthis:If,intheexampleabove,thecontractorisliableforthecracking,theemployerisentitledtoclaimagainstthecontractorandthecontractormustpay,possiblyafterlegalproceedingshavebeeninstitutedagainstit.Ifthecontractorisinsured,theprocessnotedabovewillbeactivated.Ifthecontractorhasfailedtoobtainormaintaininsuranceoriftheinsurerforsomereasonrefusestopay,itwillbeamatterfor the contractor to pay out of its own resources. The problem with an uninsuredcontractorisnotthatitisnotliabletopayfordamage,butthatitmaynothavesufficientfundstopay.Itdoesnotpreventtheemployerclaimingagainstit.

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30Whatarethedangersforemployerandcontractorinenteringintoasupplementaryagreement?DuringtheprogressoftheWorks,theemployermaydecidethatfurtherworkisrequiredwhich is so substantial or of such a nature that it is not appropriate to simply issue anarchitect’sinstruction.Insuchinstances,theemployer’ssolicitorwillsometimesprepareasupplementaryagreementforthepartiestosigninordertodealwiththeadditionalwork.Wherework is incorporatedbymeansofanarchitect’s instruction, there isnoproblem;theworkbecomespartof theWorks,andall the termsof thecontractwhich thepartieshavealreadyexecutedcovertheadditionalwork.Wheretheworkisaddedbymeansofasupplementaryagreement,itisessentialthattheagreementhastheeffectofbringingtheadditional work within the terms of the original contract. If this is not done, thesupplementary agreementmay be simply a stand-alone contractwith no relation to theoriginalcontract.Unlessspecialprovisionswerewrittenintothecontract,theeffectwouldbethatthearchitectcouldnot

issueinstructionsinrelationtotheadditionalwork;

varytheadditionalwork;

certifythevalueoftheadditionalwork;

dealwithdefectsinsuchwork;

certifypracticalcompletion;

certifymakinggoodofdefects;

issueafinalcertificatewhichwouldcoversuchwork;or

haveanypowersordutieswhatsoeverinrespectoftheadditionalwork.

Thesupplementaryagreementshouldspecifytheextentoftheadditionalwork,makeclearthatitistobeconsideredaspartoftheWorksundertheoriginalcontract,andmakeanyadjustmentsnecessaryasaresultofaddingthework.Forexample,itwillbenecessarytoadjusttheamountofthecontractsumandtoamendthedateforcompletionoftheWorks.Theremaywell be otherminor things to include, but the essential principle to keep inmindis that theadditionalworkshouldbecomepartof theoriginalWorks.Toooften,asupplementaryagreementwhichignoresthesepointsleavesthearchitectinanimpossibleposition, having no powers under the agreement but with a client expecting contractadministrationtobecarriedoutintheusualwayinregardtoboththeoriginalWorksandadditionalwork. If a supplementary agreement is contemplated, it is important that theemployer engages a person who is experienced in construction contracts to draft theagreement. It is not a time for the draftsman to insert as many clever new clauses aspossible,buttoreflecttheoriginalcontract.

31Ifacontractormustdosomething‘forthwith’,howquicklyisthat?Itisoftenbelievedthatinstructingathingtobecarriedoutforthwithmeansthatitistobedone as soon as possible. JCT contracts call for contractors to carry out architect’sinstructions forthwith, and many architects think that the contractor, on receipt of theinstruction,mustimmediatelycarryitout.Infacttherealityismuchmoremundane,nottosayleisurely.Fromthecasesdecidedbythecourts,itseemsthatthemostunsatisfactoryof situations will apply: The meaning of forthwith will be interpreted differentlydependinguponthecircumstances.Themeaningwillvaryfrom‘assoonaspossible’byconventionalmethodsofbusinesscommunicationifsomethingistobesentforthwith21to‘assoonasisreasonable’ifsomethingisinstructedtobedoneforthwith.22

Therefore,underJCTcontractsitseemsthatanarchitect’sinstructiontobecarriedoutforthwithistobecarriedoutassoonasisreasonableinthecircumstances.Inotherwords,thecontractorisnotexpectedtodropeverythinginordertocomplywiththeinstruction,butrathertocomplyassoonasitisreasonabletodoso.Obviously,eventhatissubjecttochangeifthesituationwarrantsit,andtheremaybeinstanceswhereitisabundantlyclearthataninstructionisurgentandforthwithmeansassoonaspossible.

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32Whatisareasonabletime?Theword‘reasonable’ismuchusedinlegaldocuments,andactionsareoftentobedonewithinareasonabletime.Sometimesthis isstatedquiteexpresslyinthecontract,andatothertimesitislefttobeimplied.

Whenthelanguageofacontractdoesnotexpressly,orbynecessaryimplication,fixanytimefortheperformanceofacontractualobligation,thelawimpliesthatitshallbeperformedinareasonabletime.Theruleisofgeneralapplication.23

Ifaperiodoftimeisstipulatedinacontractforcarryingoutsomeaction,thelawwillnotoverrule the stipulated time even if it can be shown to be unreasonable. What is areasonable time will depend upon the circumstances of each particular case. It is anexpressionwhich tends tobeusedwhen it is impossible tospecifypreciselyhowmuchtimeshouldbeallowed.

It issometimesarguedthatifacontractcontainsclausessettingoutspecifictimesforthecarryingoutofsomeobligationsandnothingforothers,wherenoperiodisstatednoneisintendedandneitherareasonablenoranyotherspecificperiodoftimecanbeimplied.This suggestion is misconceived, and a reasonable time will be implied in suchcircumstances.24Clause3.18ofSBCrequires thearchitect to issuevarious instructions.Notimeperiodisstipulated,butitisclearthattheremustbeanimpliedtermthatsuchaninstructionmustbegivenwithinareasonabletime.

(2013)148ConLR228.

1980Act,s.32:WilliamHillOrganisationLtdvBernardSunley&SonsLtd(1982)22BLR1.

McCutcheonvDavidMcBrayneLtd[1964]1WLR125.

RegalianPropertiesvLondonDocklandDevelopmentCorporation[1995]1AllER1005.

(1999)78ConLR188.

CrowshawvPritchardandRenwick(1899)16TLR45.

(1974)2BLR28.

(1991)53BLR23.

MopaniCopperMinesplcvMillenniumUnderwritingLtd[2008]EWHC1331(Comm).

(1991)CILL669,upheldbyCourtofAppeal(1992)62BLR107.

Mowlemplc(formerlyJohnMowlemandCoplc)vNewtonStreetLtd[2003]89ConLR153.

CarillionConstructionLtdvFelix(UK)Ltd(2000)74ConLR144.

[1989]1AllER641.

DSNBSubseaLtdvPetroleumGeoservicesASA[2000]BLR530.

CBryant&SonLtdvBirminghamHospitalSaturdayFund[1938]1AllER503.

HollandHannen&Cubitts(Northern)LtdvWelshHealthTechnicalServicesOrganisation(1981)18BLR80.

(1972)13BLR114.

CremdeanPropertiesLtdvNash(1977)244EG547.

(1976)8BLR88.

Co-operativeInsuranceSocietyLtdvHenryBootScotlandLtd(2002)84ConLR164.

21

22

23

24

StAndrewsBayDevelopmentLtdvHBGManagementLtdandMissJaneyMilligan[2003]ScotCS103.

LondonBoroughofHillingdonvCutler[1967]2AllER361.

HickvRaymond&Reid[1893]AC22.

RMDouglasConstructionLtdvCEDBuildingServices(1985)3ConLR124.

Chapter5

Warranties,bondsandnovation

33Canawarrantybeeffectivebeforeitissigned?There are relatively few cases on warranties, andNorthern & Shell plc v John LaingConstructionLtd1settlesanimportantpoint.Laing entered into a contract for the constructionof anoffice block.Under themain

contract,Laingwasobligedtogiveawarrantyinstipulatedtermstothecompanyleasingthe building from the developer. The successor to this companywasNorthern.Defectswerediscoveredsomeyearsaftercompletionofthebuilding,andNorthernreliedonthewarranty to recoverdamages fromLaingbecause thewarrantyprovided thatLainghadcompliedwith the terms of themain contract. Thewarranty stated: ‘5. This deed shallcome into effect on the day following the date of practical completion of the buildingcontract.’

The limitation period for a deed is 12 years, and Northern had not started legalproceedings until not long after that period had expired. However, there was acomplication in that thewarranty had not been signed until fivemonths after practicalcompletion, andNorthern argued that the normal rules applied and the cause of actionarosewhenitwassigned.Ifthatwasthecase,theissueofproceedingswouldbeinsidethe12-yearperiod.

TheCourtofAppealdecided in favourofLaing. It ruled thatclause5meantwhat itsaid.Ithadbeenopentothepartiestoamendtheclausewhenthewarrantywassignedsoastotakeaccountofthefactthatthewarrantywasbeingsignedretrospectively.Thefactthatthepartiesdidnotamendclause5indicatedthattheyintendedthewarrantytocomeintoeffectonthedayafterpracticalcompletion.

Thelessontobelearnedisthatthewordingofacontractofanykindexecutedbytheparties after the project has begun should be carefully reviewed, just in case any partshould be amended. This is frequently the case in regard to dates for possession inbuildingcontractsthatmightbesignedmonthsafterpossessionisgivenlate.Inthecasedescribedhere, theeffectwas that thewarrantystartedatadatebefore itwassigned. Ifclause5hadnotbeen included, thewarrantywouldnothavebeeneffectiveuntil itwassigned.Obviously, if ithadneverbeensigned itwouldneverhavebeeneffectiveatall,withorwithoutclause5.

34Whatare‘stepinrights’?Wherewarrantiesareprovided,particularlytofundersofprojects,thereisoftenaclauseincludedwhichgivesaparticularpartytherightto‘stepin’andreplaceoneofthepartiestoanagreementbetweentheothertwoparties.Forexample,anemployermayenterintoastandard form building contract with a contractor for the construction of a building. Abankmaybeprovidingfundstotheemployertoenabletheprojecttobebuilt.Thebankwilloftenrequirethecontractortoexecuteawarrantyinfavourofthebank.Theessentialclauseinthewarrantywillbethestepinclause,whichenablesthebanktotaketheplaceoftheemployerinthebuildingcontractincertaincircumstances.Thecircumstances,setout in the clause, are usually when particular occurrences entitle the contractor toterminatethebuildingcontractortreatitasrepudiated.Thecontractorisrequiredtonotifythebank if it intends to terminate, and itmust takeno further actionuntil thebankhasdecidedwhethertostepin.Thebankhasonlyaspecifiednumberofdayswithinwhichtomakeitsdecision.

Ifthebankdoesdecidetostepin,thecontractormustacceptthebank’sinstructionsasif itwas theemployer.Theemployer isoneof theparties to thewarrantyprincipally toacknowledgeagreementtothestepinprocedureandtoagreethatthecontractorcantreatthebankastheemployer.Thisistoavoidanydangerthatthecontractorwillbeinbreachofthebuildingcontract.Itislikelythattherewillbespecificprovisionstosafeguardthecontractorintheeventthattheemployerhasnotdischargedallpaymentsdue.Sometimes,the step in procedure is included inwarranties given by the architect to a funder, or inwarrantiesgivenbythearchitecttotheemployerwherethearchitectisemployedbythecontractorinadesignandbuildscenario.Inthelatterinstance,thestepinrightsmayberequired by the employer in the event that the contractor goes into liquidation and theemployerwishestocompletethebuildingusingthecontractor’sarchitect.

35JCTcontractsdonotseemtomentionperformancebonds.Whatarethey?Although JCT contracts refer to certain bonds, such as advance payment and off-sitematerialsbonds,theymakenomentionofperformancebonds.Thepurposeofanybondistoguaranteepaymentofsomecompensation,usuallyintheeventthatthepartyonwhosebehalfthebondisprovidedfailstocarryoutsomecontractualobligation.Intheinstancesnoted above, the bonds would relate to failures to repay the advance payment in theinstalments requiredor failure toprovide thematerialsorgoods forwhichpaymenthasbeencertifiedbythearchitectandpaidbytheemployer.Theyaresometimesreferredtoasguaranteebondsorguarantees.Asaguarantee,abondmustbeinwriting.2

A performance bond is a specific kind of bond whose purpose is to providecompensation if the contractor fails to carry out the building contract. Because JCTstandardcontractsdonotincludeperformancebondsorprovisionforthem,anemployerrequiringsuchabondmustensurethatthenecessaryadditionalclausesareinsertedinthecontractattenderstageandthatasuitablebondisattachedtothedocumentsand,induecourse,tothecontract.Abondisnormallyexecutedasadeedbyapersonreferredtoasthesurety.Thesuretyisusuallyeitherabankoraninsurancecompany.Ifthecontractorfails toperform, the suretyagrees that itwill compensate theemployerup toanagreedmaximum.Themaximumamountisusually10percentofthecontractsum,butitmaybemoreonsmallcontracts.Thisensuresthattheemployerwillhavesomemoneyavailable,forexampleifitbecomesnecessarytoengageanothercontractortocompletetheWorks,probablyatadditionalcost.

There are two basic types of bond: default bonds, where the employer has todemonstrate that thecontractorwasindefaultof itsobligationsbefore thesuretycanberequiredtopayout,andondemandbonds,wherepaymentcanberequiredfromthesuretywithout the employer having to demonstrate any default on the part of the contractor.Sureties tend to favour on demand bonds because they do not have to carry out anyexpensive investigations ormake any judgment about the contractor’s performance.3 Asuretyisnotusuallyworriedabouthavingtopayout,becauseitwillhavemadesurethatithasadequatesecurityfromthecontractorforsuchaneventuality.Itisoftendifficulttodeterminewhetherabondisdefaultorondemand,andcourtsareoftenaskedtodecide.Inmaking the decision, especially in caseswhere the questionmay be evenly balanced, acourtwillgiveweighttothebond’scommercialintention.4

Theprovisionsofabondmustbeadheredtostrictly.Anychangestothetermsofthecontractbetweencontractorandemployermayresultinthesurety’sliabilitycomingtoanend.5Whenthesuretyisaskedtopay,itisusuallyreferredtoastheemployer‘callingin’thebond.

Performancebondshavedatesonwhichtheyexpire,afterwhichthesurety’sliabilitytothe employer is ended. Commonly, such dates might be practical completion or,increasingly, thedateof issueofacertificateofmakinggooddefects.Contractorsoftenwritetoemployersaskingthemto‘release’thebond.Whattheymeanisthattheywishtheemployertoconfirmthatthesurety’sliabilityisended.Thisisimportanttothecontractor

becausethecontractor’sliabilitytothesuretyendswhenthesurety’sliabilitycomestoanend.Thiscanbeveryimportanttoacontractorwhohasobtainedasuretyfromitsbank.Insuch circumstances, a bankwill often reduce the contractor’s potential overdraft by theamountofthebonduntilthebondisreleased(oritexpires).

36Isanarchitectwhofailstosecureaperformancebondnegligent?Ifaperformancebond isstated in thecontract toberequiredfromthecontractor, is thearchitect responsible formakingsure that thebond isprovided?What is thepositionofarchitectswho,despiteremindingthecontractorofitsresponsibilitiesonaregularbasis,failtosucceedinensuringthatthecontractorprovidesaperformancebondasspecifiedinthecontract?ThesequestionswereconsideredinSweett(UK)Ltd(formerlyCyrilSweettLtd) vMichaelWightHomes Ltd.6 Thiswas a case in the ExeterCountyCourt, and itcontains useful guidance in the absence of a judgment of a higher court. The buildingcontractwas the JCTDesignandBuildContract2005,Revision12007. In this case, aquantity surveyor from Sweett was acting as Employer’s Agent. The Employer’sRequirementsstatedthatthecontractormustobtainaperformancebond.

SweettbroughttheactionbecauseitallegeditwasowedfeesbyMichaelWightHomes(MWH). Indeed, Sweett had stoppedwork due to non-payment of fees. The claimwasquitecomplex,butmostissuesweresettledduringthelitigationprocess.However,MWHclaimed thatSweettwas inbreachof itsduty toMWH.Sweett’sappointmentexpresslystatedthatitwould‘preparecontractdocumentationandarrangeforsuchdocumentstobeexecutedbythepartiesthereto’.MWHarguedthatSweettshouldhaveensuredthatthecontractorprovidedaperformancebondandthatithadanabsolutedutytodoso.

If someonehas an absolute duty to do something, itmeans that the duty exists quiteirrespectiveoftheamountofcaretaken.Inshort,ifSweetthadanabsolutedutytoseethatthecontractorprovidedaperformancebond, theonlyquestionwouldbewhetherornotthe contractor provided the bond. If not, thenSweettwould be liable.Not surprisingly,Sweettarguedthatitdidnothaveanabsoluteduty.Itsaidthatitsdutywasthenormalonetousereasonableskillandcare.Courtsarereluctanttofindthatsomeonehasanabsoluteduty,andinthisinstancethecourtagreedwithSweett.Itsaidthat‘arrange’didnotmean‘ensure’,butrather‘toputinplacearrangements’.Therefore,Sweett’sdutywastoputinplace arrangements for the execution of the contract documents, including theperformancebond. Indoingso,Sweetthadaduty touse reasonableskillandcare.Thecourt decided that Sweett had used reasonable skill and care because it had attendedmeetingsandchasedthecontractoronaregularbasistoobtainthebond.

Anarchitect’sdutyinrespectofaperformancebondwilldependonwhatthetermsofengagementsay.Inmostcases,asinthiscase,itisunlikelythatspecialmentionwillbemadeofthebondinthearchitect’sappointment.Usually,anarchitect’sdutywillbetousereasonableskillandcare.However,itshouldbenotedthatitispossibleforanarchitecttoassumeabsoluteliability,andthereforethewordingoftermsofengagementshouldalwaysbecarefullychecked–particularly ifdraftedbytheemployer’ssolicitor. It is likelythatthewordsintheappointmentwouldhavetobeveryclearindeedbeforeacourtwouldbepersuadedthatthearchitecthadanabsoluteliabilityinrespectofanyofhisorherduties.

37Ifthearchitectisnovatedtoacontractorwhosubsequentlygoesintoliquidation,canthearchitectbere-novatedtotheclient?The question is best answered by first considering the nature of novation. Novationcommonly occurs in the construction industry where a contract between employer andconsultantisreplacedbyacontractbetweencontractorandconsultantonidenticalterms.Itisusuallyeasier,althoughnotquiteaccurate,tothinkofnovationasremovingonepartytoacontractandreplacingitwithanother,third,party.Thus,whereanarchitecthasbeenengaged by an employer to carry out architectural services, it may be agreed that theemployerwilldropoutand theengagementwillbe takenoverafter tenderstageby thesuccessful contractor. Novation requires an agreement between all three parties (in thesituationjustmentionedthatwouldbetheemployer,thearchitectandthecontractor),butthe main difficulties arise because the contractor will not want the same terms as theemployerinthecontractwiththearchitect.Therefore,tobeeffective,thenovationmustmakeprovisionforachangeintheterms.Thebenefitofnovationissupposedtobethattheconsultantismadeliableforallthedesign,evenforearlydesigncarriedoutdirectlyfortheemployer,andthatthisliabilityisowedtothecontractor.Thatmaynotnecessarilybethecase,asdiscussedearlier.

Thesystemissupposedtopromoteasmoothdesignprocessbysimplycontinuingwiththesamedesignteaminvolved.Inthecaseofnovation,thedutyowedbytheconsultanttothe employer is wholly transferred to the contractor. The contractor takes on theemployer’sdutiestotheconsultant,andtheconsultantandtheemployeroweeachothernofurtherduties.Therefore,theconsultanthasexactlythesamedesignobligation,butitisowed to different parties at the two stages.Moreover, there are different obligations toadviseduringthestages.Theemployerandsometimestheconsultantmayforgetthattheconsultantowesnoadvisoryduty to the employer in the second stage. If the contractorinstructs theconsultant tochangepartof thedesign, theconsultanthasnooptionbut tocomply because the consultant is now acting for the contractor, even if the consultantknowsorbelievesthattheemployerdoesnotwantthatparticularchange.Thisisbecausethe contractor has merely sub-let the design to the consultant, and it is the contractorwhichhasthedirectdesignresponsibilitytotheemployer.Theconsultanthascontractedtocarryoutthecontractor’sinstructionsregardingthedesign.Theseinstructionsmaybethat the consultant must complete the design in accordance with the Employer’sRequirements, but they may be simply that the consultant will take the contractor’sinstructions. Anecdotal evidence suggests that consultants acting first for the employerand then for the contractor encounter considerable difficulties in practice, and the bestadvice to consultants and employers is to avoid these situations and act for one or theother party exclusively.However the arrangement ismanaged, the consultant is alwaysplacedinapositionofpossible,andoftenactual,conflict.

The question recounts a situationwhere novation has occurred and the consultant isunderacontractwiththecontractorwhichexcludestheemployer.Thecontractorhasgoneinto liquidation.Whathappensnext isdeterminedby the termsof the contractbetweenconsultantandcontractor.Somecontractsprovidethattheobligationsofbothpartiescome

toanendonliquidation.Somecontractsaresilentorallowtheconsultanttoterminateatwill. If liquidation of the contractor has actually taken place, it will be as though thecontractor simply ceased to exist, and therefore it will be unable to give or withholdconsent for the re-novation.However, in this instance it isassumed that thewindingupprocesshasjustcommenced.Theconsultant,dependingonthetermsofengagement,maysimplygivenoticeofterminationtothecontractorandthenenterintoanewcontractwiththe employer. Alternatively, the consultantmay request the liquidator, on behalf of thecontractor,toenterintoanovationagreementwiththeconsultantandtheemployerwiththeobjectofreplacingtheengagementwithanengagementbetweentheemployerandtheconsultant.Inthelatterinstance,itistobeexpectedthattheliquidatorwillbeseekinganypossibleadvantagetothecontractorandalso,possibly,acashpayment.

Thedifficultiesof anovationwhich seeks toexclude theemployer and introduce thecontractor instead have already beenmentioned. To attempt to reverse the processwillrequireextremelycarefuldraftingofthenovationagreement.Itisverylikelythatdifficultliability problems will emerge, particularly concerning the period during which theconsultantoweddutiesonlytothecontractor.

38Inthecaseofdesignandbuild,canthecontractorclaimfromthearchitectfordesignerrorsinworkdonebeforenovation?The benefit of novation is supposed to be that the consultant ismade liable for all thedesign,evenforearlydesigncarriedoutdirectlyfortheemployer,andthatthisliabilityisowedtothecontractor.Inpractice,thatmaynotbepreciselythecase.ItisoftenforgottenthatthecontractorisonlyliableunderDBforcompletingthedesign,quiteirrespectiveofwhether the consultant is liable to the contractor for the whole design. Therefore, theemployer’s attempt to channel all design responsibility through the contractor will failunlessDBitselfisfundamentallyamendedtomakethecontractorliableforallthedesign.Aninterestingliabilitysituationmayarise.

AsignificantcaseinthisrespectwasBlyth&BlythLtdvCarillionConstructionLtd,7which highlighted some problems that can arisewhen the parties enter into a novationagreement.Indeed,acertaintypeofclauseinnovationagreementsisroutinelyreferredtoasaBlyth&Blythclause.Inthiscase,theclaimantswereconsultantengineerswhowereclaimingfees.Thedefendantwasacontractor thatcounterclaimedagainst theengineersforlossessufferedasaresultofsomeallegedbreachesofcontract.Thecaseisinterestingbecauseofthecounterclaim.AlthoughthecontractbetweenemployerandcontractorwastheJCT1981DesignandBuildContract,thedecisionsofthecourtareequallyrelevanttothe DB 2011 contract. An important clause was inserted into the building contract asfollows:

anymistake, inaccuracy,discrepancyoromission in… thedesigncontained in theEmployer’sRequirements…shallbecorrectedbytheContractorbutthereshallbeno addition to theContract Sum in respect of such correction or in respect of anyinstructionoftheemployerrelatingtoanysuchmistake,inaccuracy,discrepancyoromission.

Article2of thecontractwasamendedsoas toplaceresponsibilityonthecontractorforanydesignof theWorkswhichhadalreadybeencarriedout.That is important,butnotunique.Therewereseveralcounterclaims,butthecourttookasanexampletheclaimforadditionalcostsarising fromalleged inaccuracies in the informationprovidedaspartoftheEmployer’sRequirements and other information provided prior to tendering. Itwasalleged that the inaccuracies resulted in the contractor having to supply additionalmaterialsforwhichitcouldnotclaimadditionalpaymentfromtheemployer,becauseofthe amendments to the contract as noted above. The engineers’ terms of appointmentcontained a clause permitting the employer to require the engineers to enter into anovation agreement in a form annexed to the appointment. In due course the novationagreement was executed by the three parties. The novation agreement provided in theusual way that the engineers’ liability, whether before or after the novation, would beowedto thecontractor justas thoughthecontractorhadbeennamedin theappointmentinsteadoftheemployer.Therewasafurtherprovisionbywhichtheengineersagreedthattheirserviceswouldallbetreatedashavingbeenperformedforthecontractorandtobeliabletothecontractorforanybreachoftheappointmentwhichoccurredbeforethedate

1

2

3

4

5

6

7

ofthenovation.The court had to decidewhether the contractor could claimagainst the engineers for

loss due to the engineers’ alleged breach of their obligation to the employer to provideaccurate information for the Employer’s Requirements. The court decided that thecontractorwasnotentitled tomakesuchaclaim.Thecourtreasonedthat thecontractorcould not claim against the engineers for a breach of duty which occurred before thenovationagreementandwasconcerningadutyowedtotheemployerunlesstheemployerhadsufferedthelosses.IntheBlythcase,anattemptwasmadebythecontractortogiveeffect to thenovation agreementby substituting theword ‘contractor’ for ‘employer’ intheappointmentwheneveritoccurred.Thisproducedresultswhichthecourtdescribedas‘nonsensical’.The reasonwhy the contractorwas unsuccessfulwasmainly because theemployer, inwhoseshoesthecontractorattemptedtostand,didnotsufferanyloss.TheBlyth&Blyth clause, alreadymentioned, attempts to forestall that defenceby requiringthat theconsultantwillnotargue inany legalproceedings thatacontractor’sclaimfailssimplybecause theemployerdidnot, in fact, suffera loss.Someclausesgofurtherandattempt to link directly to losses suffered by the contractor. However, where a normalnovationagreementisemployed,thefailuretoincludeadditionalclausesontheBlyth&Blythmodelmayresultinthecontractorbeingunabletoclaimagainsttheconsultantforpre-novationnegligence.

[2003]EWHCCiv1035CA.

S.4StatuteofFrauds1677.

BalfourBeattyCivilEngineeringvTechnicalandGeneralGuaranteeCoLtd[2000]CLC252.

ChartbrookLtdvPersimmonHomesLtd&Another(2009)125ConLR1.

HolmevBrunskill(1878)3QBD495.

[2012]EWMisc3(CC).

(2001)79ConLR142.

Chapter6

Contractor’sprogramme

39Ifanarchitectapprovesacontractor’sprogramme,canthecontractorsubsequentlychangetheprogrammewithoutthearchitect’sknowledge,and,ifso,canthearchitectdemandanupdate?Provision of a master programme by the contractor is covered by SBC clause 2.9.1.2,which requires the contractor to provide two copies to the architect. Approval of theprogrammebythearchitectisdealtwithinthenextquestion,butsufficetosaythatithasnoparticulareffectonthecontractorcontractor’sresponsibilityfortheprogramme.

SBC is the only one of the JCT traditional contracts that actually refers to thecontractor’s programme. Clause 2.9.1.2 should be carefully studied. It states that thecontractorwillprovidethearchitectwithoutchargewithacopyofthemasterprogrammefortheWorks.Ifthecontractparticularsrequireit,theprogrammemustincludeacriticalpathandanyotherdetailsspecifiedinthecontractdocuments.Forexample,thecontractdocuments may require all logic links and resources to be shown. The contractor’sobligationtorevisetheprogrammeoccursunderclause2.9.2onlyifanextensionoftimeisgiven eitherby the architect under clause2.28 in thenormalwayorby apre-agreedadjustmentasaresultoftheacceptanceofaschedule2quotation.

Thecontractorhasnoobligation to revise theprogramme if it falls behinddue to itsownfault.Lookedatlogically,thatmakesperfectsense.Ifitisthecontractor’sfaultthatadelay has occurred, it is clearly the contractor’s responsibility to recover the lost timeunder clause 2.28.6.1, which requires the use of best endeavours constantly to preventdelay.Itcanbeconvincinglyarguedthattheprogrammerequiresnoadjustmentbecausethecontractoroughttobedoingeverythingaprudentcontractorwoulddotogetbackonprogramme.Theonlytimetheprogrammerequiresadjustmentisifthecompletiondateisadjusted to a later date. In that case, the programme should be amended to reflectcompletiononthatlaterdate.

Thepracticeofcontractorsconstantlysubmittingrevisedprogrammes,notbecausethecompletion date has been revised but because the contractor has fallen behind, is to bedeplored.Thearchitectshouldnotbeinterestedinwhenthecontractorsaysitbelievesitwillfinishifthatdateisnotthecompletiondateinthecontract.Theproblemisthatmanycontractorstaketheviewthatthecontractualcompletiondateissimplyadatetoaimfor,andif it isnotachievedthearchitectwillprobably, ifsufficiently threatened,extendthecompletion date tomatch the date of practical completion. The constant submission ofprogrammes that bear no relation to the contract or extended date for completion doesnothing to assist the architect in considering extensions of time or disruptions to theregularprogressofthework.Forthatpurpose,aprogrammesubmittedatthestartoftheprojectthataccuratelyreflectstheintendedprogressandcompletionisessential.

All theforegoing isbywayofputting thequestion intocontext.Clause2.9.1.2 is theonly clause that refers to the contractor’s programme, and it will readily be seen thatnothing in the clause states that the contractor must comply with its own programme.First, it should be noted that the reference is to a master programme. That allows thecontractor to produce numerous detailed programmes which there is no obligation to

providetothearchitect.Second,thecontractorcanoptnottoworktoitsownprogrammeorevenopttochangetheprogrammewithoutinformingthearchitect.Onlyifthechangeresultsfromanextensionoftimemusttherevisedprogrammebesubmitted.Therefore,itispossibleforacontractortosubmitaprogrammeindicatingthatworkwillprogressfrompointAthroughB,C,D,etc.toZand,onsite,commenceatpointZandworkinreverse.Mostcontractorsdowork to theirownprogrammes,ofcourse,but thequestionwasnodoubt prompted by the fact that from time to time a contractor will find it useful tosignificantlyvaryitsworkfromthesubmittedprogramme.

Theprogrammeisnotacontractdocument,althoughitmightbetermedacontractualdocumentbecause it is generated in accordancewith a clause in the contract.However,neitherthecontractornortheemployerisboundtofollowit.Itwouldbepossibletomakethe programme a contract document, but that would not necessarily be an advantage,because every slight deviation from the programme potentially would have a financialimplication.1

Therefore, as the standard contract currently stands, the contractor can change theprogramme without the architect’s knowledge or permission and the architect has nopowertorequireanupdate.Obviously,additionalclausescanbeintroducedtodealwithsome of these difficulties, and programmes can be required in particular formats.However, considerable thought should be given before deciding to make it a contractobligation for the contractor to comply with its own programme. There could besubstantialfinancialrepercussions,asnotedabove.

40UnderSBC,thearchitecthasapprovedthecontractor’sprogramme,whichshowscompletiontwomonthsbeforethecontractcompletiondate.Mustthearchitectworktowardsthisnewdate?Itisquitecommonforacontractortoshowadateforcompletionontheprogrammethatisbefore the date for completion in the contract. It is never very clear why a contractorshoulddothis,becausetheprogrammecannotalterthecontractdateforcompletion.Alltheprogrammedoesistoinformtheemployerandarchitectthatthecontractorintendstocompletebeforethecompletiondate.Thecontractorisentitledtodothisbecauseclause2.4statesthatitmustcompletetheWorks‘onorbefore’thecompletiondate.

Byaskingwhetherthearchitectmust‘worktowardsthisnewdate’,thequestionercanbe referring only to three important situations: The most obvious is the provision offurther information to the contractor; another is responding to a notice of delay underclause2.28,where thearchitect, indecidingwhether togiveanextensionof time, is toconsiderwhethercompletionoftheWorksislikelytobedelayedbeyondthecompletiondate;thefinalimportantsituationisthearchitect’sobligationunderthesameclause2.28tonotifythecontractoraboutanextensionof timedecisionnolater thanthecompletiondate.Othermattersrelatetothedateofpracticalcompletion,whichoughttobethesameas,butwhichisnotnecessarilyconnectedto, thecontractcompletiondate.ThecontractdateforcompletionisthedatebywhichthecontractorundertakestocompletethewholeoftheWorks.ThedateofpracticalcompletionisthedatebywhichvirtuallythewholeoftheWorksare,asamatteroffact,complete.

Todealwith theprovisionof information first, thecourtshaveheld thatalthough thecontractorisentitledtocompletebeforethecompletiondateinthecontract,theemployerhasnoobligationtoassistthecontractortodoso.2Thisprincipleisnowenshrinedinthecontractatclause2.12.2.Thisclausestipulatesthatinprovidingfurtherinformation,thearchitectmusthaveregardtotheprogressoftheWorks.Thismeansthatifthecontractorisprogressingsoastocompletebythecompletiondate,theinformationmustbeprovidedatsuchtimesaswillenablethecontractortofinishtheWorksontime;butifthecontractorismaking slowprogress, the architect is entitled to slow the delivery of information tosuit. However, the clause proceeds to state that if the contractor seems likely to finishbefore the completion date, the architect need only provide information to enable it tocompletebythecompletiondate.

Thesecondandthirdsituationsdealwithextensionof timeandassumethateveryoneknows thecompletiondate.Theonlyway inwhich thearchitect’s responsibilitiesunderclause 2.28 can be affected is if the contractor’s programme showing completion twomonthsearlierthanthecontractdatesomehowtakesprecedenceoverthecompletiondateinthecontract.Ifthatisthecase,itwillclearlyaffecttheprovisionofinformationalso.

Thecontractdateforcompletion, like theother termsof thecontract,canbechangedonlybyagreementbetweentheparties,theemployerandthecontractor.Approvaloftheprogrammebythearchitectisoflittleornoconsequence.Theprogrammeisnotacontractdocumentandthepartiesarenotboundbyit–noteventhecontractor,strangeasthatmay

seem. Most architects will not approve the contractor’s programme, but even if theprogrammeisapproveditmerelysignifiesthatthearchitectishappywithit.Ineffectthearchitectissaying,‘Iamhappyforyoutoworkinaccordancewiththeprogrammeifthatis what you wish to do’. Approval does not transfer the responsibility for the thingapprovedfromthecontractortothearchitect3unlessthecontractmakesspecificprovisionforthattohappen.

The position might be different if the contractor submitted its programme showingcompletiontwomonthsearlierthanthecontractualdateanditwasdiscussedandagreedbybothpartiesandthenewdateconfirmed.Inthatinstance,thearchitectmaybeobligedtoworkineverywayasthoughtheprogrammedateforcompletionwasthecontractdatefor completion. The confirmed agreement of both parties amounts to a variation of thecontract terms. In practice, this could take place at a site meeting, possibly at the oneusually, and incorrectly, called the ‘pre-contractmeeting’ (‘pre-startmeeting’ is a bettername).Ifthepartiesreachanagreementatsuchameeting,withplentyofwitnesses,andiftheagreementisrecordedintheminuteswhicharesubsequentlyagreedbyallparties,itisdifficult to escape the conclusion that a valid variation of the contract terms has takenplace.Ifthecircumstancesaresuchthatavalidvariationofthetermshasnotoccurredandit is only the architect who has received and commented on the programme, thecontractor’sobligationisstilltocompletebythecontractdateforcompletion.

Asnotedearlier, it isdifficult to seewhat thecontractorgainsby this strategy. If thecontractornotifiesdelay,thearchitectappearstobeabletotakethecontractor’sproposedcompletiondateintoaccountwhendecidingwhethercompletionoftheWorksislikelytobe delayed beyond the contract completion date, but that would not work to thecontractor’sadvantage.Suppose thecontractcompletiondatewas30Septemberand thecontractor’sproposeddate forcompletionwas30July. If thecontractorargues that it isbeingdelayedincompletionbytwoweeks,thereseemstobenoreasonwhythearchitectshouldnotassumethat thecontractorwill, therefore,completebythemiddleofAugust.Thatwouldnotindicateadelaytothecontractcompletiondateandnoextensionoftimewouldbedue.On thisbasis, thecontractorwouldhave to registeradelayofmore thantwomonthsbeforeanextensionoftimewouldbedue.

41Canthearchitectinsistthatthecontractorsubmittheprogrammeinelectronicformat?Therightsandobligationsoftheemployerandthecontractoraregovernedbythetermsofthecontract.Noneofthestandardformsingeneraluserequirethecontractortosubmitaprogrammeinelectronicformat.Indeed,onlyoneoftheJCTseriesofcontractsrequiresthecontractortosubmitaprogrammeatall,andthatisSBC,whichrequiresthecontractortosubmitamasterprogrammetothearchitect.

Thereisnodoubtthataprogrammeinelectronicformatcangreatlyassistthearchitectindecidinguponthecorrectextensionsoftime,inconsideringapplicationsforlossand/orexpense and in generallymonitoring the progress of theWorks. Of course, there are anumberofdifferentcomputerprogramsthatwillsupportabuildingprogramme,anditisessentialthatanyprogrammesubmittedbyacontractorinelectronicformatiscompatiblewith thesoftwareon thearchitect’scomputer.Thealternative is toask thecontractor tosupply a list of the activities on the programme togetherwith the relevant predecessorsandsuccessorssotheycanbeenteredintothearchitect’scomputer.Thisisarathermoretedious operation than simply uploading a file, but it is far better than having no suchprogrammeatall.

All that is necessary to require the contractor to submit a programme in electronicformat is for a suitable clause to be inserted in the preliminaries section of the bills ofquantitiesor specification.Thiswillnotconflictwith theprintedcontract inmostcasesbecause,asnotedearlier,onlySBCrequiresaprogrammeofanykind.ItwillnotconflictwithSBC,becauseclause2.9.1.2expresslystatesthatthecontractormustsupplydetailsspecifiedinthecontractdocuments.Therefore, theadditionalclauseisnotoverridingormodifying theprinted formbutmerely amplifying it by adding further requirements. Inthis clause, the architect can require the programme in a form to suit his or her owncomputersoftware.Acontractorwhofailstosupplytheprogrammeintheformspecifiedwillbeinbreachofcontract,andthearchitectisentitledtotakeaccountofthebreachincalculatingextensionsoftime.4

The use of computers in dealing with extensions of time has been approved by thecourts.What is the position if there is no requirement for the contractor to supply anelectronicversionoftheprogramme?Canthearchitectcompelthecontractortoprovideitin any event? The answer appears to be that in the absence of a specific clause in thecontract, the architect cannot compel the contractor to provide a programme in anyparticularform.

However,whenacontractornotifiesdelayintheexpectationofreceivinganextensionoftime,thereisnothingtopreventthearchitectaskingforaprogrammeinaspecificformaspartofthearchitect’sgeneralpowertorequestfurtherinformationfromthecontractor.The contractormay refuse to comply, arguing that there is nothing in the contract thatrequires it.Thearchitect’s replywouldbe to simplypointout to the contractor that theabsence of such a programme as requested makes it very difficult for the architect todetermineafairandreasonableextensionoftime,andthecontractorwillbetheauthorofitsownmisfortuneifitdoesnotreceivetheextensionoftimeitexpects.

Thatusuallyhas thedesiredeffect. Ifnot, thearchitectmaygivea somewhat shorterextensionof timethanexpected. If this isdoneaspartof thereviewofextensionunderSBC,ICorICDduringthe12-weekperiodafterpracticalcompletion,thecontractorwillhavetolivewithitbecausethearchitecthasnopowerunderthesecontractstorevisitthesituationagainoncethe12weekshasexpired.Indeed,underMWandMWD,thereisnoreview provision and, therefore, no opportunity for the architect to reconsider after thedateforcompletioninthecontract,orthedateasalreadyextended,haspassed.

42Whenacontractorsaysthatitownsthefloat,whatdoesthatmean?Float isacommonlyused termthat ismuchmisunderstood. It is thedifferencebetweentheperiodrequired toperforma taskand theperiodavailable inwhich todo it.Criticalactivitiesarecriticalbecausetheyhavenofloat;thereisnodifferencebetweentheperiodneededtocarryouttheactivityandtheperiodallocatedforit.Inotherwords,thereisnoscopeforanydelayatallbeforethecompletiondateoftheprojectisaffected.Tosaythatan activity has a dayof floatmeans that the activity couldbe extendedby another daywithoutaffecting thecompletiondateof theproject.Putanotherway, theactivitycouldcommenceadaylatewithouttherebeinganyeffectontheoverallprogramme.

Contractors sometimes argue that an extension of time is due even if a non-criticalactivity is delayed. They argue that they own the float and that the employer thereforecannot‘takeadvantage’of it.This isaverystrangecontention.Nooneownsfloat. It islike trying to argue that a person is taking advantage of the air around them. Float issimply the space before or after individual activitieswhen they are put together in theformofaprogramme.Whetheritactuallyexistsatalldependsonwhethertheprogrammeisaccurate.

Itissometimesarguedthatifacontractorprogrammestocompletea12-monthcontractin10months,the2monthsarethecontractor’sfloat.Therefore,theargumentcontinues,ifthe project is delayed by even a week, an extension of time will be due even if thecontractorfinishesseveralweeksbeforethecompletiondate.Thatisobviouslywrong.Iftheweek’sdelaycausesfloattobeusedbecauseofsomeemployerdefault,thecontractorhasnoentitlementtoanextensionoftime;thedelaydoesnotaffectthecompletiondate,and that is the crucial point. It has been suggested that in such circumstances, if thecontractorissubsequentlydelayedforreasonswhichdonotwarrantanextensionoftimeand for which it would become liable to pay liquidated damages, the architect shouldneverthelessgiveanextensionoftimeforaperiodnotexceedingthelengthofthefloat.5Thepointwasmadebythecourtobiterdicta(wordssaidbythewayandnotnecessaryforthedecision).

AbetterviewwassetoutinAsconContractingLtdvAlfredMcAlpineConstructionIsleofManLtd,6where the judgeput theposition like thiswhendealingwithacontractor’sclaimagainstasub-contractor:

Imust dealwith the pointmadebyMcAlpine as to the effect of itsmain contract‘float’…ItdoesnotseemtobeindisputethatMcAlpine’sprogrammecontaineda‘float’offiveweeksinthesense,asIunderstandit,thathadworkstartedontimeandhadallsub-programmesforsub-contractworksandforelementstobecarriedoutbyMcAlpine’sownlabourbeenfulfilledwithoutslippagethemaincontractwouldhavebeencompletedfiveweeksearly.McAlpine’sargumentseemstobethatitisentitledtothe‘benefit’or‘value’ofthisfloatandcanthereforeuseitatitsoptionto‘cancel’or reduce delays for which it or other sub-contractors would be responsible inpreferencetothosechargeabletoAscon.

Inmyjudgment thatargument ismisconceived.Thefloat iscertainlyofvalueto

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the main contractor in the sense that delays of up to that total amount, howevercaused, can be accommodated without involving him in liability for liquidateddamages to the employer or, if he calculates his own prolongation costs from thecontractualcompletiondate(asMcAlpinehashere)ratherthanfromtheearlierdatewhich might have been achieved, in any such costs. He cannot, however, whileacceptingthatbenefitasagainsttheemployer,claimagainstthesub-contractorasifitdidnot exist.That is self-evident if totaldelays as against sub-programmesdonotexceed the float. The main contractor, not having suffered any loss of the abovekinds, cannot recover from sub-contractors the hypothetical loss he would havesufferedhadthefloatnotexisted,andthatwillbesowhetherthedelayiswhollythefaultofonesub-contractor,orwhollythatofthemaincontractorhimself,orspreadinvaryingdegreesbetweenseveralsub-contractorsand themaincontractor.Nodoubtthosedifferentsituationscanbedescribed,inasense,asonesinwhichthe‘benefit’ofthefloathasaccruedtothedefaultingpartyorparties,butnoonecouldsupposethat themain contractorhas, or shouldhave, anypower to alter the result so as toshift that ‘benefit’.The issues in anyclaimagainst a sub-contractor remain simplybreach,lossandcausation.

Idonotseewhythatanalysisshouldnotstillholdgoodiftheconstituentdelaysmore than use up the float, so that completion is late. Six sub-contractors, eachresponsibleforaweek’sdelay,willhavecausednolossifthereisasixweeks’float.Theyareequallyatfault,andequallyshareinthe‘benefit’.If thefloat isonlyfiveweeks,sothatcompletionisaweeklate,thesameprincipleshouldoperate;theyareequallyatfault,shouldequallyshareinthereduced‘benefit’andthereforeequallyinresponsibilityfortheoneweek’sloss.Theallocationshouldnotbeinthegiftofthemaincontractor.

IthereforerejectMcAlpine’s‘float’argument.

That view is good authority that float is owned by no one. The decision in HowEngineeringServicesLtdvLindnerCeilingsPartitionsplc7istosimilareffect.Therefore,whenacontractorsaysthatitownsthefloat,certainlyunderJCTcontractsitmeansthatthecontractordoesnotproperlyunderstandtheconceptoffloat.

YorkshireWaterAuthorityvSirAlfredMcAlpineandSon(Northern)Ltd(1985)32BLR114.

GlenlionConstructionLtdvTheGuinnessTrust(1987)39BLR89.

HampshireCountyCouncilvStanleyHughLeachLtd(1991)8-CLD-07-12.

LondonBoroughofMertonvStanleyHughLeachLtd(1985)32BLR51.

RoyalBromptonHospitalNHSTrustvHammond&Others(No.8)(2002)88ConLR1.

(2000)16ConstLJ316.

17May1995unreported.

Chapter7

Contractadministration

43Doesthecontractorhaveadutytodrawattentiontoanerroronthearchitect’sdrawing?Generally and in normal circumstances, the contractor has no liability for design and,therefore, no liability for the production of design drawings. The question often ariseswhetherthecontractorisentitledsimplytobuildwhatthedrawingsandspecificationssetout, even if there are errors on the architect’s drawing. It is not surprising that mostarchitectswouldsay‘No’,butthecaselawonthissubjectisnotsoclear.

It has been established by a Canadian case that a contractor will be liable to theemployerforbuildingerrors inadesign if theoriginalarchitectwasnot involved in theconstructionstage.1Thereasoningbehindthedecisioninthatcaseseemstohavebeenthatthe employerwas no longer relying on the architect and, therefore, relied solely on thecontractor, which should have taken care to check that everything on the originalarchitect’s drawing worked properly. That, however, is not the situation underconsiderationhere,wheretheoriginalarchitectisstillengagedandthereisanerrorinthedrawings.Thereweretwocasesin19842whichheldthatacontractordidhaveadutytowarnthearchitectifitbelievedthattherewasaseriousdefectinthedesign.Subsequently,however, another court decided that such duty as the contractormight havewas to theemployer and probably only in those cases where the contractor was aware of theemployer’srelianceonitforatleastpartofthedesign.3ThishasechoesoftheCanadiancasementionedabove.Tofurtherconfusematters,anothercaseheldthatacontractorhadadutytoatleastraisedoubtswiththearchitectifthereappearedtobesomethingwrongwiththedrawings.4Onewouldhavetowonderatthemotivesofacontractorwhohadfullknowledgeofadrawingerrorandyetfailedtobringittotheattentionofthearchitect.

ThatpositionwastakenastagefurtherbyaCourtofAppealcase.5Althoughthiscaseinvolvedsub-contractwork, theprinciples setoutby thecourt areequallyapplicable tomaincontracts.Asub-contractor (JMH)designed the temporarysupportwork toa roof.Unfortunately, its design was overruled by the employer’s engineer, who proposed adifferentdesign.TherewasnoquestioninthisinstancethatJMHwarnedtheengineerofthedangerofhisdesignquiteclearly,but theengineer tooknonoticeand thesubstitutedesignfortemporaryworkwentahead.Needlesstosay,theroofcollapsed.Surprisingly,thecourtheldnotjustthatJMHhadadutytowarn,whichthecourtseemedtoaccepthadbeendone,butthattheyhadfailedtowarnwithsufficientforce.Onecannothelpbutthinkthat the only degree ofwarning that the courtwould have accepted as sufficientwouldhavebeenifJMHhadgiventhewarningand,atthesametime,threatenedtostopworkifthewarningwentunheeded.Thisindeedappearedtobethecourt’sposition.

Thecontractor’sdutytowarnprobablyarisesonlyifthedesignisseriouslydefective.Inthecasejustmentioned,itseemstohavebeenapotentialdangertolife.Acontractorwhodidnotwarnanarchitectwhohadmadeasmalldimensionalerrororasmallmistakeindetailingwouldbeunlikelytohaveanyliability.

Theimportantpointtobedrawnfromthesecasesisthereliancebytheemployeronthecontractor.Ifitcanbeshownthattheemployerdoesrely,evenpartly,onthecontractor,itseemsthattherewillbeadutytowarnofseriousdefects.Ontheotherhand,caseswhere

the duty arises towarn the architect will be rare because the architect seldom, if ever,reliesorisentitledtorelyonthecontractor.InthecontextofJCTtraditionalcontracts,thedutyislikelytobelimitedbecausetheemployerwillusuallyberelyingonthearchitectandnot thecontractor.Contractorscantakeheart that theyarenotgenerallyresponsiblefor checking the architect’s drawings. Having said that, a contractor proceeding withconstruction in thecertainknowledge that therewereerrorson thedrawingswouldfindlittlefavourwithanadjudicatorinanysubsequentdispute.

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44UnderDB,musttheemployer’sagentapprovethecontractor’sdrawings?Clause2.8ofDBprovidesthatthecontractormustwithoutchargegivetheemployertwocopiesofitsdesigndocumentsasandwhenfromtimetotimenecessaryandinaccordancewith schedule 1 of the contract or as otherwise stated in the contract documents. Thecontractorisnottocommenceanyworkuntilithascompliedwiththeprocedure.

Schedule1setsouttheprocedure,butwithreferencetotheEmployer’sRequirements.Paragraph1requiressubmissionintheformatstatedintheEmployer’sRequirements.IftheEmployer’sRequirementsdonotstatetheformat,itseemsthecontractormaysubmittheinformationinanyformatitdesires.Therefore,itisessentialthattheformatissetout.

Thesubmissionmustbemade insufficient time toallowanycommentsmadeby theemployertobeincorporatedbeforeuseoftherelevantdocument.Thatrequirementmustbereadinthecontextofparagraph2,whichgivestheemployer14daysfromreceiptofthesubmissionor,ifthecontractdocumentsgivealaterdateorperiod,fromthedateortheexpiryoftheperiod,toreturnonecopyofthedocumenttothecontractor.

Thecontractadopts thewell-knownsystemof lettering thereturneddocumentseither‘A’,‘B’or‘C’,dependingonwhetherornottheyareinaccordancewiththecontract.‘A’meansthatthecontractormustcarryouttheWorksinaccordancewiththatdocument.‘B’or ‘C’ means that the document is not in accordance with the contract and it must beaccompanied by a written statement stating why the employer considers that to be thecase.Documentsmarked‘B’maybeusedbythecontractorif theemployer’scommentsareincorporatedandtheemployerisprovidedwithanamendedcopy.Documentsmarked‘C’cannotbeusedforconstruction,butthecontractormayre-submitafteramendment.

If the contractor thinks that the employer is wrong and that the document is inaccordance with the contract, there is the option under paragraph 7 of notifying theemployerwithinsevendaysofreceiptofthecommentthatcompliancewiththecommentwillresultinachange(i.e.avariation).Thecontractormustgiveareason,ofcourse.Theemployer has a further seven days to either confirm or withdraw the comment. If theemployersimplyconfirmsthecomment,thecontractormustthenamendandre-submitthedocument.Paragraph8thensetsoutsomeprovisos:

Whether the employer confirms or withdraws comments does not mean that theemployeracceptsthatthedocumentsoramendeddocumentsareinaccordancewiththecontractorthatcompliancewiththecommentswillresultinachange.

Ifthecontractordoesnottaketheoptionofnotifyingtheemployerthatcompliancewiththecommentwillresultinachange,thecommentisnottobetreatedasgivingrisetoachange.

Thecontractor’sdutytoensurethatthedesigndocumentsareinaccordancewiththecontractisnotreducedbythecontractor’scompliancewiththesubmissionprocedureorwiththeemployer’scomments.

Inbrief,thepositionisthatitisthecontractor’sobligationtocomplywiththecontract.Nosubmissionofdocumentsorcommentsbytheemployerwillremovethatobligation.Ifthe

employermakescommentsthatamounttoachange,thecontractormustpromptlynotifythe employerof its viewon thematter.Failure tonotify the employerwithin the sevendaysallottedwillpreclude thecontractor fromrecoveringanypayment forsuchallegedchange.However,notificationinitselfwillnotguaranteepayment;itwillbeamatteroffactwhetherornottherehasbeenachange.

Itshouldbenotedthatthecontractstayswellclearofanysuggestionthattheemployerapproves any documents. But use of the word ‘approval’ appears not to make anydifference to the principle in any event. InHampshire CountyCouncil v StanleyHughLeachLtd,6thecourtsaid:

The fact that Leach’s alternative proposals were approved by the architects isirrelevant. No employer is going to be advised to enter into a contract giving thecontractor an entirely free hand. The JCTDesign and Build Contracts require thecontractor’sdesignbeapprovedandthisofcoursedoesnotrelievethecontractorofobligationsinrespectofhisdesign.

45Whathappensifthecontractorcannotobtainmaterials?Theauthorityonthistopicisscarcetothepointofnon-existence.

Under SBC clause 2.3.1, materials and goods have to be provided only ‘so far asprocurable’.Itwillbenoticed,however,thatthecontractor’sobligationunderclause2.1istoprovidewhatisspecifiedinthecontractdocuments.Thewholeofthecontractmustbereadtogether,ofcourse,andtheintroductionoftheword‘procurable’givesthecontractorausefulprotectionifmaterialsorgoodsaretrulyunobtainable.Clearly,itdoesnotprotectacontractorwhodiscoversthatithasmiscalculateditstenderandthatitismoredifficultor more expensive than expected to provide what is specified. ‘Procurable’ is notqualified, and, on a strict reading of the clause, it can be argued that a contractor isprotected even if the materials or goods were not procurable before the contract wasenteredinto.Itmightbethoughtthatasensibleandbusinesslikeapproachwouldrestrictthemeaningof‘procurable’tothoseitemsthathadbecomeunobtainableafterthecontractwasexecuted.Whetherthatisthecorrectwaytointerprettheclauseisnotcertain.

It isdifficult to forecastwhatconclusionmightbe reachedby thecourts, still lessanadjudicator,butastrictreadingoftheclauseresultsintheconclusion(deeplyunattractivesofarastheemployerisconcerned)thatiftheitemsarenotprocurableforanyreason,thecontractor’s obligation to provide them is at an end. It then becomes necessary for thearchitect to issue an architect’s instruction requiring as a variation the provision of asubstitutematerial.Thevariationistobevaluedintheusualway.

Theeffectistoremovefromthecontractoranyobligationtocheckthatspecifiedgoodsand materials are procurable before tendering. In order to change this situation, it isprobably necessary to amend the contract clauses to specify a date after which thecontractorisnotresponsibleifmaterialsorgoodsarenolongerprocurable.

It is arguable that if the contract does not refer to materials being procurable, forexampleinICorICDcontracts,thecontractor’sinability,throughnofaultofitsown,toobtain important specified materials may render the contract frustrated. In practice, afrustratedcontractcouldbeavoidedifthearchitectgaveinstructionsforavariationofthematerial.

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46Whatpowersdoesaprojectmanagerhaveinrelationtoaproject?Over theyears the concept of projectmanagement has steadily gainedground, togetherwithagoodmanymisconceptions.Aprojectmanagerisunlikelytobethesamepersonasthecontract administrator, and it is thecontract administratorwhohas themainpowersunder the building contract. The RIBA approved a definition of a project manager asfollows:

The Project Manager is a construction professional who can be given executiveauthorityandresponsibility toassist theclienttoidentifytheprojectobjectivesandsubsequently supply the technical expertise to assess, procure,monitor and controltheexternalresourcesrequiredtoachievethoseobjectives,definedintermsoftime,cost,qualityandfunction.7

It may be argued that such a definition does nothing to set out what ought to be thefunctionofaprojectmanagerinregardtoabuildingproject.Projectmanagementisoftenconsidered as though it is a self-contained system and as though the words ‘projectmanager’instantlyconjureuparecognisableandeasilyidentifiablediscipline.However,thecourtshaveagreedthatthisisnotthecaseandthatthedutiesofaprojectmanagermayvarydependentonthebasedisciplineofthepersoncarryingouttherole.8Theconceptofprojectmanagementisnotparticularlylinkedtoconstruction;aprojectmanagerisratheracreatureofthemanufacturingindustries.Itiscertainthatallprojectmanagershaveskillsincommon,butaprojectmanageronabuildingcontractcannotapproach the taskwiththesamefreedomasifheorshewereprojectmanaginganewproductthroughafactory.Thereareroughlytwokindsofprojectmanagers:

Projectmanagerswhorepresenttheemployerandactasitstechnicalarm,and

Projectmanagerswhonotonlyrepresenttheemployerbutalsocarryoutthecontractadministrationroleinregardtobuildingcontracts.

Thefirsttypeofprojectmanageractsastheemployer’srepresentativeandgenerallyactsas agent for the employer, with the power to do everything the employer could do inrelationtotheproject.Thisisprobablytheusualpositionoccupiedbythepersontermedproject manager. He or she, having first been briefed by the employer, will appointconsultantsandcarryoutthebriefingexercise,makethefinaldecisionabouttheselectionofabuildingcontractorandansweranyqueriesfromtheprofessionalteam.Thetheoryisthattheemployerhasthebenefitofaskilledprofessionallookingafterhisorherinterestsandbeingpaidtowatchtheotherprofessionals.

Thereisnodoubtthattheemploymentofaprojectmanageraddsalayeroffeestotheproject,andonewonderswhyanemployerfeelsthatheorshecantrustaprojectmanagertoagreaterextentthantheotherprofessionals.Thirtyyearsago,thearchitectwouldhavebeen theprofessionalwhogenerallymanaged theproject, and the title ‘leadconsultant’usually signified this responsibility. There is no evidence that a person styled ‘projectmanager’ and added onto the building projectwill do anything other than introduce anelement of confusion. This kind of project manager has no powers under the building

contract,althoughheorshemaytrytoentersite,chairsitemeetingsandgiveinstructionsdirectlytothecontractor.Someprojectmanagerseventrytoinsistoncountersigningallcertificates.Thatkindofregrettablycommonactivityonthepartoftheprojectmanagerisunlawful and may lead to disputes. It always leads to confusion. A contractor takinginstructionsfromsuchaprojectmanagerismostunwise.

Most building contracts do not even acknowledge the project manager’s existence.ThereisprovisionunderSBCforanemployer’srepresentative,whocouldhavebeenbutissignificantlynottermedtheprojectmanager,tobeappointedtocarryouttheemployer’sfunctions.Someothercontracts,forexampleGC/Works/1(1998)andNEC3,refertotheprojectmanager,buttheymightaswellhaveusedthephrase‘contractadministrator’,andtheysimplyaddtothecurrentconfusionovertherole.

The second type of project manager performs all the functions of a contractadministrator so far as the building contract is concerned. The project manager in thissituation has a great deal of power because acting as the employer’s representative isaddedtotheroleofcontractadministrator.Theprojectmanager’sfunctioniscommonlythought by employers to be the management of the project, and this type of projectmanagerisclosesttothatsituation,althoughitisfairlyunusualtofindaprojectmanagerinthisrole.Thatispossiblyjustaswell,becausesuchasituationistantamounttohavingtheemployerascontractadministrator,withnoproperlyindependentprofessionalfortheissueofcertificates.Thatverymuchdevaluesanycertificatesandmakes themnomorethantheemployer’sview,whichcarriesnomoreweightthanthecontractor’sview.9

It ispossibletofindaprojectmanagerworkingsolelyforacontractor.Insuchcases,theprojectmanagerhasnomore,althoughdifferent,powerthanaprojectmanageractingsolelyfortheemployer.Indeed,itisusefultocomparethem.

47CancertificatesandformalAIsbeissuedifthecontractisnotsigned?This is aquestion thatoften troublesarchitectswhenworkhasbegunundera so-calledletter of intent, a month has gone by and the contractor is yelling for a certificate.Strangely,thearchitecthasprobablyissuedseveralarchitect’sinstructionsbythistime.Itistherequestformoneywhich,asusual,concentratesthemind.

Obviously,contractsshouldalwaysbesignedbybothpartiesbeforeanyworkbeginsonsite.Lettersofintentleadtoafalsesenseofsecurity,andtheiruseisnottobeencouraged.If the parties had contracted on what might be termed a simple contract, where thecontractoragreedtocarryoutworkforapriceandstartandcompletiondateswereagreed,thearchitectwouldhavenopower to issueeithercertificatesor instructions. Indeed,anarchitect in thesecircumstanceswouldhavenopoweratall,because therewouldbenomentionofthearchitectinthesimplecontract.Certainclauseswouldbeimpliedbystatuteorunderthegenerallaw,butthepresenceofanarchitect,oraquantitysurveyorforthatmatter,wouldnotbeoneofthem.

Ifworkisbeingcarriedoutunderatrueletterofintent,averylimitedcontractwouldbeformedof the‘if’variety:‘Ifyoudosomework,Iwillpayyouareasonableamountofmoney.’Butfew,ifany,othertermswouldbeimplied,andcertainlythearchitectwouldhavenorightsorobligationsunderit.

However,thesituationmaybethatthecontractorhasbeeninvitedtotenderonthebasisofdrawingsandspecificationorbillsofquantities,andthesedocumentsmayincludetheclearestdetailsof thecontract tobeexecuted, includinghowall thecontractparticularswill be completed. If the contractor submits anunqualified tenderon that basis and theemployerproceedstoacceptthetenderwithoutanyequivocation,abindingcontractwillbe formed incorporating all the details of the drawings and other documents in theinvitationtotenderand,mostimportantly,incorporatingthetermsofthecontractspecifiedin the documents. The architect will then be able to act exactly as if the parties hadexecutedtheformalcontractdocuments.

Ofcourse, if theacceptanceor the invitation to tendermakes reference toacceptancebeing subject to the executionof formaldocuments, no contract is inplaceuntil that isdone. On the other hand, tenders may be submitted with qualifications or letters ofacceptancemayincludeconditionsthatmakethemcounter-offers,butthequalifiedtendermaybeunequivocallyacceptedorthecounter-offermaybeacceptedbythecontractoranda binding contract come into existence in that way. The possible permutations areprobablyendless,andgreatcareisrequiredtoproperlycategorisetherelationship.

48Isthearchitectobligedtocheckthecontractor’ssettingoutifrequested?Itisquitecommonforthecontractortorequestthearchitecttocheckthesettingout,anditisusuallyprudent for thearchitect todoso.SBCclause2.10provides that thearchitectmust determine any levels required for the execution of the Works and must supplyaccurately dimensioned drawings so that the contractor can set out the Works. Thecontractor is responsible for correcting errors in its own setting out at no cost to theemployer,butthatislittleconsolationtoanemployerwhoisfacinglegalproceedingsfortrespass from a neighbour for a building which is almost finished and encroaches onneighbouring land, particularly if the contractor chooses that moment to go intoliquidation.

There isnothing in thecontractwhichplacesadutyon thearchitect tocheck settingout, and the architect owes no duty to the contractor to do so. However, the architectcertainly owes a duty to the client to inspect theWorks. Although that duty does notextend to checking every last detail of the Works, the architect must inspect all theimportantaspectsofthebuildingwork.Whatcouldbemoreimportantthanthesettingoutof thebuildingon thesite? It isdangerous for thearchitect toconfirm to thecontractorthat thesettingout isaccuratebecauseit tends torelievethecontractorofresponsibilityforerrorswhich itwouldotherwisehaveunder thecontract.Nevertheless,avisit to thesitetocheckthesettingoutshouldbeapriority,andthearchitectshouldnotwaitforthecontractor’srequest.Contractorsoftenwritetothearchitect,askingforconfirmationthatits setting out was found to be accurate. A wise architect will immediately respond,makingquiteclearthatnoapprovalisgiventothesettingoutandremindingthecontractorofitsresponsibilitiesunderthecontract.

49Ifthearchitectfindsthatthereisnoperson-in-chargeonsite,cantheprojectbehalteduntiltheperson-in-chargeisonsite?SBCandDBclause3.2 require thecontractor tohaveaperson-in-chargeon site ‘at alltimes’.IC,ICD,MWandMWDclause3.2requiretheperson-in-chargetobeonthesite‘at all reasonable times’. The phrase ‘at all times’ is not to be taken literally, and it issuggestedthatunderSBCandDBthecontractor’sobligationamountstoensuringthattheperson-in-chargeisonsiteforthewholeofthetimethatanyactivityisbeingcarriedout,evenifthatissimplyoff-loadingmaterials.TheJCTdraftsman’sdecisiontousedifferentwording for the Intermediate andMinorWorks contracts clearly suggests a somewhatlesserdutyunderthosecontracts.Whatisreasonablewilldependonallthecircumstances.Generally,itislikelythattheperson-in-chargemustbeonsitewhenevertheWorksareinprogress,althoughtheremaybesomeinstances,wheretheWorksaresmallorcarriedoutin small parcels over a long period, which do not warrant that the person-in-charge isconstantlyonthesite.Itmaybesufficienttovisitthesiteonaregularbasisprovidedthatthere is a responsible operative available. On small projects, it is common to have aworkingforemanandfortheidentityoftheforemantochangeastheworkprogressestoreflecttheprogressionintrades.

Therefore,thefirstthingistoestablishwhethertheparticularcontracttermsrequiretheperson-in-chargetobeonsite.Thesecondthingistocheckhowlongthesitehasbeenleftwithoutsupervision.Itmaybethattheperson-in-chargehassimplyleftsiteonanurgentmatterforafewminutesandwillshortlyreturn.Itwillbeserious,however,ifthearchitectarrives on site and finds that the person-in-charge has been away all morning. If theperson-in-charge is away from the site during the time that work is in progress, it iscertainly a breach of contract under SBC and DB and possibly so, depending oncircumstances,underIC,ICD,MWandMWD.Thecontractdoesnotincludeanydirectsanctionforsuchabreach,andiftheprojectsimplycontinueddespitetheabsenceoftheperson-in-charge, the employerwouldbe left to claimwhateverdamagesheor shehadsufferedasaresultofthebreach.Thatwouldgenerallyamounttothecostofcorrectingany defects in thework. If therewere no defects despite the absence of the person-in-charge,itisdifficulttoseewhatdamagetheemployercouldbesaidtohavesuffered.Theemployerwouldalwayshavetheconcernthatduringsuchabsencesomeessentialwork,now covered up, had been badly done or even omitted, but suspicionwithout evidencewouldnotgive rise todamages, and it is a commonexperience thatdefectsoccur evenwhenaperson-in-chargeisconstantlyonsite.

UnderSBCclause3.15,DBclause3.10andICandICDclause3.12,thereispowerforthearchitect(theemployerunderDB)toissueinstructionspostponinganywork,andthepower is probably implied in MW andMWD clause 3.4. Usually, when the power isexercised, it almost automatically entitles the contractor to an extension of time andappropriatelossand/orexpense.ThepositionunderMWandMWDislessclearsofarasloss and/or expense are concerned. However, it seems likely that an architect whopostpones the work as a direct result of the absence of the person-in-charge would bejustified inwithholdingbothanextensionof timeand lossand/orexpensewhichwould

otherwisebedue.Itseemstobeasensibleexerciseofthearchitect’spowerstopostponetheworkpendingthereturnoftheperson-in-chargetositeaftersendingawarninglettertothecontractorremindingitofitscontractualresponsibilities.Inpracticalterms,theprojectcannotproceed if theperson responsible fororganisingand supervising thework isnotpresentonsite.

50IftheemployersacksthearchitectunderMWandappointsanunqualifiedsurveyorascontractadministrator,isthecontractstillvalid?The identity of the architect is stated in article 3 of the JCT Minor Works BuildingContract2011(MW).It issimilar to itspredecessor(MW05)in that itstates that if thearchitect ceases to act, the replacement architect will be the person nominated by theemployer within 14 days. There is a proviso that the replacement architect must notdisregardoroverrule anycertificate, opinion,decision, approvalor instructiongivenbytheformerarchitectexcepttotheextentthattheformerarchitectwouldhavebeenabletodoso.

In article 3, reference is to the ‘Architect/Contract Administrator’, and this way ofdescribingthepersonnamedinarticle3isadoptedthroughoutthecontract.Footnote[6]of MW explains that if the person named in the contract is entitled to use the name‘Architect’inaccordancewiththeArchitectsAct1997,‘ContractorAdministrator’shouldbedeletedandisthendeemeddeletedthroughouttherestofthecontract.ThepurposeofprovidingthealternativenameistoprotectanunregisteredpersonfrombeingprosecutedundertheAct.

Itfollows,therefore,thatifthepersonoriginallynamedinthecontractisanarchitect,the words ‘Contract Administrator’ must be deleted, or if not deleted will be deemeddeleted there and throughout the contract. Clearly, an unregistered person, even if aqualified surveyor, cannot be appointed as architect. Such an appointment would notinvalidate the contract, but it would be unlawful and of no effect. Indeed, the personconcernedwouldbe liable toprosecution for infringing theAct andmayhave topay asubstantialfine.

Thereisanother,separate,consideration.Whenthecontractortendered,itwouldhavebeenonthebasisthatthecontractwouldbeadministeredbyanarchitectofknownability.Itisasoundargumentthatinthecaseofanyreplacement,thereplacementpersonmustbeofthesameability.Thiswouldpreventtheall-too-prevalentpracticewherebyanemployersacksthearchitectandself-appoints.

Ifthepositionwasreversedandtheunqualifiedsurveyorwassackedandreplacedwithan architect, there should be no difficulty, because the surveyor would have beendescribed throughout the contract as the ‘Contract Administrator’, and the architectcertainlyfitsintothatcategory.

Under SBC, article 3 states the name of the architect, and clause 3.5 provides thatrenominationmusttakeplacewithin21daysofthearchitectceasingtoholdthepost.Thecontractorisgivenexpresspowertoobjectwithinsevendaysforareasonacceptedbytheemployeror considered tobe sufficientbyanadjudicator, arbitratoror judgeunless theemployerisalocalauthorityandtheformerarchitectwasanofficialofit.TheICandICDnamethearchitectinarticle3andprovideforreplacementinclause3.4.1.ThissomewhatshorterversionisofsimilareffecttotheSBCclause,savethattheemployerhasonly14daystonominate.

51SBCcontainsaclauseinthebillsofquantitiespreliminarieswhichstatesthatnocertificateswillbeissueduntilthecontractorhassuppliedaperformancebond.Workhasbeengoingonsiteforsixweeksandthereisnoperformancebond,butthecontractorsaysthatthearchitectmustcertify.Isthatcorrect?This is a surprisingly common provision. The contractor is correct. In Gilbert Ash(Northern)vModernEngineering(Bristol),10thiskindofactionwasheldtoamounttoapenaltythatwasunenforceablebecauselargeamountsofmoneycouldbewithheldforatrivialbreach.Itcanreadilybeseenthatifaperformancebondisrequiredintheamountof10percentofthecontractsumandif10percentofthecontractsumwas,say,£85,000,thecontractormightwellhaveearnedthisamountintwoor threemonths.Therefore, towithholdpaymentbeyond thatpointwouldbe topenalise thecontractorunduly.This issomething the courts have never condoned. In considering liquidated damages andpenalties,thecourtshavemadeclearthatagreatersumcanneverbeproperrecompenseforthelossofalessersum.11

TheCourtofAppealtookadown-to-earthviewinrelationtoacontract’scommercialaspect in a more recent case involving theMillennium Dome.12 The contract betweenKoch andMillennium (for the supply and fixing of the roof) contained a clausewhichsaid,‘AsaconditionprecedenttoanyliabilityorobligationoftheclientunderthisTradeContract, the Trade Contractor shall provide at its own costs a guarantee in the formoutlinedinSchedule’.ThecontractdocumentswerecompletedbyKoch,butnoguaranteeandperformancebondwascompleted.Kochconfirmedthataguaranteeandperformancebondwouldbecompletedandsent.Kochthenheardthat thecontractmightbegiventoanothercompanyandsuspendedtheexecutionoftheguaranteeandbonduntilthepositionwas clear. Subsequently, Koch’s employment under the trade contract was terminated.MillenniumthenarguedthatitwasnotobligedtomakeanypaymenttoKoch,becausetheconditionprecedentwasnotsatisfied.

WhenthemattercamebeforetheCourtofAppeal,theCourtthoughtthatMillennium’scontentionwasmisconceived.ThepurposeoftheguaranteeandbondwastoensurethatMillenniumwasprotectedwhentheWorkscommenced.TheCourtstated:

ItwassuggestedonbehalfoftheMillenniumCompany,thatthepurposeisachievedbyrelievingtheclientfromtheobligationtomakeanypaymentsuntiltheguaranteeandtheperformancebondhaveactuallybeenprovided.But,as itseemstome, theclientandthetradecontractorcannothaveintendedthattheeffectoftheiragreementshouldbethatthetradecontractorshouldbeentitledtocarryonworkswithoutbeingpaid for some indefinite period until it chose to provide the guarantee andperformancebond.Suchanarrangementcouldproperlybedescribed,inmyview,ascommercialnonsense.

Inaddition,bychoosingtoterminateKoch’semploymentunderthecontract,Millennium

madeitimpossiblefortheconditionprecedenttobefulfilled.Thiscasemakesclearthatthecourtswilltakeadimviewofveryonerousconditionsin

businesscontractsiftheydonotmakecommercialsense.

52Ifthereisaclausestatingthatthepartieswillworktogetherinaspiritoftrust,cantheemployerdemandtoseealltherelevantbooksofthecontractor?Itiscommonforcontractstoincludeso-called‘partnering’termsincontracts.Thesetermstend to be of the ‘parties will act in a sprit of mutual trust and respect and in acollaborative manner’ type. Partnering is of course quite different from partnership.Partnershipisalegalconceptdescribingthesituationwheretwoormorepeopleenterintobusinesstogetherwithaviewtoprofit.Asignificantpointisthatpartnersinapartnershipsharebothprofitsandlosses.Partneringdoesnotattempttocreatethatkindofrelationshipbetweenemployerandcontractor.Itwouldbeexceedinglystrangeifitdid.Partneringhasbeen neatly defined as ‘a structured approach to facilitate team working’.13 The ideaappears tobe to try toget back to theway contractswere carriedout in the1950s andearlier,beforetheblameculturetookholdandfinanceruled.

Theproblemisthattheinclusionofpartneringtermsincontractshasledpartiestosuchcontracts tobelievethatpartneringtermssomehowtakeprecedenceoverother terms.Inpractice, the courts treat partnering terms like anyother terms.They try todecidewhattheymeanandwhatthepartiesintendedwhentheyagreedthem.Thecourtsdonotmakeblanket assumptions about such terms. Therefore, the answer to the question lies in anexaminationofwhatthecontractsays.Doesthecontractexpresslystatethattheemployercanseethecontractor’sbooks?Iftheanswertothatquestionis‘No’,theemployerhasnopower to demand the books. In theory, if the parties have agreed towork in a spirit ofmutual trust, there ought to be a remedy if that does not happen.However, thatwouldrequiretheinjuredpartytoprovethattheotherdidnotworkinaspiritofmutualtrust.Inturn,thatwouldrequireacourttodecidewhatworkinginaspiritofmutualtrustactuallymeant inpracticeandwhetherparticular instancesdemonstrateda failureon thepartofoneoftheparties.Sofar,thecourtshaveindicatedthattheyarenoteagertograpplewiththisproblemnorpreparedtoimplyanytermsofgoodfaithintoconstructioncontractsasamatter of law.14Moreover, the injuredpartywould thenhave to provewhat loss it hadsufferedasadirectresultoftheotherparty’sfailure.

53Isitimpossibletosaythatacontractorisfailingtoproceedregularlyanddiligently?Itusedtobesaidthatitwasnotpossibletosaythatthecontractorwasfailingtoproceedregularlyanddiligentlyifevertherewasanyoneatallonthesite,eventhoughthepaceoftheworkwassnail-like.Everyoneknewthatitwasjustplainsillytotakethatattitude,buttherewasgreatreluctanceonthepartofarchitectstotakeanyactiononthebasisoffailuretoproceedregularlyanddiligentlyoutoffearofgettingitwrong.SBC,IC,ICDclause2.4andDBclause2.3usethisphrasetodescribethecontractor’sdutytoprogress.BecausebreachofthisdutyisagroundforterminationunderSBC,DB,IC,ICD,MWandMWD,itisimportanttobeabletoidentifyit.Eventhecourtshavebeendoubtfulaboutitsprecisemeaning,andonecourtconcludeditsconsiderationofthetopicwiththenot-very-helpfulwords,‘AllIcansayisthatIremainsomewhatuncertainastotheconceptenshrinedinthese words’.15 The position changed abruptly when a court held that architects werenegligent for not issuing a default notice to a contractor specifying that it was notproceeding regularly and diligently. The Court of Appeal turned down the architects’appealandlaiddownsomeusefulguidelines:

AlthoughthecontractormustproceedbothregularlyanddiligentlywiththeWorks,andalthougheachwordimportsintothatobligationcertaindiscreteconceptswhichwouldnototherwiseinformit,thereisameasureofoverlapbetweenthemanditisthusunhelpfultoseektodefinetwoquiteseparateanddistinctobligations.

Whatparticularlyissuppliedbytheword‘regularly’isnotleastarequirementtoattendforworkonaregulardailybasiswithsufficientinthewayofmen,materialsand plant to have the physical capacity to progress the work substantially inaccordancewiththecontractualobligations.

What inparticular theword ‘diligently’ contributes to theconcept is theneed toapplythatphysicalcapacityindustriouslyandefficientlytowardsthesameend.

Taken together the obligation upon the contractor is essentially to proceedcontinuously, industriouslyandefficientlywithappropriatephysicalresourcessoastoprogress theworks steadily towardscompletionsubstantially inaccordancewiththecontractualrequirementsastotime,sequenceandqualityofwork.

BeyondthatIthinkitimpossibletogiveusefulguidance.TheseareafterallplainEnglish words and in reality the failure of which [the clause] speaks is, like theelephant,fareasiertorecognisethantodescribe.16

The final sentence quoted is probably the most telling. The number of operatives, theamountofplant and equipment and theorganisationof the site are important factors inconsidering whether or not the contractor is progressing regularly and diligently. Thecontractor’s progress compared with the programmed progress is significant but notconclusive.Whetherthecontractorisgoingaheadregularlyanddiligentlyistobejudgedby the standards expected of the average competent and experienced contractor. Thecontractadministratorisinthebestpositiontojudgewhetherworkisproceedingregularlyanddiligently, and there is a clearduty to advise the employer andwarn the contractor

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

accordingly.

BrunswickConstructionvNowlan(1975)21BLR27.

EquitableDebentureAssetsCorporationLtdvWilliamMoss(1984)2ConLR1;VictoriaUniversityofManchestervWilsonandWomersleyandPochin(Contractors)Ltd(1984)2ConLR43.

UniversityCourtoftheUniversityofGlasgowvWilliamWhitfield&JohnLaing(Construction)Ltd(1988)42BLR66.

EdwardLindenbergvJoeCanning&JeromeContractingLtd(1992)29ConLR71.

PlantConstructionplcvCliveAdamsAssociatesandJMHConstructionServicesLtd[2000]BLR137.

(1991)8-CLD-07-12.

ProjectManagement–ARolefortheArchitect(June1995)RIBAPracticeCommittee,paragraph32.

PrideValleyFoodsLtdvHall&Partners(2000)16ConstLJ424.

JFFinneganLtdvFordSellerMorrisDevelopmentsLtd(No.1)(1991)25ConLR89.

[1973]3AllER195.

KemblevFarren(1829)6Bing141.

KochHightexGmbHvNewMillenniumExperienceCompanyLtd(1999)CILL1595.

PartneringintheTeam(1997)ConstructionIndustryBoardWorkingGroup12.

YamSengPteLtdvInternationalTradeCorpLtd[2013]EWHC111(QB).

LondonBoroughofHounslowvTwickenhamGardenDevelopmentsLtd(1970)7BLR81.

WestFaulknervLondonBoroughofNewham(1995)11ConstLJ157CA.

Chapter8

Architects

54Planningpermissionwasobtainedforasmallbuilding.ThebuildingownerwantstopressaheadwithalargerbuildingwithoutfurtherreferencetoPlanning.ThearchitectknowsthatthePlanningDepartmentwouldrefusethelargebuildingoutofhand.Shouldthearchitectcontinuetodothedrawingsandadministerthecontractonsite?It is thearchitect’sduty toadvise theclientonallaspectsof thebuildingprocessaboutwhich thearchitectprofessesexpertise.Obviously, townplanning isoneareawhere thearchitectshouldhaveexpertise–nottheexpertiseofatownplanneroranexpertplanningconsultant or a lawyer skilled in this area of the law, but certainly knowledge of theordinaryaspectsoftownplanningthatonewouldnormallyexpectaspartofthegeneralarchitecturalskills.1

Inthiscase,planningpermissionhadbeenobtainedforaparticularbuilding.Theclienthad a change ofmind andwanted a bigger building on the same site.There is nothingwrongwith that, but architects have a duty to advise the client about seeking planningpermission again in such circumstances. Pressing ahead without obtaining planningpermissionwouldbeunlawful,andthearchitecthasadutytomakethatcrystalcleartotheclient. In addition, if the architectknows for certain thatmakingaplanning submissionwould be pointless, there is an added duty to convey this to the client in the strongestterms.

Thearchitectisbeingaskedtofinishthedrawingsforthelargerbuildingthatwouldnotgain planning approval even if application were made. The architect knows that thepurpose forwhich thedrawingsare intended is theunlawful constructionof abuilding.Architectsplacedinthispositionshouldflatlyrefusetohaveanythingfurthertodowiththeproject.Thiswouldnotamount torepudiationat law,muchlessbeinbreachofanypartoftheprofessionalCodeofConduct;quitethecontrary,asthelargerbuildingisnotsomethingforwhichthearchitectwasengaged.Inotherwords,itisnotpartofthetermsof engagement (for the smaller building for which planning permission has beenobtained),andthereforethearchitectcannotbeinbreachbyrefusingtodothework.

Foranarchitecttocollaboratewiththeclientinenablingtheconstructionofabuildingforwhich it isknownthatplanningpermissionwouldberefused isanunlawfulactandone that iscontrary to theCodeofConduct. If thearchitectdidnotknow thatplanningpermission was not to be sought or that it could not be obtained, there would be nowrongfulbehaviouruntilthearchitectknew,orshouldhaveknown,thetruesituation.Onbecomingawareofthetruesituation,thearchitectwouldhavenooptionbuttostopworkifadvicetotheclientfellondeafears.

55Ifanarchitectisengagedtoapplyforplanningpermissionbyacertaindate,isthearchitectliableifthatdateismissed?Itisbecomingcommonforclientstotryandbindtheirarchitectsintoagreementswhichinclude a programme for significant stages of the work. In view of the manyimponderables in the design and construction process, signing an agreement with suchtimingrequirementsisinadvisable.Nevertheless,architectsdosignsuchagreements,andquestions arise about liability if the dates are not met. A crucial date is often theapplicationforplanningpermission.Arecentcaseillustratestheproblem.

InElvaniteFullCircleLtdvAMECEarthandEnvironmental(UK)Ltd,2AMECwasengagedtomakeaplanningapplicationtouseasiteforrecyclingpurposes.AMEChadcontractedon their own terms.Elvanitewas a demolition and recycling contractor.TheagreementwasthattheapplicationshouldbemadebytheendofNovember2007,butitwasnotmadeuntilApril2008.ElvanitewithdrewtheapplicationandterminatedAMEC’sappointment.Elvanitethenengagedanotherconsultantwhoobtainedplanningpermissionayearlater.

Elvanite said that if the application had been made by the end of November 2007,planningpermissionwouldhavebeengrantedinApril2008andtheycouldthenhavesoldthesite toawell-knownwastecontractorfor£1,350,000.Althoughplanningpermissionwas granted in 2009, the market had declined and they could not find a buyer at anacceptable price. Elvanite claimed damages for breach of contract and/or negligencearisingoutofthetimingandcontentofthe2008application.Thedamages,amountingto£561,000, were in the form of loss of profit calculated by reference to the £1,350,000figurelessthecostofthesite.

Elvanite’s positionwas very simple:AMEChad been engaged to apply for planningpermission on a certain date and had not done so; therefore, they must be liable. Thequestionwas,whatwastherealcauseoftheallegedlossbyElvanite?

ThecourtconcludedthatalthoughthecontractstatedanapplicationwouldbemadebytheendofNovember2007,therewasanimpliedtermthatthedatewouldbeextendedifthereweredelayscausedbyElvanite.AlthoughAMECwereinminorbreachofcontractbecausetheydidnotcompletetwonecessaryassessmentsbytheendofNovember2007,thoseminorbreachesdidnotcausethedelay.ThedelaywascausedbyElvanite’svariousrevisions of the site layout. It is a basic principle that a person cannot complain thatsomethingisnotdoneornotdonebyacertaintimeifitisthatperson’sfaultthatitisnotdone. In addition, therewasno clear evidence as to thevalueof the sitewithplanningpermission.Inanyevent,AMEChadatermrestrictingclaimsifnotnotifiedwithinayear,andElvanitehadnotdoneso.

Therefore, even if the agreement states that an architect will apply for planningpermissionbyacertaindate,thearchitectwillonlybeliableforafailuretodosoifthedelayissolelytheresponsibilityofthearchitect.Iftheemployercontributestothedelayin somewayor if someunforeseen circumstance arises, the architectwill havenoor areducedliability.

56Arethereanycircumstancesinwhichacontractorcansuccessfullyclaimagainstthearchitect?Thisisaquestionthatcropsupfairlyfrequently.Architectsarepronetoaskitjustbeforemaking an important contractual decision; contractors ask it when they are particularlyannoyedwithanarchitect’sconduct. Ingeneral, it isusuallyeasier for thecontractor toclaimagainsttheemployerthanthearchitect,becausethecontractorandtheemployerarerelatedbythebuildingcontractwhilethecontractorhasnocontractualrelationshipwiththearchitect.Therefore,acontractorfindsitrelativelyeasytoclaimunderthetermsofthecontractagainsttheemployerforabreachofthecontract.Claimsbythecontractoragainstthe architectmust bemade in tort. Since 1990,3 negligence claims in the absence of acontractualrelationshiphavebecomeverydifficulttosustain.Acontractormakingaclaimagainstanarchitectwouldalmostcertainlydosoundertherelianceprinciple.4 Itusuallyappliestoprofessionals,althoughcourtshaveextendedthescopeinsomeinstances.Theprinciple,inbrief,isthatifaprofessionalgivesadvicetoanotherpersonorclassofpeopleknowingthatthepersonorpersonswillrelyonit,andifthepersonorpersonsdorelyontheadviceandsufferalossasaresult,thelosswillberecoverablefromtheprofessional.Thisisirrespectiveofanyfeepaidornotpaidtotheprofessionalandeventhoughthereisnocontractualrelationship.

Thecontractor suedboth employer andarchitect inMichael Salliss&CoLtd vECACalil,5 claiming that the architects owed a duty of care to the contractor.Although thecontractorwas unsuccessful in arguing that the architect owed the contractor a duty toprovideaccurateandworkabledrawings,itwassuccessfulinitsclaimthatitreliedonthearchitecttograntanadequateextensionoftimeandtoproperlycertifythevalueofworkdone. The court appeared to think that this was self-evident. It remarked that if thearchitectunfairlypromoted theemployer’s interestby inadequatecertificationormerelyfailedproperlytoexercisereasonablecareandskillinthecertification,itwasreasonablethat the contractor should not only have rights against the owner but also against thearchitecttorecoverdamages.

Three years later,Pacific Associates v Baxter6 seemed to overturn this position, butalthoughthecourtsaidthataquestionmarkhungovertheSallisscase,itstoppedshortofsayingthatitwaswronglydecided.PacificAssociateswaseffectivelythecontractorundera FIDIC contract for work in Dubai. The contractor claimed that it had encounteredunexpectedly hard materials and that it was therefore entitled to a substantial extrapayment. The engineerswould not certify the amount claimed, and the contractor suedthem.Theclaimallegedthattheengineersactednegligentlyinbreachoftheirdutytoactfairlyandimpartiallyinadministeringthecontract.InajudgmentupheldbytheCourtofAppeal, the court struck out the claim on the basis that the contractor had no cause ofactionor,inotherwords,thatitcouldnotmakeaclaiminthatparticularway.Inmakingthat decision, the court was mindful that there was provision for arbitration betweenemployerandcontractor,andthereforethecontractorcouldhavesoughtarbitrationonthedispute.

Thecourtalsoreferredtoaspecialexclusionofliabilityclauseinthecontractbywhichtheemployerwasnottoholdtheengineerspersonallyliableforactsorobligationsunder

thecontractoranswerable foranydefaultoromissionon thepartof theemployer.ThefactthattheengineerswerenotapartytotheFIDICcontract–justasarchitectsarenotpartiestoJCTcontracts–seemstohavebeenignoredbythecourt.

ThequestionmarkappearstoproperlyhangoverthePacificAssociatescaseratherthantheSalliss case.Whether a duty of care exists does not depend on the existence of anexclusion of liability clause, except to the extent that the existence of such a clausesuggests acceptance by the engineer that there is a duty of carewhich,without such aclause, would give rise to the liability. The clause in fquestion might well be deemedunreasonable under the provisions of the Unfair Contract Terms Act 1977.7 Why theinclusionofanarbitrationclauseshouldexcludeengineersfromliabilitytothecontractorisnotimmediately(orevensubsequently)obvious.Thefactthatthepartieschosetosettletheirdisputesbyarbitrationcannotexcusetheengineersfromtheirdutytobothparties.

InLubenhamFidelities&InvestmentCovSouthPembrokeshireDistrictCouncilandWigley Fox Partnership,8 the Court of Appeal (by which the court in the PacificAssociates case shouldhavebeenbound) expressly confirmed that the architect owedadutytothecontractorincertifying.Thearchitectsinthatcasewerenotheldliable,butthatwasbecausethechainofcausationwasbrokenandthecontractor’sdamagewascausedbyitsownbreachinwrongfullywithdrawingfromsite.Butthecourtreacheditsconclusionwithreluctancebecausethearchitects’negligencewasthesourcefromwhichthesequenceof events began to flow. The court expressly stated that because the architects wereappointedunderthecontract,theyowedadutytothecontractoraswellastotheemployerto exercise reasonable care in issuing certificates and in administering the contractscorrectly. By issuing defective certificates and advising the employer as they did, thearchitectsactedinbreachoftheirdutytothecontractor.

The court was simply following the precedent of earlier courts. In Campbell vEdwards,9 theCourtofAppealsaid thatcontractorshadacauseofaction innegligenceagainst certifiers and valuers. Until Pacific Associates it had not been doubted thatarchitectsowedadutytocontractorsincertifying.InArensonvArenson,10inreferencetothe possibility of the architect negligently under-certifying, it was said that in a tradewhere cash flow is perceived as important, itmight have caused the contractor seriousdamageforwhich thearchitectcouldsuccessfullyhavebeensued. InFGMinterLtdvWelshHealthTechnicalServicesOrganisation,11thecourtremarkedthatanunreasonabledelayinascertainmentwouldcompletelybreakthechainofcausation,whichmightgiverisetoaclaimagainstthearchitect.

Othercases12providefirmsupporttotheideathattherelianceprincipleestablishedinHedleyByrne(seequestion61)canbeextendedtoactionsaswellastoadvicegivenbythearchitect.

57Ifthecontractrequiresanarchitectto‘havedueregard’toacodeofpractice,doesthatmeanthearchitectmustcomplywithit?Arequirement tohavedueregard tosomething isacommonphrase inmuchlegislationandinsomecontracts.Itmustbeconstruedinthecontextofthesurroundingwords.Forexample,inSBCclause3.18.4,ifanywork,materialsorgoodsarenotinaccordancewiththecontract,thearchitectisrequiredtohavedueregardtothecodeofpracticeattachedtothecontractbeforeissuinginstructionsforopeninguptheworkortesting.Arequirementto have due regard to something is not the same as a requirement to comply withsomething. In SBC clause 3.10, the contractor must comply forthwith with architect’sinstructions.Inotherwords,thecontractormustcarryouttheinstructions.Itwouldnotbesufficient if the contractor merely had to have due regard to the instructions. Arequirementtohavedueregardtosomethingmeansthatapersonmustcarefullyconsiderthat thing and give appropriateweight to it in coming to a decision or in taking someaction.

ThecodeofpracticereferredtoinSBCclause3.18.4iscontainedinschedule4tothecontract. Its stated purpose is to assist in the fair and reasonable operation of therequirementsoftheclause.Inordertohavedueregardtothecode,anarchitectmustreaditandconsiderwhetheranyofitscontentsarerelevanttothedecisiontoopenuportest.However,theremaybecircumstanceswherethearchitectdecidesthatnopartofthecodeis relevant and, therefore, feels justified in giving no weight to it when making thedecision.

58Whatisthepurposeofanetcontributionclause?Mosttermsofappointmentofconstructionprofessionalscontainwhatisknownasa‘netcontributionclause’.Atypicalnetcontributionclauseisasfollows:

TheliabilityoftheArchitectshallnotexceedsuchsumasitisjustandequitablefortheArchitect topayhavingregardtotheextentof theArchitect’sresponsibilityforthe lossand/ordamage inquestionandon theassumptions that all consultantsandcontractors providingwork or services for the Project have provided to theClientcontractualundertakingsontermsnolessonerousthanthoseoftheArchitectunderthisAppointment and that there are no exclusions of or limitations of liability norjoint insuranceorco-insuranceprovisionsbetween theClientandanyotherpersonreferredtointhisclauseandthatallthepersonsreferredtointhisclausehavepaidtotheClientsuchsumsasitwouldbejustandequitableforthemtopayhavingregardtotheextentoftheirresponsibilityforthatlossand/ordamage.

Thepurposeoftheclauseistomakesurethatthearchitect,orotherprofessionalwhoissued by a client, pays nomore than the amount of damages for which the architect isactually responsible. In theabsenceof sucha clause, a consultant couldbe found tobeliabletopaythewholeofaclaimfordamageseventhoughotherconsultantswerepartlyresponsible.Thusaconsultantmighthavetopay100percentofaclaimforwhichtheywereonly30percentresponsible.Thatisbecausesuchclaimsaremadeonthebasisofjoint and severable liability, and a client is free to choose which of the consultants topursuefordamages.Thedifficultyforaconsultantpursuedinthiswayis thatheorshehas to take legal action against the other consultants in order to recover the part of thedamagesforwhichtheyareliable.Adangeristhatoneormoreoftheotherconsultantsmaybecomeinsolventandunabletopay.Theseclausesareusuallyresistedbyclientsonthebasisthatitisunfairthataclientshouldbeobligedtotakelegalactionagainstseveralconsultantsandpossiblythecontractorwhenthereisadefect.

NetcontributionclauseshavebeenchallengedinthecourtsonwordingasbeingunfairundertheUnfairTermsinConsumerContractsRegulations1999andunreasonableunderthe Unfair Contract Terms Act 1977, but they have been supported by the Court ofAppeal.13Thereferencetoco-insuranceprovisionswasaddedtonetcontributionclausesfollowinganothercaseintheHouseofLords.14

59Cananarchitectbeliableforadvisingtheuseofthewrongformofcontract?Thereislittledoubtthatanarchitectcanbeliableforadvisingtheuseofthewrongformofcontract.Severallegalcommentatorshavemademuchofit.However,itwouldhavetobedemonstratedthattheemployersufferedalossasadirectresultofusingtheformandthatthelosswasnotsuchaswouldhavebeensufferedinanyeventandquiteirrespectiveof the type of contract. In other words, it would have to be shown by an employerclaimingdamages for thebadadvice that itwas thebadadviceandnothingelsewhichwasthecauseoftheloss.Inpractice,itislikelythatsomearchitectsdogivetheirclientspooradviceaboutasuitableformofcontractforaparticularproject.Often,therewillbenoadverseconsequencesimplybecausecircumstancesdonotarisewhichnecessitatetheuseof thepartof thecontractwhichwoulddisadvantagetheemployer.Forexample,anarchitectmaywronglyadviseanemployer touseaparticularcontractwhichhappenstohave terms for termination of the contract which are particularly advantageous to thecontractor.Ifthereisnoneedtoterminate,therearenoconsequencesfromthebadadvice.Inarecentcase,thecourtfoundthatitwouldhavebeengoodpracticeforthearchitecttohave specified a building contract which gave the contractor design responsibility andrequiredprofessionalindemnityinsuranceforthedesignofM&Eservices.However,incircumstanceswherethecontractor’sdetaildesignwassubjecttoapprovalbytheservicesengineer,thearchitect’sdecisiontospecifyacontractwithoutdesignresponsibilityforthecontractorwasanapproachthatareasonablycompetentarchitectcouldtake.15

Thereisnodoubtthatthetaskofadvisingonthecorrectformofcontractforaprojectis becomingmore difficult.There aremanydifferent formsof contract available, and acomparison of the key terms is not easy unless an architect has an encyclopaedicknowledgeofalltheavailablecontractsandtheindividualclausesandtheirsignificance.Moreover,changes in legislation, judicialdecisionsandotherfactorsmeanthatstandardcontracts are regularly updated. If in doubt, architects should seek advice on behalf oftheir clients or advise their clients to seek further advice themselves. Obviously, if anarchitect spendsacareerengaged inone specifickindofbuildingdesignat aparticularprice range, it is likely that the same contractwill be suitable for all the projects. Thedangertendstoarisewhenanarchitectusesthesamecontractinallcasessimplybecauseit isa familiardocument.Theauthorhascomeacrossmany instancesofarchitectswhorefuse to use other than the Minor Works Contract, or sometimes the IntermediateContract,whateverthesizeorscopeoftheWorks.Thatapproachisaskingfortrouble.

60Thejobwentovertime.Theemployerandthecontractordidsomekindofdeal.Wheredoesthatleavethearchitect?Employersandcontractorsarealwaysdoingsomekindofdeal.Oftenitconcernsthefinalaccount; sometimes it is about extensions of time or liquidated damages; sometimes itconcernseverything.Thisisparticularlycommonamongemployerswhoareinbusiness.Theymaysaythattimeismorepreciousthanmoney,andthereforeitsuitsthemtoreachaquickandrelativelypainlessagreementeveniftheyhavetopaymore.

Whatsuchemployersforgetisthattheyandthecontractorsconcernedhaveenteredintobuildingcontractsbywhichtheyhaveagreedthatsuchthingsasextensionsoftime,lossand/orexpense,liquidateddamagesandtheamountduetothecontractorwillbedecidedbythearchitect.Obviously,itisalwayspossibleforthepartiestoacontracttodecideonsomechangetothatcontract.Iftheydecidethattheyprefertosortoutextensionsoftimeratherthanletthearchitectdoit,thatisamatterforthem,butitalsoaffectsthearchitect.

Architects, by their terms of engagement, usually agree to administer the buildingcontract in accordance with its terms. Contrary to the belief of some architects, anarchitect is only empowered to do that which the contract permits. Therefore, if anemployerandcontractordecide,forexample,thatthecontractperiodwillbeextendedbysixweeks,theyareentitledtodoso,butthatdoesnotmeanthatthearchitecthastoissueanextensionoftimeforthatperiod.Infact,thearchitecthasnopowerunderthecontracttodoanythinginrelationtotheagreedextension.Ifthepartiesformaliseit,thearchitectcanprobablyregarditthereafterasthedateforcompletioninthecontractasvariedbytheparties. It is that varied date that the architectwill have to consider in future if furtherdelaysarenotifiedandfurtherextensionsmaybedue.

If the employer and the contractor agree that the contractor should be paid a sumofmoneyaswellashavingthecontractperiodrevised,thearchitectcannotincludethesuminanycertificate,becauseitisnotasumproperlydueunderthetermsofthecontract,butratherasumagreedadhocbytheparties.Therefore,itisfortheemployertopaythesumdirectlytothecontractor.

There are numerous little agreements and deals intowhich the parties can enter thatleave the contract terms relatively unscathed. However, certain deals may leave thearchitectinadifficultposition.Thiscanhappenifthedealsaredonewithoutnotifyingthearchitectoriftheemployerbeginstointerferewiththecertificationprocess,forexamplebyinsistingthatthearchitectcertifysomeextraagreedamount.Theemployermayenterintowhat areofteneuphemisticallycalled ‘accelerationagreements’with thecontractor.These are often simply agreements that the contractor will work additional hours andweekends,notthattheWorkswillprogressfaster.

Manyarchitectsfindingthemselvesinthispositionwillwonderwheretheystand,whiledesperatelytryingtoadministerthecontractandadaptitstermstosuittheproblemsthathalf-considered agreements can throw up. Architects should not attempt to rescue theadministration of a contract which the employer has undermined. If the employer andcontractor strike some deal that prevents the architect from properly administering thecontract, it is probable that the employer has repudiated the architect’s terms of

engagement.Inthesecircumstances,thearchitectshouldimmediatelyseekexpertadviceonhisorherposition.Ifitisrepudiation,thearchitectwillbeentitledtoacceptitassuch,bringinghisorherobligations to anendandopening thedoor for a claim fordamagesagainsttheemployer.

61Whatarethedangersofaconstructionprofessionalgivingacertificateofsatisfactiontothebuildingsociety?The first thing to understand is that the certificate required by a building society is anentirely different thing to the certificate that an architect will routinely issue under astandardbuildingcontract.

Thecertificate,ormorelikelyseveralcertificatesthroughouttheprogressoftheproject,isrequiredbythebuildingsocietytoinsureitagainstthemoneyithasbeenaskedtolend.Where thebuilder is registeredwith theNationalHouse-BuildingCouncil, the architectwillnotusuallybeaskedtogiveacertificate,becausetheguaranteesof theCouncilareusuallyacceptabletothebuildingsociety.

If, during or at the end of a project, the employer asks the architect to provide acertificate of satisfaction (sometimes referred to as a ‘Professional Consultant’sCertificate’),andif,inthetermsofengagement,thearchitecthasnotagreedtogivesuchacertificate,thereisnoobligationtogiveone.Manyarchitectsandtheirclientswillarguethatiftheyhavebeenengagedforafullservicebytheirclients,theyshouldbepreparedtogivethecertificateat theend,because todootherwise is tantamount tosayingthat theyhave no confidence in the work they have done. To take that point of view is tomisunderstandthepurposeandimplicationsofgivingsuchcertificates.Ifanarchitecthasbeen negligent in performing the services, the client can quite easily take legal actionunderthetermsoftheconditionsofengagement.Whethersuchactiontakestheformofarbitration or legal proceedings through the courts depends on the terms of theengagement. The fact remains that the client has a perfectly adequate remedy for anydefaultonthepartofthearchitectandaseparateremedyunderthebuildingcontractforanydefectsinconstruction.

Whydoes thebuilding societywant a certificate before itwill lend anymoney?Thebuildingsocietyhasanagreementwiththearchitect’sclient,butithasnoagreementwiththearchitect.Bycompletingthecertificate,thearchitectiscertifyingnotonlythathisorherownworkhasbeenperformedproperlybutalso that thecontractor’sworkhasbeencarriedoutcorrectlyinaccordancewiththebuildingcontract.Iftheclientcannotkeepupthemortgagepayments,andifdefectsinthebuildingmeanthat it isworthlessthantheamountborrowed,thebuildingsocietycanproceedagainstthearchitectfortheshortfall.

The giving of such certificates is very dangerous for the architect, who is therebyexposedtoanincreaseinthenumberofpeoplewhocouldsuccessfullybringanactionfordamages,anditalsosignificantlyincreasestheliabilityasnotedabove.Architectsgivingsuchcertificatesknow,orwillbepresumedtoknow,thatthecertificateswillbeusednotonly for the purposes of obtaining funding but also for selling the property to futurepurchasers or leasing to tenants, who can rely on the certificates in lieu of a buildingsurvey.Thisreliancegoestotheveryheartofthearchitect’sliability.Abuildingsocietyora futurepurchaser cannotbringanaction against the architect in contract, because theyhavenocontractwiththearchitect.However,theycanbringanactionagainstthearchitectin tort on the basis of the certificates. Without the certificates, an action against thearchitectintortfornegligencewouldbeverydifficulttosustain.

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The basis for the action is an old case calledHedley Byrne & Co Ltd v Heller &Partners.16Putverysimply,ifaprofessionalpersongivesadvicetoapersonorclassofpersonknowing that theadvicewillbe reliedon,and if thepersonreceiving theadvicedoesrelyuponitandasaresultsuffersloss,theprofessionalwillbeliableforsuchloss.Inarecentcase,17tenantsleasedflatsinablockofflats.Architectswereemployedbythedeveloper for the purpose of inspecting thework and certifying that each flat hadbeenproperlyconstructedingeneralcompliancewiththedrawings.Whendefectssubsequentlyappearedinthebuilding,thetenantssuedthedeveloperandthearchitects.Thecourtheldthatthearchitectscouldbeliableintwoways:

Intortfornegligentmisstatement.

Incontract.

However, the decision was overturned by the Court of Appeal which held that thecertificates(inallbuttwocases)hadbeenissuedbythearchitectsafterthepurchasershadagreedtopurchase.Therefore,thepurchasershadnotreliedonthearchitects’certificateswhendecidingtopurchase,becausethecertificatesdidnotthenexist.Moreover,therewasnocontractualrelationshipbetweenthearchitectsandthepurchasersandthecertificatesdidnotamounttowarranties.

Architectsshouldrefuse togivesuchcertificates ifnot legallyobliged todoso. Ifanarchitectdoesagreetogivesuchacertificate,asubstantialadditionalfeeisindicated.

62Isthecliententitledtoallthefilesbelongingtoconstructionprofessionalsoncompletionoftheproject?In theory, it depends on whether the professional is acting as principal by providingprofessionalservicestoaclientorwhethertheprofessionalisactingasagentforaclient.Inpractice thesesituationssometimesgetmixedup.Forexample,architectsoftenmakeplanning applications or building regulation submissions as agents for their clients.Surveyorsmay attendmeetings on behalf of clients ormay be instructed by clients tonegotiateboundariesandthelike.

However,architectsarenotactingasagentswhentheygiveadviceonthesuitabilityofbuilding sites or when they design buildings, administer contracts or act as expertwitnesses. Quantity surveyors act as principals, not agents, when they prepare bills ofquantitiesorgivecostadvice.

If professionals are acting as principals in providing a service to their clients, suchclientsareentitledtowhattheyhavecontractedtoreceive,butnomore.Forexample,aquantitysurveyorwhohasagreedtoprovidebillsofquantitiesorspecificationsisobligedtoprovidesuchbillsandspecifications,butnotanyoftheroughcalculationsorworkingsthatprecededthem.Anarchitectmustprovidedesignsandworkingdrawings,butnottherough sketches and notes. If a client sends original documents such as leases orconveyances,theyobviouslyremaintheclient’sproperty.Iftheyarecopies,itdependsoncircumstanceswhethertheymustbereturned.

If professionals are acting as agents, their clients are entitled to all the documentscreated by the professionals or received by them from third parties in the course ofdischargingtheirduties.18Forexample,ifanarchitectsubmitsanapplicationforplanningpermission, the client is entitled to the submission together with the approvals oncereceived.

A professional is entitled to retain all the client’s letters, copies of the professional’sownletterstotheclientandallinternalmemorandaofthepractice.19Itismorelikelythatpapersbelongtotheclientwhenaprofessionalisactingasagentandmorelikelythattheybelongtotheprofessionalwhenthatprofessionalisprovidingaservice.

Obviously, the parties to a contract can expressly agree to vary those general terms.Indeed,manytermsofengagementthathavebeenespeciallydraftedforthebenefitoftheclienthaveclausesthatmodifythepositioninfavouroftheclient.Somearemodifiedtosuchanextent that theclientmaycall forany information requiredwhetherornot it isstrictlypartoftheprofessional’sownfile.

63Isthecliententitledtothearchitect’sdrawingsinelectronicformat?A client is only entitled to drawings in electronic format if the architect’s terms ofengagementgivethatentitlement.Itisbecomingcommonforclientstoaskarchitectstosupply their drawings in electronic format. Architects are understandably reluctant tocomplybecauseoftheeasewithwhichanelectronicdrawingcanbemanipulated.Ithasbeenknownforanarchitect’sdrawingstobesignificantlyalteredevenwhileretainingthearchitect’s logo. Questions can then arise as to whether the architect is responsible forpartsof thedrawingwhichmaybedefective.Onceacopyof theelectronicversionhasbeen given by the architect it can be difficult, in the absence of detailed forensicinvestigation,toshowwhatwascontainedintheoriginalversion.Anarchitectmayshowwhatpurportstobehisorheroriginaldrawing,butthereisnothingtosaythatitwasnotchangedafterthearchitectwasinformedofthedefectiveelement.

Ifthearchitectisengagedtocarryoutafullservice,thereshouldbenoproblem.Theclientshouldnotrequireelectronicformat,becausethedrawingswillonlyserveasrecorddrawings of the work that has been done. The problem comes if the architect is onlyengaged to perform services up to tender stage. The client will then often ask forelectronic copies to use during construction.Unless the architect has already agreed toprovidethem,therequestshouldberefused.Itisbetterfortheclienttobesuppliedwithalargenumberofpapercopiesthanwiththeelectronicversions,whichcouldbeamended,thearchitect’slogoremovedandthedrawingsusedtoseekplanningpermissionandbuildonanothersite.

64Whencanjobfilesbedestroyed?Thisquestioncropsupagainandagain.Beforethedaysofcomputer-aideddesignitwasaparticular worry of architects, who often had huge stocks of crumbling tracing paper,paperprintsandslightlymoredurablelinenorplasticfilm.

Thebasicanswertothequestionisthatitisimpossibletobesurethatanyparticularfilewillnotbe required in the future.On thatbasis,no files shouldeverbedestroyed. It isrecognisedthatsucharesponseisnotreallyhelpfulforaprofessional,oranyoneelseforthatmatter,whowouldliketoreducethenumberoffilesontheshelforinstorage.Theproblemisbestaddressedasaprocessofelimination.

The normal absolute minimum period for retaining any files is seven years. That isbecause six years is the time limit for limitation of action where a simple contract isconcerned,andallowancemustbemadeforthefactthataClaimForm(whichusedtobecalled aWrit) canbe held for somemonths before serving. It is also the time limit forholdingontorecordsforcompanyandInlandRevenuepurposes.Therefore,iffilesaretobe destroyed before seven years has expired, theremust be a good, positive reason fordoing so. There are some obvious examples. It may be that the files relate to a smallkitchen extension job which has itself been demolished to make way for a largerextension.

Clearly,ifamatterisalreadyinlitigationorarbitration,onnoaccountmustanyfilesbedestroyed.Indeed,apersonhasadutytopreserveallsuchrelevantfilesanddisclosethemtotheotherpartyifrequired.

It isalso important tounderstandfromwhenthesevenyearsruns. Itusuallyrunsnotfrom the date atwhich the documentswere generated, but from the last datewhen theprofessionalhadanydealingswiththatproject.Inthiscontext,itshouldberememberedthat the periodmay be restarted or interrupted if the client, however informally, seeksadditionaladvice.20Thatdoesnotmeanthatassoonasthesevenyearshasexpiredit issafetodumpthefiles;certainlynot.Forexample,manycontractsareexecutedasdeeds,andthelimitationperiodis12years(say13yearsforsafety).UndertheLatentDamageAct 1986, which amended the Limitation Act 1980, the long stop period for action innegligencewasfixedat15years.Thatmayseemanexceptionallylongperiodoftime,buteventhatperiodmaybeextendedifitdoesnotbegintorununtilcertainothercriteriaaresatisfied.Forexample, itmaybedependentonan indemnity.Fortunately,actions in thetortofnegligenceagainstprofessionalsarenotparticularlyeasytomount.

In addition, it is always important to examine very carefully the original terms ofengagement for a particular project. If theywere drafted by the client’s solicitors, theymay have extended the limitation period under the contract. This is done by craftywordingmoreoftenthanmayberealised.

Generally, it is inadvisable to dispose of any agreements, letters of intent or legaldocumentssuchasleases.Thesafestthingistokeepthemforever.

No documents should be destroyed unless the professional’s professional indemnityinsurers are happy; perhaps it is going too far to say that theymust be happy, but theymustnotraiseanyobjection.

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Some firms have a specificwritten policy about destroying documents. It can soundimpressivewhena request for adocument ismetwith the response that ‘it is companypolicytoshredalldocumentssixyearsaftertheirgeneration’.However,thecompanywillbetheloserifadocumentthatcouldbeimportantindefendingthecompanyagainstlegalaction has been destroyed. It is no defence at all to quote company policy in thesecircumstances.Theotherpartywillnotsimplygoaway.

Thequestioncanbeansweredonlyonaproject-by-projectbasisbyrunningthroughachecklistofcriteria,including

whetheritismorethansevenyearssincetherehavebeenanydealings;

whetheradeedisinvolvedthatwouldextendtheperiodto13years;

whetheritislikelythatanyclaiminnegligencecouldbebroughtthatwouldextendtheperiodtoatleast15years;

whetherallfeeshavebeenpaid;

whether there is anything about which the professional has always had a nastyfeeling;and

whethertheprofessionalindemnityinsurershaveraisedanyobjections.

If the files pass all these tests, the professionalmust try to think if there are any otherreasonsforkeepingthefiles.Ifthereare,theymustbekept.

Finally, the method of disposal must be carefully considered. Some people favourofferingthefilestotheclient.Thismaybeperfectlysatisfactoryifthefilesarecleanandcontainonlymaterialthattheclienthasalreadyseen.However,ifthefilescontainletterscoveredinscribblednotesandcommentsorifthefileshavedocumentsthattheclienthasnotpreviouslyseen,itisbestnottogodownthisavenue.

Theonlywaytogetridoffilesproperlyistophysicallydestroythembyburning(notveryeco-friendly)orbyshredding.Therearemanyfirmsthatspecialiseinsuchwork,butit is essential that the firm is reliable and known. Files cannot simply be taken to thenearest wastepaper collection centre, because they inevitably contain confidentialinformationconcerningtheprofessionalortheclient.Newsreportsoccasionallyhighlightinstances where personal records of one kind or another are found blowing about thestreets.Thefalloutofsuchinstancessofarastheprofessionalisconcernedisdisastrous.

65Isanarchitectliableforthespecificationofaproductwhichisdefective?Under a traditional contract, the architect is liable for designing the Works and thecontractor is responsible for providing the goods and materials and constructing theWorks.Specifyingispartofthedesignprocess.Initsbroadestsenseanarchitectcanbesaidtobespecifyingwhenproducingdrawingsshowingwhatistobeconstructedandtheconstituentelements.Specificationnotesmaybeinsertedondrawings.Therefore,thereislittledoubtthatspecificationasawholeissomethingforwhichthearchitectisliable.Ifsomethingisspecifiedwhichisdefective,thereisasimplequestiontobeasked:Didthearchitect specify something which was inherently defective, or something which wasentirelysuitablebutofwhichadefectiveexamplewassuppliedtosite?

Clearly, in the second instance, the architect has no liability for the specification.Having specified somethingappropriate, adefective examplewas suppliedandmustbereplaced at the contractor’s own cost. If the architect specifies something which isinherentlydefective, thekindof thingwhichwouldneverbe suitable, a further enquirywouldbenecessarytodiscoverwhetherthearchitecthadusedreasonableskillandcareinthespecification.If theprobleminvolvedthespecificationofaspecialisedproductforaparticularapplication in thebuilding, thearchitectwouldbeexpected tocarefullycheckallthetechnicalinformationwithassistancefromotherconsultants,makeenquiriesofthemanufacturersabouttheproduct’ssuitabilityfortheapplication,andinvestigateinstanceswhere it hadbeenusedpreviously in similar applications. If after theuseof reasonableskillandcaretheproductwasfoundtobedefective,itisunlikelythatthearchitectwouldbe liable. Redress might be obtained against the manufacturer, depending oncircumstancesand,importantly,whetherthemanufacturerhadconfirmedthesuitabilityoftheproducttothearchitectinwriting.Wherethefailureisinthespecificationratherthanthe product, the architect will usually be liable, perhaps because the specification wasinsufficientlydetailed.21Itoftenhappensthatanarchitectwillspecifybyreferencetoanapprovedsample.Whatisthepositionif thesampleitself issubsequentlyfoundtohavethesamecharacteristicsasthesuppliedproductswhichbecomedefective?Byspecifyingthe product to be the same as the sample, has the architect specified negligently? Thisquestion was considered in Adcock’s Trustees v Bridge RDC, where the engineer hadapprovedbricksamplesforuseininspectionchambers.22Inthatcase,thebrickssuppliedwereequal to the sampleapprovedand thecontractorwasnot at fault, even though thebricks specified and approved were not adequate for the wet conditions actuallyencountered.However,thecourtmadeclearthatitwasthe‘apparent’samplewithwhichthesuppliedbrickshadtoconform.Ifthesamplehadhadconcealedcracks,thecontractorwouldnot have compliedby supplyingbrickswith concealed crackswhich later failed.Brickswithoutcracksshouldhavebeensupplied.

66Anarchitecthasbeenappointedforworkonwhichanotherarchitecthasbeenengaged;isthereaproblem?Therearetwomajorproblemswhicharisewhenanarchitectisengagedonaprojectfromwhichapreviousarchitecthasbeendismissedorresigned.Oneconcernstheprofessionalobligationnot toseektosupplantanotherarchitect.Theotherconcernscopyright inanymaterialproducedbythepreviousarchitect.

TheRIBACodeofProfessionalConductdoesnotexpresslyrefertotakingoverfromaprevious architect, but information is contained in the excellent Guidance Notes,particularly notes 4 and 7. In essence, an architectmust not actively seek to take on acommissiononwhichanotherarchitecthasbeenappointed.However,ifapproachedbyaclient to take on a commission, an architect should try to establish whether anotherarchitectwaspreviouslyengaged.Iftherewasapreviousarchitect,thenewarchitectmustwritetotheformerarchitect,givingformalnotificationofappointment.Itmaybethattheprevious architect is unhappy because of the circumstances in which his or herappointment has been terminated. Perhaps there are fees owing, or the client may betakingsomekindoflegalaction.Onreceiptofnotificationthatanewarchitectistakingthecommission,aformerarchitectwilloftenwrite,statingthatthenewarchitectshouldnottakethecommissionandsettingoutalitanyofproblemswiththeclient.Noneofthisshouldconcernthenewarchitectunduly.Havingnotifiedthepreviousarchitect,thenewarchitect can simply get onwith the job.Obviously, somethingwritten by the previousarchitectmaycausethenewarchitecttothinkcarefullyaboutproceeding,butthereisnorequirementtorefusetoworkuntilthepreviousarchitecthasbeenpaidinfull.Itisnopartofthearchitect’sdutytopassjudgmentonwhetherpaymenthasbeenwithheldrightlyorwrongly;thatisamatterforthecourts.Ideally,thepreviousengagementshouldhavebeenamicablybroughttoanendandallfeesduepaidinfull,butlifeisrarelylikethat.

Copyright tends to be themost serious issue. If the new architect will be using anymaterial produced by the former architect, it is important that the client has a licenceallowing such use.The terms of engagement of the previous architect shouldmake thecopyrightpositionclear,butdisputesoverunpaidfeesmaymuddythesituation.Copyrightissues are notoriously complex, and the architect is not expected to be an intellectualproperty lawyer.Therefore, if there is the slightestdoubt, thearchitect shouldobtainanindemnityfromtheclient.Thisisadocument,possiblyinletterform,inwhichtheclientpromises to indemnify thearchitect against any liability, claims, etc. in connectionwithinfringementofcopyright.Itisnotsomethingtobescribbledhastilybytheclientinordertogettheprojectunderway.Thelettershouldbespeciallydraftedbyalawyerexperiencedin this field. Ifsatisfied that there isanexisting licencewhichallows theclientandanyinstructed professional to use and change copyright material or having received asatisfactoryindemnityfromtheclient,thenewarchitectcanproceedwiththeproject.

67Beingaskedtousereasonableendeavourssoundslessonerousthanbestendeavours;isthatcorrect?Thatiscorrect.Anobligationtousebestendeavourshasbeendefinedasadutytoleaveno stone unturned and to take all reasonable courses of action. It is not an absoluteobligation to ensure that somethinghappens, and its interpretationprobablydependsonthe particular circumstances.23 Thus an obligation in SBC clause 2.28.6.1 that thecontractor will constantly use best endeavours to prevent delay does not amount to aguaranteethattherewillbenodelay.Ifthatwasthecase,therewouldbenoneedforanextensionoftimeclause.Incontrast,ithasbeenheldthatanobligationtousereasonableendeavoursonlyrequiresapartytotakeonereasonablecourseofactioneventhoughtheremaybeseveraldifferentcoursesavailable.24Itshouldfollowthatifapartyisaskedtouse‘allreasonableendeavours’,itisthesameasbeingaskedtousebestendeavoursbecauseboth require that all the available reasonable courses of action are taken. However, arecentcasesuggeststhatallreasonableendeavoursmightbemarginallylessonerousthanbest endeavours, although the court was in some difficulty precisely defining thedifference.x25 It is suggested thatwhile best endeavours and reasonable endeavours arecapableofacceptabledefinition,theuseofallreasonableendeavoursshouldbeavoided.

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68Anarchitect’stermsofappointmentoftenrequire‘co-ordinating’,‘liaising’and‘monitoring’.Theseseemlikewoollyterms;whatdotheyimply?Theyarequitewoolly terms,which iswhy theyareundesirable ina legaldocument.Acynicmightsaythattheyareoftenusedpreciselybecausetheyaresomewhatwoolly;theideabeing thataclientwhorequiresanarchitect toco-ordinate, liaisewithandmonitorotherconsultantscanusethetermstomakethearchitectresponsibleforanyshortcomingsof the consultants. Whatever the truth may be behind the inclusion of such terms inappointmentdocuments,architectsshouldnotsimplysignsuchappointmentsbutshouldseektohavethemclarified.Eachpartytoacontractisentitledtoknowexactlywhattheyareundertaking.

Architects who are in the position of having signed an appointment which includesthesetermswithoutclarificationarelefttodeterminetheirordinaryEnglishmeanings:

To co-ordinate is defined as to arrange the elements of a complex whole or tonegotiateortoworkwithothers.

Toliaiseisdefinedastoestablishaco-operativelinkorrelationship.

Tomonitorisdefinedastokeepwatchover,torecordandtestortocontrol.

It is suggested that architects agreeing to carry out these duties in respect of otherconsultantsmightwellbeexpected,atoneextreme,tooverseeotherconsultantsonaday-to-daybasisandtocheckandcontroleverythingtheydo.Thiswouldgivethearchitectsinquestionanunreasonableamountofresponsibilityfortheservicesofconsultantsoperatingin disciplines of which the average architect may have but slight or merely generalknowledge.Fewclientswouldactuallyexpect thatdegreeofcontrolby their architects,andfewconsultantswouldbehappywith thesituationeven if therewereanyarchitectscapableofexercisingsuchclosesupervision.

A great danger with woolly terms such as these is that the architect will think theysimply refer to the kind of relationship between architect, as lead consultant, and otherconsultants that thearchitecthascome,byexperience, tobelieve isnormal.Consultantswillhaveasimilarview,buttheprecisedetailsofsucharelationshipwillprobablyvaryfrom the architect’s experience (unless they frequentlywork together),while the client,whomaybebuildingforthefirsttime,mayhaveacompletelydifferentideabasedonthedefinitionsnotedabove.Thequestions,ofcourse,donotariseunlessproblemsappearonsite.

69Architectsareoftencalledupontospecifythekeystaffwhowilldealwithaparticularproject.Towhatextentmaythearchitectchangesuchstaff?Ithasbecomecommonincontractsspeciallydraftedforclientsbytheirsolicitorsforthereto be a clause requiring the architect to specify the person who will be the projectarchitect,andsometimestospecifyallthesupportstaffaswell.Theextenttowhichsuchstaffmaybechangeddependsonwhatthecontractsays.Mostsuchclauseswillsaythatnamedstaffcannotbechangedwithouttheexpresspermissionoftheclientexceptinthecaseof illness,death,or thememberofstaff leavingthefirm.Inthosecasesandinanyothercasewherereplacementisallowed,theidentityofthereplacementmustbeapprovedby the client.On the one hand, this amounts to an unacceptable degree of control of aprofessional firm by its client. After all, a professional practice should be capable ofselectingappropriatestaff;ifnot,thepracticeshouldnothavebeenengagedatall.Ontheother hand, a client understandably does not want to spendmany hours discussing thebriefandthedevelopingdesignanditsconstructiononsitewithonearchitectwithwhomhe or she has developed a rapport, only to find that architect replaced by a differentarchitectwithoutwarning.

Therefore, the short answer to the question is to look at what the contract says, butgenerally thestaffmaynotbechangedwithoutagoodreason.Totell theclient that theparticular architect is needed for another (the unspoken words are ‘more important’)projectisnotlikelytobeconsideredagoodreason.

InFitzroyRobinsonvMentmoreTowersLtd,26theChiefExecutivefficer(CEO)ofthearchitects represented to the client that a particular director who was well liked andregardedby theclientwouldbe involved throughout theduration (about threeyears)oftheprojectasteamleader.Infact, theCEOknewbeforetheengagementwasconcludedthatthedirectorconcernedhadresignedandwouldbeavailablefornomorethanoneyear.Evenafterthecontractwassigned,theCEOwaitedforseveralmonthsbeforeinformingtheclientofthetrueposition.Itwasclearthatthedirectorwasthemainreasonwhythearchitects were awarded the contracts; the judge remarked that they were the mostexpensiveofthearchitectswhotenderedfortheproject.Thecourtheldthatthestatementmadetotheclientregardingthedirectorwasafraudulentmisrepresentation.However,inthecircumstancesofthecase,itdidnotleadtoanysignificantloss.

Itisnotunusualforaclienttobeattractedtoapracticebecauseofaparticulararchitect,and the practice should be quite clear in its dealings with the client if that particulararchitectmaynotbeavailable.

70Arethereanydangersforthearchitectiftheclientwantsfulldrawingsbutintendstodealdirectlywithacontractortogettheprojectbuilt?Itisbynomeansrareforanarchitecttobeaskedtocarryoutafullserviceforaclientbutfor theclient todecide toproceedwithout thearchitect for theconstructionstageof theproject. Sometimes a client will engage an architect only for the production ofconstruction drawings and the obtaining of all necessary statutory permissions. Oneassumesthattheclientismotivatedbyadesiretosavethecostsofprofessionalfeesforcontract administration. Clients may sometimes try to get the architect to agree to beavailabletovisitsiteorsimplyanswerquestionsoverthetelephoneasandwhenrequiredbytheclientorbythecontractor.Architectsarenaturallyconcernedabouttheirliabilities,forexampleifthereareanydefectsinthedrawingswhichnoonenoticesuntiltheprojectiscomplete.Isitnotthecasethattheclienthaspaidforasetofdrawingswhichshouldbeperfectandthatanyerrorsondrawingsleadingtodefectiveconstructionareentirelythearchitect’sresponsibility?

Liketheanswerstomostgeneralquestions,theanswertothisoneisthatitalldependson theparticular circumstances.Agood ruleof thumb for architects is that they shouldeitheracceptcommissionsforafullserviceorforapartialservice,butneverunderanycircumstances for amixture of the two.Where an architect carries out a full service inconnectionwithatraditionalcontract,itisclearthatthearchitectisliableforanyfailureinthedesignoranynegligentadvicegivenduringtheprogressoftheWorks.

Wherethearchitectisactingascontractadministratorandregularlyinspectingtheworkasitprogresses,itislikelythatanydiscrepanciesorerrorsinthedrawingswillbepickedup and corrected as the work progresses. If not discovered until after construction hastaken place, the architect may be liable for the consequences, after taking account ofwhether the contractor had a duty towarn of the error in the particular circumstances.Some discrepancies are virtually inevitable in any set of drawings of any complexity.Althoughthearchitecthasadutytoprovidecorrectinformationtothecontractor,minorerrorsaresomethingwhicharegenerallyrecognisedanddealtwithinpracticeastheworkproceeds.

If the architect is employedonlyup to tender stage andat the client’s request ceaseswork at that point and takes no further part in the project, neither visiting the site noransweringquestionsoverthetelephone,itislikelythatthearchitectwillhavenoliabilityfortheconsequencesoferrorsonthedrawingswhichleadtodefectsinconstruction.Thatis because the client has ceased to rely on the architect after tender stage, relying fromthen onwards on the expertise of the contractor.27 Whether and to what extent thecontractormaybeliableforfailuretodiscoveranddealwithdefectsonthedrawingswilldependontheextenttowhichthecontractorisawareandacceptsthatitisrelieduponbytheclient.Thedangerforthearchitectliesinbecominginvolvedintheprojectduringtheconstructionstage. If thearchitectagrees toansweranyquestionsor tovisitsite todealwithanyproblem,itwillbedifficult tocontendata laterdatethat thearchitectwasnotaware of any other problems on the site. Although the architect may have terms of

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engagementwhichexcludeany involvementduringconstruction, thatarchitectprobablywill be assuming responsibility by accepting a subsequent invitation to visit site or tobecomeinvolvedbygivingfurtheradvice.

Asaprofessionalperson,itisforthearchitecttoadvisetheclientaboutthedegreeofprofessionalinspectionandinvolvementrequired.Itisnotforthearchitecttodictatesuchmatters. The client’s option is to accept the services which the architect advises arenecessary or not to accept them. Would a firm of solicitors agree to produce all thedocumentsrequiredforatrialandsubsequentlyonlyattendcourtasandwhentheclientdecided(leavingasidethatthecourtruleswouldnotallowit)?Wouldasurgeonperformaserious operation and then agree to see the patient for follow-up consultations inaccordancewith thepatient’swishes?Oneonlyhas to thinkofcomparablesituations inotherprofessionstoseethattoexpectthearchitecttoattendsiteonlyasrequiredbytheemployerorthecontractorisnonsensical.

BLHoldingsvRobertJWoodandPartners(1979)12BLR1.

(2013)148ConLR127.

MurphyvBrentwoodDistrictCouncil(1990)50BLR1.

HedleyByrne&CovHeller&PartnersLtd[1963]2AllER575.

(1987)13ConLR68.

(1988)44BLR33.

SmithvEricSBush[1989]2AllER514.

(1986)6ConLR85.

[1976]1AllER785.

[1975]3AllER901.

(1979)11BLR1;partlyreversedbytheCourtofAppeal,butnotonthispoint(1980)13BLR7CA.

HendersonvMerrittSyndicates[1995]2AC145,(1994)69BLR26;WhitevJones[1995]1AllER691;ConwayvCrowKelsey&Partner(1994)39ConLR1;JJarvis&SonsLtdvCastleWharfDevelopments&Others[2001]1Lloyd’sRep308.

WestvIanFinlay&Associates(2014)153ConLR1CA.

Co-operativeRetailServicesLtdvTaylorYoungPartnershipLtd[2002]1AllER(Comm)918.

WestvIanFinlay&Associates[2013]EWHC868(TCC).

[1963]2AllER575.

Hunt&OthersvOptima(Cambridge)Ltd&Others(2013)148ConLR27;(2014)155ConLR29CA.

FormicaLtdvECGD[1995]1Lloyd’sRep692.

InreWheatcroft(1877)6Ch97.

KaliszewskavJohnClague&Partners(1984)5ConLR62.

RotherhamMetropolitanBoroughCouncilvFrankHaslamMilanandCoLtd(1996)59ConLR33.

(1911)75JP241.

MidlandLandReclamationLtd&AnothervWarrenEnergyLtd(1997)EWHC375(TCC).

RhodiaInternationalHoldingsLtd&AnothervHuntsmanInternationalLLC[2007]EWHC292.

Jet2.comLtdvBlackpoolAirportLtd(2012)142ConLR1.

(2009)125ConLR171.

BrunswickConstructionLtdvNowlan(1975)21BLR27.

Chapter9

Fees

71Canthearchitectholdontothesignedcontractdocumentsiftheemployerhasfailedtopayfeesowing?Lienistherighttoholdpropertyuntilsomeobligationhasbeendischarged.Itisusuallyencountered in connectionwith debt. If I takemy car into the garage for a repair, thegarageownerhas the right tokeepholdofmycaruntil Ipay thecostof the repair.Anarchitecthastherighttokeepdrawingspreparedforaclientuntiltheclienthaspaidthearchitect’sfeesowing.

Lienfallsundervarioustypes.Theexamplesabovefallunderthecategoryofspecialorparticular lien,and theyare themostcommonlyencountered.There isalsogeneral lien,possessorylien,equitablelienandcontractuallien.Ingeneralterms,ifanemployerowesfeestoanarchitect,thearchitectisentitledtoretainpossessionofgoodsanddocumentswhich belong to the employer until the fees are paid. The signed contract documentsundoubtedly(asbetweentheemployerandthearchitect)belongto theemployer,butanarchitectowedfeesbytheemployercouldretainthecontractdocumentsuntilpaid.Iftheemployerurgentlyneeds thedocumentsbut isnotprepared topay thearchitect fees forsomereason, theCivilProcedureRulesallowtheclaimant to retrieve thedocumentsonpayment into court of the amount claimed by the architect, that sum to await thedeterminationofthearchitect’sclaim.1

72Isthearchitectentitledtochargeanewclientfullfeesforadesignwhichthearchitecthasalreadypreparedforadifferentclientandforwhichfeeshavebeenpaid?Thecopyrightpositionwhereanarchitecthasprepareddrawingsforasiteandtheclientsells the site is dealt with in question 86. This is a somewhat different question. Itenvisages an architect completing drawings for a client on a particular site and beingaskedtosellthedrawingtoadifferentclientwithadifferentsite.Thereisnodoubtthatthearchitectretainscopyrightandnodoubtthatthenewclienthasnorighttoalicencetousethedrawings.

Ifthearchitectdoessellonthedrawingsandthenewclientconstructsabuildingfromthem, it is likely that the original clientwill not be pleased at having another house ofexactlythesamedesigninthearea.Unlesstheoriginalclientcontractedonthebasisthatanexclusive licence tobuild thehousewouldbeprovided, there isnothing tobedone.However,anarchitectwhograntsanexclusivelicencecannot(asthenameimplies)grantanotherlicencetoanotherpersonforthesamedesign.

Therefore,providedthatthearchitecthasnotpreviouslygrantedanexclusivelicencetoconstructahousefromthedrawings,thearchitectcancertainlysellthedrawingsagaintoanother client. In practice, the architect will have to carry out some changes to thedrawings.Thetitleblocksmustbechangedtorefertothenewclientandsite.Itislikelythatvariousminorchangeswillbenecessarytoensurethat thebuildingsitsproperlyonthenewsite.Moreover,anewsiteplanandprobablyfoundationplansmustbeprepared.Thearchitectisentitledtochargefullfeesforthesedrawings.Thefactisthatthearchitectisentitledtochargewhatevertheclientispreparedtopay.Likeanyothertransaction,thefee will be determined not by reference to whether the drawings are copies of earlierdrawings,butbywhethertheclientwillpaythefee.

73Canthearchitectclaimextrafeesforlookingatclaims?ThisquestionusuallyariseswhenthearchitecthasbeenengagedonthebasisoftheRIBAStandardorConciseConditionsofAppointments for anArchitect 2010 (2012 revision)whicharesomewhatsimilarinterms.Inordertoarriveattheanswertothisquestion,itisnecessarytolookatthetermsoftheengagement.Aclientwillusuallyarguethatdealingwith contractors’ claims is part of the architect’s normal contract administration duties.However, if the architect is being remunerated on a percentage basis (as is usual), theclientwillalsoarguethatthereisnoincentiveforthearchitecttoreduceaclaimmadebythe contractor, because the architect’s percentage payment will increase as the claimincreases. Such an argument says little for the client’s opinion of the architect’sprofessional integrity,and it isasourceofwonder thataclientwillemployanarchitectwhilehavingsuchreservations.TheRIBAStandardConditionslaythatparticularconcernto rest; under ‘Definitions’ it clearly states that theConstructionCost does not include‘anylossand/orexpensepaymentspaidtoacontractor’.AsimilartermwouldbeimpliedintheRIBAConciseConditions.

For a fully designed project where the architect’s services include administering thebuilding contract, the RIBA Standard Conditions include ‘ascertaining or instructingascertainment of loss and expense due to the contractor’. The Special Services sectionincludes theoptionof‘Assistance to theContractAdministratordealingwithextensionsof time and contractor’s claims’. Where the architect is already acting as contractadministrator, this service is not additional. Therefore, it seems clear that the architectmust include for ascertainment of claims, even though, if a percentage fee is beingcharged,theamountoflossand/orexpenseisnotpartoftheconstructioncostonwhichitis based.The architect’s only remedy appears to be to instruct the quantity surveyor toascertainwhatboth theRIBAtermsand thebuildingcontractpermit,which isprobablythenorm.Hopefully,thequantitysurveyorcanchargeextrafeesforascertainment.

Thecontractadministratorrolesaysnothingabouttheextremelytime-consumingtaskofforminganopinionpriortocarryingouttheascertainmentofmoneydue.Itmightbearguedthatit isimpliedthatthearchitectmustcarryoutthistaskaspartofthecontractadministrator’srolebecauseitissomethingwhichhastobedone.Ofcourseitonlyhastobe done if the contractor submits a claim. One can only imply a term like this into acontractifitisobviousandifitdoesnotflyinthefaceofatermalreadyincluded.Clause5.9 already allows the architect to claim additional fees ‘for reasons beyond theArchitect’s reasonable control’ and for which the Architect ‘would not otherwise beremunerated’. It is clear that the contractor’s claims for loss and/or expense and thenotification of delays requiring extension of time are matters beyond the architect’scontrol. It is also clear that the architect would not be reimbursed in any other way.Therefore, there is no room to imply a term which would conflict with clause 5.9. Insummary, itappears thatunder theRIBAStandardConditions,anarchitect isentitledtoclaimadditional fees for services in connectionwithextensionsof timeand forminganopinion about whether regular progress is likely to be affected by one of the relevantmatterscausinglossand/orexpense,butnotfortheactualascertainmentoftheresultant

payment to the contractor. This is an awkward conclusion dependent on the reading ofvariouspartsoftheappointmentdocuments.ItwouldbeusefulfortheRIBAtolookintoamendingthistomakewhatisintendedmuchclearer.Ideally,thearchitectshouldbeabletoclaimadditionalfeesforadditionalworktheextentofwhichcannotbeforeseen.

The Concise Conditions are simpler, as the name suggests. Although a number ofactivitiesarestatedasbeingincludedinthecontractadministrator’sduties,dealingwiththecontractor’sclaimsisnotoneofthem.Dealingwithcontractor’sclaimsisoneoftheadditional services thatmust be specifically added to the small project services, whichcomeswiththeConciseConditions.Clause5.5permitsthearchitecttochargeadditionalfeesifthearchitect‘isinvolvedinextraworkorincursextraexpenseforreasonsbeyondthe Architect’s reasonable control’ because performance of the Services is delayed,disruptedorprolonged;‘extrawork’mustincludedealingwithcontractor’sclaims.Itistobenotedthatthephrase‘contractor’sclaims’isbroadenoughtocoverextensionsoftimeandadditionalpreliminariesinrelationtovariationsaswellaslossand/orexpense.UndertheConciseConditions,thearchitectcanclaimforcarryingoutascertainment.

Architects claiming additional fees arewell advised to notify the client as soon as itbecomes clear that extra fees will be involved, and detailed timesheets should be keptsettingoutexactlywhatthearchitectdoesinrelationtotheclaim.Thetimesheetsofmanyarchitectsaretotallyinadequateasarecordofwhatwasactuallydone.

74Ifthearchitectchargesadditionalfeesforworkwhichhastobedoneasaresultofthecontractor’sbreachofsomeobligation,cantheemployerrecoversuchfeesfromthecontractor?Therearetwoimportantpointstoconsider.Thefirstisthatifthecontractorisinbreachofanobligationunderthecontract,thegenerallawallowstheemployertorecoverdamagesforthebreach.Themeasureofsuchdamagesisthattheemployerisentitledtobeputbackinto the position he or she would have been in, so far as money can do that, if thecontractorhadproperlyperformeditsobligations.2Thesecondpointisthat,underRIBAappointment documents, the architect is entitled to claim additional fees if engaged inadditionalworkduetomattersbeyondthearchitect’scontrol.

Therefore,ifitcanbeestablishedthatthecontractorisinbreachofcontractandifthebreach is the direct cause of additional work being required from the architect, thearchitect’sfeesassociatedwiththeadditionalworkwouldbethedamagesufferedbytheemployerasa resultof thebreach.Therefore, it follows that theemployer isentitled torecovertheamountofsuchfeesfromthecontractor.Theeasiestwayfortheemployertodothatistoissueapaylessnoticefortheamountanddeductitfrompaymentduetothecontractorunderacertificate.Ifnofurtherinterimcertificatesaredue,theemployermayeither issue the pay less notice for the final certificate and deduct the amount from thefinalpaymentortakelegalactiontorecoverdamagesforbreachofcontract.Adjudicationmay be the simplest route, but more complex matters might better be dealt with inarbitrationorlitigationaspermittedunderthetermsofthecontract.

An overriding consideration is whether the building contract contains machinery fordealingwiththebreachinquestion.Ifso,itisthatmachinerywhichwilltakeprecedenceoverthecommonlawposition.Forexample,ifthecontractorisinbreachofitsobligationtocompletetheWorksbythecompletiondateinthecontract,itisabreachofcontractforwhichtheemployerisentitledtodamages.However,undermoststandardformbuildingcontracts there is provision for liquidated damages in such circumstances, which willdetermine what remedy is available to the employer. All the costs resulting from latecompletion,includingadditionalprofessionalfees,aredeemedtobeincluded.Therefore,the employerwould not be able tomake a separate claim for architect’s fees. There isdetailed provision in most building contracts for remedies if the contractor fails toconstructtheWorksinaccordancewiththecontract.Normally,itisthoseremedieswhichwillapply.Sometimes,clausesaremadesubject toanyother rightsandremediesof theparties.SBCclause8.3.1isanexample.Inthatcase, thepartiesarenotrestrictedtotheremedies set out in the contract and may seek common law remedies instead or inaddition.Obviously,theemployercannotrecovertwiceforthesamebreach.

Less clear is the situationwhere the architect is entitled to chargeadditional feesbutmaynotbecertainthatthecontractorisinbreach.Forexample,it isnotunknownforacontractor to notify the architect that practical completion has been achieved, but thearchitect finds on inspection that this is not the case. Sometimes such notifications and

abortive inspections occur several times. It is perhaps open to debate whether thecontractor’snotificationgivingincorrectinformationisabreachofcontract.Onbalance,itis possibly in breach of an implied term that the contractor should co-operatewith theemployer to execute the Works. If the preliminaries to the bills of quantities or thespecification expressly require the contractor to notify the architect when practicalcompletion has been achieved, a failure to do so properly – that is to say, notifyingprematurely–iscertainlyabreach.Whatofcontractorswhosubmitapplicationsforlossand/orexpenseunderclause4.23ofSBCthataretwiceorthreetimestheamounttowhichtheyareentitled?Thereisprobablyavalidcasetobemadethatacontractorwhosubmitsa grossly inflated claim and thereby involves the architect in substantial expenditure oftimeandresourcesindealingwithitisinbreachofitsobligationunderclause4.23.Theargumentwouldprobablybethatthecontractorisentitledtosubmitanapplicationforlossand/orexpenseaspermittedunder thecontract,butplainly it isnot entitled to submit aclaim for loss and/or expensewhich is in excessofwhat is allowedunder the contract.Indeed,acontractorthatmakesaclaimformoneywhichisdemonstrablywrongmayhaveseriousquestionstoanswerrelatedtoattemptingtoobtainmoneybydeception.

75Canthearchitectclaimanextrafeeifanothercontractorisengagedaftertermination?The important question is whether the termination has taken place as a result of somedefault on the part of the architect. If not, the engagement of another contractor tocomplete the Works following termination is certainly additional work beyond thearchitect’s control and, therefore, the subject of additional fees. The calculation of theadditionalfeeswillrequiresomecare.TakethesituationwheretheterminationhastakenplaceandtheWorksareonlyabout50percentcomplete.Thearchitectwillbeinvolvedinorganisingtendersforcompletion,andasurveyofthecompletedworkmaybenecessary.Itispossiblethatanewspecificationmustbedraftedandtherewillbealotofoldgroundto cover again with the new contractor. However, it is not sufficient for the architectsimply to log all the time expended from the notice of termination until practicalcompletionunderthenewcontract,becausethearchitectwouldhavebeeninvolvedinthefinal 50 per cent of the Works in any event; that cannot be entirely additional work,althoughtheremaybesomeaspectswhichareadditional.

Wheretherehasbeenadefaultonthepartofthearchitectwhichhasledtoterminationby the contractor, the architect, if not already dismissed by the employer, would beextremely unwise to attempt to charge for additional fees related to completion withanothercontractor.Iftheemployercanshowthattheterminationisadirectresultofthearchitect’s default, thatwould found an action for damages against the architect for alllossessufferedbytheemployerasaresultofthetermination.Evenifthearchitecthadthenervetosubmitafeeaccountfortheadditionalwork,theamountclaimedwouldsimplyrankasdamagesforwhichtheemployercouldclaimfromthearchitect.RIBAStandardAgreement2010(2012revision)clause5.9isexpresslystatednottoapplywherethereisabreachof theagreementby thearchitect.Obviously,anynegligentactof thearchitectwhich resulted in the contractor successfully terminating its employment would be abreachof thearchitect’sobligationunder theagreement tousereasonableskillandcare(clause 2.1). However, examination of the grounds for contractor termination in SBC(clauses8.9and8.11)suggeststhatsuchterminationasaresultofthearchitect’sdefaultwillberelativelyrare.

76Thearchitectagreedafeeof5percentofthetotalconstructioncost.Thecontractsumwas£325,000,butitisnowonly£185,000atfinalaccountstage.Isthearchitectobligedtoreturnsomefees?Manyquantitysurveyorsworkon thebasis that if they informtheclient throughout thecontractthatthefinalaccountislikelytobe£x,butattheendoftheprojecttheyareabletotelltheclientthatthefinalaccountfigureisactually£xminus£20,000,theclientwillbesurprisedandgratefulandconsidertheprojectahugesuccess.Thereisagreatdangerinthisapproach,whichisthattheclientisanythingbutgratefulandconsidersthatifithadnot been for the incompetent reporting of the projected final account throughout theprogressoftheWorks,theclientwouldhaveknownthattherewasmoneytosparewhichcould have been readily spent on upgrading an important part of the building. Theapproachsmacksofthesurgeoninformingthepatientthatdeathhasbeenavoidedwhenthepatientactuallywouldliketobemadewell.

Forarchitects,thiskindoflastminuterevelationcanbecatastrophic.Thatisbecauseitiscommonforarchitectstobasetheirpercentagefeeinstalmentsonthelatestvaluationorfinalaccountforecastbythequantitysurveyor.Ifthequantitysurveyorquitesuddenlyattheendoftheprojectvaluesthefinalaccountatsomethingsubstantiallylessthanforecast,thearchitectisleftwiththeprospectofhavingtoreimbursesomefees.

Inthisquestion,thearchitectisentitledto5percentof£185,000.However,thereisabigquestiontobeaskedabouthowthecontractsumdroppedsomarkedly.Ifitwasasaresultof theclient requestingsavings, thearchitect isofcourseentitled,certainlyundertheRIBAAgreements, to recover thecostof redrawingor re-specifying,probablyatanhourlyrate.WhereRIBAAgreementshavenotbeenused,thepositionwilldependontheagreementbetweenarchitectandclient,butinmostinstancesthearchitectshouldbeableto charge for the extrawork provided due notice is given to the client before the extraworkisundertaken.Ifthequantitysurveyorproperlyforecastthedownwardtrendinthefinalaccountassavingsweremade,thearchitectoughttohavebeenawareofthelikelyoutcomeandmadeprovisionaccordingly.Ofcourse,ifthequantitysurveyormaintainedahigh forecast until the lastminute, such a precipitous dropmay amount to professionalnegligence on the part of the uantity surveyor. However, unless the architect wasemployinghequantitysurveyordirectly,itwillbedifficulttofoundaclaimintheabsenceofacontract.

The answer to the question ofwhat the architect can recover in fees depends on thetermsofengagement.Ifthetermssay5percentofthetotalconstructioncost,thatiswhatthearchitectcancharge.Ifthearchitecthasinadvertentlychargedmore,theremustbeareimbursement. If the architect has done extrawork there can be an additional charge,usuallyonatimebasis.Therearemanypitfallsinclaimingfees,oftenbecausethepartieshave not looked far enough ahead or thought of all the possibilities before signing acontract.3

Manyarchitectsthinkthatbasingapercentagefeeonthelowestacceptabletenderwillsavethedayiftheclientdecidesnottoproceedattenderstage.Sucharchitectscommonlyconfusethelowestacceptabletenderwiththelowesttender.Iftheclientdoesnotconsideranytenderisacceptable,thearchitectmayhaveadifficulttaskinarrivingatafigureonwhichtobasethepercentagefee.

77Canthearchitectrecoverinterestonunpaidinvoicesiftheclientcanshowthattheyareincorrect?Before1998,therewasnoautomaticinterestondebts.Inordertodecidewhetherinterestwaspayable,onehadtolookatthecontractprovisionsorwhetherornotinterestcouldbeclaimed as special damages. All that changed in 1998 when the Late Payment ofCommercialDebts(Interest)Act1998startedtocomeintoforce.Itwasnotfullyinforceuntil 2002, because the kinds of organisations who could claim under the Act wereprogressivelyincreasedbetween1998and2002.Thecurrentpositionisthatifaninvoicefromonecommercialorganisationtoanotherbecomesoverdue,interestisclaimablefromthedateitbecameoverdueattherateof8percentovertheBankofEnglandBaseRatecalculated for sixmonthly periods from 30 June or 31December. That is quite a highinterestrateeveniftheBaseRateislow.Inaddition,thepartyclaiminginterestcanalsoclaimalumpsumpaymentforeachunpaidinvoice,rangingfrom£40to£100dependingonthesizeoftheinvoice.TheActmaynotapplyifthecontractprovidesforasubstantialremedy.Nointerestorlumpsumatallcanbeclaimedifitcanbeshownthatthemoneyclaimedontheinvoiceisnotactuallydue.

The answer to the question is to be found in a case heard in 2009.4 A plant hirecompanyhadsubmittedinvoices,whichweredisputed,forcleansinganddecontaminationworkinconnectionwithanoutbreakofswinefeverandfootandmouthdisease.Infact,manyoftheinvoiceswerefoundtobewronginthatinvariouswaystheywereclaimingtoomuch.TheSecretaryofStatearguedthattheLatePaymentActdidnotapplyuntilhewas in possession of completely accurate invoices and they had become overdue. ThematterwenttotheCourtofAppeal.

Inajudgmentwhichisofinteresttoallconstructionprofessionalsandotherswhoareseekingpaymentindifficultcircumstances,theCourtdrewattentiontosection4(5)oftheActwhichstatesthatthe‘relevantday’(thelastdateforpayment)iscalculatedfromthedateonwhichtheobligationisperformedforwhichthedebtarisesorthedateonwhichthepurchaserhasnoticeoftheamountofthedebt‘orthesumwhichthesupplierclaimsisthe amount of the debt’, whichever date is later. The Court held that section 4(5)anticipatedthatthesuppliermaytakeaprovisionalviewoftheamountdue,whichwouldbe subject to review, but that did not prevent interest from accruing on whatever waseventuallyfoundtobethecorrectamount.Importantly, theCourtheldthattheAct,asamatter of policy, did not require an invoice to be perfect. If it did, a purchaser wouldsimplyhavetofindthesmallesterrorinordertoavoidpayinginterest.Itwasnotedthattheinvoiceshadbeenaccompaniedbysupportinginformationsuchastimesheets,whichmadeitpossiblefortheSecretaryofStatetocalculatetheactualamountdueandtopayit.

Itisasadfactthatmanypeopleandorganisationsmakenoattempttopayinvoicesuntilunder threatof legalproceedings,andat thatpoint theyrevealsomeerror inan invoicehopingtocausethecreditortohavetostartagainandre-submitanotherinvoice.Thiscaseshowsthatdelayingpaymentonthatgroundwillnotworkandthatinterestontheamountproperlyduewillstillaccrueandbepayable.TheAct’spurposewastoencourageprompt

payment.Latepaymentisthebiggestevil intheconstructionindustry.Ifallpartiespaiddebts within seven days, cash flow problems would be largely eradicated. It is theunavailability of money to pay debts which causes businesses to fail, even though onpapertheymaybeinsubstantialprofit.Allparties,constructionprofessionals,contractors,sub-contractorsandsuppliersshouldnothesitatetogetcopiesoftheActandapplyitassoonasinvoicesbecomeoverdue.Averyusefulwebsiteiswww.payontime.co.uk.

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78Canthearchitectwhoisowedfeesalsorecoverthecostofmanagementtimechasingpayment?Gettingpaid isaproblem in theconstruction industry. It isquitecommonforarchitectsandotherstosendreminderafterreminderandevenhavetoconvenemeetingsinordertoget paid.Evenbefore such a dispute gets to court, the architect often incurs substantialcosts chasing payment. The Late Payment of Commercial Debts (Interest) Act 1998providesforone-offlumpsumpaymentsinadditiontointeresttoassisttowardsthecostsinvolved,but inmost cases thepayment (amaximumof£100 for invoices inexcessof£10,000) is nowhere near the actual cost.Many architects simplywrite off small debtsbecauseitisnotworththecostofchasingthem.

Whetherthecostofchasinginvoicescanbeclaimedhasbeenaddressedbythecourts.InClancy Consulting Ltd v Derwent Holdings Ltd; Anglo International Holdings Ltd;Mardown Ltd; Cashtal Properties Ltd; Mount Murray Country Club Ltd; CashtalDevelopmentsLtd,5 thedefendantswereseparatecompanieswhichwerecontrolledbyacommontrust. Iwill refer to themcollectivelyas‘Derwent’. InstructionsweregivenbyDerwent’sagent,KingsleyFeredayManagementLtd(KFM).Clancyprovidedmechanicalandengineeringservicesandwastoberemuneratedinaccordancewithvariouscontracts.AmonthlycertificationprocesswasinvolvedinwhichKFMdidthecertifying.ItwassaidthatthepaymenttermsofthecontractswerethatClancywouldberemuneratedfromtimetotimeonanhourlyratebasis,beingtheratesinforceatClancy,unlessanduntilafurtherlumpsumfeewasagreedwithKFM,andthatClancyshouldinvoicefortheirowncostsonatimechargebasisuntilaformalfeeagreementhadbeenenteredintoinrelationtotheschemeasawhole.Clancyclaimedthreeamounts:

£329,525plusVATinrespectofsumscertifiedbyKFMbutnotpaidbyDerwent;

£68,565plusVATinrespectofsumsnotcertifiedbyKFMandnotpaidbyDerwent;

£37,242inrespectofmanagementfeesasdamagesincurredinchasingpayment.

The defence served by Derwent was categorised by the court as being unsatisfactory,consistingofbaredenials.ThecourtheldthatClancywasentitledtobepaidtheamountcertified. There was no basis for any defence. So far as the uncertified amount wasconcerned,Derwenthadnotobjectedatanytimeorinanydocumenttothehoursclaimed.Theyhadneversaid that theywereexcessive,and theycouldnotsubsequentlyargue tothe contrary. Likewise, they had never complained about the rates, nor had they putforward an alternative rate or said why Clancy’s rates were unreasonable. Therefore,Clancywasentitled topaymentof theuncertified sumalso.Derwent tried toargue thatClancycouldnotbepaidwithoutacertificate,butthecourtpointedoutthattheissueofacertificatebyKFMwasnotsaidtobebindingontheparties.

Thatlefttheclaimformanagementtimeinclaimingpayment.Thecourtdescribeditasa‘fairlymodestamount’.Derwenthadnotmadeanypositivedefencetotheclaim,sothebest it could do was to make Clancy prove the amount. The court gave some usefulguidancetoclaimingthesekindsofcosts:

Claims of this sort… are not always easy to establish. They require two things,

1

2

3

4

5

aboveall: first, they requireapropercausal linkbetween thecost incurredand theallegeddefaultonthepartofthedefendant;and,secondly,theyrequireproofoftheextenttowhichtheordinarytradingroutineoftheclaimantwasdisturbed.

Becausethecasewasanapplicationforsummaryjudgment,thecourtdeclinedtoawardthesecosts,butitdescribedthedefenceas‘unpromising’andrequiredthesumclaimedtobe paid into court as a condition of allowingDerwent to defend. The court seemed toaccept theclaiminprinciplebutallowedDerwent toargueas to theamount.Oneneverknowswhichpaymentsaregoing tobeapain tocollect,but theguidancegiven in thiscaseindicatesthatifoneiscontemplatinglegalactionforrecovery,agoodrecordofthetimespenttryingtogetpaymentintheperiodbeforethelegalactionstartsisessential.

CPRRule25.1(1)(m).

RobinsonvHarman(1848)1Ex850.

PickardFinlasonPartnershipLtdvLock&Another[2014]EWHC25(TCC).

RuttlePlantHireLtdvSecretaryofStateforEnvironment,FoodandRuralAffairs[2009]EWCACiv97.

[2010]EWHC762(TCC).

Chapter10

Design

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79Canthearchitectescapeliabilityfordefectivedesignbydelegatingittoasub-contractor?In general, the answer to this question is ‘No’. However, the precise terms of thearchitect’sengagementbyaclientwillobviouslyhavesomebearing.Itispossiblethatanarchitectcanhaveexclusionsofliabilityfordesignwrittenintothetermsofengagementwithacommercialclient,butnotethatsuchtermswillbeeffectiveonlyiftheysatisfythetestofreasonablenessintheUnfairContractTermsAct1977.IfthearchitecthasenteredintoanengagementwithaclientononeoftheRIBAAgreementsoronasimpleexchangeofletters,thatarchitectwillhaveoverallresponsibilityfordesignoftheproject.Theonlywayinwhichthearchitectcanavoidthatliabilityisiftheclientspecificallysoagrees.

InMoreskCleanersLtdvThomasHenwoodHicks,1 theclientwasadrycleaningandlaundry company. It engaged the architect to prepare plans and specifications for theextensionofitslaundry.Unknowntotheclient,thearchitecthaddelegatedthedesignofpart of the building to specialist sub-contractors. Subsequently, cracks appeared in thestructurethatwerefoundtobedesigndefects.Itwasheldthatthearchitecthadnopowertodelegatedutiestootherswithoutthepermissionoftheclient.

Inamorerecentcase,anengineerreliedonaspecialistsub-contractortodesignvibroreplacement,butsubstantialsettlementoccurred.2Thecourtheldthattheengineerwasnotnegligent for relyingon the adviceof the specialist, and it set out someprinciples.Thecourt referred to ‘construction professionals’, and the principles are applicable toarchitects:

Construction professionals do not by themere act of obtaining advice or a designfromanotherpartytherebydivestthemselvesoftheirdutiesinrespectofthatadviceordesign.

Constructionprofessionalscandischargetheirdutytotakereasonablecarebyrelyingontheadviceordesignofaspecialistprovidedthattheyactreasonablyindoingso.

In determining whether construction professionals act reasonably in seeking theassistanceofspecialiststodischargetheirdutytotheclient,thecourthastoconsiderallthecircumstanceswhichinclude:

whethertheassistanceistakenfromanappropriatespecialist;

whether it was reasonable to seek assistance from other professionals, research orotherassociationsorothersources;

whether there was information which should have led the professional to give awarning;

whetherandtowhatextent theclientmighthavearemedyinrespectof theadvicefromtheotherspecialist;

whether theconstructionprofessionalshouldhaveadvised theclient toseekadviceelsewhere or should themselves have taken professional advice under a separate

retainer.TheRIBAAgreementscontainimportantprovisionsthatallowthearchitecttoadviseonthe need to appoint consultants to carry out specialist design. In such instances, thearchitect is clearly not liable for any defects in the consultants’ designs. This point isemphasised in theRIBAStandardAgreement 2010 (2012 revision), inwhich the clientundertakes thatwhere a person is appointed to perform specialist services, the architectwillnotberesponsibleforsuchservices.Thisisamostimportantprovisionthatprotectsthe architect, and a forerunner of this clause has been upheld by the courts for thearchitect’sbenefit.

Obviously, if the architect fails to advise a client on the appointment of specialistdesigners, the client will be entitled to assume that the architect will retain designresponsibilityinthoseareas.Itisnotsufficientthatthespecificationorbillsofquantitiesrefer to design by specialist consultants or sub-contractors, nor even that the contractversions incorporatingcontractordesignedportionsareused(suchas in ICDorMWD).The architect will be responsible to the client for all design unless the client has beenexpresslyinformedotherwiseandhasconsented.Clearlythisisbestdoneinwriting.Anarchitectwhodoesadvisethetransferofdesignresponsibilitytoothershasacleardutytoensurethatappropriatecontractsandwarrantiesareputinplacetoprotecttheclientintheeventthattherearedefectsinthetransferreddesigns.Failuretoputsuchmattersintrainmaywellamounttoseriousprofessionalnegligenceonthepartofthearchitect.

80Ifthearchitectcompletesthedesignbutisaskedtomakechanges,isthatsimply‘designdevelopment’?The term‘designdevelopment’ is frequentlyusedbyclientswhen theydonotwant thearchitecttochargeformakingalterationstothedesign.Itmustbeclearlyunderstoodthatitisnotatermwhosemeaningisgenerallyacceptedasatermofart,andifitcamebeforea court, the courtwould try to give it its ordinary everydaymeaning.Most dictionariesdefine‘development’asa‘fullerworkingout’ora‘moreelaborateform’.That,ofcourse,isnotachange.

In this context it is useful to examine the design process. In essence, it is fairlystraightforward. It is the client’s duty to clearly tell the architectwhat is required. Thearchitecthasanimportantroleinteasingouttheinformationandinseparatingthe‘needs’from the ‘wants’, but eventually there should be a reasonably comprehensive set ofrequirements(the‘brief’). It is thearchitect’s tasktosatisfy thebriefwith thedesign.Ifthe design, viewed objectively, can be said to satisfy the brief, the architect’s task iscompletedfor thatstage. It isoften thecase thatafterhavingseen thebriefsetoutasadesign,theclientwillrealisethatsomeoftherequirementsinthebriefweremisguidedorunnecessary,but thatdoesnotdetract fromthefact that thearchitecthascompleted thatstage.

In practice, most architects will amend the design without charge, sometimes quiteextensively,tosatisfytheclient’schangesofmind.Itisthiswillingnesswhichisprobablyresponsibleforthegeneralviewthatitisthearchitect’stasktokeepchangingthedesignuntil the client is satisfied with it. One wonders what the reaction of a painter anddecorator would be if a client, having requested a room painted in dark green, had achangeofmindonseeingtheresultandexpectedthepaintertoredecorateinbeigeatnoextracost;then,dissatisfiedwiththebeige,decidedonlightblueandsoon.Althoughtheanalogyisnotperfect,itissomewhatsimilartowhatarchitectsarecommonlyexpectedtodo.Oncethearchitecthassatisfiedtheclient’sbrief,allfuturechangesshouldbesubjectto a charge. What can be described as ‘design development’ occurs when the initialdesigns,commonlyreferredtoassketchdesigns,satisfythebriefandtheclientdoesnotwantanychanges.Thearchitectthendevelopsthedesignbyputtinginmoredetail(stillinaccordancewiththeclient’sbrief).

In thisway, thedesigndevelopsbybeingextendedandclothed indetails, eventuallybecoming a set of construction drawings. That is the normal process of designdevelopmentforwhichthearchitectchargesafeeagreedbeforetheservicescommence.Architectsareentitled tochargeadditional fees forchanges to thedesignresultingfromchangestothebrief.Thatisnot‘designdevelopment’;itissimply‘change’.

81Isthecontractorliableforsomethingdoneonitsowninitiative?Itissurprisinghowoftenthisquestionarises,typicallywhenacontractor,workingunderaJCT traditionalcontract,knowsbroadlywhat is requiredbutdoesnothavedrawingsorspecificationwhichshowthedetailprecisely.Thecontractor thinks itknowswhat todoandcarriesonwiththeworktoitsowndetail.Subsequently,thedetailfailswithseriousconsequences.Itmightbeabadlyconstructedroofdetail,aninadequatestanchionbaseorperhapswronglypositionedheatingpipes.Who is liable?UnderSBC, ICandMW, thecontractor has no liability for design. Even where ICD and MWD are used, thecontractor’s liability for design is confined to those items clearly listed in the contractparticulars.Underatraditionalcontract,thearchitectdesignsandthecontractorconstructsinaccordancewiththedesigns.

Providedthatthecontractorconstructsexactlyasdrawnorspecified,itislikelytohavelittleliabilityfortheresultunlessthedefectissoobviousthatthecontractorshouldhavewarned the employer of the potential danger. However, the position changes if thecontractor is not provided with sufficient information to enable it to construct theparticular detail. In such situations, it is for the contractor to ask the architect for themissinginformation.Inpractice,acontractormayfinditselfinasituationwhereitiskeentomakeprogress,butthereisnodetail.Ifitpausesuntilthedetailhasbeenrequestedandeventually provided, there may be a delay of which the contractor has to notify thearchitectandhopeforanextensionoftimewhichisbynomeanscertain.Ifthecontractor,thinkingitknowswhatisrequired,pressesonwiththework,itplacesitselfinadifficultsituation.

There are twoproblems for the contractor. First, the architect, on seeing the solutionwhichthecontractorhasadopted,mayinstructthecontractorthatitisnotinaccordancewith thecontractandmustbe removed.Thatwouldbestrictlycorrect:Thecontractor’sworkisnotinaccordancewiththecontract,becausethecontractdocumentsdonotshowwhatthecontractorhasdone;infacttheyshownothingregardingthedetail inquestion.Second,evenif thearchitectdoesnotnoticewhathasbeendone, theremaybeadefectthatcausesaproblem–intheworstcase,perhapsacollapse.Thecontractorcannotblamethe architect, because the architect has not designed the detailwhich has been built. Insuch circumstances, it is likely that the contractor has assumed responsibility for thedesign.3 Therefore, the contractor will probably be liable for the consequences of thedefectivedesignprovidedthattheywerewithinthecontemplationofthepartiesatthedatethe contract was executed as likely to occur. There are probably many such instanceswhere thecontractorunthinkinglyassumesdesign responsibility,butwhere therearenountoward consequences because the contractor has produced a satisfactory solution.However,theauthorrecentlyheardofacontractorwhichbecameresponsibleforanentiredefective heating system in a building. The contractor had been providedwith only anoutlineconceptdrawingshowingpipeworkandequipmentindiagrammaticfashionandanoutline specificationwhich required thecontractor to complete thewholeof thedesign.Insteadof informingthearchitect that ithadnodesignresponsibilityunder thecontract,thecontractorproceededtodesignthewholesystem,includingallpiperuns,andspecified

equipment where not otherwise stated. The system was defective, and the cost ofrectificationwasclaimedfromthecontractor.

82Ifthecontractoristo‘completethedesign’,doesthatmeanthattheexistingdesigncanbeassumedtobecorrect?Theanswertothatquestionisthatitalldependsonthetypeofcontractbeingused.UndertheWCD98contract,thecontractorwasrequiredtocompletethedesignoftheWorks.Itusedtobethoughtthatthecontractorwasnotbeinggivenresponsibilityforthedesignasa whole, but merely responsibility to complete what was, presumably, left incomplete.That seems the sensible view. However, that view changed with the judgment inCo-operativeInsuranceSocietyLtdvHenryBootScotlandLtd.4Althoughthiscaseconcernedthe JCT 80 form of contract as amended by the Contractor’s Designed Portion (CDP)Supplement,theCDPhadmanysimilaritiestothedesignandbuildcontract,importantlyincludinganobligationthatthecontractormust‘completethedesignfortheContractor’sDesignedPortion’.Someotherclauseswerealmostidenticaltotheequivalentclausesinthedesignandbuildcontract.Thecourttookaveryclearapproach:

In my judgment the… process of completing the design must, it seems to me,involve examining the design at the point at which responsibility is taken over,assessing the assumptions uponwhich it is based and forming an opinionwhetherthoseassumptionsareappropriate.Ultimately,inmyview,someonewhoundertakes,ontermssuchasthoseoftheContract…anobligationtocompleteadesignbegunbysomeoneelseagreesthattheresult,howevermuchofthedesignworkwasdonebefore the process of completion commenced, will have been prepared withreasonableskillandcare.Theconceptof‘completion’,ofadesignofnecessity,inmyjudgment, involves theneed tounderstand theprinciplesunderlying theworkdonethusfarandtoformaviewastoitssufficiency.

This judgmentmakesclear that thecontractor’sobligation tocomplete thedesignundertheCDPsupplementextendstoanobligationtocheckthedesignwhichhasalreadybeenpreparedtomakesurethatitworks.Thecontractorcannotsimplyassumethatinformationalreadyprovided,includingdesigninformation,iscorrect.Becauseofthesimilarwording,itappearsthatthejudgmentalsoappliestoWCD98.Indeed,itisprobablynotgoingtoofar to say thatwherever a contract calls upon the contractor to complete the design, itsobligationextendstocheckingtheoriginaldesignbeforeproceeding.

When drafting the later design and build form, DB, the JCT took account of thisjudgment. A new clause, 2.11, was included, which provides that the contractor is notresponsiblefortheEmployer’sRequirementsnorforverifyingtheadequacyofanydesigncontained in them. It seems to follow that if the employer has caused thewhole of thedesign to be prepared by an independent architect and includedwithin the Employer’sRequirements, there will be no design to complete and the contractor will have noobligationinthisregard.Attheotherendofthescale,ifthereisnodesignincludedintheEmployer’sRequirements,thecontractorwillberesponsibleforallthedesign.UnderDB,if the contractor is handed a partly finished design, it appears that the contractor’sobligationwillsimplybetocompletethedesignwithoutcarryingoutanychecks,unlessofcoursethereareobviousproblemswiththeoriginaldesign.Thiseffectivelyreinstates

thepositionasmostpeoplesawituntiltheCo-operativeInsurancecase.

83Ifthearchitect’sdesignisfaulty,butthecontractorbuildsitbadly,whoisliable?This is the kind of questionwhich crops up time and again, usuallywhen an architectinstructs a contractor to rectify defective work and the contractor argues that it is thedesign which is faulty. The contractor may argue that it matters not at all that itconstructedtheworkbadly,becausefaultydesignwouldinevitablyresultinfailure.

ThiswasconsideredinSinclair&AnothervWoodsofWinchester(No.2).5Thiswasanappeal from theawardofanarbitrator,and thecourtdecided that thearbitrator’sawardwas not to be overturned on this point, because among other things the arbitrator wasobviously right. In this case, the design was the responsibility of a nominated sub-contractor,buttheprincipleisthesameasifithadbeenanarchitect’sdesign.

Thisquestionhastobeansweredbydecidingwhatistheunderlyingoroperativecauseofthedefect?Inthiscase,thearbitratorfoundthattheoperativecausewasthedesignandthattheerrorsattributabletothecontractorsimplycompoundedthespeedofthefailures.Theanswertothequestioncanonlybediscoveredbyalogicalanalysisofthefacts,andthereforenoall-embracingformulacanbeapplied.It is tentativelysuggestedthatif it isestablished that bothdesign andworkmanship aredefective, thenext question to ask iswhethergoodworkmanshipwouldhavemadeanydifference. Ifnot, it is likely that theliabilitywillfallentirelyonthedesigner.However,ifthedefectiveworkmanshipcausedthedefecttoappearearlierortobegreaterinextentthanwouldhavebeenthecase,theliabilitymaybe shared.Plainly, theremaybe instanceswhere the effectsof a less thanidealdesignwouldbeentirelyamelioratedbygoodworkmanship,and,insuchacase,thecauseofthedefectmightwellbeheldtobethepoorworkmanship.

84Doesthearchitecthaveadutytocontinuecheckingthedesignafterthebuildingiscomplete?A problem that frequently arises is the architect’s duty to review the design. In otherwords,thearchitect’sdutytocheckwhetherthedesignis,infact,sufficient.Istheresuchaduty?Andifthereis,whendoesitend?Ifproblemsariseafterthearchitecthasfinishedanyinvolvementwiththebuilding,mustthearchitectreturnattherequestoftheclienttocheckthedesign?

ThesequestionswereconsideredbythecourtinthecaseofNewIslingtonandHackneyHousingAssociationLtdvPollardThomasandEdwardsLtd.6Essentially,whatthejudgewastryingtodowasdecidewhetherthelimitationperiodhadexpired,withtheresultthatthearchitectswereprotectedagainstanactionforbreachofcontractand/ornegligence.Inthisinstance,thejudgedidindeedfindinfavourofthearchitects.

Indecidingwhether thearchitect isunderacontinuingduty to review thedesign, thestartingpointhastobethetermsofengagement.Inthiscase,thetermsweremuchwhatonemightexpect,including‘completingdetaileddesign’andthevariouspartsofstageH:tenderactiontocompletion.StageHincludedpreparingthecontract,issuingcertificates,performingotheradministrativetasksandacceptingthebuildingfortheclient.Thetermsdidnotexpresslyincludeadutytokeepthedesignunderreview,stilllessthedutytokeepthedesignunderreviewafterpracticalcompletion.

ThebuildingcontractwasIFC84,andthejudgewasparticularlyimpressedbythefactthatalthoughthecontractallowedthearchitecttoissueinstructionsrequiringvariationsupto practical completion, the contract did not allow the issue of such instructions afterpracticalcompletion(thesameprincipleappliestothecurrenttraditionalJCTcontracts).So,although thearchitectcouldhavealtered thedesignbeforepracticalcompletion, thearchitectwasunabletodosoafterwards.

The judgewent further.He said that if the client asked the architect to investigate apotentialdesigndefectafterpracticalcompletion,thearchitectwasentitledtorefuseortoagreeonlyiftheclientwaspreparedtopayafeebecausesuchworkwasnotpartoftheoriginaltermsofengagement.Inanyevent,evenifthearchitecthadadutytoreviewthedesignafterpracticalcompletion,itwouldariseonlyifsomethinghappenedthatgavethearchitectreasontothinkthatareasonablycompetentarchitectoughttoreviewthedesign.

85Whoownscopyright–clientorarchitect?Thestraightanswertothisquestionisthatcopyrightinanarchitect’sdesignisownedby(‘vestedin’isthelegalphrase)thearchitectwhoproducedthedesign.Clientssometimesclaimcopyrightiftheyfalloutwiththeirarchitectsandaredisinclinedtopaytheproperfee.CopyrightisgovernedbytheCopyright,DesignsandPatentsAct1988asamended,andthereisalsoasubstantialamountofcaselawonthetopic.Itisquitecomplex,andaswith all the other questions in this book, specific problems require specific answers.Therefore,allthatcanbedonehereistosetoutafewgeneralprinciples.

Itisimportanttounderstandthatcopyrightdoesnotsubsistinideas,butonlyinthewayinwhichthe ideasarepresented.Clientsoftenthinkthat theyare justasresponsibleforthefinisheddesignasthearchitectconcerned.Inawaythatistrue.Architectsandclientsusuallyworktogetherverycloselytoproducethebriefandthentocreatethebuildingthatsolves the problem posed by the brief. Some clients have very clear ideas about theirrequirements,butitisthearchitectwhointerpretstheseideasintheformofadesign.Ifaclientwasabletosustainaclaimtocopyrightinadesign,itwouldhavetobeshownthattheclient tookpart in the transformingof the ideas intodrawings,whetherviadrawingboardorCADmachine,orgavepreciseinstructionsastowhatwastobeincludedinthedesign.7Intherarecaseofaclientbeingableaccuratelytodrawadesignthatsatisfiedthebriefand topass it to thearchitectso thatall thatneeded tobedonewas todrawitoutneatly,orbeingabletoprovidesuchclearinstructionsthatthearchitectbecame,ineffect,a draftsman, itmight be that the client had a share in the copyrightwith the architect.However,thatwillbeaveryrarecircumstance.

Eveniftheclientgivesthearchitectadetaileddrawingofwhatisrequired,thearchitectwill usually have to change it considerably in order to make it work in practice. It isdifficult to show that onedesignhasbeen copied fromanother,which iswhy there arerelativelysofewsuccessfulcasesaboutinfringementofcopyright.Usuallytherehavetobesomesignificantfeaturesonbothdesigns.

Inthemajorityofinstances,thearchitectretainscopyrightinthedesignsandtheclienthasa licence to reproduce thedesign in theformofabuilding.Sometimes the termsofappointmentexpresslysetthisout,asintheRIBA-producedformsofappointment.Eveniftheappointmentdocumentdoesnotmentioncopyright,itwillbeimpliedthattheclienthasalicencetoreproducethedesignifasubstantialfeehasbeenpaid.Asaruleofthumb,itisusuallyassumedthatthelicencewillbeimpliediftheclienthaspaidforallworkuptoRIBAstageD(nowapproximatelyRIBA2013stage3).Ifthefeepaidisonlynominal,nosuchlicencewillbeimplied.Forexample,aclientwillnotnormallyhavealicencetoreproduce a design in the form of a building if the architect has been paid only forpreparingaplanningapplication.

86Ifadesignerhasbeenpaidforproducingfulldrawingsforadevelopmentandtheclientsellsthesite,canthenewownerusethedrawingstobuildonthesite?Thisisaquestionofcopyright,andparticularlyaquestionofcopyrightlicence.Copyrightlegislation is enshrined in the Copyright, Designs and Patents Act 1988 as amended.Copyrightmattersareapttoberathercomplex,andprovingcopyrightinfringementisnotstraightforward.Thereislittledoubtthatifadesignerhasbeenpaidinfullforproducingacompletesetofproductiondrawings, theclientwillhaveanimpliedlicencetousesuchdrawingstoconstruct thebuildingonthatsite.Thetermsofengagementusedmayvarythatposition,ofcourse,butcertainlytheprovisionsoftheSFA/99,CE/99,SW/99andtheRIBAAgreements2010(2012revision)expresslyprovidethattheclienthasalicencetoreproducethedesignintheformofabuildingwhenfullfeesoralicencefeehavebeenpaid.Themorecomplexquestionistheoneposedhere,whenthesitehasbeensoldtoanewowner.

InBlair v Osborne & Tomkins (a firm) & Another,8 an architect designed a pair ofhousesandthesiteownerssubsequentlysoldthesitetoothers.Thebuyerscommissionedotherarchitectstodevelopthedesign,anditwasbuiltonthesite.Anactionforbreachofcopyrightfailed.Theoriginalarchitectwasclaimingthattheclientdidnothavealicencetousethedrawingstobuildthehouseswhenthearchitect’sappointmentwasterminated,even thoughhewaspaid in full to thatstage.TheCourtofAppealappear tohavebeengreatly influenced by the existence of a clause allowing either party to terminate onreasonablenotice.Theyconsideredthatifthearchitectwascorrect,itallowedhimtoholdtheclienttoransom.Perhapsmoretothepoint,theyalsoheldthatthelicencewhichwasimpliedinthatcaseextendedtothepurchaserofthesite.Itisnotentirelyclearfromthejudgmentwhy theydid this.However, theyweredeciding theextentof the licence,andtheyimpliedalicenceforallpurposesconnectedwiththeerectionofthehouses.Itshouldbenoted thatSalmonLJquestioned the extent of the licence impliedby this court in asubsequentcase(Stovin-BradfordvVolpointPropertiesLtd&Another9).If a licence is expressly stated, as in the RIBA Standard Agreement 2010 (2012

revision) for example, there should be no doubt about what it covers. In the StandardAgreement,theclientissaidtohave‘alicencetocopyandusedrawings,documentsandallothersuchworkproducedbyoronbehalfoftheArchitectinperformingtheServices’.Therefore,thelicenceappliestotheclientandtotheclientonly.Thegeneralruleisthatalicence cannot be assigned without permission; neither can rights under a licence betransferredwithoutpermission.Therefore,theclientcannottransferthislicencetoathirdpartywithoutthedesigner’spermission.Butwheretermsofengagementsimplysaythatthelicencewillbegrantedtoonstructthedesignonthesite,itappearsthatthislicencecanbeinterpretedtocoveranypersonwhoisthesuccessorintitletotheproperty.TheCourtofAppealintheBlaircaseappeartohavetakentheviewthatwherenothingisexpresslystated, the licence is to be given a wide interpretation. However, if the terms ofengagement state that neither party will assign or transfer any of the benefits or

obligations of the appointment without written consent from the other – a commonprovision–thesituationisnotsosimple.Thecopyrightlicenceisobviouslyabenefitofthe appointment. Therefore, it is very arguable that the licence, although potentiallyapplicabletoallsuccessorsintitletotheproperty,isnotsoapplicableunlessanduntilthedesignerconsentstoitinwriting.

Insummary, itmaybesaid thatwhere termsofengagement stipulate that the licenceextendstotheclientonly,afuturepurchaserofthesitewillnothavealicencetousethedesign.Ifthetermsaresilentabouttherecipientofthelicence,itislikelythatthecourtswill imply a term that futurepurchasersof the site alsohave thebenefit of the licence.However, future purchasers may be prevented from obtaining the licence if there is aclausewhichprohibitstransferofthelicencewithoutthedesigner’spermission.

87Whatdoesitmeantotake‘reasonableskillandcare’,andhowisthatdifferentfromanobligationtoprovidesomethingthatis‘fitforpurpose’?The law requires a professional person to exercise reasonable skill and care in theperformance of his or her duties. This standard is also required of the designer by theSupplyofGoodsandServicesAct1982inrespectofanycontractforthesupplyofdesignservices. This statutory duty can be displaced by the imposition of a stricter duty in acontract.Thestricterdutyis‘fitnessforpurpose’.Thedutymaybestatedinacontract,orthe lawwillnormally imply itwhere thecontract ison thebasisofworkandmaterialsunlessitisclearthattheemployerisnotrelyingonthecontractorfordesign.10InGreaves(Contractors)LtdvBaynhamMeikle&Partners,11thecourtsaid:

Thelawdoesnotusuallyimplyawarrantythat[anengineer]willachievethedesiredresultbutonlyatermthathewillusereasonableskillandcare.Thesurgeondoesnotwarrantthathewillcurethepatient.Nordoesthesolicitorwarrantthathewillwinthecase.But,whenadentistagreestomakeasetoffalseteethforapatient,thereisanimpliedwarrantythattheywillfithisgums,seeSamuelsvDavis.12

It is likely that differing standards will apply to different professions, and thequalificationsofasurgeonarenotthesameasthoseofasurveyor.Therefore,itmaynotbe appropriate in every case to apply the common standard of the average competentprofessional.Ifaparticularprofessionalisveryexperiencedorqualified,itmaybethattheappropriate standard of skill and care will be the standard usually exercised by fellowmembers of the same profession having similar experience or qualifications.13 Thestandardof care is judgedat the timeof thedecisionor act andnotwithhindsight, forexampleatthetimeofahearingsomeyearslaterwhenknowledgeintheprofessionmayhaveimprovedorchanged.Animportantdifferencebetweenreasonableskillandcareandfitnessforpurposeisthattheprofessionalcanusethestandardofknowledgeatthetimeoftheactasadefence,whereasacontractorliableforconstructingabuildingfitforpurposehaslittleornodefenceifthebuildingdoesnotperformproperly,anditisirrelevantthatitcanbringproof toshowthat itwasnotnegligent.Theobligation tousereasonableskilland care is an obligation related to the way the professional exercises the particularprofession. The obligation to achieve fitness for purpose is not concerned with howsomethingisdone,butratherwiththestandardachievedwhenthe‘doing’isfinished.

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88Whydoesadesignandbuildcontractorusuallyhaveafitnessforpurposeobligation,butnotundertheJCTDesignandBuildContract?Whereanemployerreliessolelyonacontractortodesignandconstructanentirebuilding,atermofreasonablefitnessforpurposewillbeimpliedandthecontractor’sliabilitywillnotdependonitsnegligenceorfaultorwhethertheunfitnessresultsfromthequalityofworkormaterialsorfromdefectsinthedesign.14Ithasbeenexpressedlikethisinacaseconcerningthecollapseofatelevisionmast:

intheabsenceofaclear,contractualindicationtothecontrary,Iseenoreasonwhy[acontractor]whointhecourseofhisbusinesscontractstodesign,supplyanderectatelevisionmast is not under anobligation to ensure that it is reasonably fit for thepurposeforwhichheknowsitisintendedtobeused.TheCourtofAppealheldthatthiswas the contractual obligation in this case and I agreewith them.The criticalquestionoffactiswhetherheforwhomthemastwasdesignedreliedupontheskillofthesupplier…todesignandsupplyamastfitfortheknownpurposeforwhichitwasrequired.15

Therefore,whereacontractisenteredintobywhichacontractorisrequiredtodesignandconstruct a building, its liability will be to ensure that the building, when finished, isreasonablyfitforitsintendedpurposesofarasthatpurposehasbeenmadeknown.

The JCTDesign andBuildContracts have amended this usual implicationof lawbyinsertingaspecialclause(DBclause2.17.1)whichexpresslystatesthatthecontractorhasthe same liability as an architect or other appropriate professional designer. This is avaluable concession to contractors which is not available under most other design andbuildcontracts.

(1966)4BLR50.

Co-operativeGroupLtdvJohnAllenAssociatesLtd[2010]EWHC2300(TCC).

CGABrownvCarr&Another[2006]EWCACiv785.

(2002)84ConLR164

(2006)109ConLR14.

[2001]BLR74.

CalaHomes(South)LtdvAlfredMcAlpineHomesEastLtd[1995]EWHC7(Ch).

(1970)10BLR96.

(1971)10BLR107.

Young&MartenLtdvMcManusChildsLtd[1968]2AllER1169.

[1975]3AllER99.

[1943]2AllER3.

DuchessofArgyllvBeuselinck[1972]2Lloyd’sRep172.

14

15

VikingGrainStorageLtdvTHWhiteInstallationsLtd&Another(1985)3ConLR52.

IndependentBroadcastingAuthorityvEMIElectronicsLtdandBICCConstructionLtd(1980)14BLR1.

Chapter11

Architect’sinstructions

89Whatcountsasaninstruction?Thisisacommonquestion.Standardbuildingcontractsrefertoinstructionsandwhetherthey must be in writing or oral and how they may be confirmed and by whom, butcontracts donot specifywhat constitutes an instruction.Usually, to qualify as awritteninstruction,theremustbeanunmistakableintentiontoordersomethingandtheremustbewrittenevidencetothateffect.Notallwritteninstructionsareclear–somearedecidedlyvague(contractorsmightbelievedeliberatelyso).Althoughaninstructionmaybeimpliedfromwhatiswrittendown,itissaferfromthecontractor’spointofviewtoensurethatthewordsclearlyinstruct.Totakeacommonexample:Adrawingsenttoacontractorwithacomplimentsslipisnotnecessarilyaninstructiontocarryouttheworkshownthereon.Itmay simply be an invitation to the contractor to carry out the work at no cost to theemployer;itmaybeinvitingthecontractor’scomments;oritmaysimplybesaying,‘Thisiswhatwethoughtaboutdoing,butwechangedourminds’.Althoughmostadjudicatorswouldnodoubtassumethatadrawingsentwithnothingbutacomplimentsslipwasaninstructiontodotheworkshownonthedrawing,suchanassumptionwouldbesubjecttochallenge.Unlessitcontainswordingtotheeffect‘dothis’,howcanitbeaninstruction?All drawings should be issued with a letter or instruction form clearly instructing thecontractortoconstructwhatisonthedrawing.

The same comment applies to copy letters sent under cover of a compliments slip.Architectssometimessendaletter totheemployersayingthat theyaregoingtoinstructthe contractor to do certain additionalwork in accordancewith the employer’swishes.Those same architectsmisguidedly believe that if they send a copy of that letter to thecontractor,itamountstoaninstructiontothecontractortogetonwiththework.Clearly,thatiswrong.

An instruction on a printed ‘Architect’s Instruction’ form is valid if signed by thearchitect.Anordinarylettercanalsobeavalidinstruction.Ifthearchitectwishes,heorshecanwritetheinstructiononapieceofoldrooftileoronthesideofabrick.Providingtheyaresignedanddatedandlegible,theyareallvalidinstructions.Theminutesofasitemeetingmaybeavalidinstructionifthecontentsareexpressedclearlyandunequivocally,particularlyifthearchitectisresponsiblefortheproductionoftheminutes.However,sitemeetingminutesareobviouslynotagoodmediumforissuinginstructions,becauseofthepossibledelayindistribution.

90Whatcanbedoneifacontractorrefusestocarryoutaninstructionandrefusestoallowtheemployertosendanothercontractorontothesite?Clause 3.10 of SBC requires the contractor to comply forthwith (as soon as it canreasonably do so) with architect’s instructions that are properly empowered by thecontract. If thecontractor refuses todosoorsimply ignores requests togetonwith theinstruction,thearchitectisentitledtoissueawrittencompliancenoticeunderclause3.11.Thisnoticegivesthecontractorsevendaysfromreceipttocomplywiththeinstruction.Ifthe contractor still refuses, the employer may employ others to do the work and anappropriatedeductionofalltheadditionalcostsmaybemadefromthecontractsum.Sofarsogood.Thequestionreferstothehopefullyrareinstancewhereacontractorrefusestogiveaccesstothesitetotheothercontractorengagedbytheemployertocarryouttheinstruction.

Inarecentcase,1theCourtofAppealwasfacedwithaninterestingconundrum.Manyof the details are unimportant for this purpose; suffice to say that an impasse arosebetween theemployerand thecontractorbecause thecontractor,havingobjected toandrefused to carry out an instruction, would not allow the employer to bring anothercontractor onto the site to do it. The employer sought an injunction to prevent thecontractorfromrefusingaccess.Thatisthebackground.Itshouldbesaidthatbothpartiesmusthavebelievedthattheyhadgoodreasonforactingastheydiduptothatpoint.

Now the position becomes interesting. Courts are generally reluctant to grantinjunctionsunlessthereisatrueemergency.Usually,theywillgrantaninjunctiononlyifthe problem is such that no amount of future damages can sufficiently recompense theinjured party after trial. For example, a court may well grant an injunction to preventsomeone chopping down a five-hundred-year-old oak tree in a prominent position,becauseoncechoppeddownnoamountofmoneycouldrestorethetree.However,acourtwouldbeunlikelytograntaninjunctiontopreventthedemolitionofanordinarymodernbrickwall,becauseanawardofmoneywillcertainlybeenoughtopayforitsrebuilding.

Thecontractorarguedagainstgrantingan injunctionbecause thecontractcontainedaliquidated damages clause, and if the contractorwas ultimately found to bewrong, theliquidateddamageswouldrecompensetheemployerfortheresultantdelay.TheCourtofAppeal disliked this argument. In granting the injunction to the employer, they decidedthatthecontractorwasinbreachofcontractforrefusingaccessinthisinstanceandthatthe liquidated damages clause was not an agreement between the parties that thecontractor could continue its breach of contract. Although liquidated damages wereordinarilythemostdamagesthatcouldberecoveredfordelayincompletion,theydidnotproperlycompensatetheemployerforthelossitwouldsufferbythecontinuingbreach.

On the basis of this case, it seems that employers can expect to obtain injunctions ifcontractorsrefuseaccesstothesitetoothercontractorswhohavebeenlawfullyengagedunderthetermsofthecontract.

Itissometimessaidthatliquidateddamagesarenotonlydamagesduetotheemployerinthecaseofabreachonthepartofthecontractortocompleteintime,buttheyarealsoto be regarded as the price payable by the contractor for the option of taking longer tocomplete.Thiscaseshowsthatsuchaviewisnotcorrect.

91ShouldAIsbesignedbyanindividualorthefirm?Thisquestioncropsupfromtimetotime.Itisusuallyaskedbyarchitectsfearfulthataninstructionwillbeinvalidifnotsignedbythecorrectperson.

Thesimpleanswer to thequestion is thatanAImaybesignedbyanypersonwho isauthorisedtodoso.Thearchitectisthepersonnamedinthecontract.Onlythearchitectmayissuecertificatesandinstructionsunderthetermsofthecontract,butthatnecessarilyincludesanyoneauthorisedbythearchitect.Thearchitectshouldbecarefultoinformallinterestedpartiesofthenamesofallpersonsauthorisedtoactonhisorherbehalf.

Veryoften,thenameofthearchitectinthecontractwillbeafirm,‘XYZArchitects’orsomesuchname.Therefore,theletterinformingallpartiesofauthorisedpersonsmustbesignedby‘XYZArchitects’.Ifthefirmisalimitedcompany,thesignatureofadirectorwilldo; ifapartnership, it shouldbesignedbyoneof thepartners; ifa limited liabilitypartnership,byoneofthedesignatedmembers.

WhereAIs,certificatesorlettersaresignedbyanauthorisedperson,thatpersonshouldsign‘forandonbehalfof’.Thisisundoubtedlythebestmethod.It isnotsufficientthatthe letter, etc. is on headed paper. The important thing is that itmust be plain that thesignatory isnot signingonhisorherownbehalfbutonbehalfof the architect, be thatcompany,partnershiporsoleprincipal.Soitisprobablysufficientifthenameofthefirmis typed where the signature would normally go and the authorised person signsimmediately underneath. Sometimes people sign the actual name of the architect. Forexample,ifthenamedarchitectisJohnSmith,oneoftheauthorisedpersons,sayEmmaCrow,maysign‘JohnSmith’providedsheinitialsthesignature.2

Theuseofmechanicalimpressionsofsignaturesareofdoubtfulvalidityandshouldbeavoided,butamechanicallyimpressedsignaturetogetherwiththeinitialsorsignatureofanauthorisedpersonisprobablyvalid.

92Iftheemployergivesinstructionsonsitedirectlytothecontractor,mustthearchitectthenconfirmthoseinstructionsinwriting?Many employers seem to find it difficult to stay away from site. It should go withoutsayingthatemployersshouldneverbeallowedtovisitsiteunaccompanied.Atbesttheywillgetawarpedideaofwhatishappening(forexample,alltheroomslooktoosmallatfoundation stage); at worst they may answer questions from the contractor or giveinstructionsevenwhennoquestionsareasked.Thecontractorshouldbecarefullybriefedat thepre-startmeetingalways to referanyqueries to thearchitectandnever toask theemployer any questions directly.Despite this, instructionsmay be given directly to thecontractor and the contractor may carry out the instruction without reference to thearchitect.Thearchitectisnotobligedtoconfirmtheinstructionsinwriting.

The first thing to establish is why and in what circumstances the instructions weregiven.ThesecondistoestablishtheeffectoftheinstructionsontheWorksasawhole.Itmaybe that theemployergave the instructionbutalso told thecontractor tocheckwiththe architect, or it may be that the employer gave the instruction without reallyunderstanding what was being asked. Neither of these circumstances exonerates bothemployerandcontractorfromthechargeoffailingtoactinaccordancewiththecontract,ofcourse,butlifeislikethat.Peoplefailtoactastheyshould.

If thearchitectdecides that the instruction,althoughgivendirectly, isof thekindthatwould have been issuedwithout difficulty if the employer had asked, the architectwillpresumablyhavenoproblemswithratifyingtheinstruction.Thepositionbecomesmoredifficultifitisaninstructionthatthearchitectwouldnothaveissuedandwhichperhapshasadetrimentaleffectontheproject.Thereisnodoubtthattheemployerandcontractor,as parties to the contract, are entitled to vary the terms as they wish. If the employerdecidestogiveadirectinstruction,albeitthecontractprovidesforonlythearchitecttodothat, and if the contractor accepts the instruction, it is likely that either a fresh littlecontracthasbeenformedforthatitemofworkor,alternatively,thattheitemofworkmayrank as a variation to the original contract. Obviously, the architect cannot include thevalueofsuchavariationinacertificateunlessitisthesubjectofanarchitect’sinstruction.Ifthearchitectdoesnotconfirmwithaninstruction,thecostofthevariationmustbepaidbytheemployerdirectlytothecontractorwithoutacertificate.

A contractor who accepts a direct instruction from the employer is unwise. If thecontractorcarriesoutthework,buttheemployercontendsthattheinstructionwasnevergiven, the contractor is in breach of contract and can be obliged to amend thework toconformtothecontractdocuments.

93Doesthearchitecthavepowertogiveinstructionsafterpracticalcompletion?There appears to be no reason why the architect should not be empowered to issueinstructions after practical completion subject to certain exceptions. SBC clause 3.10permitsthearchitecttoissueinstructionsinregardtoanymatteraboutwhichthecontractexpresslyauthorisesinstructions.UnlikethepositionunderothercontractssuchasACA3andGC/Works/1, the JCT contracts do not list permissible instructions conveniently inone clause.One has to search through the contracts. For example, inSBC there are 31clausesthroughoutthecontractwhichauthoriseinstructions.Oncesuchclauseshavebeenidentified,thequestioniswhetherthearchitect’spowertoissuethemexpiresatpracticalcompletion.

Noneof the clauses is specific on this point, but it is obvious that instructionsundersome clauses cannot be issued once the Works have been completed. It is plain thatinstructionsrequiringvariationstotheWorkscannotbeissuedafterpracticalcompletion,becausepracticalcompletioniswhentheWorksarecompletesaveforminorthings.Theissue of an instruction requiring substantial changes would be inconsistent with that.Moreover, practical completion marks the beginning of the period during which thecontractor is to provide information for the preparation of the adjusted contract sum. Iftherewas no stop to variations, the contractorwould not knowwhen the final accountdocumentationcouldbecompleted.Thereisjudicialopinioninsupportofthisview.3(Asubsequentdecisiontothecontraryissometimesquoted,4butinthatinstanceaJCTprimecost contract was under consideration. There was no stipulated scope of work and thecontractorsimplycarriedoutinstructions.Moreover,thecontractorinthatcaseagreedtoremainonsite toexecute the instructedwork.)Therefore, it seems tobesettled that thearchitectwillhavenopowertopostponeworkafterpracticalcompletionandnopowertoissue instructionsaboutsettingout,drawingsordiscrepancies.However, thereseemsnoreasonwhythearchitectshouldnotbeabletoissueinstructionsregardingdefects,makinggoodandrequiringopeninguportesting.

94WhatisthepositionunderaJCTtraditionalcontractifthecontractoractsoninstructionsgivendirectlybythemechanicalservicesconsultant?The JCT traditional contracts are SBC, IC, ICD,MW andMWD. The parties to thesecontracts are the employer and the contractor, and there is provision for naming anarchitect or other contract administrator. SBC clause 3.10, IC and ICD clause 3.8, andMWandMWDclause3.4requirethecontractortocomplyforthwithwithanyinstructionsauthorisedunderthecontractandissuedbythearchitect.Thereisnoprovisioninanyofthesecontractsforthemechanicalservicesconsultantoranyoneelsetoissueinstructions.Therefore, an instruction with which the contractor must comply cannot be issued byanyone other than the contract administrator. Obviously, as parties to the contract, theemployerandthecontractormayagreetovarysometermorsomepieceofwork,butthecontractorisentitledtorefusetocarryoutanyinstructionsgivenbytheemployer.

The mechanical services engineer may be a sub-consultant to the architect or, moreusually, engaged directly by the employer. In either case, neither the engineer nor anyotherconsultantisentitledtogiveinstructionstothecontractorunderthetermsofanyofthesecontracts.Thecorrectprocedureisforsuchconsultantstogivethearchitectanoteoftheinstructionrequired;whenthearchitectissatisfiedabouttheneedforsuchinstruction,it is a matter for the architect to issue the instruction under the terms of the contract.Therefore, a consultantwho gives a direct instruction to the contractor is attempting tooperate inbreachof the termsof thebuildingcontract.AcontractorwhichacceptssuchinstructionsandproceedstocarrythemoutisinbreachofitsobligationstoconstructtheWorksinaccordancewiththecontractdocuments.Thearchitectisentitledtoinstructthecontractortoremovesuchworkasbeingnotinaccordancewiththecontract.Ifthework,althoughnotproperlyinstructed,isneverthelessworkwhichshouldhavebeencarriedout,thearchitecthaspowerunderthecontracttoratifysuchinstructionsor,ifappropriate,toaccepttheworkwithaconsequentreductioninthecontractsum.

Sometimesthearchitect,atanearlysitemeetingorinsomeothercontext,willsaythatconsultants may visit the site independently and may issue instructions directly to thecontractor. This is a thoroughly bad practice and sets the scene for seriousmisunderstandings and other problems. The effect is probably to make each of theconsultants theauthorisedrepresentativeof thearchitect for thatproject.Architectswhomakethiskindofarrangementhaveadeathwish.

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95DoesthewordingofMWgivethearchitectpowertoissueaninstructiontopostponetheWorks?The main provision governing the issue of instructions under MW is clause 3.4. Theclauseisbroadlyworded,givingthearchitectpowertoissueinstructionswithwhichthecontractormustcomplyforthwith.Atfirstsight,itappearstogivethearchitectpowertoissue instructions about anything connected with the contract. However, the courtsgenerally look to restrict such broad wordings, and it is likely that the clause will beinterpretedsoastoallowthearchitecttogiveonlysuchinstructionsasarenecessaryfortheproperadministrationofthecontract.Thereareonlyfiveotherclauseswhichrefertoinstructions:

Clause 2.10 permits the architect to issue instructions that the contractor is not tomakegooddefects.

Clause3.6permitsthearchitecttoordervariations.

Clause 3.7 requires the architect to issue instructions about the expenditure ofprovisionalsums.

Clause3.8permits the architect to issue instructions for the exclusion from site ofanypersonemployedontheWorks.

Clause 5.4B.2 requires the architect to issue instructions for reinstatement afterinsureddamage.

It isclear that there isnoexpresspower to issue instructionspostponinganypartof thework.However,inthecaseofarelativelyshortcontractsuchasMW,thecourtsmaywellimplytermsiftheyarenecessarytomakethecontracteffective,ortheywillconstruetheexisting terms of the contract, such as clause 3.4, in a purposive way. For example,although not expressly stated, the architect must have power under clause 3.4 to issueinstructionsrequiringtheremovalofdefectiveworkandmaterials.Alliedtothatpoweristhepowertoorderopeningupandtesting.Itisthoughtthatthearchitectprobablyhasthatpower, and it would be an implied term that where the opening up or the test resultsshowedthattheworkwasinaccordancewiththecontract,theemployerwouldbeobligedtoreimbursethecontractorforitscosts,and,ifappropriate,anextensionoftimemustbegiven because the delay was beyond the contractor’s control. The architect must havepower to issue instructions for the correction of inconsistencies; otherwise the firstdiscoveredinconsistencycouldbringtheprojecttoahalt.

Itisalsolikelythatthearchitectwouldhavepowertopostponethewholeoranypartofthe Works. The power would not extend to deferring possession of the site. It seemsinevitablethatanypostponementwouldresultinanextensionoftimeonthebasisthatitisoutsidethecontractor’scontrol.However,additionalpaymenttoreimbursethecontractorfor associated costs may not be simple. It could not be claimed under the contractprovisions,becausethereisnoprovisionforascertainmentoflossand/orexpenseinthosecircumstances. Moreover, it could not be claimed as damages for breach of contract,becauseifthearchitectdoeshavepowerunderthecontracttopostponework,theexercise

of such power cannot be a breach of contract. It appears that the only way that thecontractorcouldbereimbursedwouldbebytheimplicationofanothertermtothateffect.Thatinfactseemsthesensibleandjustsolution.

1

2

3

4

96CantheclerkofworksstoptheWorks?Clerksofworksaresometimesheardtosaythattheyhave‘putastoporder’ontheWorksor that they have ‘stopped the job’. More commonly, they are heard to threaten thesethings.A ‘stoporder’ sounds suitably impressive andquiteofficial.For contractors andarchitects,whoarenotasfamiliarwithbuildingcontractsasperhapstheyshouldbe,thethreat can sound intimidating and reassuring respectively; the contractor threatened andthearchitectreassuredthattheclerkofworksknowsexactlywhattodoandisnotafraidtodoit.Thereasonforthethreatisnotimportant.Itmaybebecausethecontractorisnotprogressing to the satisfaction of the clerk of works in rectifying defective work. Thepowers anddutiesof the clerkofworks are set out inSBCclause3.4 and ICand ICDclause3.3.Alltheseclausesstatethattheclerkofworksisactingsolelyasinspectoronbehalf of the employer and under the direction of the architect. SBCgives the clerk ofworks the additional power to issue directions provided they are in relation tomattersaboutwhichthearchitectisexpresslyempoweredtoissueinstructionsandprovidedthatthearchitectconfirmssuchdirectionsinwritingwithintwodays–whichratherbluntsthepower.

AnysearchthroughtheprovisionstofindreferencetothepoweroftheclerkofworkstostoptheWorkswillbeinvainforthesimplereasonthataclerkofworksdoesnothavesuchpowerunderanyof the standard formbuildingcontracts. Indeed, the idea that theclerkofworkscanissueanultimatumandthenstoptheWorksisludicrous.Thearchitectmaypostpone thewholeoranypartof theWorksand,aftersuitablepreliminarynotice,theemployermayterminatethecontractor’semploymentiftherightcriteriaaresatisfied,buttheclerkofworksmayonlyinspectandreporttothearchitect.Contractadministrationis in thehandsofoneperson;anythingelsewould lead tochaos.AclerkofworkswhothreatenstostoptheWorksclearlyhaslittleideaofwhattodo,andattemptingtostoptheWorks would be an action seriously in excess of his or her powers. A contractor thatstoppedtheWorksonbeinginstructedtodosobytheclerkofworkswouldbeinbreachof contract and, if the stoppagewas prolonged, in danger of repudiating its obligationsunderthecontract.

Bath&NorthEastSomersetDistrictCouncilvMowlem(2004)100ConLR1.

LondonCountyCouncilvVitaminsLtd[1955]2AllER229.

NewIslingtonandHackneyHousingAssociationLtdvPollardThomasandEdwardsLtd[2001]BLR74.

Treasure&SonLtdvMartinDawes[2007]EWHC2420(TCC).

Chapter12

Inspection

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97Whatisthearchitect’ssiteinspectionduty?Inspectionisnotsomethingtobecarriedoutlightly.Manyarchitectssimplywanderontothesitewithnoveryclearideaofwhattheyexpecttofind,norindeedwhattheyshouldbelooking for. TheRIBAAgreements do not deal in detailwith inspection of theWorks.TheysimplyrequirethearchitecttomakevisitstotheconstructionWorksinconnectionwithgeneralinspectionofprogressandqualityofwork;fortheapprovalofanyelementsreservedforthearchitect’sapproval;forobtaininginformationnecessaryfortheissueofnotices,certificatesandinstructionsatintervalsreasonablyexpectedtobenecessaryatthedate of the appointment; and to advise if a clerk of works is necessary. It must berecognisedthatthenumberofvisitsisonlyanestimate.

Itisperhapscynicaltosaythatacourtwillfindthatanarchitect’sdutyistofindjustthoseproblemsthathavebeenmissed.

Nevertheless,architectsmayhavedifficultyinensuringthattheyarenotopentolegalaction from their clients for failure to inspect adequately. The best safeguard for anyarchitectistobeabletodemonstratetoacourtthattheirinspectiondutieswerecarriedoutin an organisedmanner, having regard to what the courts have said. Therefore, beforecommencingan inspectionof theWorks, thearchitectmusthaveaplanofcampaignasfollows:

Inspections should have a definite purpose. They should coincide with particularstagesintheWorks.Itissensibleforthearchitecttositdownbeforehandanddrawupa listofpartsof theconstruction thatmustbe inspectedon thatparticularvisit,together with items of secondary importance to be inspected if possible. Thecompositionofthelistandthefrequencyofinspectionswilldependonfactorssuchastheemploymentofaclerkofworks,thesizeandcomplexityoftheprojectandtheexperience and reliability of the contractor. Comments can be made against thechecklist as the inspection progresses. The list and the comments are for thearchitect’s own files, not for distribution.Although an architect’s inspection dutiesarequiteonerous,heorshewillbebetterabletomountadefenceincourtagainstanallegation of negligent inspection if, by reference to contemporary notes, it can beshownthatinspectionswerecarriedoutinanorganisedmanner.1

Timesofinspectionsshouldbevariedsothatadeviouscontractorcannotrelyuponconcealingpoorworkbetweeninspections.

The architect should always finish an inspection by spending a few minutesinspectingatrandom.

Actionshouldbetakenassoonasthearchitectreturnstotheoffice,whetherornotany defects have already been pointed out to the sitemanager. It iswise to put inwritingallcommentsregardingdefectivework.

During site inspections, the architect is bound to be asked to answer queries. It isprudent togiveanswerson return to theofficewhen it ispossible to sitdownandcalmly assess the situation. Many decisions made on site are either amended orregrettedlater.

An architect’s failure to inspect will not excuse a contractor from maintaining properquality control systems. The contractor has undertaken to carry out the Works inaccordancewiththecontract,nottocarryouttheWorkstoaslowastandardaspossibleunless the architect notices. Nevertheless, although the architect owes no duty to thecontractor to finddefects,2 theclient isentitled toexpect thearchitect tocarryout suchinspectionsaswillidentifyseriousdefectsandareasonableproportionofminordefects.

Ifadetailismorecomplexthanusual,thearchitectwillbeexpectedtotakemorecarein inspecting. Just because it is difficult to inspect something does not mean thatinspectionisnotnecessary.Itisevenmorenecessary,infact,becausethecontractormightbe relyingon thedifficultyof inspection toattempt togetawaywithdefectivework. Ifwork,by itsverynature, isbeingcoveredupalmost as soonas it isdone, thearchitectmight argue that there is little point in inspecting because, although the operativeswillcarry out the work properly while the architect is there, they will revert to poorworkmanshipassoonasthearchitectgoes.Infact,thatisacogentreasonforcontinuousinspection of that particular element.3 The architect’s knowledge of the skill andexperienceofthecontractorisanimportantfactor;moretimemustbespentinspectingtheworkofaninexperiencedcontractor.Itwillusuallyavailthearchitectnothingtosaythatreliance was placed on the contractor’s assurance that everything had been properlyexecuted.Butifanarchitecthasagreatdealofexperiencewiththeworkofaparticularcontractorandknowsit tobegood,reliableandconscientious,lessinspectionshouldbeneeded.

Thenumberofvisitsandtheirdurationisnotthetestofadequateinspection.Thekeyisthenumberofvisitsnecessary.Therefore,itisnodefenceforanarchitecttosay,‘Ivisitedtwiceaweekforanhoureachtime’.Suchaschedulemaybeexcessiveinsomeinstancesandinsufficientinothers.Moreover,anarchitectshouldexpecttohavetovisitsitemoreoftenatsomestagesofthework,occasionallyspendingfulldaysifveryimportantworkisbeingdone.Theleadingauthorityonthearchitect’sdutytoinspectisthedecisionoftheHouseofLordsinEastHamCorporationvBernardSunley&SonsLtd:

Asiswellknown,thearchitectisnotpermanentlyonthesitebutappearsatintervals,itmaybeofaweekorafortnight,andhehas,ofcourse,toinspecttheprogressofthework.Whenhearriveson the site theremaybeverymany importantmatterswithwhichhehastodeal:theworkmaybegettingbehindhandthroughlabourtroubles;someofthesuppliersofmaterialsorthesub-contractorsmaybelagging;theremaybe physical trouble on the site itself, such as, for example, finding an unexpectedamount of undergroundwater. All these arematterswhichmay call for importantdecisions by the architect. Hemay in such circumstances think that he knows thebuildersufficientlywellandcanrelyuponhimtocarryoutagoodjob;thatitismoreimportantthatheshoulddealwithurgentmattersonthesitethanthatheshouldmakea minute inspection on the site to see that the builder is complying with thespecificationlaiddownbyhim…Itbynomeansfollowsthat,infailingtodiscoveradefectwhich a reasonable examination should have disclosed, in fact the architectwasnecessarilytherebyinbreachofhisdutytothebuildingownersoastobeliableinanactionfornegligence.Itmaywellbethattheomissionofthearchitecttofindthe defects was due to no more than an error of judgment, or was a deliberatelycalculatedriskwhich,inallthecircumstancesofthecase,wasreasonableandproper.

Thesearecomfortingwords,but it is important togive themdueweight in the lightofotherdecisions.Ausefulsummaryof the legalposition isgiven inMcGlynnvWalthamContractors&Others(No.3).4

98Whatisthepositionifthecontractorhascoveredupwork?Therearetwopossiblereasonswhytheremaybeaproblemwithworkcoveredup.Thefirstisthattheworkmaybedefective;ifcoveredup,thedefectsmaynotmakethemselvesknownuntilafter theemployerhas takenpossessionof thecompletedbuilding,withalltheconsequentdisruptionwhile remedialwork isundertaken.Thesecond reason is thatsomeoftheworkcoveredupmayneedmeasuringinordertovalueandcertify.

Theproblemofdefectiveworkbeingcoveredcanbedealtwithintwoways.Thebestwayis tohaveaclause inserted in thecontractwhichmakesclear thatnoworkmaybecovereduntil thearchitector theclerkofworkshas inspected it; if coveredbefore it isinspected, thecontractormust,withoutcharge to theemployer,uncover thework to theextentrequiredbythearchitecttocarryoutthenecessaryinspection.Preamblestobillsofquantities commonly contain a clause to that effect. The downside is that the smartcontractorwillprobablyrequirethearchitecttoexpresssatisfactioninwrittenformwithwork about to be covered on the perfectly reasonable premise that it needs thewrittenstatement toavoid thepossibility that thearchitectmight subsequentlydenyhavinghadthe opportunity to inspect. Many contractors will give the architect two or three daysnoticethatsomethingistobecovered.Ifreasonablenoticeisgiven,itwillbedifficulttoblame the contractor if the architect does not inspect. Alternatively, the contractor caninterprettheclausestrictlyandrefusetocovertheworkuntilthearchitecthasinspected,evenif there isaresultantdelayto theprogressof theWorks.Agoodcompromiseis tohaveaclausewrittenintothecontractwhichrequiresthecontractortogivethearchitectareasonableperiodofnotice,say24or48hours,beforecoveringanywork.Whetherornotthearchitectinspects,inspectionmaybedeemedtohaveoccurred.

The other way to deal with the problem is for the architect to issue an instructionrequiringthecontractor toopenupfor inspectionanyworkwhichhasbeencoveredup.Moststandardformcontractsallowforthatkindofinstruction(forexampleSBCclause3.17). Unfortunately, if the uncovered work is in accordance with the contract, theemployerhastopayfortheopeningupandthecontractormaybeentitledtolossand/orexpenseandanextensionoftime.Thismethodrequiresthearchitecttobefairlysurethereissomethingwrongbeforeissuingtheinstruction.

It isusually in thecontractor’s interests tohaveworkmeasuredwhich is about tobecoveredup,particularly if theworkcarriedout is additional towhat isdescribed in thebillsofquantities.Therefore,whereacontractorcoversupworkwhichisextratowhatismeasuredwithoutnotifyingthequantitysurveyorfirst,thecontractorwillonlyhaveitselftoblameifthequantitysurveyordeclinestovaluethesupposedextrawork.Indeed,itisdifficulttoseehowthequantitysurveyorcandootherwise.

Therefore,ifthecontractorhascoveredupworkandthereisnoadditionalclauseinthecontractdealingwiththeposition,thearchitectwillbeobligedtomakeadecisionaboutopeningupthework,withthepossibilityofadditionalcostsiftheworkisfoundtobeinaccordancewiththecontract.However,ifaclauseisincludedandthecontractorcoversupworkeitherbeforethearchitecthasinspectedorbeforethenoticeperiodhasrunout,orwithoutgivingnoticeatall,dependingonthewordingoftheclause,thecontractorwillbe

inbreachofcontract.Theemployerwillbeentitledtodamagesforthebreachsufficienttoputtheemployerinthesamepositionasif thebreachhadnotoccurred.Inotherwords,the employer could engageothers to openup and check theworkbefore coveringoveragain. Inpractice, thecontractorwouldprobably realise itserrorandopenupandcarryout reinstatement itself. Obviously it would not be entitled to payment, whatever wasfound,becauseitwouldberemedyingitsownbreach.

99Ifthearchitect’scontractstipulatesinspectionseverytwoweeks,isthearchitectliableifdefectiveworkisdonebetweeninspectionsandisnotvisiblesubsequently?Becausethesequestionsareactualquestions(albeitsomewhatshortened),itispossibletosee that inmany cases thequestion itself is defective.This question remindsmeof themaninacarinStIvesaskingthewaytoBelfast;heshouldnotbestartingfromthere.

An architect’s contract which stipulates inspections every two weeks makes thesituation in question inevitable.First, the lawof averages determines that at least somedefective work will be done and covered up between inspections, and second, if thecontractorknows that thearchitectwill inspectonlyevery twoweeks, itwillmakesurethat any inadequate work carried out between inspections is covered up before thearchitect next arrives on site.This kind of arrangement is positively asking for trouble.Thecontractorisonlyhumanandthetemptationtoskimpshouldnotbeoffered.

Although,ashasbeenseenfrompreviousanswersaboutinspections,thearchitectisnotexpectedtofindeverylittledefect,thearchitectisexpectedtotakereasonablecaretoseethat important parts of the structure are carefully inspected. An architect should neveroffertheclientanappointmentdocumentwhichlimitsinspectionstoeverytwoweeks.Iftheclientasksthearchitecttosignabespokeappointmentinthoseterms,thearchitecthasadutytoadvisetheclientthatsuchaprovisioniswhollyinadequate.Thearchitectshouldnot accept appointment if those terms are included. It is common now for architects tohaveatermintheirappointmentswhichsaysthatthefeeincludesafixednumberofvisitstosite.Again,theproblemisthatthenumberandfrequencyofvisitstositecanonlybedecidedoncethecontractorhasstartedonsiteandthearchitecthashadachancetoassessworkmanship,progressandsoon.

An architect who is appointed to inspect at fixed intervals or for a fixed number ofinspectionscansafeguardagainstliabilityforfailuretoinspectsomethingimportantonlybyignoringthefixedintervalsornumbersofinspectionsandsimplyinspectingwhenitisappropriate to do so. Therefore, the strict answer to the question as posed is that thearchitectinthosecircumstancesisleavinghimorherselfopentoliability.

100Isthereadifferencebetweeninspectingandsupervising?‘Inspection’and‘supervision’areoftenconfused.Architectsarecommonlyreferredtoasbeing responsible for ‘design and supervision’, but this confuses supervision withinspection.Supervision is obviously amore onerous obligation than inspection andonewhichcanonlybecarriedoutbysomeonewhohascontrolovertheworkforce.InBrown&BrownvGilbertScott&Paynethecourtsaid:

Inmyjudgmentthe[architect]hadadutytoinspecttheworksofthe[contractor]andthattheuseoftheword‘supervision’doesnotenlargehisdutyinanyway.Aswassaid in evidence by one of the experts, ‘supervision’was thewordwhich used toappearintheRIBAFormofEngagementbutinmorerecenteditionsthisisreplacedbytheobligationto‘inspect’.5

That appears to be awrong view. Inspection involves looking and noting, and possiblycarryingouttests.Supervision,however,notonlycoversinspection,butalsotheissuingofdetaileddirectionsregardingtheexecutionoftheWorks.Supervisioncanbecarriedoutonlyby someonewith the requisiteauthority toensure that thework isundertaken inaparticularway.That is theprerogativeof thecontractor.Asubsequentcasedecided that‘inspection’isalesserresponsibilitythan‘supervision’.6Thatisthebetterview.

101Canthecontractorarguethatthearchitectsawwhatwasbeingdoneonsiteandmusthaveagreedwithit?When an architect condemnswork, a contractormay say that the architect has alreadyseen the work and, having said nothing about it, must have accepted it. Thematter isobviously most important if the task of rectifying the work at the stage at which it iscondemned is likely tobeexpensivebecauseotherperfectlygoodworkwillhave tobedismantled.ThebasicpositionisthatthecontractorisobligedtocarryoutandcompletetheWorksinaccordancewiththecontractdocuments.Therefore,ifthecontractorhasnotdoneso,itisabreachofcontractforwhichitisliableindamagestotheemployer.Todealwithsuchbreaches,moststandardformcontractshaveproceduresinvolvingthearchitectin instructing the contractor to rectify the non-compliant work or, in the case of SBC,ordering the contractor to remove the work from site – an inappropriate instruction inmanycases.

Wheretheworkisundoubtedlydefective,thematterisstraightforward,andthefactthatthearchitectmaynothavereferredtoitcannotexcusethecontractorfromitscontractualobligations.7Theproblemariseswhere it is a questionof standards ofworkmanshiporqualityofgoodsormaterialswhicharetobetothereasonablesatisfactionofthearchitect.SBCdealswiththematterinclause3.20,whereitstatesthatifthearchitectisdissatisfied,thereasonsfordissatisfactionmustbegivenwithinareasonabletimeoftheworkbeingexecuted.This is a thoroughly bad provision and should be deleted. It goes against theordinary rule that the contractor must comply with the contract whether or not thearchitect spots the error. There is a serious difficulty in deciding what constitutes areasonable time.Commonsensemightsay that it isassoonas thearchitecthashad theopportunitytoinspecttheworkinquestion.Thelawsaysthatitiswhatisreasonableinallthecircumstances,whichdoesnothelpanyoneseekingcertainty.

Evenifclause3.20isdeleted,orincontractsthatdonotcontainthatkindofclause,itisopen to the contractor to argue that the architect, by seeing something on site and notsaying it was defective, actually acquiesced in it. Of course, as noted above, such anargumentcanonlyapplytothearchitect’ssatisfaction,nottodefectivework.Itispossiblefor an architect to agree something by watching without comment as the contractorconstructsit.8Thelapseoftimebetweenseeingtheinfringementandcommentingonitisnotnecessarilysignificant.Thequestionappearstobewhetheritwouldbeunreasonable(the court’s word is ‘unconscionable’) for someone, in this case the architect, to denysomething which he or she has allowed the contractor to assume to its detriment.9 Inconstruction, it would be to the contractor’s detriment if the architect allowed thecontractor to assume thatworkwas of a satisfactory standard, leaving the contractor tocontinue with construction which would later have to be demolished and corrected.Obviously,allthecircumstanceswouldhavetobetakenintoaccount,andthefactthatthearchitect had seen thework could not be used to argue that the architect had agreed towhatotherwisewouldbeaclearbreachofcontract.

102Isthearchitectliablefortheclerkofworks’mistakes?The answer to that question depends, in part at least, onwhether the clerk ofworks isemployedbythearchitectorbytheclient.

InKensington&Chelsea&WestminsterAreaHealthAuthorityvWetternComposites,10theemployerhadengaged theclerkofworksandwas responsible forhispayment.Theemployer took proceedings against the architects because some of the precast concretemullionswerefoundtobedefective.Thecourtheldthatthepresenceofaclerkofworksdid not remove or reduce the architects’ obligation to use reasonable skill and care ininspecting the work, but the employer was vicariously liable for the negligence of theclerk ofworks even though the clerk ofworkswas under the architects’ direction.Thearchitects were found liable, but their damages were reduced by 20 per cent to takeaccountoftheemployer’sliabilitythroughtheclerkofworks.

The importanceof the clerkofworksbeing employedby the employerwasnoted inpassing inGray (SpecialTrusteesof theLondonHospital) vTPBennett&Son.11Thiswasacasewheredefectswerediscoveredinthebrickworkandsupportingconcretenibsofanurses’homesome25yearsafteritwasbuilt.Noneoftheprofessionalswerefoundtohavebeennegligent,andthedefectswerefoundtohavebeendeliberatelyconcealed.Inregardtothearchitectandtheclerkofworks,thecourtsaid:

it isclear thatMrPotts,asclerkofworks,was tobe theemployeeof thehospital,even though recommended by the architects. Furthermore, on the evidence it wasestablishedthatattheendofthejob,itwastheBursarofthehospitalwhonotifiedhim that his employment was at an end. I appreciate that the question of controlfrequently determines who in reality is utilising his services for the purpose ofestablishing vicarious liability, but in this instance the architect from the outsetrequiredanindemnityfromthehospitaliftheyweretoaccepthimasanemployee.That indemnity the hospital were not prepared to give, with the result… that theclerkofworksremainedtheiremployeeinthecapacityofinspectorforthebuildingowneraslaiddownin…thecontract,althoughhewasalsotheeyesandearsofthearchitect.

Asanemployeeofthehospital,thearchitectwasclearlynotliablefortheclerkofworks’actions,albeitinthisinstancetheclerkofworkswasfoundtohavecarriedouthisdutiesstrictlyandnoblamewhatsoeverwasattachedtohim.

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103Whatisthepositioniftheclerkofworksapprovesdefectivework?Under JCT contracts, the clerk of works has no power to approve anything or to giveinstructionstothecontractor.ICandICD,underclause3.2,expresslyrestrictthepoweroftheclerkofworkstoinspectingonbehalfoftheemployerbutunderthedirectionofthearchitect.SBCclause3.4allowstheclerkofworkstoissuedirections,butonlyinregardto things aboutwhich the architect is empowered to issue instructions.Moreover, suchdirectionsarestatedtobeofnoeffectunlessconfirmedinwritingbythearchitectwithintwodays.Inpractice,ofcourse,manycontractswouldcometoacompletestopifclerksofworksstoppedgivinginstructionstocontractorsandifcontractorsstoppedcomplying.Nevertheless, theposition remains that a contractor that complieswithan instructionoftheclerkofworksdoessoatitsperil.

Clerksofworksaresometimescalled‘theeyesandearsofthearchitect’,andrightlyso.Agoodclerkofworkswillbeonsiteatregularintervals,andsometimespermanentlyonlargerprojects.Therelationshipbetweentheclerkofworksandthecontractorshouldbeoneofmutualrespectratherthanfriendship.Iftheclerkofworksispermanentlyononesite,however,itisverydifficulttokeepthekindofreservenecessary.Mostarchitectswillmakeeveryeffort tosupport theclerkofworks,butsometimesaclerkofworkswillgotoofar.Thenightmarescenarioisforanarchitect,arrivingonsitetoinspectthework,toinstructthesiteagentthatcertainworkisunsatisfactoryonlytobeinformedthattheclerkofworkshasalreadyapprovedoracceptedit.Thereisnoeasywayofdealingwith thatsituation.Thearchitecthasnoalternativebuttorefertothecontracttomakeplaintothecontractor the limits of the clerk ofworks’ authority.An architect’s instructionmust beissued requiring the removal of the defectivework, and a quietwordwith the clerk ofworksisindicated.Theresultislikelytobethatthecontractorwillsubsequentlyrefusetotakeany instructionsordirections, evenofaclarifyingnature, from theclerkofworks,possiblyresultingintheprojectsufferingsomedelays.

Inordertoreducethechanceofthiskindofsituationdeveloping,itissuggestedthatthepowers and duties of the clerk of works be set out during the pre-start meeting andconfirmedintheminutes.Ofcourse,itisalwaysopentothepartiestoagreethattheclerkofworksmaygiveinstructions,andthecontractcanbeamendedaccordingly.However,the consequence is likely to be confusing for the contractor and frustrating for thearchitect. Inpractice, therecanbeonlyonesourceof instructions,and, logically, that isthearchitect.

EastHamCorporationvBernardSunley&SonsLtd[1965]3AllER619;SutcliffevChippendaleandEdmondson(1971)18BLR149;Brown&BrownvGilbertScott&Payne(1993)35ConLR120;AlexanderCorfieldvDavidGrant(1992)59BLR102;Bowmer&KirklandvWilsonBowdenPropertiesLtd,11January1986unreported.

OldschoolvGleesonConstructionLtd(1976)4BLR103.

GeorgeFischerHoldingsLtdvMultiDesignConsultantsLtdandDavisLangdon&Everest(1998)61ConLR85.

(2007)111ConLR1.

(1993)35ConLR120.

ConsarcDesignLtdvHutchInvestmentsLtd(1999)84ConLR36.

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10.

11.

Bowmer&KirklandvWilsonBowdenPropertiesLtd,11January1986unreported.

ERIvesInvestmentLtdvHigh[1967]1AllER504.

WillmottvBarber(1880)15ChD96.

(1983)1ConLR114.

(1987)43BLR63.

Chapter13

Defectsduringprogress

104CanthearchitectstipulatewhenthecontractormustrectifydefectiveworkunderSBC,orcanthecontractorsimplyleaveitalluntiljustbeforepracticalcompletion?SBCclause3.18givesthearchitectpowerstodealwithdefectsduringtheprogressoftheWorks.Therearebasicallytwokindsofdefects:thoseduetoaninadequatespecificationthatarenotthecontractor’sproblem,andthoseduetoworknotbeinginaccordancewiththecontract.Itisonlythesecondkindwithwhichthecontractisconcerned.Thearchitectmay issue instructions regarding the removal fromsiteof anydefectivework,goodsormaterials,butnothingintheclauseentitlesthearchitecttoinstructwhenthedefectsmustbe corrected. This is in accordancewith the contractor’s right to plan and perform theWorksinwhateverwayitchooses.1

If, in theopinionof thearchitect, thecontractordoesnotcomplywithina reasonabletimewithaninstructiontorectifyworknotinaccordancewiththecontract,thearchitecthastwopossiblewaystoapproachthedifficulty.Clause3.11givesthearchitectpowertoissueanoticetothecontractorgivingitsevendaysfromreceiptinwhichtocomplywithan instruction. If the contractor fails to comply, the employer may engage anothercontractor to carry out the instruction. The original contractorwill be liable for all theadditionalcostsincurredbytheemployer,whichmustbedeductedfromthecontractsum.Suchadditionalcostswill,ofcourse, includeanyadditionalprofessionalfeeschargedtotheemployerasaresultofthecontractor’sfailure.Thiswillbetherouteofchoiceinmostcases–assumingthatacoupleofthreateninglettersdonotdothetrickfirst.

Asa last resort, thearchitectmaysendadefaultnotice to thecontractorunderclause8.4.3, giving notice that the employermay terminate the contractor’s employment if itsrefusal or neglect to comply with the architect’s instruction to remove defective workresults in theWorks beingmaterially affected. This ground used to be qualified by theword‘persistent’.Thatisnolongerthecase;theimportantpointisthattheWorksmustbesubstantiallyaffected.Theparticulargroundappearstobeaimedatdefectsthatareabouttobecovereduporwhich,forsomeotherreason,wouldbeawkwardtoputright ifnotgivenpromptattention.Therefore,ifthereisnourgencyabouttheneedtomakegood,thisremedyisnotappropriateandthecontractorisentitledtoplanthemakinggoodtofitinwithitsotherwork.

Theposition is, therefore, that in principle the contractor is entitled to plan itswork,includingmakinggood,tosuititself.However,thearchitectisalwaysentitledtoinsistoncompliancewithaninstructionwithinsevendays.InseriouscaseswheretheintegrityoftheWorksisthreatened,terminationcanbeconsidered.

105Thecontractorincorrectlysetoutaschoolbuilding,butitwasnotdiscovereduntiltheendoftheprojectwhenfloortilesinthecorridorwerebeinglaid.Whatshouldbedone?Much depends on the effect of the incorrect setting out. If it resulted in the schoolencroachingovertheboundaryontoanotherperson’sland,itisvirtuallycertainthatunlessadealcanbedonewiththeadjoiningowner,theoffendingpartoftheschoolwouldhavetobe takendownandrebuilt toadifferentdesign.Thiscouldbeveryexpensivefor thecontractor,ifindeedtheproblemwasincorrectsettingoutratherthanincorrectsetting-outdrawings.

Thereareotherpossibilities.Forexample,theschoolmightsimplyhavegainedhalfametre in length without causing anyone a problem. In such circumstances, the schoolauthoritieshavemoreschooltoheatandlight,butalsoslightlymoreaccommodation.Ifthegainisminorandofnoconsequence,itistechnicallyabreachofcontractbecausethatparticular part of theWorks is not in accordancewith the contract, but both parties arelikelytoletthematterrest.Obviously,theclientwillnotbepreparedtopayfortheextrawalls,floorsandroof,andtheyshouldnotbevalued.

Atrickierdifficultyarisesifthepoorsettingoutresultsinthelossofhalfametreorintheawkwardinternalarrangementofpartoftheschool.Onequestiontheclientissuretoaskiswhytheerrorwasnotpickedupsoonerbythearchitect.Iftheerrorresultedinaninternalplanningproblem,itisindeeddifficulttoseewhyitwasnotpickedupearlierthanwhenthefloortileswerelaid.Anerrorpickedupatsuchalatestage,becomingapparentonlywhen the floor tiling pattern is disturbed, suggests that the error is purely one oflengthorbreadth.Itwillbefor thearchitect, ifchallenged, toprovideevidencethatsiteinspectionswereproperlycarriedoutandthattheaveragearchitectinthatpositionwouldnothavefoundtheerror.

Thebasiccontractpositionisthatanemployerisentitledtogetwhatisbeingpaidfor.IfIpayforblueboxes,thenIshouldhaveblueboxesandnotgreenboxes,eventhoughthecolourmaynotmatter toanyonebutme.Alongside that is the rule thatabreachofcontractentitles theinjuredpartytobeputbackin thepositionitwouldhavehadif thecontracthadbeenproperlyperformed,sofarasmoneycandothat.2However,thecourtshavemodifiedthatrathertoughposition,andtheywilltakeallfactorsintoaccountbeforeagreeingthatacontractorinthispositionmustspendlargesumsofmoney.Theprinciplethecourtsapplyisthatthebenefitprovidedbytheremedialworkmustoutweighthecostof putting it right.3 In some instances this is easy to calculate. In the Ruxley case, aswimming poolwas not built deep enough at the shallow end, but theHouse of Lordsdecidedthatdemolishingandreconstructingthepoolwasnotworththecost.

In that case, a factor was also whether the injured party would use the money toreconstruct.Ifsomethingiswithoutvalueorseriouslyreducedinvaluebytheerror,itislikely thatacourtwoulduphold its replacement.Ontheotherhand, it isunlikely thata

court would instruct wholesale demolition purely on aesthetic grounds. Therefore,although the baseline is that the contractor is responsible for its errors, care should beexercisedbeforetakinglegalactioniftheerrorsareexpensivetocorrectforlittleapparentbenefit.

106IfasupplierpersuadestheemployertouseaparticularproductintheWorksanditsubsequentlyfails,hastheemployeranyredress?Architects sometimesspecifyproductswhich fail to liveup toexpectations.Plainly, thecontractor is not responsible if a product supplied and installed exactly as specifiedsubsequently fails. It is awkward for an architect to avoid liability in such cases. Thearchitecthasadutytocarefullycheckthesuitabilityofproducts.4Evenifthearchitecthasreadthesupplier’s technical informationbeforespecifying, itwillbedifficult topinanyblameonthesupplier,whomaywellsay,correctly,thattheywerenotawareoftheprecisecircumstancesinwhichtheproductwouldbeused.Theemployerhasnocontractwiththesupplierandprobablyhasnothadanydirectcommunication,anditisthearchitectwhomtheemployerwouldsueforadefectinthedesignand/orspecification.Thearchitectwillhave difficultymaking a claim against the supplier because the supplier has a contractonlywiththecontractor,notthearchitect,forthesupplyoftheproducts.

If the supplier has represented to the employer directly that its product would besuitable for a particular specified application, the position is likely to be different. Asupplierthatpersuadesanemployertouseitsproductbysayingthatitwillbesuitablefora particular purpose is giving a warranty in return for which the employer is givingconsiderationintheformofanundertakingthatthecontractorwillusetheproduct.Iftheproductsubsequentlyfailstoliveuptothesupplier’swarranty,theemployerwillhaveadirectclaimagainstitfordamages.5

107WhatcanbedoneunderSBCifaseriousdefectariseswhentheWorksarenearlyfinishedifthecontractordeniesliabilityandtheemployerisdesperatetomovein?This is thekindofquestionwhichcropsup frequentlyand towhich there isnoanswerwhichwillcompletelysatisfytheemployer.HereisasituationwheretheWorksareonthebrinkofbeingcertifiedasachievingpracticalcompletion,butpracticalcompletioncannotbecertifiedifthereisaknowndefectpresent.Therefore,practicalcompletioncannotbecertified in this instance. It is established that the contractor has an implied licence tooccupy the site of the Works until practical completion. Therefore, the employer isprecludedfromresumingoccupation.Tocompoundtheproblem,thecontractorisdenyingliabilityforthedefectandthereisnoimmediateprospectofaresolutiontothedifficulty.

Inorder to findaway forward, it is important tobreakdown theseveralpartsof theproblem. Contractually, the key is the serious defect. That must be rectified beforepracticalcompletioncanbecertified.Thefirstandobviousstepisforthearchitecttoissueaninstructionunderclause3.18.1.Thissomewhatawkwardlywordedclausereferstotheremoval from site of work, materials or goods which are not in accordance with thecontract.Thisistheclausethearchitectmustuseinordertosecurethecorrectionofthedefect. Presumably the architect has already issued such an instruction because thecontractorhasmadeclearthatitdoesnotintendtoremedythedefect,atanyrateunlessitispaid.Thearchitectshouldissueanoticeunderclause3.11,whichcansimplybeintheformofalettermentioningtheclause,requiringthecontractortocomplywiththeearlierinstructionwithinsevendaysofreceipt.Becausereceiptistheimportantoccurrence,thenoticeisbestsentbyspecialdeliveryposttoensuredeliverybythenextbusinessday.Ifthecontractorcomplies,all iswell.If itdoesnotcomply, theemployercanthenengageanother contractor to rectify thedefect.Theoriginal contractorwill be liable for all thecosts incurredby theemployer, and thesecostscanbededucted from thecontract sum.The architect can then immediately issue the certificate of practical completion and theemployercanmoveintothebuilding.

Ontheassumptionthatthedefect,althoughserious,wouldnotposeadangertohealthor safety, the employer could takematters in hand and ask the contractor to consent topartial possessionof thewholeof theWorks.On receipt of such consent, the employerwouldsimplyretakepossessionandpracticalcompletionoftheWorkswouldbedeemedtohaveoccurred.6Thatwouldstillleavetheproblemoftheseriousdefect,butitcouldbedealtwithafteroccupationbyissuinganinstructionfollowedbyacompliancenotice.Aproblemwith this approach is that after practical completion of theWorks (deemed orotherwise), the architect must issue an interim certificate releasing the first half of theretention(clause4.20).Ifthereleasewouldleavetheemployerwithinsufficientfundstodealwiththeseriousdefect,itmaybenecessaryfortheemployertoissueapaylessnoticeinrespectoftheinterimcertificateforthecostofrectifyingthedefect.

It isunlikely that thecontractorwould refuseconsent topossession, firstbecause thecontract provides that such consentmust not be unreasonably delayed orwithheld, and

secondbecausedeemedpractical completion starts the rectificationperiod, bringing thecontractor’sWorks insurance to an end and ending the period during which liquidateddamagescanbeincurred.

108Ifthecontractorisliableforaveryseriousdefect,mustitdowhatevertheemployerrequirestocorrectit?AcommonproblemconcernswhatremedyisappropriatewhenaseriousdefectoccursintheWorks.Smalldefectsdonottendtocauserealproblems.Ifawindowisdefectiveoradooriswarped,itisclearthatthecontractormustreplacethewindowordoorwithanewone,anditisseldomthatthecontractortriestoarguethattheyneednotbereplaced.Theprinciple isplain: If there is abreachof contract, suchas abuildingdefect, the injuredparty(theemployer)mustbeputinthesameposition,sofarasmoneycandoit,asifthebreachhadnotoccurred.Inpractice,however,thepartiescaneasilyfailtoagreewhatisappropriate when serious defects occur which are expensive to rectify. The contractornaturallywishestoapplythecheapestpossibleremedy,whiletheemployerwantstomakesurethattheremedyis100percenteffective.

ThecourthadtodealwithjustsuchasituationinAlbertBartlett&Sons(Airdrie)LtdvGilchrist&LynnLtd,7 inwhichthemajordefectwasabadlyleakingroofoverapotatoprocessingandpackagingplant.Theroofconstructionwasfactoryappliedplasticcoatingonmetalsheetroofing,withcorrugatedplasticsheetsforlighting.Theevidencewasthatthe roofwasallowingwater into thebuildingevenas itwasbeingconstructed, and thesituationdidnotimproveaftercompletion.Thewaterpenetrationwasthroughvirtuallyallthe end laps of the panels.Therewas alsowater vapour condensing in the double skinrooflights. The parties arrived in court because they could not agree on the mostappropriate remedy for the defects. For the purpose of the proceedings, the contractoradmittedbreachofcontract.Asthebuildingwasinconstantuse,itwasagreedthatitwasnotfeasibletostripitandre-roof.Theemployerhadadvicethatthewholeroofshouldbeovercladinasinglemetalskinonametalgridabouttwoinchesabovetheexistingroof.However,thecontractormaintainedthataperfectlysatisfactoryjobcouldbeachievedbyapplyingaliquidwaterproofingsystemtothepartsoftheroofwhichleaked.

The cost of overcladding was at least £1.3 million, whereas the cost of the liquidtreatmentwasonly£145,000.Thecourtheldthattheemployerhadadutytomitigateitsloss and that the cost of the remedy should not outweigh the benefit. A reasonableapproach must be used. Other courts have held that where two systems of repair areequallyeffective,thecheapestmustbechosen.8Inthiscase,notonlywerethecostsoftheopposingapproachesvastlydifferent,buttheovercladdingsystemhadnotbeenproperlyworked out and therewas a distinct possibility that the costmight eventually reach £2million.Theliquidwaterproofingsystemwouldwork,buttheovercladdingwasdoubtful.Moreover, the two proposals had a very similar projected life of about 25 years beforemaintenance would be required. Therefore, the court decided in favour of the liquidwaterproofing.

In most instances, the cost of remedial work will not be a factor, and the averagescheduleofdefectsisfairlymundane.However,itisusefultoknowthatwhenaseriousfaultoccurs,thecourtstakeasensibleapproachtothesolution.

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GreaterLondonCouncilvClevelandBridge&EngineeringLtd(1986)8ConLR30.

RobinsonvHarman(1848)1Ex850.

RuxleyElectronicsandConstructionLtdvForsyth[1995]3AllER268.

RichardRobertsHoldingsLtdvDouglasSmithStimsonPartnership(1988)22ConLR60.

ShanklinPierLtdvDetelProductsLtd[1951]2AllER471.

SkanskaConstruction(Regions)LtdvAnglo-AmsterdamCorporationLtd(2002)84ConLR100.

[2009]CSOH125.

GeorgeFischerHoldingsLtdvMultiDesignConsultantsLtdandDavisLangdon&Everest(1998)61ConLR85.

Chapter14

Defectsafterpracticalcompletion

109Thecontractorhasre-laidadefectivefloorattheendoftherectificationperiod.Canthecostofre-layingthecarpetbedeductedfromthefinalaccount?UnderSBCclause2.38and similar clausesunderother JCTcontracts, the contractor isentitledtoreturntositetomakegoodthosedefectsnotifiedtoitinthescheduleofdefectsdeliveredbythearchitectattheendoftherectificationperiod.Thedefectsinquestionaredefects,shrinkagesandotherfaultsthatareduetomaterialsorworkmanshipnotbeinginaccordancewith thecontractor toafailureby thecontractor tocarryout itsobligationsunderthecontractor’sdesignedportion.Anappropriatedeductionistobemadefromthecontractsuminrespectofthosedefectswhichthearchitect,withtheemployer’sconsent,hasinstructedthecontractornottomakegood.

Itisassumedthatthecarpet,towhichthequestionrefers,waspurchasedandlaidbytheemployerafterpracticalcompletionoftheWorks.Thedefectsarebreachesofcontractonthepartof thecontractor.Thequestioniswhether thecontractor is liablefor thecostofhaving the carpet professionally re-laid after the remedial work. The answer to thequestiondependsontheprincipleofforeseeability.Inotherwords,wasitobvioustothecontractoratthetimethecontractwasexecutedthatadefectintheflooringwhichwouldhavetobeputrightbythecontractorcompletelyre-layingthefloorwouldalsorequirethere-layingofcarpet,installedbytheemployerafterpracticalcompletion,ofthesametypeandqualityaswasinfactthecase?Iftheanswertothatquestionis‘Yes’,thecontractorisliableforthecostofre-layingthecarpet.1However,thatcostcannotbedeductedfromthefinalaccountbythearchitectinthefinalcertificate,becausethecarpetisnotpartoftheWorks.Theemployerhasthechoiceeitheroftakingactionagainstthecontractorforthecost, or – the simplermethod–of deducting the cost from the amount due in the finalcertificate after having served the appropriate pay less notices under clauses 4.13 and4.15.4.

If itwas foreseeable that theemployerwould layacarpet,butnotof suchqualityorrequiringsuchcareinlaying,thecontractorwouldbeliableonlyforthekindofcoststhatwouldbereasonablyforeseeable.2

110ThecontractorsaysthatithasnoliabilityunderICfordefectsappearingaftertheendoftherectificationperiod.Isthatcorrect?The rectification period in all standard building contracts, despite its name, does notsignifythemaximumperiodduringwhichthecontractorisliableforrectifyingdefects.Itisthereforthecontractor’sbenefit.TherectificationperiodinICisanexample.Underthetermsofthecontract,thecontractor’sobligationistoconstructthebuildinginaccordancewith the contract documents (clause 2.1), which probably consist of drawings and aspecification.Ifthecontractordoesnotcomplywiththecontractdocuments,amendedifappropriatebyarchitect’sinstructions,itisinbreachofcontract.

When the contractor offers the building to the architect as having reached practicalcompletionandthearchitecthasissuedacertificatetothateffect,thebuildingshouldhavenovisibledefectsandthereshouldbeverylittleworklefttocomplete.3Thecontractor’slicencetooccupythesiteexpiresatpracticalcompletionanditmustleave.Ifanythingisfound at this point to be not in accordancewith the contract documents and architect’sinstructions,thecontractorisinbreachofcontract.

If therewas no rectification period, the employerwould have the right to notify thecontractorof thedefects,seekcompetitivequotations fromothercontractors formakinggood, have the defects corrected by the lowest tenderer, and recover from the originalcontractorasdamagesthetotalcostofsuchmakinggood,includingprofessionalfees.Theemployerwouldhavetheoptiontorequestthecontractortomakegoodthedefectsatitsowncost,butintheabsenceofarectificationperiod,theemployerwouldnotbeboundtodosoandthecontractorwouldnotbeboundtomakegood,althoughitwouldbeliableforthe breaches of contract. The contractor’s liability would extend for six years frompracticalcompletion(twelveyearsif thecontractwasexecutedasadeed)inaccordancewiththeLimitationAct1980.

The rectification period (formerly the ‘defects liability period’ under previous JCTforms of contract) was introduced to give the contractor the right to return to site andmakegoodanydefectsnotifiedattheendoftheperiod.Itisobviouslylesscostlytothecontractortomakegooditsowndefectsthantopayforothercontractorstodothework.Iftheemployerdoesnotwantthecontractor tomakegoodsuchdefects, thearchitectmayissue instructions to thateffect to thecontractor,andan ‘appropriatededuction’ is tobemadefromthecontractsum(clause2.30).Unlessthereasonfortheinstructionsconcernssome serious fault on the part of the contractor, such as failure to act despite severalreminders, thedeductionfromthecontractsumcanbeonlywhatitwouldhavecost thecontractortomakegood.4

It isclearfromthecontract that thecontractor’srighttoreturntositeextendsonlytothose defects that appear during the rectification period. Any defects that appearafterwardsarestillbreachesofcontract,andthecontractorisofcoursestillliableforthemtotheendofthelimitationperiod.Theemployerisentitledtodealwiththemasthoughtherewasnorectificationperiod,asnotedabove.5

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111Arelatentdefectsallthedefectsdiscoveredduringtherectificationperiod?No,quitethereverse.Defectscanbeplacedintotwocategories:

patentdefects,and

latentdefects.

A patent defect is a defect which is visible or which can be discovered on reasonableinspection.Acourthasexplainedpatentdefectslikethis:

Where,inthenormalcourseofevents,asurveyorwouldbeengagedinthesurveyofa building for a purchaser, and with the exercise of due diligence, that surveyorwouldhavediscoveredadefect,thatdefectispatentwhetherornotasurveyorisinfact engaged and, if engaged, whether or not the surveyor performs his taskcompetently.6

A latent defect is a defect which is hidden and cannot be discovered on reasonableinspection.Acourthassaidthisaboutlatentdefects:

Theonlyquestioniswhetherby‘latent’ismeantthatyouhavetouseeverypossiblemethodtodiscoverwhetheritexists,orwhetheryoumustusereasonablemethods…I think it means such an examination as a reasonably careful man skilled in thatmattermightmake.7

Therefore,it ismoreaccuratetosaythatlatentdefectsareallthedefectsnotdiscoveredduring the rectification period, provided that the architect has used due diligence ininspecting.

112Cantherectificationperiodbeextendedtodealwithdefectsdiscoveredandrectifiedattheendoftheperiod?This is actually a very good idea, but it is not provided for under the JCT contracts.However, there is provision under GC/Works/1 clause 21. This contract refers to therectification period as the ‘maintenance period’. This is amisnomer, and a contractor’sobligationsunder thiscontractarebroadlysimilar toJCTcontractswherearectificationperiodisspecified.IfGC/Works/1reallydidrefertoamaintenanceperiod,itwouldimplythatthecontractorwasobligedtokeepthebuildinginpristinecondition.

Clause21divergesfromtheequivalentclauses inJCTcontractsbecauseclause21(4)provides that themaintenanceperiodwill apply in full to remedialworks from thedatethat they aremade good.Therefore, if a defect is notified to the contractor a few daysbeforetheendofa12-monthmaintenanceperiodandthecontractordealswithit,afresh12-month period will begin to run for that remedial work. The position could getextremelycomplicatedifnumerousdefectsarerectifiedoveralengthyperiod.Underthiscontract, the architect has to keep a careful record of the dates defects are notified andmadegoodinordertoproperlytrackthenewmaintenanceperiods.Anemployerwasonceheardtosaythatsheintendedtokeepthewholeofthesecondhalfoftheretentionbecauseshecouldnotbesurethattherectificationworkwascarriedoutproperlyandsheneededsomecashinhandincaseshehadtofundfutureremedialworkherself.Needlesstosay,thatwouldbeabreachofcontract,althoughsuchreasoningwouldbeunderstandable insomeinstances.

113IfthereisaDBcontractandthearchitecthasbeennovatedfromtheemployertothecontractorattenderstage,cantheemployeraskthesamearchitecttopreparealistofdefectsafterpracticalcompletion?If the novation has been carried out properly, it has the effect of ending the contractbetweentheemployerandarchitectandsubstitutingacontractbetweenthecontractorandthearchitectonessentially thesame terms,albeitminorchangesmaybeneeded todealwith thedifferentcircumstances.Theemployer’sand thearchitect’sduties toeachotherareatanend.Afternovation,thearchitect’sdutyisowedtothecontractoralone.

Novation of the architect’s contract is never a good idea, because the employer andarchitectwillhavebuiltuparapportduringthepreliminarystagesoftheappointmentanditisdifficultforbothpartieswhenthearchitectchangesallegiance.Indeed,thereisaclearconflict of interest for the architect,mitigated only by the fact that both employer andcontractorhaveagreedtothechange.Afternovation,itisoftendifficultfortheemployerto understand that the architect is no longer his or her architect and advisor, and theemployermayaskthearchitecttodothingswhicharenolongerpossible.Forexample,ifthearchitectagreedtoprepareathoroughlistofdefectsafterpracticalcompletion,itcouldbesaidtobeactingagainstthecontractor’sinterests.

TheDBcontractprovidesforanemployer’sagenttobeengagedbytheemployer.Itistheemployer’sagentwhoisresponsibleforcarryingouttheinspectionandpreparingalistofdefectsaftertheendoftherectificationperiod.

114WhatifanarchitectforgetstoissuealistofdefectsattheendoftherectificationperiodunderSBC?Thishappensmoreoften thanmightbe imagined. If thearchitect forgets toprovide thecontractorwiththelistofdefectswithin14daysfromtheendoftherectificationperiod,the most obvious thing is for the architect to issue the list just as soon as he or sheremembers.Althoughthearchitectisinbreachofdutyunderthecontract,thereisagoodchancethatthecontractorwillsimplygetonwiththeremedialwork.Thecontractormayrefusetodothework,arguingthatitisundernoobligationtoattendtoanydefectswhicharenotifiedmorethan14daysaftertheendofthedefectsliabilityperiod.Thecontractormaybeunderthecommonbutmistakenimpressionthattheendoftherectificationperiodmarkstheendofitsliabilityfordefects.Notso.Thecontractor’sobligationistocarryoutandcompletetheWorksinaccordancewiththecontract.Ifitfailstodothisitisinbreachofcontract,asmaybeevidencedbydefectsappearingduringtherectificationperiod.

The contract provides for the contractor to return to site and rectify the defects. If itdoesnotwishtotakeadvantageofthisopportunity,theunrectifieddefectsamounttoanunremediedbreachofcontract.Thecontractorisnotobligedtorectify,butitisliablefordamagesforthebreach.Ifthecontractordeclinestorectifythedefects,theemployermayengage others to correct the defects and recover the cost. As a result of the architect’sfailure to issue the list within the contractual timescale, however, the employer cannotrecoverthewholeofthecostofrectification.Strictly,theemployermayonlyrecoverwhatitwouldhavecostthecontractortocorrectthedefects.8Inpractice,theemployerwouldsimply issue a pay less notice and calculate money due by deducting the cost of theremedialwork.Thatavoidspayingthemoneyandhavingtosueforitsreturn.

MWclause2.10andMWDclause2.11makeprovisionforarectificationperiod.Thereisnospecificrequirementforascheduleofdefects,butsimplyfornoticetobegivenbythe architect,who it seems can require defects to bemadegood at any timeduring theperiod.Itisgoodpracticetoissuealist,andprovidedthatthearchitectisnotverylateindoingso,thecontractorprobablywillhavelittlegroundforcomplaint.

115Isthereatimelimitwithinwhichacontractormustremedyalldefectsnotifiedattheendoftherectificationperiod?SBCclause2.38statesthatthecontractormustmakegoodthedefectswithinareasonabletime.Someother contracts donot include any reference to thematter at all.Where thecontractissilent,itislikelythatthelawwillimplyatermtotheeffectthatthecontractormustrectifythedefectswithinareasonabletime.Thequestionthenisthemoredifficultoneof‘whatisareasonabletime?’Itiseasy,andaccurate,tosaythatthedefinitionofareasonable timedependsonall the circumstances, but it is notveryhelpful.Ultimately,whatisimportantiswhattheadjudicator,thearbitratororthejudgethinksisreasonableinanygivensituation.

Circumstanceswhichwillbe taken intoaccount indetermininga reasonabledeadlinefor making good are the number of defects and the difficulty of rectification. Ifrectification requires seriousopeningupof the fabric, itmaywell take some time.Theurgency of a particular defect will also be a factor, as will other work in which thecontractor is engaged.The fact that a contractor is busywith otherwork is unlikely toweigh heavily with an adjudicator in view of the fact that each defect is, of course, abreach of contract. Highly specialised work may take longer to organise and rectifybecauseof thedifficulty in securing theappropriate sub-contractor.Asa ruleof thumb,onemightsaythatamedium-sizedcontractordealingwiththeaveragelistofdefects(i.e.onewithout any really seriousproblems) at the endof a contract to construct amodestdetachedhouse should startworkwithina coupleofweeksafter receiving the scheduleandfinishrectifyingthedefectsafterafurthertwotofourweeksofreasonablycontinuouswork.Obviouslyeverythingdependsonthetypeofdefect.

Acontractorwhodoesnotproceedwiththeremedialworkshouldbegivensevendaysnoticetocommence,afterwhichthearchitectshouldadvisetheemployerabouttherightto instruct the defects not to bemade good. The employer should exercise the right toengage others, and the architect should then make an appropriate deduction from thecontractsumofthewholecost,includingprofessionalfees,involvedingettingthedefectsmadegood.

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116Mustthecontractordealwithdefectsattheconvenienceoftheemployer?It isrelativelycommonforthecontractor tobeexpectedtoworkaroundtheemployer’sschedulewhenrectifyingwork.Theemployermaysaythataccesswillbeallowedonlyoncertain days, and perhaps only during certain hours on those days.Most standard formbuildingcontracts saynothingabout such things, andwhile itwill beunderstood that acontractor returning to sitewill not be allowed a completely free runof the building atsuchtimesasitseesfit,itwillbeimpliedthatthecontractorisentitledtoaccesstocarryouttheremedialworkatreasonabletimes.Itmaysuitbothpartiesforthecontractortodotherectificationinsmallparcelswithminimumdisruptionor,alternatively,todisposeofthewholeofthedefectsinonecontinuousperiodofhighactivity.Eitherapproachcouldbe reasonable, dependingon the circumstancesof bothparties.Theone certain thing isthat it is to theadvantageofbothparties to sortouta straightforward timetablewithoutrecoursetolegalactionwhichmayresultinanorderwhichsuitsneitherparty.

Iftheemployerrefusesaccessatallexceptunderunreasonableconditions,theemployerwillbeinbreachofcontract.Aftergivingnoticetotheemployer, thecontractormaybeable to accept theemployer’s actionsas a repudiatorybreachenabling thecontractor toaccepttherepudiationandbringthecontractor’sobligationstoanend.Theemployermaystillbeabletoclaimfromthecontractorwhatitwouldhavecostthecontractorifithadbeenallowedtomakegoodthedefects.However,inthosecircumstancesacourtorothertribunalmaybemoreinclinedtoacceptthecontractor’sestimateofsuchcostratherthantheemployer’s.Anemployerwhomakesanarrangementwiththecontractortoenterthepremisestomakegooddefectsandthenrefusesentrywithoutagoodreasonisprobablyinthesameposition.

HWNeville(Sunblest)vWilliamPress&Son(1982)20BLR78.

HadleyvBaxendale(1854)Ex341.

WestminsterCorporationvJJarvis&Sons(1970)7BLR64.

WilliamTomkinsonandSonsLtdvTheParochialChurchCouncilofStMichael(1990)6ConstLJ319.

Pearce&HighvJohnPBaxter&MrsBaxter[1999]BLR101.

BaxallSecuritiesLtdandAnothervSheardWalshawPartnership(afirm)&Others(2002)83ConLR164.

Charles Brown&Co v Nitrate Producers’ Steamship Company (1937) 58 Lloyd’s Rep 188. The definitionwasadopted in a construction dispute in Victoria University of Manchester v Wilson and Womersley and Pochin(Contractors)Ltd(1984)2ConLR43.

Pearce&HighvJohnPBaxter&MrsBaxter[1999]BLR101.

Chapter15

Valuationandpayment

117UnderMW,canthecontractorinsistonagreementonpricebeforecarryingoutthework?MWdealswithinstructionsinclause3.4.Variationsandthevaluationofsuchinstructionsare covered in clause 3.6.Clause 3.6.2 states that the architect and the contractormustendeavourtoagreeapricebeforethecontractorcarriesoutaninstruction,butclause3.6.3sets out the architect’s power to determine the value of work if no agreement can bereached.

Somecontractorshavehadtheunfortunateexperienceofcomplyingwithaninstructionandwaitingalongtimefororneverreceivingpayment.Wheretheamountsarerelativelysmall, it isnousearguingthat thecontractorhastheoptionofseekingadjudication; thecostwouldbeprohibitive.

The contractor can certainly insist on endeavouring to reach an agreement with thearchitectfirst,butitisimpossibletoinsistthatanotherpersonagreesanythingtowhichheorsheobjects.Clausesrequiringthearchitectandthecontractortotrytoagreesomethingarenotmuchuse.Canthecontractorarguethatthearchitectdidnot‘endeavour’toagreeaprice.Yes,ofcourse,butitwillbeawellnighimpossibletasktoprove.Thearchitectneedonly say that they could not agree on the price. It is as simple as that. The contractorcannotrefusetocomplywithaninstructionbecausetherehasbeenafailuretoagreetheprice.Itshouldnotbeforgottenthatthefactthatthecontractorhascarriedoutadditionalwork does not automatically entitle the contractor to payment. There must be aninstructionproperly issuedunder the termsof thecontract. If the instruction isproperlyissued,thecontractorshouldnotbeoutofpocket.

118Isthecontractorobligedtosticktoalowrateinthebillsofquantitiesiftheamountofworkissubstantiallyincreased?Contractorsoccasionallyinsertthewrongrateinbillsofquantities.Sometimesitisdoneonpurpose.Buteveniftheratecanbeconclusivelydemonstratedtobeinaccurate,itisofnoconsequence;therateorpriceinthebillsmustbeusedasthebasisforvaluation,anditcanbeadjustedonlytotakeaccountofchangedconditionsand/orquantity.ThecontractorhascontractedonthebasisthatvariationsmaybeorderedintheWork,andtheemployerhascontractedtopayforthemonthisbasis.Neitherpartycanavoidtheconsequencesonthegroundsthatthepriceinthebillswastoolow.Thecontractor’sonlyhopeistoshowthat the rate in question is narrow in its application and therefore not capable of beingapplied if the amount increases. The matter was settled by the courts long ago1 andrevisitedmorerecentlywithessentiallythesameresult.2Acontractorwillsometimestakeagamblebyputtingahighrateonanitemofwhichthereisasmallquantityoralowrateonanitemofwhichthereisalargequantityintheexpectationthatthequantitiesoftheitemswillbeconsiderablyincreasedordecreased,respectively.Ifthecontractor’sgamblesucceeds,itwillmakeaniceprofit.Ifitfails,thecontractormayloseaconsiderablesum.Thisapproachisnotunlawful,butratherpartofacontractor’scommercialstrategy.3

119Tenderswereinvitedonthebasisofabillsofquantities.Aftertendering,thethreelowesttendererswereaskedtopriceabillofreductions.Theoveralllowesttendererwasappointed.DuringtheprogressoftheWorks,thequantitysurveyorwantstovalueusingpricesfromeitherthebillofreductionsorfromtheoriginalbillsofquantities,whicheverislowest.Iftenderscomeintoohigh,itiscommonpracticeforthequantitysurveyortobeaskedifthetenderscanbereducedbyvaryingthebillsofquantitiessoastochangesomeitemsandomitothers.Thelowesttenderershouldbeapproachedfirst,andifareducedbillsofquantities is prepared, it is the lowest tendererwhich should be asked to price.Only ifnegotiations with the lowest tenderer fail should it be necessary to approach the nextlowest tenderer. The procedure outlined in the question could result in severe financialrepercussionsfortheemployeriftheoriginallowesttendererisnotappointed.

Theobjectofproducingabillofreductions(sometimescalledanaddendumbill)istoreducetheoriginaltenderfiguretosomethingwhichtheemployerfindssatisfactoryandwhichthenbecomesthecontractsum.Thebillofreductionsisoftenproducedfollowingnegotiationswiththelowesttendererinordertorecordtheagreedchangestothebillsofquantities.Thequantitysurveyorisnotentitledtochoosethelowestof thepricesintheoriginalbillorinthereductionbillinordertovaluework.Thereasonisquitesimple:Thecontractsumhasbeenagreedanditisbasedontheoriginalbillsofquantitiesasamendedby the bill of reductions. The parties have agreed that the contractorwill carry out theWorks shown in thebill as amended, and the employerhas agreed topay the amendedprice, which is then the contract sum. Therefore, the contract sum is comprised of theoriginalbillasamended,andit isonlytheamendedfigureswhichthequantitysurveyorcanuse.

It may be thought that the quantity surveyor is actually correct, and saying that theoriginalbillasamendedmustbeusedissimplyaquibblewithnosubstance.Thatwouldbetomisunderstandwhathappenswhenthecontractorpricesareductionbillornegotiatesonitstender.Itdoesnotfollowthatthecontractorwillreducealltheindividualprices.Inorder to achieve an overall reduction in the price, the contractormaywish to increasesomepricesandreduceothers.Thereareseveralreasonswhythecontractormightdothis.Itmightbebecauseitcanmakeagreaterprofitonsomeitemsthanothers,oritmaybethatthereisthepossibilityofincreasinginquantitycertainisolateditemsonwhichalargeprofitcanbemade.Amodestincreaseintheratesforsuchitemsmayeventuallyrecouptheprofitlostbyreducingtheratesforotheritems.

120UnderSBCWithQuantities,thecontractorputinaveryhighrateforanitemofwhichtherewereonly3inthebillsofquantities.Itwassubsequentlyfoundnecessarytoinstructover200oftheseitems.Isthequantitysurveyorinordertoreducetheunitrate?Theanswertothisquestionisvirtuallythesameastheanswertoquestion118.It is thecontractor’srighttopricethebillsinanywayitchooses.However,thecontractorrunstheriskthatlow-priceditemsmaybeincreasedinquantityandhigh-priceditemsdecreasedinquantity. If thecontractor is luckyandputsahighpriceonan itemthat issubsequentlyvaried so that much more of the item is required, the contractor gets a windfall. Thequantity surveyor is entitled to reduce the unit rate only by a reasonable percentage toreflecteconomyofscale,butfromthestartingpointofthecontractor’sbillrate.

121Cananarchitectwhodiscoversthatthecontractorismaking300percentprofitonsomegoodsitiscontractedtosupplyunderMWdoanythingaboutit?Anarchitectmightbequiteannoyedtodiscoverthatacontractor,whosetenderhasbeenaccepted,ismakingalargeprofitonsomeitems.EvenwherethearchitectisdesignatedasthepersontovaluevariationsunderMWorMWD,thearchitectrarelygetstoknowtheprofit margin because the only relevant document will be the priced specification or ascheduleofrates.

Occasionally,thearchitectdoesgettoknowthebuildupofsomeoftherates,andthatis when the nasty surprises occur. Generally, it is unreasonable for the architect to getupset ifacontractor ismakinga largeprofit. Itmustbe remembered that thecontractorhaswonthecontract,presumablyonthebasisof thelowestoverall tender.Therefore, iftheprofitmarginonsomeitemsishigh,itislikelytobecorrespondinglylowonothers.Whencontractorssubmittenders,theyeffectivelytakeagamble.Theyhavetopitchtheirtendersatalevelthatwillgivethemareasonablereturn,butnotsohighthattheylosetheprojecttoanothertenderer.

Aftercarefullyconsideringtheprojectandthesite,acontractorwilllookforitemsthatarefewinnumberbutwhichcanfairlyconfidentlybeexpectedtoincreasesubstantially.Theseitemswillbegivenhighprofitmarginsonthebasisthatitwillnotaffectthetotalpriceverymuchbutmayeventuallynetalargeprofit.Ontheotherhand,numerousitemsthatcanbeexpectedtobereducedorevenomittedaltogethercanbepricedatalowprofitmargin,orevenoccasionallyataloss;theseitemswillhaveabigeffectonthetotalprice,butifomittedthepossiblelosswillbeomittedalso.Itisagamblebecausethecontractormaybewrongaboutitsexpectations.Thisapproachhasbeenacceptedasnormalpracticebythecourts.4

The architect can do nothing about the high profit margin if the tender has beenaccepted. The priced specification is part of the contract, and the architect must haveregardtoitwhenpricingvariations.Architectsbecomingtooenragedatthethoughtofthe300 per cent profit should consider whether theywould want to takemeasures if theydiscoveredthatacontractorwasmakinglittleornoprofitatall.

122Whatisthesignificanceofretentionbeingintrust?Retentioniswhenanamountiswithheldfromsumsotherwisecertifiabletothecontractorto serve as a safeguard against the possibility of defective work or materials or evenfailuretocarryouttheWorksbythecontractor.Itisusuallytermeda‘retentionfund’.Theamountretainedisusually3percent(orsometimes5percentofsmallervaluecontracts)of the work properly executed by the contractor. It is accumulated by deducting theappropriatepercentagefromthevaluationofworkateach interimpayment.SBCclause4.18.1,DBclause4.16.1andACAclause16.4allstatethattheemployer’sinterestisastrustee.Notallcontractscreateatrustfundfortheretention.TheretentionfundundertheIC,ICD,MWandMWDcontractsisnotheldintrust.

Wheresomeone is inapositionof trust, thatpersonhasaduty toexerciseanyrightsandpowersfor thebenefitof thepersonforwhomthe trustwascreated.Somebuildingcontracts, such as SBC in clause 4.18.1, provide that the employer’s interest in theretentionmoniesisfiduciaryasthetrusteeforthecontractor.Theclausesoftenstipulatethattheemployerhasnoobligationtoinvesttheretentionmoneyretained.Thelegaleffectof thiswording is doubtful and appears to be contrary to theTrusteeAct 1925 and theTrusteeInvestmentsAct1961,whichimposeadutyonatrusteetoinvesttrustmoniesinspecifiedinvestments.

Many standard form contracts provide for the employer to set themoney aside in aseparatebankaccountat therequestof thecontractor.Thisreflectsarequirementof thegenerallawwheneverthecontractprovidesthattheretentionmoneyistobeheldintrust.Therequirementapplies in lawwhetherornot thecontractoractuallymakesa request.5

Theaccountnameshouldmakeitveryclearthatit isadesignatedtrustaccount6andbeveryclearastotheidentityofthebeneficiary.Itisgoodpractice,althoughnotprescribedin the contract, for the employer to certify the action to the architect. The purpose ofholding the retention in trust is to safeguard the contractor’smoney in the event of theemployerbecominginsolvent.Therefore,theobligationtosettrustmoneyasidecannotbeovercome by deleting such clauses. The court would simply imply a clause to similareffect.

123Isthereaproblemfortheemployerwhoassiststhecontractorbymakinganadvancepayment?SBCclause4.8provides that theemployermay,but isnotobliged to,makeanadvancepaymenttothecontractor.Theideaisfairlystraightforward.Ifboththeemployerandthecontractoragreethatanadvancepaymentistobemadebytheemployertothecontractor,theamountagreedandthedateforpaymentmustbeinsertedinthecontractparticulars,togetherwithaschedulesettingoutthetimesandamountsforrepayment.Thisisachievedbythearchitectdeductingthemonthlyamountfromtheamounttobecertified.TheRIBAstandard certification formsmake express provision for the insertion of this repaymentsum.Aformofbondisboundintothebackofthecontract,andit isusedtoprotecttheemployerifthecontractorfailstorepaytheamountadvanced.Thecontracthasadefaultposition that the bond is required unless expressly stated otherwise. It is difficult toenvisage an advance payment situation in which a bond would not be required. TheprovisionsofSBC,IC,ICDandDBarevirtuallyidentical.Thereisnoadvancepaymentprovision inMWorMWD.Theprovisionsdonot applywhere the employer is a localauthority. It is not clear why that should be the case, especially since many localauthoritiesseekwaystodisposeofexcessmoneybeforetheendofthefinancialyearandhavetomakeamendmentstothestandardformcontractstoallowadvancepaymenttobemade.

Thedangersofadvancepaymentdonotappeartobegreatprovidedthattheemployerinsistsonabondbeingtakenout.Withoutabond,thedangeristhat,havingreceivedthepayment,thecontractorbecomesinsolventbeforetheprojectisfinishedandtheemployerloseshisorhermoney.Where there isabondand thecontractordefaults, theemployersimplyrequeststhesuretytopaytheamountforwhichthecontractorhasdefaulted.Ifthecontractorbecomes insolvent, theemployerwillcontinue to receive the repayments, theonlydifferencebeingthattheywillhavetoberequestedatthetimeofeachcertificate.

124Ifworkisbeingdoneonadayworkbasis,canthetimeclaimedbereducedifthequantitysurveyorthinksthatthecontractorhastakentoolong?Thewholetopicofdayworksisthesubjectofmuchmisconception.Moststandardformsof contract provide for dayworks only as an option to be used if the normal valuationmechanism is not appropriate. It bringsup the rear in thevaluation rules becauseworkdone on a daywork basis generally costs more than work valued in any other way.Quantity surveyors tend to be frustrated by this state of affairs and use their ownexperiencetoreducethetimeclaimedifitappearstothemthatitislongerthanitshouldbe.Itisinthoselastfivewordsthatthemisconceptionlies.

Ifthepartieshaveagreedthatpaymentistobemadeonadayworkbasis,thequantitysurveyor has no right to reduce the hours and other resources on the sheets.7 That isbecause they have agreed that the contractor will be paid for the hours spent and theresourcesused,notforthehoursthatshouldhavebeenspentandtheresourcesthatoughttohavebeenused.Ofcourse,theprovisoisthatdayworkistheagreedformofpayment.A contractor is not entitled to be paid on a daywork basis simply because it submitsdayworksheets.Acontractorwilloftensubmitsuchsheetsbecausepaymentonthatbasisisusuallybetterthanvaluationatcontractrates.

Often themagicformula‘Forrecordpurposesonly’ isaddedbyanarchitectasked tosigndayworksheets.However,wheredayworks is tobe themethodofvaluation inanyparticularcase,theadditionofthosewordshaslittlepracticalvalueandcertainlydoesnotpreventthecontentsofthesheetsbeingusedforcalculationofpayment.8

125Isthecontractorentitledtolossofprofitifworkisomitted?If the contractor has undertaken under a contract to do a certain amount ofwork for astated sum ofmoney, it has the right to do it if it is to be done at all. If the contractprovidesthattheworkmaybeomitted,thatallowsthearchitecttoinstructthattheworkistobeomitted.However,itdoesnotpermittheworktobegiventosomeoneelse,becausethatwouldnotbeomittingtheworkbutmerelytransferringittoanotherparty.Architectssometimeswonderiftheproblemcanbeovercomebyomittingtheworkfromthecontractandnotgivingtheworktoanothercontractoruntilmuchlaterinthecontractorevenafterpractical completionhasbeencertified.Suchanaction is likely tobe ineffectivebeforepracticalcompletion;whether itwouldbeeffectiveafterpracticalcompletion isopen toquestion. The key point might well be the intention of the employer at the time theomissionwasinstructedbythearchitect.

AnAmericancasedealtwithacontractthatissimilartoJCTcontracts.9Thecontractprovidedfortheomissionofworkwithoutinvalidatingthecontractandontheconditionthatsuchomissionsshouldbevaluedanddeductedfromthecontractsum.TheAmericanappealcourtsensiblyheldthattheword‘omission’meantonlythatworknotbedoneatall. It did notmean thatwork could be taken from the contractor and given to anothercontractor.TwoEnglishcaseshavereachedsimilarconclusions.10

Thepositionisverystraightforward.Ifthecontractorhascontractedtodothework,ithastherighttodoit.Iftheworkisgiventosomeoneelsetodo,itisabreachofcontractentitlingthecontractortodamagesunlessbothemployerandcontractorconcurredintheaction.Thedamagesarecalculatedontheprinciplethatthecontractorisentitledtobeputback in the position, so far as money can do it, as if the contract had been properlyperformed. Where work is omitted and given to another contractor, damages usuallyamounttotheprofittheoriginalcontractorwouldhaveearnedhaditcarriedoutthework.Ofcourse, itmaybethat thecontractorwouldnothaveearnedanyprofit–itmayevenhavemadealoss.Inthesecircumstances,thecontractormaybegratefulthattheburdenofcarrying out loss-making work has been removed. It hardly needs saying that thecontractorisentitledtolossofprofitonlyifaprofitwouldhavebeenearned.

Because these are damages for a breach of contract and not loss and/or expense, thearchitecthasnopowerunderthecontracttocertifysuchasumtothecontractor.Whenthesumisagreed, itshouldbepaiddirectlyfromtheemployer to thecontractorwithoutanarchitect’scertificate.

126Isittruethatachangeinthescopeofworkcanresultinare-ratingoftheentirebillsofquantities?Acontractorwhohasunder-pricedaprojectorwhohasbeenonthereceivingendofmanyarchitect’s instructionsoftencontends that theeffectofall the instructions is to turn theprojectintosomethingentirelydifferentfromwhatthecontractorpricedinitstender.Thephraseusedisusuallythattheinstructions‘changedthewholescopeandcharacterofthework’.Ifthevariationshavehadthiseffect,thecontractorwouldberightinitsassertiondespite SBC clause 3.14, which empowers the architect to issue instructions requiringvariations. Everything depends on what the parties expressed as their intentions in thecontract.OneoftheimportantreasonsforthevariationclauseinacontractistopreventthecontractbeingputatanendbyaninstructiontothecontractortoalterormodifytheWorks in some way; SBC clause 3.14.5 expressly so states. If there was no variationclause,analterationtotheWorkswouldnecessitateagreementbybothpartiesandperhapsarenegotiationofthecontract.

Theusualexampleofchangingthescopeoftheworkhastodowithacontracttobuildone house; if the architect issued a variation to add another similar house, it wouldprobably vitiate the original contract because the scope of the work would have beendoubled and the contract would be markedly different from the one the contractorundertooktocarryout.If,however,thecontractwastobuildonehundredhousesandthearchitect issuedavariationtoaddonehouse, itwouldbeunlikely tovitiate thecontractbecause the scopewouldhavebeen increasedbyonly1per cent; itwouldbe the samecontractwithaminorvariationtotheWorks.Obviously,anarchitect’sinstructionorseriesof instructionswhichhad theeffectofalteringanoffice intoa factorywouldvitiate thecontract.

Therefore, the answer to this question is ‘Yes in principle’.However, in practice thesituation will rarely arise. Even where the architect issues a substantial number ofvariations,acontractorwillfinditdifficulttoarguethatthewholescopeoftheWorkshasbeenchanged. InMcAlpineHumberoak vMcDermott International Inc (No.1),11 it washeld at the first trial that the contract was frustrated because of the large numbers ofdrawingswhichwereissued.TheCourtofAppealheldthatitwasnotfrustrated,becausetherewasprovision for thevariations tobeproperlyvaluedandfor thecontractor toberecompensedfor thedelays.Evenwhereahousingcontract inthesumof£126,000wassubsequentlyamendedbyvariationtobecomeacontractof£1.45million,thecourtseemstohavebeenunconcerned.12Admittedly,thereappeartohavebeensomeunusualfactorsinthatinstance,butitisthoughtunlikelythatacontractor’sclaimthatthewholescopeoftheWorkshasbeenchangedwillusuallystandmuchchanceofsuccess.

127Canthequantitysurveyorbeliableformeasuringworkwhichisdefective?It is a rareoccurrence for aquantity surveyor tobe suedbyanemployer in connectionwithabuildingcontract.However,onesuchcasehasrecentlybeenbeforetheTechnologyandConstructionCourt.ThecasewasDhamijavSunningdaleJoineriesLtd&Others.13

Mr andMrs Dhamija brought the case against the contractor, the architects and thequantitysurveyors.Thecasebeforethecourtwasanapplicationbythequantitysurveyorsfor the case against them to be struck out.The case amounted to an allegation that thequantitysurveyorsowedadutytotheDhamijastoseethattheonlyworkthatwasvaluedwas work that the contractor had properly executed and that was not defective. Thequantitysurveyorschallengedthatview.

Although thequantity surveyorswere introducedby thearchitectsandalthough therewasnoevidenceofawrittenororalcontractwiththeDhamijas, thecourtheld,perhapssurprisingly,thattherewasacontract,butwithnoexpressterms,asaresultoftheconductof the parties. On the valuations, a gross valuation for the Works was identified thatexcluded ‘anywork ormaterial notified to us [the quantity surveyors] by the ContractAdministratorinwritingasnotbeinginaccordancewiththeContract’.Anotherpartofthevaluationsaid,‘ItisassumedthattheContractAdministratorsatisfieshimselfthatthereisnoworkormaterialthatisnotinaccordancewiththeContract’.

Thecourtsaidthatatermwouldbeimpliedthatthequantitysurveyorswouldactwiththe reasonable skill and care of ordinary quantity surveyors. However, the Dhamijasargued that a term should be implied which omitted ‘reasonable skill and care’. Inrejecting that argument, the court held that if that was correct, the quantity surveyorswould have an absolute obligation, measurable by results like a guarantee, and aresponsibilitytoinspecttheworkbeforepreparingavaluation.

Thecourt’sviewwasthatthequantitysurveyorswerenotresponsibleforcheckingfordefectivework,andtheirvaluationshadanotewhichmadethatveryplain.Moreover,theearliercaseofSutcliffevChippendaleandEdmondson14wasauthority for theviewthatthe quantity surveyor was concerned with quantity, not quality, and that it was thearchitects’ responsibility to inspect the Works for defects and to notify the quantitysurveyoraboutthem.

Itwasarguedonbehalfof theDhamijas that full informationhadyet tobedisclosedwhichmightchangethecourt’sview.Thecourtdescribedthatas‘somewhatforlorn’,butreluctantlyagreednottostrikeouttheclaimagainstthequantitysurveyorsuntiltherehadbeenaone-dayhearingfortheDhamijastoshowthatthequantitysurveyorshadsomehowfallen below the necessary standard. The court described it as ‘something of an uphilltask’. The clear conclusion is that quantity surveyors can be liable for failures to usereasonableskillandcareinmeasuring,buttheycannotbeliableformeasuringdefectiveworkunlessthearchitecthasnotifiedit.

128Underwhatcircumstancesisthecontractorentitledtothecostsofacceleration?Acasedecidedin2000defined‘acceleration’likethis:

‘Acceleration’ tends to be bandied about as if itwere a term of artwith a precisetechnicalmeaning,butIhavefoundnothingtopersuademethatthatisthecase.Therootconceptbehindthemetaphorisnodoubtthatofincreasingspeedandtherefore,in the context of a construction contract, of finishing earlier. On that basis‘accelerativemeasures’ are steps taken, it is assumed at increased expense,with aview to 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 twofurtherquestionsarerelevanttoanysuchissue.Thefirst,implicitinthedescriptionitself, is ‘earlier thanwhat?’The secondasksbywhosedecision the relevant stepsweretaken.

The answer to the first questionwill characteristically be either ‘earlier than thecontractualdate’or ‘earlier than the (delayed)datewhichwillbeachievedwithouttheaccelerativemeasures’.Inthelattercategorytheremaybefurtherquestionsastoresponsibilityforthedelayandastowhetheritconfersentitlementtoanextensionoftime.The answer to the secondquestionmay clearlybedecisive, especially in thecommoncaseofcontractualprovisionsforadditionalpaymentforvariations,butitiscloselylinkedwiththefirst;accelerationnotrequiredtomeetacontractor’sexistingobligationsislikelytobetheresultofaninstructionfromtheemployerforwhichthelattermustpay,whereaspressurefromtheemployertomakegooddelaycausedbythecontractor’sownfaultisunlikelytobesoconstrued.15

Unlessexpresslystatedinthebuildingcontract,thearchitecthasnopowerstoinstructthecontractortoacceleratework.Thecontractor’sobligationistocompletetheworkwithinthetimespecifiedor,wherenoparticularcontractperiodisspecified,withinareasonabletime.Theemployercannotinsistthatthecontractorcompleteearlierthantheagreeddateintheabsenceofanexpresscontractterm.

NoJCTtraditionalcontractsgiveeitherthearchitectortheemployerpowertoorderthecontractortoaccelerate.Thereis,however,suchapowerintheACA3form,clause11.8.Thecontractorshouldbeabletoobtainpaymentwhenthearchitectordersaccelerationofthe work under a term of the contract or when the employer and the contractor agreeacceleration.The so-called ‘Variation andAccelerationQuotationProcedures’ in certainJCTcontractsdonotgive thearchitectpower to instructacceleration,butonlysetoutaframeworkforagreement.

Acontractorwillsometimesputmoreresourcesintoaprojectthanoriginallyenvisagedandthenattempttorecover thevalueonthebasis that therewasnorealisticalternative,because thearchitect failed tomakeanextensionof thecontractperiod.Acontractor inthis situationcontends that, asadirect resultof thearchitect’sbreach, itwasobliged todevotemoreresourcestotheprojectsoastofinishbythedateforcompletion,otherwisetherewasadangerthattheemployerwouldlevyliquidateddamages.Thisclaimtendsto

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beadvancedwhetherornotcompletionontheduedateisactuallyachieved.Beforethisargumentcanbeentertained,thekeyquestionis,‘Whatwasthetruecause

oftheacceleration?’Thecontractor’sdifficultyisthatif thearchitectwrongfullyfailstomake an extension of time, either at all or of sufficient length, the contractor’s redressunderthecontractisadjudicationorarbitration.Ifthecontractorisentitledtoanextensionof time, itshouldsimplycontinuetheworkwithout tryingtoaccelerate,knowingthat itwillbeabletorecoveritsprolongationlossand/orexpense,andanyliquidateddamagesdeducted, by referring the dispute to adjudication or arbitration. If the contractoraccelerates, the true cause of the contractor’s acceleration is not any breach by thearchitect,butsimplyadecisionby thecontractor toput inmore resources.Ofcourse,acontractor in this positionmay not be entirely confident that adjudication or arbitrationwill result in reimbursementofmoney lost.Thereare fewcertaintiesand the liquidateddamages may be high. Few would pretend that justice will inevitably be done inadjudication,arbitrationor legalproceedings.Thecontractormayconsider that it is lessexpensive to accelerate than to face liquidated damages with no guarantee that anextensionoftimewillultimatelybemade,evenwithoutrecoveringaccelerationcosts.Itmaysimplybeacommercialdecisionforthecontractor.Itisthoughtthataclaimofthiskindhaslittleprospectofasuccessfuloutcome.

Acommonsituationiswhereacontractoraccelerateswithoutanyagreementwiththeemployerorinstructionfromthearchitect.Theresultmaybethatsometimeisrecoveredandanextensionof timemaybeavoided. In thissituation,acontractormayargue(andsometimesuseacomputermodeltodemonstrate)thathaditnotaccelerated,therewouldhavebeenadelaytocompletion.Nevertheless,inmostsuchcasesthecontractorwillnotfind iteasy toargue that itwasdoingother thanusingbestendeavours to reducedelay,and there isnoclause in theJCT traditionalcontracts thatcouldbeused to reimburseacontractorinthisposition.

Although acceleration has been considered in another case, the conclusion was sobizarre as to render it extremely suspect.16 In this case, the court decided that thecontractor was entitled to recover the cost of acceleration if an extension of time wasjustifiedbutrefusedandtheliquidateddamageswere‘significant’.Sofarsogood,albeitsomewhat off the mainstream view. However, the court held that the contractor wasentitled not only to the cost of acceleration but also to loss and/or expense for theprolongation that would have taken place but for the acceleration. On any view, thatamountstodoublerecovery.Tosummarisetheposition:

There is no clause in traditional JCT contracts and nothingwhich the general lawwouldimplythatgivesthearchitectpowertoinstructthecontractortoaccelerate.

The contractor and the employer can enter into a separate agreement to accelerate,butpaymentcannotbemadeunderthecontract.

Acontractorthataccelerateswithoutanagreementfromtheemployercannotrecoverthecostsofdoingsoexceptinwhollyexceptionalcircumstances.

129Whatistheeffectofagreeingpayment‘infullandfinalsettlement’?Itisrelativelycommonforpaymenttobeoffered‘infullandfinalsettlement’.Greatcaremustbetakenwhenfacedwiththesewords.Thelawisquitecomplexandbasedonwhatisknownas‘accordandsatisfaction’.Thisisdefinedas:

Thepurchaseofareleasefromanobligationwhetherarisingundercontractortortbymeans of any valuable consideration, not being the actual performance of theobligationitself.Theaccordistheagreementbywhichtheobligationisdischarged.Thesatisfactionistheconsiderationwhichmakestheagreementoperative.17

Ifthereisaccordandsatisfaction,itactsasabartoanyaction.

Ifapersonagreestoacceptpartpaymentandtoreleasetheotherfrompaymentofthebalance, thiswillbevalid if theagreement is supportedby freshconsiderationor if theagreementisadeedthatrequiresnoconsideration.Thekeypointisthatthecreditormustaccept something different from the legal entitlement.18 The law does not accept that adebtcanbedischargedsimplybypaymentofalessersum.Therefore,ifapartyisowed£500and thedebtoroffers£200‘in fullandfinalsettlement’of thedebt, thecreditor isentitledtotakethe£200andsubsequentlytakeactiontorecoverthebalance.

Thepaymentwouldbevalidlymadetosettlethedebtifitweremadeinadifferentwayor,perhaps,inadifferentplace.Forexample,if£500isowed,paymentof£200worthofgrassseedcouldrepresenttrueaccordandsatisfaction.

Sometimesachequeissentonthebasisthatpaymentintotheother’sbankaccountwillsignify acceptance ‘in full and final settlement’. If the cheque is simply paid into theaccount,itislikelythatacourtwoulddeemthatitwasacceptedonthebasisitwaspaid.Itisunderstandable that apartyoweda substantial sumwitha cheque in itshandwillbekeen to recoverasmuchaspossibleand, therefore,willbeanxious tobank thecheque.Theanswer is towrite to thesendernoting that thecheque isacceptedandwillbepaidintothebank,notinfullandfinalsettlementbutasapartpaymentofmoneyowing.Thechequeshouldbepaidintotheaccountacoupleofdayslater,allowingtimeforthesendertostop thecheque if it feelsso inclined.Perhapssurprisingly, fewchequesappear tobestopped in this situation, the senderpreferring to relyon thenowuselessargument thatpaymentisasindicatedbythesender’sterms,despitethenotefromthereceivingpartytothecontrary.

InStourValleyBuildersvStuart,19 thebuilders sent an invoice forworkundertaken.The Stuarts disputed the amount and sent a cheque for a lesser sum ‘in full and finalsettlement’.Thebuilderscashedthecheque,buttelephonedtheStuartssayingthatitwasnotacceptedinfullandfinalsettlement.TheCourtofAppealheldthatthechequewasnotacceptedinfullandfinalsettlement,andthereforethebuilderswereentitledtorecoverthebalance.Thecourtsaid:‘Ifthecreditorattheverymomentofpayinginthechequemakesclear thathe isnotassenting to thecondition imposedby thedebtor,howcan itbesaidthat,objectively,hehasacceptedthedebtor’soffer.’

However,thecommentappliestoasituationwherethedebtisindisputable.Takeasan

exampleagenuinedisputeinwhichonepartysaysitisowed£500andtheotherarguesthat itowesnothing:Anoffer in fulland final settlementby theallegeddebtorof£200which is accepted by the creditor will not enable the creditor to return later for thebalance;accordwasreachedinsettlementofadispute,andthecourtsencouragepartiestosettle their differences by agreement. It is crucial to decidewhether there is a genuinedisputeorwhetheronepartysimplydoesnotwanttopay.Inthesesituations,legaladviceisalwaysnecessary.

130Iftheemployerandthecontractoragreeafinancialsettlement,cantheemployerset-offmoneybecauseofasubsequentdefect?Itisrelativelycommonfortheclosingstagesofacontracttobemarkedbyanagreementbetween theparties regarding the final sumdue to the contractor.Obviously,where theparties have reached an agreement rather than going through the contract proceduresinvolving the computation of a final account by the employer’s quantity surveyor or,perhapsonsmallercontracts,bythearchitect,thearchitectcannotissueafinalcertificate.Thatisbecausethefinalcertificateisthearchitect’sprofessionalopinionabouttheamountduetothecontractorunderthetermsofthecontract.Thesumagreedbetweenthepartiesisnottheresultofthearchitect’sopinionortheapplicationofthetermsofthecontract;therefore,thearchitectcannotissueafinalcertificate.

Clearly, one significant outcome of a settlement is that the rules surrounding theconsequencesof a final certificate donot apply.Therefore, it is amatter for thepartiesthemselvestoensurethattheyknowwhattheyhaveagreed.Bythetimethepartieshaveagreed the amount due to the contractor, it is likely that the architectwill no longer beinvolvedwiththecontract.Theissueofthefinalcertificateisusuallythearchitect’slastfunction; if that is removed, the architect’s last function is probably to check that alldefectshavebeenmadegoodandtoissueacertificatetothateffect.Evenifthearchitectisstillinvolvedforotherreasons,itisnopartofthearchitect’sdutytoadvisethepartieson the terms of their settlement, other than perhaps to point them in the direction of asuitableprofessionalcapableofdraftingtheagreement.Suchapersonwilloften(butbyno means always) be a lawyer. Firms of construction contract consultants are oftenperfectlyabletodealwithsuchatask.

In practice, the likelihood is that the parties simply come to an oral agreement, theemployerpaysthebalance,andtheywalkaway.ProblemscanariseifthecontractorlaterthinksthatitwasentitledtomoremoneyortheemployerfindsdefectsintheWorkswhichthecontractorrefusestocorrect.

Inonecase,20thecourthadtoconsidertheconsequencesofasettlementorcompromiseagreement. Combined Stabilisation Ltd (CSL)was engaged by Jim Ennis ConstructionLtd(Ennis) tocarryoutgroundworksatasite inWigan.Ennisweresub-contractors toBovis Lend Lease. After the sub-contract workswere finished, the parties entered intonegotiationstoagreethefinalaccount.CSLmadeawithoutprejudiceoffertoEnnisinthesum of £735,000, to which Ennis countered by an offer of £700,000 in full and finalsettlement.Eventually,afigureof£707,500wasagreed.EnnissentaCertificateofFinalAgreement toCSL,andfurthere-mailswereexchangeduntilagreementwas reached intermsunderwhichCSLremainedliablefordefectsandEnnisconfirmedthat£142,901.13remaineddueforpaymentwithintendays.

Immediatelyaftertheagreement,EnnisnotifiedCSLthatthe£142,901.13wouldnotbepaidinfull,butthatitwouldbewithholding£7,362.88foradamagedgaspipe.Ennisthenpaidthebalance.Atthispoint,thingsbecameinteresting.CSLarguedthatEnnis’sfailure

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topay the full amountmade theagreementvoidand thatCSLwasentitled toa revisedfinalaccountofover£1million.Ennispaid theamountwithheldand thewholedisputeendedincourt.

Thecourtmadethefollowingusefulpoints:

A court will be reluctant to hold void for uncertainty (of no legal effect becauseunclear)anagreementwhichwasintendedtohavelegaleffect.

Theagreementwasnotvoidforuncertainty,becausebothpartiesintendedittohavelegal effect and there was an implied term that payment would bemadewithin areasonabletime.

The court rejected CSL’s argument that Ennis had repudiated the agreement byfailingtopaythe£7,362.88.Itdrewthedistinctionbetweenacompromiseagreementastovalueinreturnforapromisetopayandanagreementastovalueinreturnforpayment.Inthiscase,Ennishadsimplypromisedtopay,andafailuretopayentitledCSL to sue for damages but left the agreement intact. If the agreement had beenbasedonpaymentbyEnnis,CSLcouldhavetreatedthefailureasrepudiation.

Generally speaking, a compromise agreement will discharge all claims andcounterclaimsunless provision is especiallymade for their revival in the caseof abreach.

Ennisdidnotrepudiate,becausetheypaidthemajorportionofthesumtoCSL.Inwithholding£7,362.88,Enniswerewrong.However,invokingacontractprovisioningoodfaithbutinerrorisnotusuallyarepudiatoryact.

CSLwereboundbytheagreementto£707,500.

Therefore, the answer to the question is that the employer cannot subsequently set-offmoney once a financial settlement has been agreed. The actual judgment, which isrelatively short and can be downloaded from thewebsite of theBritish and IrishLegalInformation Institute (www.b ailii.org), repays careful reading. The parties obviouslythoughttheyhadcoveredall theeventualitiesbutfinishedhavingtohavetheagreementsortedoutincourt.

131UnderDB,theEmployer’sRequirementsaskedforspecialacousticwindowswhichtheContractor’sProposalsdidnotinclude.Thecontractissigned.Cantheemployerinsistonthespecialwindowsatnoextracost?At the root of this question is the priority of documents. In DB, two situations areenvisaged: adiscrepancywithin theEmployer’sRequirements andadiscrepancywithinthe Contractor’s Proposals. In each case, employer and contractor share the duty ofinformingtheotherifadiscrepancyisdiscovered.Underclause2.14.2,adiscrepancyinthe Employer’s Requirements is dealt with in whatever manner is stated in theContractor’sProposalsor, ifnot so stated, as suggestedby thecontractor; the employercaneitheracceptthecontractor’ssolutionorrejectitinfavourofitsownsolution.Eitherway,itistobetreatedasachange(whichisthetermforavariationinDB).AdiscrepancyintheContractor’sProposalsiscoveredbyclause2.14.1.Thecontractormustsuggestanamendment,andtheemployermaychoosebetweenthediscrepantitemsorthesuggestionatnoadditionalcost.

WhathappenswhenthereisadiscrepancybetweentheEmployer’sRequirementsandtheContractor’sProposals? In thiscase, theEmployer’sRequirementsasked forspecialacousticwindows,buttheContractor’sProposals,byaccidentordesign,didnotincludethem.TheDBcontractdoesnotexpresslyaddressthisproblem.Footnote[3]emphasisestheimportanceofremovingalldiscrepanciesbetweenthetwodocuments.Unfortunately,discrepancies will occur. The usual way of resolving such matters is on the basis ofpriorityofdocuments.

It isoftenmistakenlysaid that the thirdrecitalof thecontractcovers thepositionandshows that the Contractor’s Proposals take precedence. This recital provides that theemployer has examined theContractor’sProposals and, subject to the conditionsof thecontract,issatisfiedthattheyappeartomeettheEmployer’sRequirements.Whateverelsemaybesaidaboutthisrecital,theuseoftheword‘appear’andthefactthatitissubjecttothe conditions is significant.Without these qualifiers, the employer is satisfied that theContractor’s Proposals meet the Employer’s Requirements. The addition of ‘appear’makesclearthatthesatisfactionissimplydealingwithsurfaceappearance.Onemightsay‘onthefaceofthings’or,asthelawyersusedtosaybeforeLatinbecameunfashionable,primafacie.Thedictionarydefines‘toappear’as‘togiveanimpression’.Itisclearlynotintended that the employer or his or her advisers exhaustively check the Contractor’sProposalstoensure thattheymeettheEmployer’sRequirements.Hadsuchathingbeenintended,itwouldhavebeeneasyforthedraftsmantohaveusedclearwordstothateffect.Iftheemployerrequestedafive-storeyofficeblockintheRequirements,thethirdrecitalmerely records that the employer believes that is what the Proposals provide. That thestatement ismade subject to the conditionsvery clearly tells the reader that theprintedconditionshavesomethingimportanttosayaboutthesituation.

The wording strongly points to the intention that the Contractor’s Proposals will bedrafted to meet the Employer’s Requirements. In doing so it is merely confirming the

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philosophy of the contract as can be discerned from the recitals as a whole. TheContractor’sProposalsshouldbeanindicationofhowthecontractoristocomplywiththeEmployer’sRequirements–not an indicationofhow thecontractorwishes to constructtheprojectorallocaterisk.Thewordingofthefirstandsecondrecitalsreflectsthis.

However,itismisguidedtoplacesuchrelianceonthethirdrecital,becausetheroleoftherecitalsininterpretingacontractislimited.Wherethewordsintheoperativepartofacontract are clear, the recitals do not vary thatmeaning. It is onlywhen the rest of thecontract is ambiguous that one turns to the recitals for assistance. In this instance thecontract is clear, as can be seen below. Therefore, the third recital has no, or limited,relevancetothisparticularquestion.

TheDBcontractisclearlywrittenwiththeintentionthattheEmployer’sRequirementsprevailinthefollowingways:

Clause1.3providesthatnothingintheEmployer’sRequirementsortheContractor’sProposalscanoverrideormodifytheprintedform.

Clause2.2providesthattheEmployer’sRequirementsprevailovertheContractor’sProposals where workmanship or materials are concerned. Clause 2.2.1 states, inpart, ‘Allmaterialsandgoodsfor theWorksshall…beof thekindsandstandardsdescribedintheEmployer’sRequirements,or,ifnottherespecificallydescribed,intheContractor’sProposals’.ItisclearthatitisonlyiftheEmployer’sRequirementsmake no mention of the materials and goods that the contractor can turn to theProposals.Clause2.2.2isinverysimilarwordsinrespectofworkmanship.

Under the termsof thecontract, theemployercannot issueachangeinstructingthecontractor to vary the Contractor’s Proposals. Clause 5.1 provides that a changemeansachangeintheEmployer’sRequirements.NorcantheemployerinstructtheexpenditureofaprovisionalsumintheContractor’sProposals(seeclause5.2.3).Ifthe Contractor’s Proposals prevailed over the Employer’s Requirements, it wouldpreventtheemployerfromissuingchangesinrespectofthediscrepantpartsofthoseContractor’sProposals.Thatcannotbewhatthecontractintended.Suchchangesgobeyondmattersofdesignandconstructionandembracesequenceofworkandaccess,etc.

The intention of the contract is that the Employer’s Requirements and theContractor’sProposalsshoulddovetailtogether.Wheretheydonotdoso,itwouldbeperversetopermittheProposalstotakeprecedence,becausetheemployerisentitledtoassumethatthecontractoriscomplyingwiththeRequirements.

Theanswertothequestionisclearlythattheemployercaninsistonthespecialwindows,becausetheEmployer’sRequirementsprevailovertheContractor’sProposalsintheeventofaconflict.

DudleyCorporationvParsons&MorrinLtd,8April1959unreported.

HenryBootvAlstomCombinedCycles[1999]BLR123.

ConventHospitalvEberlin&Partners(1988)14ConLR1.

ConventHospitalvEberlin&Partners(1988)14ConLR1.

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WatesConstruction(London)LtdvFranthomPropertyLtd(1991)53BLR23;RayackConstructionLtdvLampeterMeatCoLtd(1979)12BLR30.

Bodill&Sons(Contractors)LtdvHarmailSinghMattu[2007]EWHC2950(TCC).

Clusky(tradingasDamianConstruction)vChamberlain,BuildingLawMonthly,April1995p6.

InsercovHoneywell,19April1996unreported.

GallaghervHirsch(1899)NY45.

VonlynnHoldingsLtdvPatrickFlahertyContractsLtd,26January1988unreported;AMECBuildingLtdvCadmusInvestmentsCoLtd(1997)13ConstLJ50.

(1992)8ConstLJ383.

BrunoZornow(Builders)LtdvBeechcroftDevelopmentsLtd(1990)6ConstLJ132.

[2010]EWHC2396(TCC).

(1971)18BLR149.

AsconContractingLtdvAlfredMcAlpineConstructionIsleofManLtd(2000)16ConstLJ316.

MotherwellBridgeConstructionLtdvMicafilVakuumtechnik&Another(2002)81ConLR44.

BritishRussianGazette&TradeOutlookLtdvAssociatedNewspapersLtd[1933]2KB616.

Pinnel’sCase(1602)5CoRep117a.

[2003]TCLR8.

JimEnnisConstructionLtdvCombinedStabilisationLtd[2009]EWHCB37(TCC).

Chapter16

Certificates

132InSBC,isthecontractorentitledtosuspendworkundertheConstructionActifthearchitecthasunder-certified?Therighttosuspendperformanceofobligationsunderthecontractiscontainedinsection112 of the Housing Grants, Construction and Regeneration Act 1996 (as amended).Section112(1)states:

112(1)Wheretherequirementinsection111(1)appliesinrelationtoanysumbutisnot complied with, the person to whom the sum is due has the right (withoutprejudicetoanyotherrightorremedy)tosuspendperformanceofanyorallofhisobligations under the contract to the party by whom payment ought to have beenmade(‘thepartyindefault’).

Section111(1)requiresthat,subjecttovariousprovisions(suchaspaylessnotices),sumsprovided for in construction contracts must be paid on or before the final date forpayment.Furthersub-sectionsproceedtostipulatethatatleastsevendays’writtennoticemustbegiven,thattherighttosuspendcomestoanendwhenpaymentinfullhasbeenmade, and that the person suspending has, in effect, the right to an extension of anyrelevantcontractperiodandtherighttobepaidcostsandexpensesreasonablyincurred.

Under SBC, the architect is required to issue interim certificates under clause 4.10.Clause4.14essentiallyrepeatsthesubstanceofsection112.Thefinaldateforpaymentisstipulated by clause 4.12.1 to be 14 days after the date of issue of the architect’scertificate. Therefore, it is clear that there can be no final date for payment unless thearchitectissuesacertificate.Thereisauthoritytosaythattheemployermaywellbeliableif the architect does not properly comply with his or her duties under the contract,including theduty tocertifyat the intervalsprescribed in thecontract.1The employer’sliabilitywoulddependontheemployerknowing,first,thatthearchitecthadsuchadutyand,second,thatthearchitectwasinbreachoftheduty.2

However,wearenotconsideringasituationwherethearchitectfailstocertifyatall,butwherethearchitectcertifiesalessersumthanthecontractorthinksisdue.Therefore,thearchitecthasnotfailedtocarryoutthedutytocertify.Clause4.12.2obligestheemployerto pay the contractor the amount stated on a certificate (obviously, this is subject tocontractor’snotificationandtheemployer’srighttopaylessinclauses4.12.3and4.12.5).Therefore, if the employer pays the amount on an architect’s certificate, even if thatcertificate is seriously undervalued, the employer cannot be in breach of contract.3 Thecontractor’s right to suspend arises only if the amount due under the contract – in thisinstanceitisthesumcertified–remainsunpaidafterthefinaldateforpayment.

Althoughthearchitect’sfailuretocertifytheproperamountmaybeabreachofcontractonthepartoftheemployer,dependingonwhethertheemployerwasawareofanyunder-certification, it is clearlynot something forwhich thecontractorcan suspend.Althoughthequestioniscouchedintermsofsuspendingwork,itisworthnotingthatbothSBCandsection112oftheActgomuchfurtherandrefertosuspension‘ofperformance’.Inotherwords, in situations in which the contractor is entitled to suspend performance, it is

entitled to suspend anything at all that the contract requires it to do. The fact that thecontract requires the contractor to insure theWorks immediately springs tomind, alongwith other matters. If the contractor not only suspends work but also suspends all itsinsurancesrelatingtotheWorks,theemployerwillbeinaverydifficultposition.

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133Cananarchitectissueanegativecertificate?Usually,theterm‘negativecertificate’referstoacertificatethatshowsanegativeamountowingfromtheemployer to thecontractor– inotherwords,acertificate indicating thatthecontractorhasalreadybeenpaidtoomuch.Thisraisesthreequestions:

Arethereanyoccasionswhenanarchitectmayissuesuchacertificate?

Ifyestoquestion1,isthecontractorthenobligedtopaythenegativeamounttotheemployer?

If yes to question 2, do the provisions about notices, particularly pay less notices,workinreverse?

IfonelooksattheJCTStandardBuildingContract(SBC),thereisnothingthatstatesthatthearchitectmayissueanegativeinterimcertificate.Ontheotherhand,thereisnothingtosaythatthearchitectmaynotissueone.

Interimcertificatesaredealtwithunderclause4.Clause4.10.1statesthatthearchitectmustissueinterimcertificates‘statingthesumthatheconsiderstobeortohavebeendueattheduedatetotheContractor’.Clause4.9statestheduedatesforinterimcertificates.There seems at first sight to be nothing that entitles the architect to issue a negativeinterim certificate. Indeed, everything points to certificates stating payments due to thecontractoronly.Theprovisionsfortheissueofthefinalcertificatearetheonlyoneswhichrecognisethattheremaybeapaymentduetotheemployer.

However,clause4.19.2,referringtotheamountstatedasdueinaninterimcertificate,providesthatitmustbethegrossvaluationlesscertainotherpermitteddeductionsandtheamount previously certified or paid in respect of an interim payment notice. It is clear,therefore,thatiftheamountpreviouslycertifiedand/orpaidandthepermitteddeductionsaretogethermorethanthegrossvaluation,anycertificatethenissuedwouldbeshowinganegative amount. In practice, this situation can easily arise if a previous certificate isovervalued bymore than the total of thework done between the issue of the previouscertificateand thenewcertificate, so that thecontractorhasnotcarriedoutwork to thevalueoftheovervaluationintheinterveningperiod.

Eveninthissituation,thestandardcertificationformsissuedbyRIBAEnterprisesare,quiterightly,notwordedsoastoallowthearchitecttorequirepaymentofthebalancebythe contractor, and an architect who issues the certificate in the form of a letter is notentitledbythecontracttoworditinanyotherway.Theinescapableconclusionisthatthearchitect may issue a negative certificate, because that is the result of applying thecalculation set out in the contract. However, there is no provision for the architect tocertifyapayment from the contractor to the employer.This is perfectly sensible and inlinewiththegeneralintentionofthecontract.Interimcertificationisnotmeanttoprovidethecontractorwithanexactfigure.Itspurposeistoprovidethecontractorwithcashflow;sometimes the certificate will be slightly less and sometimes slightly more than theamountofworkactuallycarriedout.4

Inthelightofthoseconclusions,question3abovedoesnotrequireananswer.Infact,

theprovisionsregardingnoticesarenotwrittensoastoworkinreverse.Theyexpresslyrefertonoticestobeissuedbytheemployerandtothecontractor.

Therefore, the answer to questions 1, 2 and 3 appear to be ‘Yes’, ‘No’, and ‘Notapplicable,butNoinanyevent’.

So far as the final certificate is concerned, clause 4.15.2 provides that the finalcertificatemuststateanamountduetotheemployerortothecontractor,asthecasemaybe.Provisionforapaylessnoticeinclause4.15.4referseithertotheemployerortothecontractor.Therefore,ifinthefinalcertificatethecontractorwasfoundtoowemoneytotheemployerandthecontractorwishedtowithholdsomeorallofthatmoney,itisclearthatthecontractormustgiveapaylessnotice.

134Cananarchitectwhohasunder-certifiedwithdrawthecertificateandissuearevisedcertificateorsimplyissueanothercertificatefortheadditionalmoney?Thestraightanswertothisisthatmostcontractsmakeprovisionforinterimcertificatestobe issued at stated intervals, commonly monthly. The architect only has the powersconferredbytheprovisionsofthecontract,andthereforeadditionalcertificatesmayonlybeissuedattheintervalsstated.Forexample,ifthecontractstatesthatcertificatesmaybeissuedeverymonth,thearchitecthasnopowertoissueacertificatebeforethemonthhaselapsed. In practice, the parties can jointly authorise the architect to issue an additionalcertificatewithinashorterperiod;inthecaseofaseriousshortfall,nodoubtthatwouldbethe answer. An architect who has under-certified may not be eager to make that factknown to the employer and may seek to withdraw one certificate and replace it withanother. An architect who has over-certified will also wish to withdraw that particularcertificate.

On the basis of well-known principles applicable to arbitrators’ and adjudicators’awards and decisions, there seems to be little doubt that the architect will be able towithdrawthecertificateandissueanewoneifthereasonforthewithdrawalamountstoasimplearithmeticalerrororsomeothersimilaraccidentalslip.However,thereappearstobeno judicialdecisiondirectlyaboutsituationswhereanarchitecthaswronglycertifiedforotherreasons.Theproblemisthatthearchitect,incertifying,isexercisingprofessionaljudgment, and the certificate is the formal expression of that judgment. Therefore, inissuingthecertificate, thearchitect isexpectedtohaveusedreasonableskillandcareincoming to that judgment. The withdrawal of the certificate and its substitution withanother may suggest that the architect has been negligent in the issue of the firstcertificate.Inpracticalterms,thewithdrawalofacertificateandthesubstitutionofoneforagreateramountwilldrawnocomplaintsfromthecontractor,butitmaypossiblyinvitemanyseriousquestionsfromtheemployer.Replacingacertificatewithoneoflessvaluemay,dependingonthevalue,causethecontractortoseekadjudicationandmaystilldrawquestions from the employer.Although theremay be some advice to the effect that anarchitectcanwithdrawandreplaceanycertificate,itisthoughtthatthebetterviewisthata certificate, once issued and with the exception of accidental errors previously noted,cannot bewithdrawn by the architect and can only be overturned by agreement of thepartiesorbyanadjudicator,anarbitratororacourt.

135Whatshouldthearchitectdoiftheemployersaysthatcertainworkisnottohisorhersatisfaction?Undermostformsoftraditionalcontract, it is thereasonablesatisfactionofthearchitectwhichdetermineswhetherstandardsofworkmanship,goodsormaterialsareacceptable.Itispossibletohaveacontractwherethesatisfactionisamatterfortheemployer,buttheproblemthereisthattheemployerisnotindependent,andanydecisionwouldbesubjecttothestrictscrutinyofacourt.Acourtwouldexpectthatanyexerciseoftheemployer’sjudgmentwouldnotbeunreasonable,capriciousordishonest.5

Wherethecontract(suchasSBC)statesthatcertaingoods,materialsorworkmanshipare to be to the reasonable satisfaction of the architect, the employer’s approval orotherwise should not concern the contractor. In practice, of course, if the employerindicatesdissatisfaction,itisabravearchitectwhoignoresitandexpressessatisfactiontothe contractor. Most matters of this kind can be sorted out by architect and employerdiscussing thematter.However, if theemployercannotpersuade thearchitect thatheorsheshouldnotbesatisfied,thearchitectisobligedtoignoretheemployer.

Whatcanacontractordoifitsuspectsthatthearchitectisbeingundulyinfluencedbytheviewsof the employer?That is a difficult question. It is not easy to prove that oneperson is being influenced by another unless one can point to an opinion given andsubsequentlychanged.Architectsdonotusually register satisfactionuntil they issue thefinal certificate, which is conclusive about those things for which the architect’ssatisfactionorapprovalisrequired.Nevertheless,anarchitectmaybeobligedtoexpresssatisfaction in cases where the contractor is progressingwith thework and subsequentdissatisfactionwill involvesubstantialcost. Insuch instances,acontractorwhoasks thearchitect to confirm that something is satisfactory is behaving perfectly reasonably andoughttoexpectareasonableresponse.Thatispresumablythereasonfortheinclusionofclause3.20inSBC,whichrequiresthearchitecttoinformthecontractorofdissatisfactionwithin a reasonable time of the execution of work. That clause is probably too farreaching,asnotedelsewhere in thisbook.Acontractor thatbelieves that thearchitect isbeinginfluencedbytheemployercanseekadjudicationonthematter.Althoughitmaybedifficulttoconvinceanadjudicatorthatthearchitecthasbeeninfluencedbytheemployer,itwillbeeasiertoconvincetheadjudicatorthatanarchitectoughttohavebeenreasonablysatisfiedinanygivensituation,becausethatwillsimplyinvolvetheadjudicatorinreadingwhatisspecifiedanddecidingwhetherwhatthecontractorhasdonecomplies.

136IsittruethatarchitectsmaylosetheirrighttocertifyunderJCT2011contracts?In JCTcontractsprior to2011, thekey factor indetermining the finaldate forpaymentwas thedateof issueof thearchitect’s interimcertificate.Thedatewas specified in thecontractparticulars.Theonly sanction if the architectwas late in issuing the certificatewasthecontractor’srighttointerestfromthedayafterthefinaldateforpaymenthadthecertificate been issued at the right date.However,when the amendment to theHousingGrants, Construction and RegenerationAct 1996 came into force in October 2011, thecontractshadtobeamendedtoreflectthechanges.Thekeydatenowisnottheissueoftheinterimcertificate,butratherthe‘duedate’.ThefinaldateforpaymentinSBC,ICandMWis14daysaftertheduedate.Theduedateisspecifiedinthecontractparticularsandistobemonthlythereafteroronthenearestbusinessday.MWspecifiestheduedateinaslightlydifferentway,buttheprincipleofpaymentisthesame.

Each contract states that the architectmust issue the interim certificate not later thanfivedaysaftertheduedate.Eachcontractgoesontostatethatifthearchitectfailstoissueacertificatewithinthatperiod,thecontractormayissueapaymentnoticeatanytimeafterthefive-dayperiod.Thepaymentnoticemuststatethesumthecontractorconsiderstobedue. Then that is the sum payable by the employer unless the employer gives thecontractorapaylessnoticenolaterthanfivedaysbeforethefinaldateforpayment.InthecaseofSBCandIC,thecontractorisentitledtosubmitaninterimapplicationforpaymentno later than seven days before the due date. If the architect fails to issue the interimcertificatewithinthefivedays,theapplicationbecomesthepaymentnotice.Thefinaldateforpayment ismovedontoallowextra timeequivalent to thenumberofdaysfromtheendof thefive-dayperiod to thedate thenotice is issued.Therefore, thearchitecthasaperiodtoissuetheinterimcertificateofonlyfivedays,afterwhichtheinterimcertificatecannotbeissued.Ifissuedlate,itisnotavalidcertificate.

Asimilar,butpotentiallyworse,situationarisesifthearchitectdoesnotissuethefinalcertificatewithintheperiodspecifiedinthecontracts.Thefinalpaymentdueisthesuminthecontractor’sfinalpaymentnoticeunlessapaylessnoticeis issued.Moreover, inthecaseofSBCandIC,therewouldbenoconclusivityinrespectofthefinalsum,extensionsoftime,lossand/orexpenseandthearchitect’ssatisfaction.Theabsenceofaconclusiveeffectofthearchitect’ssatisfactionwouldnotbeofconcerntotheemployer,buttheothermatters would be of great concern. However, the final certificate under MW is notconclusive about anything, and some other contracts do not have conclusive finalcertificates.Therefore, theabsenceofa finalcertificatemaybe lessofaproblemunderthosecontracts.

137Ifthecontractorisfallingbehindprogramme,isthearchitectjustifiedinreducingtheamountofpreliminariescostsininterimcertificates?Thepreliminariessectionofthebillsofquantitiesorspecificationshouldbepricedbythecontractor when submitting a tender. It may price every item individually based on itsanticipatedcostsforthatitem,oritmaysimplyallowapercentageagainstpreliminarieswhichiscalculatedonthecostofthemeasuredwork.Sometimesacontractorwillsimplyinsertalumpsumfigureasatotalforallthepreliminariesitemswithoutgivinganyhintofthewayinwhichithasbeencalculated.Itisusualwhenpreparinganinterimvaluationtoincludeasumtorepresentareasonableproportionofthecontractor’spreliminariesprice.Ifthecontractorhaspricedindividualitems,thenthissumcanbecalculatedusingthoseitems.Ifthepreliminariesfigureisalumpsum,thevaluermaysimplydividethesumbythenumberofmonthsinthecontractperiodtorepresentmonthlyvaluations.

If thecontractor fallsbehindprogrammeso that it seems likely that the totalcontractperiodwillbeexceeded,itiscommonforthemonthlypreliminariesamounttobereducedin order to extend the total, unchanging preliminaries amount over the longer contractperiod. This is sometimes referred to as ‘adjustment of preliminaries’. It is alwayssomethingofaguess,becausewhenthedecisiontoadjustorextendthepreliminariesismade, it will not be known with any precision how much the overrun will be. Thejustificationfor reducing thepreliminariessumin individualvaluations,so that theyarespread out over a longer period, is that the preliminaries costs should be related to theactualworkcarriedout.Therefore,ifthecontractorhasonlycarriedouttwothirdsofthework, it should be entitled only to two thirds of the preliminaries. The contractor’sargumentislikelytobethatitissufferingthesamelosseseachmonthwhetherornotthetotalperiodisprolonged.Againstthisitcanberightlysaidthatifthecontractorhadnotcausedthedelay,itwouldnotbesufferingthelosses.

Dependinguponthetermsofthebuildingcontract,thepositionwillbedifferentifthecontractor is entitled to loss and/or expense for the overrun period. If thewhole of theprolongedperiodiscausedbyreasonswhichentitlethecontractortolossand/orexpense,therewillbenoadjustmentofpreliminariesatall.Thecontractorwillbeentitled to thefullamountof thepreliminarieseachmonth(e.g.onetenthof thetotalpreliminariesforeachmonthofaten-monthcontract).Thelossand/orexpensewilldealwiththeadditionalperiod.Inpractice,thesituationwillprobablybethatresponsibilityfortheoverrunwillbepartly the fault of the contractor and partly for reasons which entitle it to loss and/orexpense. In such a case, the extension of preliminaries will be carried out for thecontractordefaultperiod,andlossand/orexpensewillbeascertainedonthecontractor’sproperlysubmittedapplicationbyreferencetoactuallossandactualexpense.

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138Mustthearchitectcertifytheamountinthequantitysurveyor’svaluation?SBCclause4.10.2 states that interimvaluationsmustbemadeby thequantity surveyorwhenever thearchitectconsiders themtobenecessaryforascertainingtheamount tobecertified. The exception to that is if fluctuations option C, formula adjustment, isapplicable, inwhich case the valuationmust bemade before each interim certificate isissued. Therefore, it is clear that, in general, the architect need not ask the quantitysurveyor to prepare a valuation.However, the question iswhether the architect, havingrequested and received the quantity surveyor’s valuation, must certify the amount thequantity surveyor has indicated orwhether the architect is entitled to certify a differentamount. It is thought that the architect is entitled to certify a different amount for thefollowingreasons:

Even though the contract provides for a valuation to be carriedout if the architectbelieves it to be necessary, it is the architect who is charged with certifying theamountduetothecontractor.Ifthearchitecthadnopowertovarytheamountvaluedbythequantitysurveyor,therewouldbelittleornopointinanarchitect’scertificatebeing necessary before payment is due. The contract could easily provide for theemployertopayonthebasisofthequantitysurveyor’svaluation.

Thearchitectisnotobligedtoseekavaluationbeforeeachcertificate,andonthoseoccasions when a valuation is not sought, the certificate will be based not on avaluationbutonthearchitect’sownopinion.Ifthearchitectisentitledtousehisorher discretion in deciding whether or not to ask for a valuation and, if not, todetermine theamount tobecertified, it should logically follow that thearchitect isentitledtousediscretionevenifavaluationhasbeenrequested.

Thearchitecthasadutytobereasonablysatisfiedwiththecorrectnessofthequantitysurveyor’svaluationand tomake the finaldecisionon theamount tobecertified.6Thatdoesnotmeanthatthearchitectisobligedtocheckthewholeofthevaluation,and certainly not to carry out a separate valuation.However, the prudent architectwill request the quantity surveyor to provide a general breakdown so that thearchitectcancheckthatdefectiveworkhasnotbeenincludednorsomelargeitemsomitted.

Somethingwhich isverycommon,butwhichanarchitect shouldneverdo, is tosimplycopy down all the figures from the quantity surveyor’s valuation onto the interimcertificatewithoutgivinganythoughttowhethertheyarecorrect.Suchactionisborderingon,ifnotactually,negligence.

However, the situation is different if fluctuations option C, formula adjustment, isapplicablewhenthevaluationmustbemadebeforeeachinterimcertificateisissued.Theresult is that thearchitectcannotissueacertificateunlessthequantitysurveyorhasfirstissuedavaluation.Thestatusofthequantitysurveyor’sinterimvaluationissignificantlyraisedwhenfluctuationclauseoptionCisused.Whatitmeansisthatthevaluationswhichmustprecedetheinterimcertificatesaremadeinordertostatetheamountswhicharetogo in the interimcertificates.This effectively removes the architect’s power to issue an

interimcertificateinasumdifferentfromthatintheinterimvaluation.

139Ifthearchitecthasmadesomefactualerrorsonaninterimcertificate,istheemployerentitledtorefusepayment?Iftheemployerspotstheerrorsintime,apaylessnoticecanbeissuednolaterthanfivedaysbefore the finaldate forpayment, stating theamount theemployerconsiders tobedueand thebasisof its calculation. It isvery important to showhow the sumhasbeencalculated,perhapssimplybyhighlightingthearithmeticalerrorsandshowinghowtheyarecorrected.

Alternatively, after the deadline for the pay less notice has expired, the architect isentitled to issue a new, correctly calculated certificate to replace the old one.However,thatcanonlybedonetocorrectanarithmeticalerroronthefaceofthecertificate,andthearchitectcannottakeadvantageofthereplacementcertificatetoamendanythingelse,suchas the valuation itself. For example, if the gross amount certified is £300,000 and thearchitect has deducted retention of 5 per cent and arrived at a figure of £295,000, thereplacementcertificatecancorrecttheerrorandshowafigureafterretentionof£285,000and amend the figures which follow. The architect is not entitled to amend the grossamountfrom£300,000tosomethingelse.

140Atthecontractor’srequest,thearchitecthasstartedissuingcertificateseverytwoweeks.Isthereanythingwrongwiththat?Allthestandardcontractsstatethefrequencyofinterimcertificates.ForexampleSBCandICspecifyinterimcertificateseverymonthuntilpracticalcompletion,andMW,everyfourweeks. These periods are terms of the contract. They can only be varied by agreementbetweentheemployerandthecontractor.Ideally,suchanagreementshouldbeinwritingandsignedbybothparties.Attheveryleast,theremustbesomerecordoftheagreement.An architect’s instruction is not an appropriate method of recording. Many architectsmistakenly believe that they can issue interim certificateswhen it seems to them to beappropriate to do so. Such architects have obviously neglected to read the contract formanyyears.Thearchitecthasnopowertoissueinterimcertificatesmorefrequentlythanstatedinthecontractortoenterintoanyagreementtoamendthecontractonbehalfoftheemployer.

Quiteapartfromtheunlawfulnatureofthearchitect’sactions,thereisarealdangerthatissuing interim certificates more frequently will lead to over-certification. A contractorthatrequests interimcertificatesatmorefrequent intervals thansetout inthecontract isprobably struggling to stay solvent. Over-certification in those circumstances can becatastrophicfortheemployerifthecontractoractuallybecomesinsolvent.Irrespectiveofwhether theemployeragrees tocertificationevery twoweeks,changing theperiodmayhave effects on other parts of the contract, and these effects need to be carefullyconsidered.

141Whatisthestatusofacertificateissuedbythequantitysurveyororprojectmanager?Italldependsontheroleoftheprojectmanagerorthequantitysurveyor.Thetitle‘projectmanager’tendstobeusedratherloosely.Aprojectmanagerwhoisnamedasthecontractadministrator under a JCTcontract is fully entitled to do everythingwhich the contractstatesacontractadministratoreithermustormaydo.Thatobviouslyincludestheissueofcertificates. Only the contract administrator can issue certificates. Therefore, a projectmanagerwhoisnotanamedcontractadministratorcannotissuecertificates.Thatmeansthat the issueof suchacertificatewouldbe invalidandofnoeffect at all.There is themyth (explored elsewhere in this book) that just because someone is called a projectmanager,heorshecandoanythingnecessarytomanagetheproject.Thatistoignorethelawofcontract,whichisveryprecise.Itisnotunknownforaprojectmanagertoinsistoncountersigningallcertificates issuedby thecontractadministrator.Provided thecontractadministrator has signed, they are valid certificates, but the presence or absence of theprojectmanager’ssignatureisirrelevant.

Forsomeunknownreason,quantitysurveyorsunderJCTcontractsare in thehabitofissuingtheirvaluationstotheemployerandthecontractoraswellastothearchitect.Itisadangerous thing todo,because thequantity surveyorundermost JCT formsofcontractmayonlyissueavaluationwhencalleduponbythearchitect.Inthecaseoflargeprojects,one would expect the architect to request a valuation before each interim certificate isissued.Nevertheless, the architect is entitled to issue a certificate in a different amountratherthanacceptingthequantitysurveyor’svaluation.Ifthequantitysurveyorhasissuedthe valuation to the contractor, the ground is prepared for a needless dispute about thevalue of the certificate. Some contractors issue their invoice to the employer, and theemployerhasbeenknowntopay,allbeforethearchitectissuesthecertificatewhichstatesthe actual amount due. Architects should make clear to the quantity surveyor that thevaluationistobegivenjusttothearchitect.

Obviously,aquantitysurveyorwhohasbeennamedascontractadministratorisentitledto issue certificates, which are all valid. Contractors often refer to the valuation as acertificate,andevensomearchitectshavebeenknownto let thequantitysurveyor issuecertificatesinlieuofvaluations.Such‘certificates’havenocontractualvalidity,butiftheemployer,contractorandarchitecthavebeenoperatinginthismanner,itmightbeheldina dispute that the employer has waived the right to insist on an architect’s certificatebeforepayment.

142UnderIC,ifthetimeforissuingapaylessnoticehasexpiredbutsomeseriousdefectscometolight,cantheemployerset-offthevalueagainsttheamountcertified?This is the employer’sworst nightmare.Under clause4.7.2, the architectmust issue aninterim certificate, not later than five days after the due date, stating the amountconsideredtobedueinaccordancewithclause4.8andthebasisonwhichtheamountiscalculated.Ifthearchitectfailstoissueacertificate,thecontractormayissueapaymentnotice, or if the contractor has already submitted an application for payment, thatapplicationisconsideredtobeapaymentnotice.Iftheemployerwishestopaylessthantheamountcertifiedorinthepaymentnotice,theemployermustgiveawrittenpaylessnoticetothecontractornotlaterthanfivedaysbeforethefinaldateforpayment,statingtheamountconsideredtobedueandthebasisonwhichitiscalculated.Ifthenoticeisnotgiven, the employer must pay the amount stated in the interim certificate or paymentnotice,asapplicable.

Ifseriousdefectsmake theirappearanceafter thedeadlinefor thepay lessnotice, theemployerhasnooptionbut topay. If the employer fails topay, therewill benoviabledefence if the contractor goes to immediate adjudication. There are similar provisionsrelatingtothefinalcertificateinclause4.14.

Ithasbeenknownforanemployerwhocanputbeforeanadjudicatorpositiveevidenceabout the existence and value of the defects to persuade the adjudicator to support thelesser payment even though it was made without proper notice. But to be frank, thatdependsupontheappointmentofanadjudicatorwithaninadequateunderstandingofhisorherrole.

Realistically,theemployermustpay,andifthedefectsarenotcorrectedbythedateofthenextvaluation, thearchitectmustcertify theamountproperlydue taking thedefectsintoaccount.Thismayresult inanegativecertificate. Inmostcases, thedefectswillbemadegoodandtheoverpaymenttothecontractorwillrectifyitselfasworkproceeds.Inrarecases,adisputemaydevelopand thecontractormaybecomeinsolvent, leaving theemployerinthepositionofhavingoverpaid.Inthatsituation,theemployermaywelllooktoseewhethersomeactionispossibleagainstthecertifyingarchitect,thebasisbeingthattheseriousdefectswouldhavebeendiscoveredearlierifthearchitecthadproperlycarriedout inspection duties. Whether that approach would be successful depends on thecircumstancesofeachindividualcase.

143Iftheemployerandthecontractoragreethefinalaccount,shouldthearchitectissueafinalcertificateinthatamount?Allthestandardformcontractsrequirecertificatestobeissuedbythepersonnamedinthecontractasthearchitectorthecontractadministrator.Acertificateistheformalexpressionof the architect’s professional opinion.7 In short, it is a very serious document and notsomethingtobeissuedwithoutcarefulthought.

Itisquitecommonfortheemployerandthecontractortoeffectively‘doadeal’attheendofaprojectandagreebetween themtheamount theemployerwillpay toclose thecontract.Suchanagreementisoftenbasedontheage-oldprincipleofafiguremorethanthe employer really wants to pay and less than the contractor expects. A settlement issometimessaidtobesuccessfulwhenbothpartiesaredissatisfiedwithit.

In the normal course of events, the issue of the final certificate under any of thestandard formswill be the culmination of a process that has been continuing from thecommencementofworkonsite.Duringthistime,thecontractsumisconstantlyadjustedto takeaccountofvariationsandanyothermatters that theparticularcontractallows tochangethecontractsum.AfterpracticalcompletionoftheWorks,ifthecontractorwishesto submit any further information to the architect (or to the quantity surveyor if thecontract stipulates that thequantity surveyor is tovalue), there is a specific timewithinwhich this may be done, usually six months. The quantity surveyor completes theadjustmentofthecontractsumandafterconsultationwiththearchitectsendsthisfiguretothe contractor. Within a contract-stipulated timescale, the architect issues the finalcertificate.Thiscertifiestheamountthatisduetothecontractorandthattheamounthasbeencalculatedinaccordancewiththetermsofthecontract.

Obviously, where a settlement figure has been agreed between the parties to thecontract,ithasnotbeencalculatedinaccordancewiththetermsofthecontract.Therefore,thearchitectcannotcertifythatitistheamountwhichisobjectivelyduetothecontractor.It follows that if the parties agree the amount payable from employer to contractor(usually)tosettlethecontract,thearchitectcannotissueacertificatetothateffect.Thatisbecausetheissueofthefinalcertificateisaprocedureunderthecontract,andthearchitecthas the power to do only thatwhich the contract empowers.Any settlement agreementcannot be a settlementunder the contract, butmerely a settlementof the contract. Thesettlementshouldbeseparatelyrecordedandsignedbythepartiesasbringingthecontracttoanend.Itisbestdoneintheformofadeedtoavoidanyquestionthatthereisalackofconsideration.Properlegaladviceisrequired.

Architectswhotakeituponthemselvesorwhoarepersuadedbyclients to issuefinalcertificatesfortheamountofasettlementfacethepossibilityoffuturechallengesandthereal risk that such certificates are invalid. Indeed, architects certifying in thesecircumstancesareprobablynegligentinissuingcertificatesthattheyknowtobewronginthesensethattheyarenotproperlycalculatedinaccordancewiththecontract.

144Ifthecontractorfailstoprovidethefinalaccountdocumentswithintheperiodspecifiedinthecontractafterpracticalcompletion,whatshouldthearchitectdo?SBC provides in clause 4.5.1 that the contractor must give the architect or quantitysurveyorallthedocumentsnecessaryforadjustmentofthecontractsumwithinsixmonthsafter practical completion. The architect or quantity surveyor then has threemonths inwhichtoascertainanylossand/orexpenseandprepareastatementofadjustmentstothecontract sum. The IntermediateBuildingContracts IC and ICD have clauses to similareffect.

Most contractors satisfy the requirement by submitting their ownversionof the finalaccount, often earlier than practical completion. Many contractors, however, fail toprovide all the documents necessary for substantiation. Delay in the issue of the finalcertificatecanoftenbeattributedtodelaysintheprovisionofthisinformation.Ofcourse,withoutsubstantiationthequantitysurveyorishamperedincompletingtheaccount.Therehavebeenmanyinstanceswhere thefinalcertificatehasbeenheldupfor literallyyearsbecause the information is not to hand. The Technology and Construction Court hasconsidered thisproblemandgivensomeusefulguidance.8TheJCT80formofcontractwasbeingconsidered,buttheprincipleholdsgoodforthesecontractsalso.

Thecourtshonesomemuch-neededlightonthepositionwhenitpointedoutthatifthecontracthadprogressedproperly,theinformationrequiredbythequantitysurveyorwouldhave been obtained from the contractor during the progress of theWorks. Strictly, thequantitysurveyorshouldbekeepingthestatusofthefinalaccountuptodatethroughoutthecontractperiod,inaccordancewithanyauthorisedvariations.Theeffectwouldbethatby the time the certificate of practical completionwas issued by the architect, the finalaccount should be just about ready so far as the quantity surveyorwas concerned. Thecourtsaidthatthepurposeofclause4.5.1istogivethecontractor

a last opportunity to put its house in order and to ensure that the employer’srepresentatives know of the full extent of the entitlement to which the contractorconsidersitselfentitledandoftheevidencetojustifytheamountofthatentitlement.

The court said that if the contractor failed to take advantage of the opportunity, thearchitectandthequantitysurveyorwouldhavetodothebesttheycouldusingwhateverinformationthecontractorhasalreadyprovidedtogetherwiththeirownknowledgeoftheproject.Thecourtmadeclearthatthearchitectandthequantitysurveyorcannotdeclinetoact,and,especially,thearchitectcannotrefusetoissueafinalcertificate.Suchanoutcomewould permit the contractor to control the issue of the certificate, and the contractorcannotbeallowedtogainanadvantagefromitsownbreach.

Moreover, and perhaps more surprisingly, the court held that the provision to thecontractor of a copy of the quantity surveyor’s version of the final account was notnecessaryasaprecursortotheissueofthefinalcertificate.Inthecourt’sview,thefinalcertificateitselfwouldbeenoughtoallowthecontractortodecidewhetheritwassatisfied

withtheamount.Thecontractorwasabletoseekadjudicationorarbitrationifdissatisfied.The ground rules are now clear. The quantity surveyor should keep the status of the

finalaccountuptodatethroughouttheprogressoftheWorks,seekinginformationfromthe contractor as required. After practical completion, the contractor has sixmonths tosubmit anything further that may influence the final account. In any event, whetheranythingissubmittedornot,thequantitysurveyorshouldproceedwithcalculationofthefinal account after the six months expires, and the architect should issue the finalcertificate strictly in accordancewith the contract.Clause 4.15.1 provides that the finalcertificate shall be issued no later than twomonths after the last of the following threeevents:theendoftherectificationperiod;theissueofthecertificateofmakinggood;orthe datewhen the architect sends the copies of the final account to the contractor. Thecourtmadeclearthatthetwomonthsisamaximumperiod,andwheneverthelasteventoccurred,thefinalcertificatecouldbeissuedthefollowingday.

145Whatdoesitmeanto‘issue’acertificate?Thisisatopicwhichcausesconsiderabledifficulty,althoughitappearssosimple.Manybuilding contracts require certificates to be issued. The date of issue of a certificate isimportant, although not as important as it was before the amendment of the HousingGrants, Construction and Regeneration Act 1996. Under JCT contracts, a certificatestatingtheamountofpaymentmustbe issuednolater thanfivedaysafter theduedate.Wherethefinalcertificateisconcerned,underSBC,ICandICD,thecertificatemustbeissuedwithinastatedtimeperiod.Issueofthecertificatewithinthetimeperiodmarkstheduedate,andthefinaldateforpaymentis28daysfromtheduedate.

Althoughithasbeenthesubjectofsomediscussion,thedateofissueofacertificateisestablishedasbeingthedateonwhichthecertificatewassentoutbythecertifier.Thefactthatitissentout,thatitleavesthesender,isimportant.Ifthecertificatewasactuallysentoutfromthearchitectonalaterdatethanthedateonthecertificate,itisprobablethatitwould be the date of sending out (the date of issue) which would be relevant.9 Forexample, a certificate is not issued if it is merely signed by the architect and put in adrawer.10Ontheotherhand,theissueofacertificateisnotthesameastheservingofacertificate on, or the receipt by, another party.11 Issue and receipt may, and often are,achieved on different dates, and it is significant that it is the date of issue, not receipt,whichisimportantinJCTandothercontracts.InTokenConstructionCoLtdvCharltonEstatesLtd12thecourtsaid:

[Counsel]stresses thatclause16 imposesnorequirementof thedocumentwhereby‘the architect certifies in writing’ his opinion must be served upon any particularperson,andisthusunlike,forexample,clause21(a),whichrequiresthearchitecttoissue interimcertificates to the ‘contractor’.Nevertheless I have somedifficulty inthinking that there would be sufficient compliance with clause 16 if the architectcertifiedinwritingandthenlockedthedocumentawayandtoldnooneaboutit.

146Whatcanacontractordoifthearchitectfailstocertify?This used to be a fairly tricky business. The architect is not a party to the contract;therefore,animportantquestionistheextenttowhichanemployermaybeliableforthearchitect’s failure to certify. An old case has decided that termswill be implied into acontract thatanemployerwillnot interferewiththearchitect’sdutiesascertifier,butanemployerwillensurethatthearchitectcarriesouthisorherdutyascertifier.13Althoughthis is an Australian case and not binding in the UK, it is thought that it properlyrepresentsthelawherealso.Moreover,alaterEnglishcaseheldinregardtothearchitect:

Theremay, however, be instances where the exercise of his professional duties issufficiently linked to theconductandattitudeof theemployer thathebecomes theagentoftheemployerssoastomakethemliableforhisdefault.14

Somedoubthasbeenthrownonthesefairlyboldstatementsbyamorerecentcase.15Thecourtheldthatthearchitect,althoughemployedbytheemployer,wasgivenauthoritybybothpartiestothecontracttoformandexpressopinionsandissuecertificatesasandwhenrequiredbyitsterms.Whensoacting,thearchitectwasnottheagentoftheemployer,but

[theemployer]wasthepartywhocouldcontrol[thearchitect]ifhefailedtodowhatthecontractrequired.Sincethecontractisnotworkableunlessthecertifierdoeswhatisrequiredofhim,[theemployer],aspartof theordinaryimpliedobligationofco-operation,wasunderadutytocall[thearchitect]tobook… if itknewthathewasnot acting in accordance with the contract… . the duty does not arise until theemployerisawareoftheneedtoremindthecertifierofhisobligations.

The situation has changed since the amendment of Housing Grants, Construction andRegenerationAct1996,whichmadetheduedateratherthanthearchitect’scertificatethetriggerforcalculatingthefinaldateforpayment.Since2011,ifthearchitectfailstocertifywithinfivedaysoftheduedate,thecontractorisentitledtosubmitapaymentnoticewithits own calculation of the sumdue.The employermust pay that sumunless a pay lessnoticeisservednolaterthanfivedaysbeforethefinaldateforpayment.

147Ifthecontractorhassignedthefinalaccountasagreed,isthearchitectentitledtoreduceitthereafter?Thisisaninterestingquestionbecause,althoughitisbasedtosomeextentonamyth,itmayhave real consequences.Clause4.5.1ofSBCstates that, not later than sixmonthsafterpracticalcompletion,thecontractormustprovidethearchitect(orifsoinstructedthequantitysurveyor)withallthedocumentsnecessaryforadjustingthecontractsum.Withinthreemonthsofreceivingthedocuments,thearchitectmustprovidethecontractorwithastatementofalltheadjustmentsandascertainmentoflossand/orexpense(ifany).Thisiscommonlyreferredtobyallpartiesasthe‘finalaccount’.Thecontractorproceedstosetout,inclause4.15.1,whenthearchitectmustissuethefinalcertificate.Thisdependsonwhicheverofthreeeventsislatest.Oneofthoseeventsisthesendingofthefinalaccounttothecontractor.

Itisusualforthequantitysurveyor(ifappointed)todealwiththefinalaccount.Indeed,itisalmostinvariablythequantitysurveyorwhosendsthefinalaccounttothecontractor.Again,itisalmostinvariablethatinsendingthefinalaccount,thequantitysurveyorwillaskthecontractortosignandreturnittoconfirmthatitisagreed.Sometimes,thequantitysurveyorhasalreadygottheemployer’ssignatureonthefinalaccounttoindicatethattheemployeragreeswithit.Themythisthatthecontractormustagreethefinalaccount.Thissigningofthefinalaccountisnowhererequiredbythecontractanditisbadpractice.Thepurpose of sending the final account is to let the contractor know what the quantitysurveyor believes to be the final account calculation. Nothing in the contract actuallystatesthatthearchitectwillincludeinthefinalcertificatethefigureinthefinalaccount.Therefore,althoughitmaycomeassomethingofashocktothecontractorifthearchitectcertifiessomethinginthefinalcertificatethatislessthanexpected,it iscertainlywithinthe architect’s power to do so. The contractor’s remedy is then to seek immediateadjudication or whichever of arbitration or legal proceedings has been chosen in thecontract.

Ifbothemployerandcontractorhavesigned thefinalaccountasagreed, thearchitectcannotissueafinalcertificateforalesseramount,becausethetwopartiestothebuildingcontract have agreed the final figure – which they are quite entitled to do. In normalcircumstances,oneexpectsthatthearchitectwillcertifythisfigure.However,ifforsomereasonthearchitectdoesnotagreewiththefinalaccountfigure,heorshewillbeunabletoissuethefinalcertificateatall,anditwillbelefttotheemployertopaythebalanceinthe agreed final account. If the employer has not signed the final account but thecontractorhas,canthearchitectissueafinalcertificateinalessersum?Itmaybearguedthatthequantitysurveyorhasnoauthoritytoaskthecontractortoagreeandsignthefinalaccount,andthereforethecontractor’ssignaturecountsfornothingorevenbindsonlythecontractornottorequiremorethaninthefinalaccount.Clearly,thatiswrong.Therecanonlybeanagreementwhenbothpartiesareagreedor,inthisinstance,whentheemployerhas given something (consideration) for the contractor’s agreement to the figure as aceilingontheamounttobeincludedinthefinalcertificate.Soeitheritisagreedbybothpartiesorbynone.

Thequantitysurveyorisdirectlyemployedbytheemployer,orifemployedthroughthearchitect, thequantitysurveyor isacting through thearchitect so faras thecontractor isconcerned.Whetherornotthequantitysurveyorhasobtainedtheemployer’ssignatureonthefinalaccount,thecontractor,whenaskedtosignasagreed,isentitledtoassumethatthe quantity surveyor is acting on behalf of the employer. Contractors would normallyassumethatthequantitysurveyorhasostensibleauthoritytoactonbehalfoftheemployerinrespectofvaluations.Thecontractorisfurtherentitledtoassumethatitisbeingaskedto agree the final account only because the employer has already agreed it. In thosecircumstances,itisdifficulttoseehowthearchitectcanlawfullyreducetheamountinthefinalcertificate.

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148Isthefinalcertificateeverconclusiveaboutworkmanshipandmaterials?Itusedtobethoughtthatwhenthearchitectissuedthefinalcertificateitwasequivalenttoa statement from the architect that the whole of the Works had been carried out inaccordancewiththecontract.Thatmaywellhavebeenthepositionunderearlyeditionsofthe JCT contracts, but it is not the case now. There has always been an element ofconfusion about the final certificate. Some people believe that it is conclusive simplybecauseitisthefinalcertificate,ratherlikegrassisgreenbecauseitisgrass.Itisnotclearwhenthissomewhatmysticalapproachtothefinalcertificatetookhold,butwheneveritwas,itwaswrong.ThefirstthingtounderstandisthattheissueofthefinalcertificatebythearchitectissimplyadeviceadoptedbytheJCTandsomeothercontractstobringthecontract to an orderly close. They could have adopted some other way. The finalcertificateundertheMWandMWDcontractsisnotconclusiveaboutanythingatall,noteventhefinalcertifiedsum,andafterreceivingpaymentofthebalance,thecontractorisatlibertytoclaimmoremoneyifitthinksitcansubstantiatetheclaim.However,itcannotdo so under the contract mechanism, because the contract is at an end. The ACA 3contract also has a final certificate, and it also is not conclusive about anything. TheconclusivityofthefinalcertificateispeculiartocertainJCTcontracts.

Whenafinalcertificateissaidtobe‘conclusive’,whatismeantisthatitisconclusiveevidence in regard to certain matters if neither party has referred such matters toadjudication,arbitrationorotherproceedingsbeforetheexpiryof28daysafteritsissue.Alinehasbeendrawnunderthosemattersandtheycannotbereopened.Therefore,ifafinalcertificate is said to be conclusive that the amount of the final sum has been properlycalculated,itwillnotpreventoneofthepartiesfromreferringthemethodofcalculationtoadjudicationorarbitration.Butall that isnecessary is for theotherparty toproduce thefinal certificate to have the claim dismissed. Certificates under SBC, IC and ICD areconclusiveinrespectofthefollowing:

Thatifthecontractbillsordrawingsoranyarchitect’sinstructionorfurtherissueofdrawings state clearly that particularqualities ofmaterials orgoodsorparticularstandardsofworkmanshiparetobetothearchitect’sapproval,theparticularqualityorstandardsaretothearchitect’sreasonablesatisfaction:Itshouldbenotedthatthefinalportionofthisprovisionmakesclearthatthefinalcertificateisnotconclusivethatanyofthosequalitiesorstandardsoranyothermaterials,goodsorworkmanshipcomply with any other requirement of the contract. That means that even if thearchitecthasspecifiedthatsomethingistobetohisorhersatisfaction,itwillnotstopan employer seeking redress for work ormaterials which do not complywith thecontractdocumentsinotherways.

Thatalltheprovisionsofthecontractrequiringadjustmentofthecontractsumhavebeen compliedwith: The final certificate is conclusive evidence that all necessaryadjustments (adds, omits, etc.) to the contract sumhave beenproperly carried out.Accidentalinclusionoromissionofworkormaterials,anobviousarithmeticalerrororfraudaretheonlymattersthatwillallowthesumtobecorrected.

That all extensions of timewhich are due under the extension of time clause have

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beengiven:Thispreventsthecontractorsubmittingnewevidenceaboutdelaysafterthefinalcertificatehasbeenissued.

That reimbursementof lossand/orexpense is in final settlementofall contractor’sclaims in respect of the matters identified under the loss and/or expense clause,whethertheclaimsareforbreachofcontract,dutyofcare,breachofstatutorydutyor otherwise: This is a very broad clause intended principally, like the previousclause,toensurethatthefinalcertificatereallydoessignifytheendoftheroadsofarasfinancesareconcerned.Itshouldbenotedthattheconclusivityiseffectiveonlyinrespect of the loss and/or expense clause. It does not prevent the contractor frommakingclaimsinregardtobreachesofcontractwhichfalloutsidethescopeofthesematters.

Some confusion was generated when the Court of Appeal, in Crown EstatesCommissionersvJohnMowlem&CoLtd,16consideredtheeffectoftheissueofthefinalcertificate as it applied to the architect’s satisfaction with workmanship and materials.Muchtotheconcernofarchitects,thecourtinterpretedthewords‘whicharetobetothesatisfaction of the architect’ very broadly, deciding that all workmanship andmaterialswereinherentlymattersfor thearchitect’ssatisfactionandthat thefinalcertificateunderJCT80wasconclusivethatthearchitectwassatisfiedwiththequalityandstandardsofallmaterials,goodsandworkmanship.Theconsequencewasthattheemployerfounditverydifficulttotakesubsequentactionagainstthecontractorforlatentdefects.Asaresult, itbecamecommon for architects to avoid issuinga final certificate at all, leavinga smallsumofmoneyoutstandinginthebeliefthatthecontractorwouldnotbothertopursueit.Itwas hoped that the employer would not be prevented from seeking redress from thecontractorifanydefectsappeared.

Subsequently,theJCTissuedamendmentstoeachoftheaffectedformsofcontract.Theamendmentsweredesigned to remove theeffectof theCourtofAppealdecisionby re-wording the sub-clauses relating to the architect’s satisfaction. The position appears tohavebeenrestored towhateveryone thought itwasbefore theCrownEstatescase:Thefinalcertificatewasconclusiveabout thearchitect’ssatisfactiononlyif thearchitecthadspecifically stated in the bills of quantities or specification that some item of goods,materialsorworkmanshipwastobetohisorhersatisfactionorapproval.TheJCT2011seriesofcontracts incorporate theamendment.TheDBcontractcontainsclause1.8.1.1,which is to similar effect except that it refers to the final statement instead of the finalcertificateandtotheemployerratherthantothearchitect,forobviousreasons.

PeriniCorporationvCommonwealthofAustralia(1969)12BLR82.

PenwithDistrictCouncilvVPDevelopmentsLtd(2005)102ConLR117.

LubenhamFidelities&InvestmentCovSouthPembrokeshireDistrictCouncilandWigleyFoxPartnership(1986)6ConLR85.

SutcliffevChippendaleandEdmondson(1971)18BLR149.

CammellLaird&CovTheManganeseBronzeandBrassCo[1934]AC402.

SutcliffevThackrah[1974]1AllER859;RBBurdenLtdvSwanseaCorporation[1957]3AllER243;Cantrell&AnothervWright&FullerLtd(2003)91ConLR97.

TokenConstructionCoLtdvCharltonEstatesLtd(1973)1BLR48.

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PenwithDistrictCouncilvVPDevelopmentsLtd(2005)102ConLR117.

Cantrell&AnothervWright&FullerLtd(2003)91ConLR97.

LondonBoroughofCamdenvThomasMcInerney&SonsLtd(1986)9ConLR99.

GlenvTheChurchWardens&OverseersoftheParishofFulham(1884)14QBD328.

(1973)1BLR48.

PeriniCorporationvCommonwealthofAustralia(1969)12BLR82.

Rees&KirbyLtdvSwanseaCityCouncil(1983)25BLR129.

PenwithDistrictCouncilvVPDevelopmentsLtd(2005)102ConLR117.

(1994)70BLR1CA.

Chapter17

Sub-contracts

149Mustthearchitectapprovethesub-contractor’s‘shopdrawings’?Itisnotunusualforacontractortosubmitasub-contractor’sorsupplier’s‘shopdrawings’for approval before manufacture of the element concerned. Indeed, few sensiblecontractorswould authorise proceedingwithmanufacture until the architect is satisfiedwith the details. Of course, in most cases the shop drawings are simply the sub-contractor’sowntranslationofthearchitect’sdrawingsanddetailsintosomethingthatthesub-contractor believes is easier to understand in the context of the particularmanufacturing process. In other words, the sub-contractor is using the informationprovidedbythearchitectthroughthecontractortoproducetheshopdrawings.

I once knew a very brave architect who would respond to the contractor with thefollowing words: ‘If the shop drawings are in accordance with the drawings I haveprovided,theyarecorrect;ifnot,theyarewrong.’Thisisequivalenttosaying‘checkthemyourself’.Italsorequiresalargedegreeofconfidenceonthepartofthearchitectthattheoriginaldrawingsarecompletelyaccurate.

Fewarchitects can say that their drawings are guaranteed to be100per cent correct.That is not to criticise architects; it is just a characteristic of the complexnature of theprofessionthatdiscrepanciesandothertypesoferrordooccur.Therefore,mostarchitectswillcheckshopdrawingsjusttobesurethattheirowndrawingsarecorrect.Theproblemis that, in checking whether the shop drawings accurately represent their drawings,architects inevitably check things that have been introduced by sub-contractors.Sometimes,sub-contractorswillactuallychangearchitects’detailstomakethemsuittheparticularsub-contractelement.Suchchangescaneasilybemissedif thearchitectgivesthe drawings only a cursory inspection. Architects should either check shop drawingsthoroughlyornotatall.Evenifthearchitecthasnocontractualresponsibilityforcheckingsuch drawings, responsibility may be assumed if the architect nonetheless does checkthem.

Inmostcases,thearchitectwillwanttobesatisfiedthattheshopdrawingsareaccurateand, therefore,will check them.Whether the architect has an obligation to approve thedrawingswilldependuponthe termsof thecontract.Suchanobligationwillusuallybefound, if at all, in the preliminaries section of the bills of quantities or specification.Ideally,thearchitectshouldmakesure,beforethedocumentsaresentoutfortender,thatthereisnorequirementforhisorherapproval.Theabsenceofsucharequirementwillnotprevent the contractor from sending the drawings for approval, but it will enable thearchitecttopointoutthatthereisnocontractualrequirementforthearchitect’sapproval.Moreover, the architect should inform the contractor that it is the contractor’s task tocheckandco-ordinatesub-contractors’drawings.

Obviously, if the sub-contractor is being asked to carry out part of the design, thepositionisratherdifferent.Thearchitect,whoisusuallythedesignleader,willhaveadutytoco-ordinatethesub-contractor’sdesignwiththerest.Therefore,thearchitectwillhaveacorrespondingdutytocheckthedrawingstoensurethisco-ordination.

Thepositionis,therefore,clear.Thearchitectwillrarelyhaveanyobligationtoapprove

asub-contractor’sshopdrawingsunlessthesub-contractorhasadesignobligationorthecontract documents expressly require the architect to approve such drawings. Whendealingwiththesub-contractor’sdesign,itissafestifthearchitectavoidsusingtheword‘approve’ and instead simply states thatheor shehasnocomment tomake.Useof theword ‘approve’ has been discussed elsewhere. It does not usually remove anyresponsibilityfromthecontractor.

150UnderMW,ifthecontractorisinfinancialtrouble,cantheemployerpaythesub-contractorsdirectly?Under JCT 98, there used to be provision for the employer to pay nominated sub-contractorsdirectlyincertaincircumstances.TherearenosuchprovisionsinSBC;indeed,there are no nominated sub-contractors in SBC. Even under JCT 98 terms, the directpaymentprovisionswerehedgedaroundbysubstantialconditions.

Under current traditional JCT contracts, there are no circumstances under which theemployershouldpaysub-contractorsdirectly.

Itisimportanttounderstandthattheemployerisincontractwiththecontractor,andthecontractor is in contract with the sub- contractors. There is no contractual relationshipbetween the sub-contractors and the employer unless some kind of directwarranty hasbeenemployed,becauseclausesinthemainandinthesub-contractspreventtheContracts(RightsofThirdParties)Act1999havinganyeffect.Therefore, theposition is that thecontractorhasundertakentotheemployer,forpayment,tocarryoutcertainWorks.PartoftheseWorkshasbeensub-let tosub-contractors.That is tosay, thesub-contractorshaveeachundertaken to the contractor to carryout theirpartsof themaincontractWorks inreturnforpaymentfromthecontractor.

Whenasub-contractorcarriesoutworkforthecontractor,itispartofthemaincontractWorks,andthecontractorisentitledtopaymentforitfromtheemployer.Ifthecontractordoesnotpaythesub-contractor,thesub-contractor’sredressisagainstthecontractor.Thesub-contractorhasnovalidclaimdirectlyagainst theemployer. It isunfortunate for thesub-contractor(indeedforallconcerned)ifthecontractorgetsintofinancialdifficultiesorevengoesintoliquidation.Thatisthekindofthingthatthesub-contractor,likeanyotherbusiness,musttrytoguardagainst.Someemployersbelievethattheyareentitledtopaythe sub-contractor directly and thendeduct themoneypaid from the contractor.That iswrong.

Theemployerwhopaysdirectlywillbeinbreachoftheinsolvencyrulesbymakingthesub-contractor into a preferential creditor. Even if that is not an issue, in the case of acontractor who simply will not pay sub-contractors, the employer will undoubtedly becalledupontopaythecontractorfortheworkcarriedoutaspartofthemaincontractbythe sub-contractor. The employer will have no defence. It is not an argument for theemployertosay,‘Iwillnotpayyoubecauseyouhavenotpaidyoursub-contractors’.Theemployer’sdutytopaythecontractorunderthemaincontractisnotdependentonwhetherthecontractorhaspaidthesub-contractors.Indeed,thecontractor’srelationshipwithsub-contractors is no business of the employer’s except to the extent that themain contractrequiresthecontractortoincludecertainprovisionsinthesub-contract(forexample,SBCclause3.9.2).

Onapurelypracticallevel,thereisnowayinwhichtheemployercanbesurethatthesub-contractorhasnotbeenpaidunless the sub-contractor takes legal actionagainst thecontractor.Inthatcase,thesub-contractorwillrecoverwhatevertheadjudicator,arbitratororjudgebelievesisappropriate.

151Ifthearchitectinstructsthecontractortoacceptaspecificsub-contractor’squotation,istheemployerliableifthecontractorfailstopay?Thequestionofwhetheracontractorcanrefusetoacceptsuchaquotationhasbeendealtwithelsewhere.Assumingthatacontractorhasacceptedthequotation,thequestionreallyiswhethertheemployerhasanyliabilitytothesub-contractorafterthat.Itoftenhappensthatacontractorbecomesinsolventwhileowingmoneytosub-contractors.Doesitmakeadifferencethatthecontractorwasinstructedtoacceptthisparticularsub-contractor?Inprinciple,itdoesnotmakeadifference.Sofarastheemployerisconcerned,thisisasub-contractfreelyenteredintobetweencontractorandsub-contractorbywhich,inreturnforwork, thecontractoragrees topay thesub-contractoracertainamountofmoney. If, foranyreason,thecontractorfailstopay,thatisamatterbetweenthecontractorandthesub-contractor.Theemployer isnot aparty to the sub-contract andhasno liability toeitherpartyunderit,althoughofcoursetheemployerhascertaindutiestothecontractorunderthemaincontract.Thisquestionwasprobablypromptedbymemoriesof thenominatedsub-contractprovisionsinJCT98.Underthoseprovisions,ifthecontractorfailedtopayanominated sub-contractormoneywhich the contractor had been directed, as part of thecertificate,topay,thearchitectcouldcertifythefailuretotheemployer,whothenhadtopay the sub-contractor directly the amount owed by the contractor. The employer wasentitled todeduct theamount fromany furthermoneydue to thecontractor.Even theseprovisionsweremodifiedifthecontractorbecameinsolvent.Therearenonominatedsub-contractprovisionsinthe2011suiteofJCTcontracts,andtheexistingnamingprovisionsdonotallowtheemployertopaysub-contractorsdirectlyifthecontractorfails.

152Ifthecontractorengagesasub-contractorwithoutthearchitect’sconsent,canthecontractoravoidhavingtopaythesub-contractorforworkdone?SBCclause3.7.1 states that the contractormustnot sub-contract anypartof theWorkswithoutthearchitect’sconsent,whichmustnotbeunreasonablydelayedorwithheld.Theprovisionisimportant.Whentheemployer,withtheadviceofthearchitectorthequantitysurveyor,selectedcontractorsforthetenderlistandacceptedthepriceofoneofthem,itwasonthebasis,atleastpartly,ofthereputationofthosecontractors.Ifacontractorwasallowed to sub- contract as it pleased and to choose sub-contractors indiscriminately,perhapssimplyonthebasisofthelowestprice,thepointofselectingacontractorwithareputationforgoodworkwouldbedefeated.Ifacontractorsub-contractswithoutconsent,itisagroundfortheissueofadefaultnoticeunderclause8.4.1.4priortoterminationbytheemployer.

In practice, a contractor will often sub-contract without consent and then requestconsent later.Manyarchitects feelpressured intogiving theconsent simplybecause theconsequencesofwithholdingconsent,evenifjustified,mightbetocauseaseveredelaytothecontract.Althoughthedelaywouldbethecontractor’sfault,andtheemployercouldrecover liquidated damages, the actual period of delay could never be recovered.Therefore, the instances when an architect will refuse consent to a sub-contractor arelikelytoberare.Nevertheless,itdoesoccur.Whenconsentisrefused,thecontractormaybe in the positionof having instructed the sub-contractor to carry out part of thework,whichmayhave tobe redonewithanauthorisedsub-contractoror, if sub-contracting isnot consented to at all, by the contractor itself. Even worse, the contractor may haveenteredintoasub-contractwiththesub-contractorforthewholeofthatparticularitemofwork,forexampleheating,andfaceliabilityforrepudiationofthesub-contract.

Does the refusal of consent by the architect, necessitating the use of a different sub-contractor by the contractor or the carrying out of that work by the contractor itself,somehow invalidate the sub-contract so as to relieve the contractor from any liabilityunder it?Sadlyfor thecontractor, theanswer to thatquestion is ‘No’.Theobligation toobtain consent prior to sub-contracting is a term of the main contract between thecontractor and the employer. If the contractor enters into a sub-contract with the sub-contractorwithoutconsent,thatsub-contractisperfectlyvalidandlegallybindingonbothsub-contractorandcontractor.Thetermsofthemaincontractareofnoconcerntothesub-contractor unless the sub-contractor has received adequate notice of them.Even if suchnotice has been given, the sub-contractor has no duty to checkwith the contractor thatconsenthasbeenreceivedfromthearchitect.Thesub-contractor’spositionwouldbethesameasthatofthepartytoanyothercontractwhererepudiationhadtakenplace.Itwouldbe impossible for the sub-contractor to continue, and itwould have little choice but toaccepttherepudiationandclaimdamages.

153Thecontractorhasgoneintoliquidation,andtheheatingsub-contractorsaysitisgoingtoremovealltheloosepipingstoredonsiteandtakeawaytheradiatorsfixedinthebuilding.Canitdothat?This is a complex topic. Very often, when a contractor goes into liquidation, sub-contractors and suppliers are left unpaid. SBC attempts to deal with this situation inclauses2.24and3.9.Clause2.24statesthatsitematerialsmustnotberemovedfromtheWorks without the architect’s consent; if the value has been included in an interimcertificateandtheamounthasbeenpaidbytheemployertothecontractor,thematerialsbecomethepropertyoftheemployer.Ofcourse,thisclauseisbindingonlybetweentheemployer and the contractor. It cannot bind a third party such as a sub-contractor orsupplier. The contract tries to overcome that problem in clause 3.9,where it states that‘when it is considered appropriate’,whatever thatmaymean, the contractor shall enterinto the relevant version of the JCT standard sub-contract. The clause then proceeds tostatewhatthesub-contractmustinclude.Amongthetermsaretermswhichreflectclause2.24.Whilethecontractorremainssolvent,andprovidedthatthecontractorhascompliedwithclause3.9ofSBC,removalofmaterialsfromthesitebyasub-contractorwouldbeaseriousbreachofthesub-contractforwhichthecontractorwouldbeliabletotheemployerthroughthemaincontract.

Thedifficultyariseswhenthecontractorbecomesinsolvent,becausethereisusuallynopoint in taking legal action for breach of contract against an insolvent party. If thecontractor has failed to ensure that the requisite sub-contract has been executed, it is abreach of contract with no remedy. Even if the insolvent contractor has ensured theexecution of the sub-contract, the contractual exclusion of rights under the Contracts(RightsofThirdsParties)Act1999(clause1.6ofSBCandsimilarclausesinotherJCTcontracts)means that the sub-contract confers no benefit on the employer and the sub-contractor can ignore itwith impunity.Many suppliers and sub-contractorswill have aretentionof title clause in their contractswith the contractor.This clause states that thesub-contractor retainsownershipof thematerialsuntil it receivespayment.Therefore, itownsitsmaterialsonsiteifnotpaidfor.IfithasenteredintoastandardJCTsub-contractwith the contractor, the retention of title clause will not usually apply. For the sub-contractor to enter the site and remove loose materials for which it has not been paidwouldamounttotrespass.However, if thetrespasshasbeencarriedoutwithoutcausinganydamagetotheWorksorthesite,itisdifficulttoseewhattheemployercandoaboutit.Theemployer’sbestshort-termsolutionistomakethesiteandallmaterialssecureassoon as the insolvency is confirmed. However, despite SBC clause 2.24, the sub-contractormaystillhaveavalidclaimtotheloosematerials.1

Fixedmaterialssuchasradiatorsareanentirelydifferentmatter.Inprinciple,oncethematerial has been fixed to the building it becomes part of the building, and thereforeownershippassestotheemployer.2Radiatorssecurelyfixedtothebuildingarenolongerthepropertyofeithersub-contractororcontractor.Theybelongtotheemployer,andifthe

sub-contractorremovesthemitistheft.Wheresuchremovalisthreatened,itisimportantthat the employer or the employer’s solicitor writes immediately to the sub-contractorinformingitthatwhatitisthreateningtocommitisacriminaloffence.

154Cantherebeliquidateddamagesinasub-contract?Thestraightanswertothatquestionisthattherecanbeprovisionforliquidateddamagesinasub-contract,butitisnotusuallyaverygoodidea.Thereisagreatdealofcaselawconcerningliquidateddamagesstretchingbackmanyyears.Forexample,aleadingcaseisDunlopPneumaticTyreCoLtdvNewGarage&MotorCoLtd.3Thesecasesdealwithattemptstoimposeliquidateddamagesinallkindsofcircumstances.Whatisclearisthatthepurposeofliquidateddamagesistoavoidtheneedforpartiestobecomeinvolvedinexpensivelitigationinordertoestablishabreachofcontract,provethedamageresultingfromthatbreachandthenquantifythecostofrectifyingthedamage.Instead,thepartiesagreeonasumofmoneywhichistobedeductedontheoccurrenceofanevent.Thenallthat need be done is to identify that the event has occurred and to allocate the sum ofmoney. In building contracts, liquidated damages are almost invariably connected to afailure by the contractor to complete theWorks by the completion date in the contract.Liquidated damages are usually stated as £x for every day orweek that theWorks aredelayed.Before theliquidateddamagescanlawfullybededucted, itmustbeshownthatthecontractorwasnotentitledtoanyextensionofthecontractperiod.Theperiodsoftimebetweencontractcompletiondateandactual(practical)completionaremattersoffact.

Akey factor indealingwith liquidateddamages is that the sumofmoneymust be agenuinepre-estimateofthelosslikelytobesufferedbytheemployerifdelaysoccur.Agenuinepre-estimatedoesnotmeanthatthesumhastobecalculatedwithgreatprecision.Sometimesprecisioncanbeused,andwhereitcan,itshould.However,inmostcases,theemployermayonlyhaveavagueideaattheexecutionofthecontractofthesumlikelytobe lost. In general terms, provided a genuine effort has beenmade nomatter how theoutcomeisguessedat,thedamageswillbeenforcedbythecourts.Incalculatingthesum,theemployerhastothinkofonlyonething–theconsequencesifthecontractordoesnotfinishontime.Failuretofinishwillbeinstantlyclear.

Contrastthatsituationwiththesituationinvolvingasub-contractor.Asub-contractorisoneofseveral,perhapsmany,onthesite.Asub-contractorhasitsowntimescaleinwhichtowork, inandamongother sub-contractorson thesite. It isoftennecessary fora sub-contractortogoawayandthenreturntositewhenneeded.Therefore,whenlookingattheprogrammeencompassingalltheworktobedoneonaproject,allthesub-contractorsarecloselylinkedandduetocompletetheirsectionsoftheWorksatdifferenttimes.Ifasub-contractorisdelayedduetoitsownfault,itsdelaywillaffectsome,butprobablynotall,of theother sub-contractors.A sub-contractor indelay cando little to recover lost timebecausethedelaywillaffectothers,andevenifthedelayingsub-contractorreturnstositelaterandfinishesthatpieceofworkinhalfthetime,itisunlikelytohaveamajororanyeffect on the completion date of theWorks as awhole. The chances are that themaincontractorwillalsocausesomedelayswhichwillobviouslyaffectthesub-contractors.Itis impossible for themain contractor to calculate a suitable sum representingagenuinepre-estimateofthelosslikelytobesustainedbythemaincontractorifanyorallofthesesub-contractors fail, through their own fault, tomeet their individual completion dates.Evenifitwasknownthatjustoneofthesub-contractorswouldfailtomeetitscompletion

date,thecalculationofresultinglosstothemaincontractorwouldbedifficulttodoaftertheeventandwouldcertainlynotbepossiblebefore.Therefore,thesub-contractorshouldbe able to successfully challenge the whole basis and amount of liquidated damages.Where several sub-contractors are in delay, the problem ismagnified.Main contractorshavebeenknowntoinsertastheliquidateddamagesforeachsub-contractortheamountofliquidateddamageswhichthemaincontractorisliabletopayunderthemaincontract.Ittakesbutamoment’sthoughttoseethatsuchanapproachiscompletelyuntenable.

Itisnocoincidencethatallthestandardformsub-contractswhichhavebeenproducedprovideforunliquidateddamagesonly.Inotherwords,theyallacknowledgethatthemaincontractorwillhavetoprovethatasub-contractorwaslatethroughitsownfaultandtheamountofdamagessufferedthereby.

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155Isthesub-contractorobligedtoworkinaccordancewiththeactualprogressofthemaincontractor’sWorks?Prior to 2005, standard sub-contracts tended to require the contractor to carry out andcomplete the sub-contract works in accordancewith the programme details in the sub-contractandreasonablyinaccordancewiththeprogressoftheWorks.Manycontractorsassumedthat,havingenteredintoasub-contractwithasub-contractor,thesub-contractorwasobliged toworkwhenandwhereon theWorks thecontractordirected.Contractorsexpected to be able to telephone the sub-contractor and to secure its presence on sitevirtuallyimmediatelyandtohaveitmoveoffthesitewithequalspeedasdirected.Whentestedinthecourts,thatapproachwasheldtobewrong.4Thecourtsdecidedthatthesub-contractorcouldplanandcarryouttheworkasitwishedifthesub-contractsaidnothingtothecontrary,butthesub-contractorwastofinishbythetimestatedinthesub-contract.The sub-contractorwasnot required to perform thework in anyparticular order at anyparticularrateofprogressortofinishanypartofthesub-contractworksbyanyparticulardatesoastoenablethecontractortoproceedwithotherparts.Butthesub-contractorwasnottounreasonablyinterferewiththecarryingoutofotherworkwhichitwasconvenienttocarryoutatthesametime.TheJCT2005suiteofsub-contractshavewordingwhichisslightlychangedfrompreviouseditions.However,itisthoughtthatthechangeinwordingdoesnothingtoincreasethesub-contractor’sobligationssofarasprogressisconcerned,butratherconfirmsthepositionassetoutbythecourt.Thesituationisnotentirelyone-sided.Asub-contractorhasargued thata termshouldbe implied intosub-contracts thatthemaincontractorwouldmakesufficientworkavailabletoenablethesub-contractorstomaintain reasonable progress and to execute the work in an efficient and economicmanner. That argument has been rejected by the Court of Appeal, which held that thegenerallawhadnoruleimplyingsuchatermintosub-contracts.5Everythingdependsonthe precise terms of the sub-contract being used. Often such sub-contracts are not instandardformbutratherarespeciallywrittenforthecontractor.

DawberWilliamsonRoofingLtdvHumbersideCountyCouncil(1979)14BLR70.

ReynoldsvAshby[1904]AC466.

[1915]AllER739.

PigottFoundationsvShepherdConstruction(1993)67BLR48.

MartinGrant&CoLtdvSirLindsayParkinson&CoLtd(1984)3ConLR12.

Chapter18

Extensionsoftime/Adjustmentofthecompletiondate

156Canthearchitectignoredelaysifthecontractorhasfailedtogivepropernotice?Thisisacommonquestion,theanswertowhichdependsonthetermsofthecontract.Atone time it was considered that if the employer committed any act of prevention, thecontractorwasentitledtoanextensionoftimeirrespectiveofanynoticeprovisions,andifnoextensionwasgiven,timebecameatlargeandthecontractor’sobligationwassimplytocompletetheWorkswithinareasonabletime.

Ithassincebeenrecognisedthatsuchanapproachwouldallowacontractortoputtimeat largeatwillby thesimpleexpedientof ignoringnoticeprovisionswhichwouldhavetriggered an extension of time. It has been held that if a contractor ignores a noticeprovisionwhichisaconditionprecedent,therewillbenoentitlementtoextensionoftime,eventhoughtherewouldotherwisebeaclearbasisonthegroundsoftheemployer’sactsofprevention.1Ithasbeensaidthatinorderforarequirementfornoticetobeaconditionprecedent,severalseriousconditionsmustbesatisfied.Forexample,thetimeforserviceofthenoticemustbestatedandmustmakeclearthatifthereisafailuretogivethenotice,a specific rightwill be lost.That positionhas been consideredby the court, and itwasrejectedexpresslyinregardtoextensionoftimewheretherewasaclausewhichhadasaprovisothewords,‘thesub-contractorshallhavegivenwithinareasonableperiodwrittennoticetothecontractorofthecircumstancesgivingrisetothedelay’.2Thecourtheld:

if there is a genuine ambiguity as to whether or not notification is a conditionprecedent, then the notification should not be construed as being a conditionprecedent, since the provision operates for the benefit of only one party i.e. theemployer,andoperatestodeprivetheotherparty(thecontractor)ofrightswhichhewouldotherwiseenjoyunderthecontract.

…inmyjudgmentthephrase…isclearinitsmeaning….Inmyopiniontherealissuewhichisraisedonthewordingof thisclauseiswhether thoseclearwordsbythemselves suffice, or whether the clause also needs to include some expressstatementtotheeffectthatunlesswrittennoticeisgivenwithinareasonabletimethesub-contractorwillnotbeentitledtoanextensionoftime.

Inmyjudgmentafurtherexpressstatementofthatkindisnotnecessary.Iconsiderthat a notification requirement may, and in this case does, operate as a conditionprecedenteventhoughitdoesnotcontainanexpresswarningastotheconsequenceofnon-compliance.

InCity Inn Ltd v ShepherdConstruction Ltd,3 the contractorwas required to carry outvarious actions andmake specific submissions before being entitled to an extension oftime in regard to certain architect’s instructions.The court had no hesitation in holdingthatfailuretocomplywiththerequirementswouldpreventthecontractorfromgettinganyextension of time in respect of the particular instructions. It is quite common to find arequirementfornotice instandardformcontracts,particularly inregard toextensionsoftimeandapplicationsforlossand/orexpense.Thesedecisionssuggestthatthecourtswillnot ignoreacontractor’s failure togivenoticesprescribedby thecontract, and it seemslikely that such clauses will be interpreted as conditions precedent. If that is correct,

contractors will have to give timely and effective notices before the architect needconsiderthem.

157Whatisthepositionifthecontractorisdelayedbydelaysinobtainingspecifiedgoodsfromoverseassuppliers?ArchitectssometimesspecifygoodswhichareonlyobtainablefromsuppliersoutsidetheUK.Theirreasonsfordoingsoarelargelyimmaterial,butinmostinstancesitisprobablybecausetheparticularitemisattractiveintermsofdesignorfunctionandisnotavailablein theUK.Once the item is specifiedand/or included in thebillsofquantities, it is theresponsibility of the contractor, when preparing its tender, to check availability of thespecifieditem.Whenthecontractorsubmitsitstender,itisofferingtocarryouttheworkandsupplythegoodsinthedocumentsprovidedfortenderingpurposes.

Oncethetenderisacceptedoraformofcontractbasedonthetenderisexecutedbytheparties,thecontractor’sobligationtosupplytheitemislegallybinding.Fromthenon,thecontractorshouldordertheitemandenterintoacontractofsalewiththesupplier.Clearly,whendealingwithoverseessuppliers,contractsofsalearenotasstraightforwardasifthesupplierwasbasedintheUK.Thecontractitselfmaybeinaccordancewithsomeothersystemoflawwhichraisesitsownproblemsifthingsgowrong.However,bytendering,the contractor has taken all these difficulties on board. In these circumstances, a wisecontractormayseektoqualifyitstenderatanearlystage.Ifnot,thecontractorisliableforanylatedeliveryjustasifthedeliverywaslatefromaUKsupplier.

Ifthegoodsinquestionarenotjustlatebutunobtainable,SBCexcusesthecontractorfromtheobligationofsupplyaltogether,anditisamatterforthearchitecttospecifysomeother product. If the fact of the goods being unobtainable causes delay, the contractorwould be entitled to an extension of time, and depending on all the circumstances, thecontractorcouldsuccessfullymakeanapplicationforlossand/orexpense.Thequestionofmaterialsandgoodsnotbeingprocurableisdiscussedinquestion45.

158Isanoteintheminutesofasitemeetingsufficientnoticeofdelayfromthecontractor?From time to time,questionsariseabout the statusof sitemeetingminutes.A favouritequestioniswhethertheyconstituteawritteninstructionofthearchitectasrequiredbytheJCTandotherstandardcontracts.Theanswerisprobablythattheydo,providedthattheminutes are drafted by the architect. A more bizarre question is whether minutes arewrittenapplicationsbythecontractorinrespectofdirectlossand/orexpense.Theanswerto that is clearly that theyarenot, even if they record that thecontractorasked for lossand/orexpenseatthemeeting,unlessthecontractoractuallydraftedtheminutes.

Arelatedquestioniswhetheranoteinsitemeetingminutescouldbeanoticeofdelaytocomplywithclause2.27.1ofSBC.Theclause requires thecontractor togivewrittennoticeforthwithwheneveritbecomesreasonablyapparentthattheprogressoftheWorksisbeingorindeedislikelytobedelayed.Thisquestionwasgivenshortshriftbythecourtinarecentdecision:4

Ialsoconsiderthatthewrittennoticemustemanatefrom[thesub-contractor].Thusfor example an entry in aminute of ameeting prepared by [the projectmanager]which recorded that therehadbeenadelay…wouldnot inmy judgmentby itselfamounttoavalidnoticeundercl.6.1.Theessenceofthenotificationrequirementinmy judgment is that [the main contractor] must know that [the sub-contractor] iscontendingthatrelevantcircumstanceshadoccurredandthattheyhaveledtoadelayinthesub-contractworks.

In thatcase, anamendedMF/1 formofcontractwasusedbetweenmaincontractorandsub-contractor,buttheprincipleofawrittennoticewassimilartowhatisrequiredunderJCT contracts. Anything in a document written by someone other than the contractorclearlycannotbethecontractor’swrittennotice.However,thereseemsnoreasontodoubtthatifaprogressreportispresentedinwritingtothearchitectatasitemeeting,thatreportwouldsufficeasawrittennotice,provideditcontainedtherelevantinformationrequiredunderthecontract.Anyreferencetoitinthesitemeetingminuteswouldbenomorethanareference.Thenoticewouldbethereportitself.

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159Istimeoftheessenceinbuildingcontracts?Timeis‘oftheessence’whenanybreachofstipulationsabouttimeinacontractcanbetreated as repudiatory so as to entitle the other party to terminate performance of itsobligationsandclaimdamages.Thereareprobablyonly three instanceswhere timewillbeoftheessence:

ifitspecificallystatesinthecontractthattimeisoftheessence;

iftimebeingoftheessenceisanecessaryimplication;

ifonepartyisindelaytoanunreasonableextent,timemaybemadeoftheessenceiftheotherparty servesanoticeon theparty inbreachsettinganewand reasonabledateforcompletion.5

Thetermmustbesofundamentalthatafailuretocomplywouldmakethecontractalmostworthlesssofarastheotherpartywasconcerned.Ifashopordersgoodsforsaletomeetaparticulardemand,forexample,andthatdemandisknowntothesupplier,failuretomeettherequireddeliverydatemight,dependingonallthecircumstances,amounttoabreachofanessentialterm.

Timewillnotnormallybeoftheessenceinbuildingcontractsunlessexpresslystatedtobeso.Thereasonisthatthecontractmakesexpressprovision,intheformofanextensionoftimeclauseandliquidateddamages,forthesituationifthecontractperiodisexceeded.6Therefore, itwouldbenonsensetomaketimeof theessence:Onetermwouldbetotheeffectthatfailuretocompletebytheduedatewouldentitletheotherpartytoacceptthefailureasrepudiation,whiletheothertermwouldallowthecontractortoanextensionoftime for appropriate reasons. Time was made of the essence in Peak Construction(Liverpool)LtdvMcKinneyFoundationsLtd,7andthisapparentlygavetheemployertherightto‘determinethecontractat theendof’ theperiodasextendedbythearchitect.Inthe case of most building contracts, the provisions for termination (e.g. for failure toproceedregularlyanddiligently)adequatelycoverthesituation.

160What,inpractice,are‘concurrentdelays’?Concurrent delays are the subject ofmuch debate and, itmust be said, a great deal ofmisunderstanding.A simple approach is to say that concurrent delays arewhen two ormore things happen at the same time and delay the completion date of a particularcontract.However,thatisnotthewholestory.Therearetwokindsofconcurrentdelays.Therearedelayswhichoccuratthesametimetotwodifferentactivities,andtherearethedelayswhichoccuratthesametimetothesameactivity.Itisthelatterwhichcausestheproblems.

Ifdelaysactondifferentactivities,itiseasytodealwiththesituationbyinputtingthedelaysoneata time into thecontractor’sprogrammeandnoting theeffect.Thiscanbedoneusingcomputersoftware.Only thedelayswhicharegroundsforextensionof timemustbeentered.Contractor’sculpabledelaysareignored.Onecourtcommented:

it is agreed that if there are two concurrent causes of delay, one of which is aRelevantEvent,andtheotherisnot,thenthecontractorisentitledtoanextensionoftime for the period of delay caused by the Relevant Event notwithstanding theconcurrenteffectoftheotherevent.8

This must be a correct view where the two concurrent delays operate on differentactivities,and,asnoted,computeranalysiseasilydealswiththissituationbyignoringalldelayswhicharenotrelevantevents.9

True concurrency iswhen the causes of delay operate at the same time on the sameactivity.Totakeasimpleexample,acontractormayhavedifficultyinobtaininglabourtolay paving, but the architectmay also be delayed in providing the necessary drawingsshowing the layout of the paving. The courts have not adopted an entirely consistentapproach. Indeed, the guidance one might expect from the courts has not been veryhelpful.Sometimes,whatisknownasthe‘dominantcause’approachhasbeenadvocated.Onecourthasasked‘whatwas theeffectiveandpredominantcauseof theaccident thathappened,whateverthenatureoftheaccidentmaybe’.10Ithasbeensaidthatthetestisthat of the ordinary bystander, such that anyone looking onwould be able to correctlyname the predominant cause of the delay. Yet again, a court has suggested that thearchitectmight simply apportion the responsibility fordelaybetween twocauses.As tohowthatistobedone,thecourtconcludedthatthebasismustbefairandreasonable.11Asensibleviewofconcurrencywasgiveninalatercase:

However, it is, I think, necessary to be clearwhat onemeans by events operatingconcurrently. Itdoesnotmean, inmyjudgment,asituation inwhich,workalreadybeing delayed, let it be supposed, because the contractor has had difficulty inobtainingsufficientlabour,aneventoccurswhichisaRelevantEventandwhich,hadthecontractornotbeendelayed,wouldhavecausedhimtobedelayed,butwhichinfact,byreasonoftheexistingdelay,madenodifference.InsuchasituationalthoughthereisaRelevantEvent,‘thecompletionoftheWorksis[not]likelytobedelayedtherebybeyondtheCompletionDate’.TheRelevantEventsimplyhasnoeffectuponthecompletiondate.12

Inamorerecentcase,thecourtsaidthis:

The general rule in construction and engineering cases is that where there isconcurrent delay to completion caused by matters for which both employer andcontractor are responsible, the contractor is entitled to an extension of time but hecannotrecoverinrespectofthelosscausedbythedelay.Inthecaseoftheformer,thisisbecausetherulewheredelayiscausedbytheemployeristhatnotonlymustthecontractorcompletewithinareasonabletimebutalsothecontractormusthaveareasonable time within which to complete. It therefore does not matter if thecontractorwouldhavebeenunabletocompletebythecontractualcompletiondateifthere had been no breaches of contract by the employer (or other events whichentitledthecontractortoanextensionoftime),becauseheisentitledtohavethetimewithinwhichtocompletewhichthecontractallowsorwhichtheemployer’sconducthasmadereasonablynecessary.13

That is a very concise yet comprehensive statement of the law. True concurrency isfortunately rare. In most instances where delays occur to the same activity, they areconsecutive.

161Howdoestimebecome‘atlarge’?In the absence of an express term in a contract fixing the date for completion, thecontractor’sobligationistocompletewithinareasonabletime.(Thetaskofdeterminingwhatareasonabletimeisonanyparticularoccasionisaquestionoffactdependingonallthe terms of the contract and the surrounding circumstances.) That situation is oftenreferredtoastimebeingatlarge.Timeisatlargewhenthereisnodateforthecompletionofthecontractorifthedatefixedhasbecomeinoperableforsomereason.

Allthestandardformsofbuildingcontractprovideforadateforcompletionandalsomakeprovisionforfixinganewdateforcompletionwheredelayhasoccurredduetotheactionsorinactionsoftheemployerorsomeoneforwhomtheemployerisresponsible,forexample, thearchitect. It is relativelyrarefor timetobecomeat large,and,possiblyforthisreason,manyadjudicatorsappearreluctanttocometothatconclusionevenwherealltheevidencepointstoit.Theusualreasonwhytimemaybecomeatlargeisbecausethearchitectfailsproperlytogiveanextensionoftimeunderthecontractprovisions.

It will be unusual for time to become at large if the architect properly operates thecontract.Oneof theconsequencesof timebecomingat large is that liquidateddamagescan no longer be deducted because there is no date fromwhich such damages can becalculated.14

The position can become complex if the architect awards extensions of time aftercompletionoftheWorks.Whetherornotthearchitectisentitledtodosodependsontheprecisewordingofthecontractconstruedinthelightofdecidedcases.SBC,ICandICDexpresslygivethearchitectpowertoextendtimeandfixanewdateforcompletionafterthecontractcompletiondatehaspassed.

162UnderSBC,ifthearchitectgivesaninstructionafterthedatethecontractorshouldhavefinished,isthecontractorentitledtoanextensionoftime,and,ifso,howlong?It isoftenargued,withsomemerit, that thearchitectshouldissueall instructionsbeforethecompletiondate in thecontract.Butwhat is the situation if thecompletiondatehaspassed, the contractor has been trying to finish the Works for several weeks, and aninstructionforadditionalworkisissued?Clearly,theinstructionisgoingtocauseadelay,andthecontractorisentitledtoanextensionoftimeasaresult.Thequestioniswhetherthecontractorisentitledtoanextensionoftimefromthecompletiondatetothedateonwhichthecontractoractuallyfinishestheadditionalwork,oranextensionoftimeaddedtothelastcompletiondateandmerelyofalengthtorepresentthetimetakentocomplywiththeinstruction.

Thecontractorwillusuallybelookingfortheformer,butthearchitectwillbekeentogive the latter.Thecontractor’sargumentmakessense. Itamounts to this:Thearchitectcouldhave issued the instruction at any timeup to thedateof completionbut chose toissueitafterthecompletiondatewaspast.Thereisnoexcuseforthat,becausewhereSBCisused,alltheworktobedoneshouldbeknownwhentheWorkscommence.Therefore,thearchitectcannotsaythatheorshecouldnotissuetheinstructionuntilthecontractorhadreachedaparticularstage.

The architect’s argument is simply that instructionsmay be issued at any time up topracticalcompletion.Therefore,althoughanextensionoftimeisdue,itcandealonlywiththeactualperiodofdelay.Thecontractoriseffectivelysaying,‘Howcanyougivemeaninstructiontocarryoutworktodayknowingthatitwilltakeuntilnextweektodo,butatthesametimegivemeanextensionoftimethatsaysIshouldhavefinishedseveralweeksago?’

The question was considered by the court in Balfour Beatty Ltd v ChestermountPropertiesLtd15 inconnectionwith theJCT80formofcontract.Thecourtdecided thatthecontractorwasentitledonlytothenetamountofthedelayaddedontothecompletiondate.The court’s approach appeared tobe that itwasnot the relativedateswhichwereimportant,butratherthetimeperiodsofthedelay.Thisseemedtobethecourt’sviewofwhatwasareasonablesolutiontotheproblemratherthanaresultofastrictreadingofthecontract. Essentially, the court said that in such circumstances the architect shouldestimatethelengthoftimethecontractorneededtocompletetheworkintheinstructionand then add it on to the last date for completion. This had the effect of removing thecontractor’speriodofculpabledelayfromtheextensionperiod.Itcanbeseenthatthisisajust solution, but whether it is what the contract actually said is open to doubt. ThedecisionwasbasedontheJCT1980andisapplicabletoSBC,ICandICD.

163If,underSBC,thearchitectdoesnotreceiveallthedelayinformationrequireduntilaweekbeforethedateforcompletion,musttheextensionoftimestillbegivenbeforethecompletiondate?This question originates from the fact that clause 2.28.2 states that the architect mustnotifythecontractorofthedecisiontogiveanextensionoftimeinwriting‘assoonasisreasonably practicable’, but it must be within 12 weeks of receipt of the requiredparticulars. The clause goes on to state that if the period between receipt and thecompletion date is less than 12 weeks, the architect must endeavour to notify thecontractor before the completion date. This wording, and similar wording in thepredecessor contract JCT 98, is a source of concern to many architects. The currentwording stipulates that the architect must ‘endeavour’ to notify before the completiondate. That is newwording introducedwith SBC and requires the architect tomake anearnest or determined attempt. The previous wording let the notification depend onwhetheritwas‘reasonablypracticable’todoso.

Thekeyisthedateofreceiptoftherequiredparticulars.Theparticularsaredetailedinclause 2.27.2 and are said to include the expected effects of the relevant event and anestimateofanyexpecteddelay.Itisonlywhenthearchitectreceivesthisinformationthatthetimeperiodformakingadecisionbegins.Therefore,ifthearchitectdoesnotreceivetheparticularsuntil aweekbefore the completiondate, the architect is still expected to‘endeavour’toreachadecisionandnotifythecontractorbeforethecompletiondate;butrealisticallythisisprobablyunlikely.

Contractorssometimesdelayprovidingtheinformationuntilthereareonlydaystogobeforethecompletiondateinthehopeofbeingabletoarguethatthearchitecthasfailedtoact,andthereforetimeisatlarge.Suchargumentshavelittlechanceofsuccess.Indeed,ifthearchitectcannotreachadecisionbeforethecompletiondatedespiteendeavouringtodoso,heorsheshoulddosoassoonaspossible.Alternatively,itmaybeconsideredthatthematteristhenpartofthedecisiontobemadebythearchitectunderclause2.28.5.Thisclausestatesthatafterthecompletiondatethearchitectmay,andnotlaterthan12weeksafterthedateofpracticalcompletionthearchitectshall(must),carryoutareviewofallextensions and make what is effectively a final decision. Therefore, if the contractordelays in providing the required particulars, it runs the risk that a decisionwill not bemadeinrespectofthosedelaysuntilsomeweeksafterpracticalcompletion.

Thereisnothingthatobligesthecontractortoprovideadditionalinformationrequestedbythearchitect,butifthearchitectreasonablyasksforinformationtoassistinmakingthedecision the contractor would obviously be foolish to withhold it. For example, thearchitectmay say that it is not possible to understand the effects of the relevant eventunless thecontractorprovidesacriticalpathnetworkshowingtheeffectof thedelayonthecompletiondate.Thatdoesnotappeartobeanunreasonablerequest.Onthecontrary,itseemstobearequestintheinterestsofallparties.

(I)

164Isthereaneasywaytodecideanextensionoftime?Thesimpleansweristhatthereisnoeasyway,butthatsomewaysareeasierthanothers.Theways inwhichdelayscanoperateonacontractaremanyandvaried,and trying toassesstheeffectsofadozenormoredelaysactingondifferentactivities(andsomeactingonthesameactivity) isquitedifficult.Formanyyears,architectswouldtrytosolvetheconundrum by comparing actual against programmed progress on a bar chart, makingwhatallowanceseemedappropriateforthecontractor’sowndelays,andfinallymakingastabatit.

Some architects, with total disregard for the contract provisions, approached theproblem from an entirely new angle and simply considered whether they felt that thecontractor’s progress, taken as a whole, was reasonable or not and decided upon theextensionof time accordingly.Needless to say, this kindof exercise usually resulted incontractors being given more extension of time than their strict entitlement, andoccasionallytoratherlessthantheirentitlement.

In recent years, more reliance has been placed on the computer and its ability toperform a greatmany complex calculations almost instantaneously.Although the initialeffort required is fairly substantial, the advantage of using a computer to assist incalculatingextensionsoftimeisthatlogiccanbebroughttotheprocessandtheanalysiscan be carried out on a reasonable basis. The courts have shown themselves ready toacceptsuchanalysisprovidedthatitisproperlycarriedout,anditiscertainlybetterthanwhen the architect reaches a decision based on an impressionistic assessment.16 Acomputerprogrammebasedonacriticalpathnetworkorprecedencediagramisused,andthereareanumberofsuchprogrammesavailable.Theprogrammesenableactivitiestobelinked in a logical fashion so that the effect of a delay on one activity can be trackedthroughtheprogrammetothecompletionoftheWorks.Theprogrammesallowactivitiesto be delayed or started early, and resources can be added. Architects and projectmanagersshouldroutinelyusecomputerisedprogrammesasamatterofcoursetomonitorprogress andassist in analysingdelays.Contractors should submitdetailedprogrammesondiskaswellasinhardcopy.

Programmes can be prepared to show the progress as-built compared to intendedprogress, and known employer-generated delays can be takenout to examine the likelysituationhadthosedelaysnotoccurred.Thereverseoperationcanalsobetried.Thelogiclinkswilldeterminetheeffectofdelays,anditisimportanttoensurethattheyareshowncorrectly.

InBalfourBeattyConstructionLtdvTheMayorandBurgessesoftheLondonBoroughofLambeth,17referencewasmadetotheuseofprogrammesforestimatingextensionsoftime.Aspartofitssubmissioninadjudication,BalfourBeattyreferredtothe‘mostwidelyrecognisedandused’delayanalysismethods:

TimeImpactAnalysis(or‘timeslice’or‘snapshot’analysis).Thismethodisusedtomap out the impacts of particular delays at the point in time atwhich they occur,permittingthediscreteeffectsofindividualeventstobedetermined.

(II)

(III)

(IV)

(V)

Windowanalysis.For thismethod theprogramme is divided into consecutive time‘windows’where thedelayoccurring in eachwindow is analysedandattributed totheeventsoccurringinthatwindow.

Collapsed as-built. Thismethod is used so as to permit the effect of events to be‘subtracted’fromtheas-builtprogrammetodeterminewhatwouldhaveoccurredbutforthoseevents.

Impacted plan where the original programme is taken as the basis of the delaycalculation, and delay faults are added into the programme to determinewhen theworkshouldhavefinishedasaresultofthosedelays.

Globalassessment.Thisisnotaproperoracceptablemethodtoanalysedelay.

Whendealingwith JCTcontracts, themost basicmethodof analysingdelays is for thearchitecttolistallthedelaysnotifiedbythecontractorandconsidereachonetodeterminewhetheritisarelevanteventand,ifso,theamountbywhichtheactivityinquestionhasbeen delayed. After putting the contractor’s planned critical path programme on thecomputer,eachdelaycausedbya relevanteventshouldbe imputed into theprogrammeand the results observed. The computer-calculated new end date will be the datemostfavourable to the contractor, because in reality the contractorwould probably carry outsome reprogramming after each delay, thus reducing the overall effect of subsequentdelays.Butthecomputeranalysiswillprovidearelativelyquickanswerandonethatwilldemonstratehowthedelayshaveaffectedprogress.Thehardworkcomesinputtingtheprogramme data into the computer, and the architect’s judgment comes into play indeterminingtheamountofdelaytoeachactivityasastartingpoint.

165Ifthereisaclauseinthecontractwhichsaysthattheemployerwillremaininresidenceduringalterationstoahouse,buttheemployerinfactmovesout,shouldtheimprovedworkingconditionscountasa‘discount’againstanyextensionoftimewhichmightbedue?Mostcontractsprovideforthecontractortohaveexclusivepossessionofthesite,andsucha term would usually be implied in any event. Therefore, if the employer is going toremain in occupation of some or all of the property, a term must be included in thecontracttothateffectsothatthecontractorcanmakeasuitableallowanceforanylikelydelaysorinefficiencies.Thecontractormightdecidetomakesuchallowancebyrequiringalongercontractperiodthanwouldbethecaseif theemployerwasnotinresidence,orthecontractormayaddsomethingtoitsprice,orboth.

Iftheemployersubsequentlydecidestoleavethepremises,thatisentirelyamatterfortheemployer.Thecontractorcannotberequiredtoadjustitspriceorcontractperiodasaresult. Indeed, it is difficult to see how the extra time and/or money allocated by thecontractortoworkingwhiletheemployerwasinresidencecanbedeterminedunlessthecontractor volunteered the information, and it is under no obligation to do so. Thecontractorhasagreedtocontractonthebasisthattheemployerwouldstayinresidence,andthereforetheemployerhastheoptiontostayorgo.Therehascertainlybeenachangeincircumstances,butnochangeintheworktobedone.

Althoughtheimprovedworkingconditionscannotbesetagainstanyextensionoftimeotherwise due, it is likely that the architect would be entitled to take into account thecontractor’scurrentworkingconditionswhencalculatingwhetherthecontractorhasbeendelayed.Inotherwords,thearchitectwouldnotbeobligedtoartificiallyassumethatthecontractor’sworkmethodswerealreadyimpededbythepresenceoftheemployerwhenadelayoccurred;thearchitectmustconsiderthesituationasitactuallyexistedatthetimethedelayoccurred.18

166Cantheclientlegallypreventthearchitectfromgivinganextensionoftime?Understandardformsofbuildingcontract,itisthearchitect’sdutytogiveanextensionoftimetothecontractorif therelevantcriteriahavebeenmet.Thebuildingcontractorandtheemployerhaveenteredintoacontractwherebytheybothhaveagreedthatthearchitectwill give the contractor an extension of time when the contract criteria are satisfied.Design and build contracts such as the JCT DB contract are excluded from thisgeneralisationofcourse,becausenoarchitectisinvolved.

Itiscommonforanarchitecttonotifytheemployerbeforeanextensionisgiven,butitisnotstrictlynecessaryanditcouldbesaidtobemisleading.Theemployermaythinkthatthearchitectisseekingconsenttotheextension.Ifthearchitectdoesrefertheextensionoftimetotheemployer,itisprobablywisetomakeclearthatthenotificationisacourtesyandforinformationonly.Havingsaidthat,itisdifficulttocriticiseanarchitectwhotakesthe widest possible soundings before deciding on an extension of time. Not only theemployerbutalso theclerkofworksandotherconsultantscouldbecanvassed.Usuallythearchitectwillbeseekingfactualtestimonysothatthelengthofparticulardelayscanbeestablishedwithaccuracy.Theessentialthingisthatthearchitectmustnotonlydecidetheextensionoftime,butalsomakequiteclearthatitisthearchitect’sdecisioneventhoughothersmaybeconsulted.

InArgyropoulos&PappavChainCompaniaNavieraSA,19 the (Claimant) architect,under the JCTContract forMinorBuildingWorks1980,gaveextensionsof time to thecontractor, and the employer objected – even going to the extent of considering theextensionoftimeclause‘nolongervalid’.Theemployerrefusedtoaccepttheextensionanda laterextensiongivenby thearchitect.Thearchitectwas informedthatemployer’sapprovalwasrequiredforanyextensionof time.Atonestage, theemployervisitedsiteand told the contractor that the architect had no power to give extensions of time.Eventually,thearchitect,ontheadviceofsolicitors,withdrewitsservices.Theextensionoftimepointwasjustonepartofthecase,butinrelationtoitthejudgesaid:

theDefendantssought to interferewith the[architects’]performanceof theirdutiesunder[theextensionoftimeclause]whichtheyveryproperlyresisted.Someof[theDefendants’]letterswerealsoveryoffensiveandindicatedatotallackofconfidencein the [architects]. [The Defendants and their] Solicitors also undermined thePlaintiffs’ position in relation to the contractors. In my judgment the Defendants’letters,theSolicitors’lettersandtheDefendants’conductwereinbreachofcontractandthe[architects]wereamplyjustifiedintreatingtheirengagementasatanend.

Notonlydoes thatshowthat interferencewith thearchitect’sduty togiveextensionsoftimeisunlawful,butinsomecircumstancesitprobablyamountstorepudiationonthepartoftheemployer.

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167Mustthearchitectgivethecontractordetailedreasonstoexplaintheextensionoftime?MoststandardformsofcontractrequirethecontractortogivenoticeofdelaytotheWorksas soon as it becomes reasonably apparent. For example, SBC clause 2.27 requires thecontractortonotifythearchitectinwritingofallsuchdelaysirrespectiveofwhetherornottheyarerelevantevents.Theclausegoesontorequirethecontractortoprovidespecificdetails of thedelaying event and its likely effect and to provide the architectwith suchfurther information as reasonably required. Armed with this information, the architectmust make an extension of time. SBC clause 2.28.3 sets out what the architect mustincludeinthedecision.Itisverybriefandamountstonotificationoftheextensionoftimeattributed to each relevant event and the reduction in time (if any) attributed to eachrelevant omission. Therefore, the contractor will receive, in return for what might beseveral files of information, a single sheet of paper setting out the bare bones of thedecision.Contractorsoftenaskformoredetails.Whattheywantaredetailsofthewayinwhichthearchitecthascalculatedtheextensionoftime.Theywanttoknowpreciselywhysomeoftheirdelaynoticesapparentlyhavebeenignored.Atonetimeitwascommonforarchitects to send very detailed responses and to receive, in return, detailed objectionsfromcontractors.Fromthecontractor’spointofview,itisobviouswhyitwantstoseethearchitect’sreasoning.Onlythencanitstarttobuilditscase.

There are threeverygood reasonswhy an architect shouldnot providedetails of thereasoningbehindextensionoftime:

Thecontractdoesnotrequireit.

Itwillsimplyprovokeaseriesofexchangeswiththecontractorregardingsomethingaboutwhichthearchitectmustmakethefinaldecisionunderthecontract.

The contractor will find it more difficult to challenge an extension of time if theunderlyingreasonsarenotknown.

If this appears to be rather mean-spirited on the part of the architect, it must berememberedthatthearchitecthastofixanextensionoftimewhichisfairandreasonable.The architect is called upon to exercise judgment and not to use a coldly logicalapproach.20Ifthecontractor,orindeedtheemployer,wishestochallengetheextensionoftime,theadjudicationprocedureprovidesaquickmechanism.Inthatforum,thearchitect,if required by the adjudicator,must provide reasons for the extension of time, and theadjudicatormustdecidewhether the contractorhasprovided sufficientgrounds toupsetthearchitect’sdecision.

168UnderSBC,isitpermissibleforthearchitecttogiveafurtherextensionoftimeifdocumentsfromthecontractorhavenotbeenreceiveduntilaftertheendofthe12-weekreviewperiod?Manycommentatorssaythatthearchitectisnotboundbythe12-weekperiodbecausetheperiodisonlydirectory,notmandatory,ontheauthorityoftheCourtofAppealinTemlocLtd vErrill Properties Ltd.21 Commentatorswho take this viewmay perhaps not haveread the judgment with the care it deserves. A careful reading shows that the court inTemloc,insayingthatthe12weekswasnotamandatoryperiod,wereactuallyinterpretingthe provisions against the employer that was seeking to rely upon them (the contraproferentemrule).Inthatcase,theemployerhadstated‘£nil’asthefigureforliquidateddamages,andthe

CourtofAppealheldthatifthecontractordidnotcompletetheworkuntilafterthedateforcompletion,liquidateddamageswouldbechargeableonlyatthestipulatedrate,whichwouldamounttonoliquidateddamagesatall.Thecourtsaidthattheemployercouldnotdecidetoclaimunliquidateddamagesinstead.Intheusualway,thecontractprovidedthatthearchitectmustwithin12weeksafterpracticalcompletionconfirmtheexistingdateforcompletion or fix a new date. The architect did not act within the 12 weeks, and theemployer’spositionwasthattheliquidateddamagesclausecouldbetriggeredonlyifthearchitectcarriedout thedutywithin the12weeks.Therefore, theemployerasserted therighttoclaimunliquidateddamagesforbreachofanimpliedterm.Itwasinthiscontextthatthecourtsaidthatthetimeperiodwasnotmandatory.

Thecourtapparentlyacceptedthearchitectastheemployer’sagent.Themattercouldhavebeenclearedupverysimplyonthebasisthatiftheemployer’sargumentsucceeded,itwouldhavebeencontrarytotheestablishedprinciplethatapartytoacontractcannottakeadvantageofitsownbreach.22

In a more recent case, the 12-week review period was confirmed in the followingparagraph:‘Theprocessofconsideringandgrantingextensionsoftimeistobecompletednot later than 12 weeks after the date of practical completion’.23 There may be rareinstanceswhereanarchitectwhohasnot issued the finaldecisionbefore theendof thereview periodmay issue it after the end, provided that it is issued as soon as possible.Therefore, it follows that if the contractor submits information after the 12 weeks hasexpired,thearchitectcannotconsiderthatinformation.Thatisthecaseevenifitisclearthat an extension of timewould have resulted if the information had been provided ontime.Toavoid thiskindofdifficulty,or at any rate to avoidanyuncertainty, it isgoodpracticeforthearchitecttowritetothecontractorshortlyafterpracticalcompletionwithareminderaboutthedeadlineandrequestingthatanyfurtherinformationthatthecontractorwishes tobeconsideredbeprovidedno later than, say,week7of the12.Thatputs thecontractoronnotice,andiftheinformationisnotprovidedontime,thecontractorhasnooneelsetoblame.24

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Obviously, there are sometimespressing reasonswhy it is desirable that the architectconsiders late submissions – for example when to do otherwise would be to risk timebecomingatlarge.Inthesehopefullyisolatedcases,thepartiestothecontractcanagreetogive the architect power to consider thematter after the 12weeks has expired. That isbecausethepartiestoacontractcanalwaysagreetovarythetermsoftheircontractiftheywish.

MultiplexConstructions(UK)LtdvHoneywellControlSystemsLtd(2007)111ConLR78.

SteriaLtdvSigmaWirelessCommunicationsLtd(2007)118ConLR177.

[2008]BLR269.

SteriaLtdvSigmaWirelessCommunicationsLtd(2007)118ConLR177.

ShawtonEngineeringLtdvDGPInternationalLtd[2005]EWCACiv1359.

BabacompLtdvRightside[1974]1AllER142.

(1970)1BLR114CA.

HenryBoot(Construction)LtdvMalmaisonHotel(Manchester)Ltd(1999)70ConLR32.

SteriaLtdvSigmaWirelessCommunicationsLtd(2007)118ConLR177.

YorkshireDaleSteamshipvMinisterofWarTransport[1942]2AllER6.

CityInnLtdvShepherdConstructionLtd[2008]BLR269:adecisionoftheScottishcourts;thatapproachhasbeenrejectedbyEnglishcourts:WalterLilley&CoLtdvMackay&Another(2012)143ConLR79.

RoyalBromptonHospitalNHSTrustvHammond&Others(No.7)(2001)76ConLR148.

DeBeersUKLtdvAtosOriginITServicesUKLtd(2010)134ConLR151.

WellsvArmy&NavyCo-operativeSocietyLtd(1902)86LT764.

(1993)62BLR1.

JohnBarkerConstructionLtdvLondonPortmanHotelsLtd(1996)50ConLR43.

[2002]BLR288.

WalterLawrencevCommercialUnionProperties(1984)4ConLR37.

(1990)7-CLD-05-01.

CityInnLtdvShepherdConstructionLtd[2008]BLR269.

(1987)39BLR30.

AlghusseinEstablishmentvEtonCollege[1988]1WLR587HL.

Cantrell&AnothervWright&FullerLtd(2003)91ConLR97.

LondonBoroughofMertonvStanleyHughLeachLtd(1985)32BLR51.

Chapter19

Liquidateddamages

169Isthereatimelimitfortheissueofthecertificateofnon-completionunderSBCandIC?Thecertificateofnon-completion isgovernedbyclauses2.31and2.22 inSBCand IC,respectively.Theseclausesprovide that thecertificatemustbe issuedby thearchitect ifthe contractor fails to complete theWorks by the contract date for completion or anyextensionofthatdate.Thereisnoexpressstipulationthatthecertificatemustbeissuedbyany particular date, although it is surprising howmany people believe that it must beissuedwithinsevendaysofthecontractor’sfailuretocomplete.Thisisincorrect.Theonlytimelimit is that imposedbythe issueof thefinalcertificate.Thefinalcertificate is thearchitect’sfinalactionunderthecontract.Afterissuingit,thearchitectisfunctusofficio–thatistosaythearchitecthasnofurtherpowersordutiesand,therefore,cannotissuethenon-completioncertificate.

Itmaybeargued,withsomemerit,thatthecontractclearlyenvisagesthatthecertificatewillbeissuedpromptlybecause,onapracticallevel,thelaterthecertificateisissuedthelessmoneywillbeavailablefromwhichtheemployercandeductliquidateddamages.

170Theemployerterminatedintheninthmonthofaten-monthcontract.Cantheemployerdeductliquidateddamagesfromtheoriginalcontractoruntilpracticalcompletionisachievedbyothers?Ingeneralterms,itappearsthatterminationoftheemploymentofthecontractorbringstheobligationsofbothparties toanendinsofaras futureperformance isconcerned.1Thisseemstobeperfectlyinaccordancewithgoodsense,becausetheoriginalcontractorcanhave no control over the completion if theWorks are completed by another contractor.Thatisnottosaythatapartywillavoidthepaymentofdamagesaccrueduptothetimeoftermination.2

The decision in re Yeardon Waterworks Co & Wright3 suggests that the courts willsupportaspecificterminthecontractthatprovidesthatintheeventofterminationoftheemploymentofacontractorand thecompletionbyanother,damagescouldbededucteduntil theWorksarecompleted. In thatcase,however, theWorkswerecompletedby theguarantorofthecontractor,whichwasprobablythedecidingfactor.

The JCT series of contracts provide for termination of the contractor’s employment,followingwhich theemployermayengageanothercontractor toentersiteandcompletetheWorks.SuchaclausewasheldtobeincompatiblewiththerighttoliquidateddamagesinBritishGlanzstoffManufacturing Co Ltd vGeneral Accident Fire& Life AssuranceCorporationLtd.4 If a contractor has left the site,wrongly thinking that theWorks arecomplete, it seems that contractorwill be liable for liquidateddamagesuntil theWorkshave in fact been completed by a replacement contractor.5 The precise wording of theclause in the contractwill be the deciding factor. In theNewZealand case ofBaylisvMayor of the City ofWellington,6 liquidated damages were held to be deductible afterterminationbecausetheclausespecificallyexcludedentitlementduringthetimetakenbytheemployertosecureareplacementcontractor.

InreWhite,7 theelectric lightingcontractcontainedwhatwasheld tobea liquidateddamagesclause.Thecourtremarkedthattherewasaclauseinthecontractwhichgavetheengineer power, if necessary, to employ other contractors to complete theWorks, andwhich provided that the defaulting contractor should be liable for the loss so incurredwithoutprejudicetohisobligationtopaytheliquidateddamagesunderthecontract.Itisnotclear from the reportwhether theemployerwasseeking liquidateddamagesbeyondthedateoftermination.Theemployerdoesnot,however,appeartohaveclaimedanythingotherthanliquidateddamagesdespitethewordsofthecontract,whichappeartogivetheemployer the right to claim liquidateddamages forbreachofobligation to completeontimeuntil thedateofactualcompletion, togetherwithall theadditionalcostsassociatedwithcompletionbyanothercontractor.

The effect of termination on the right to recover damages was considered in PhotoProductionLtdvSecuricorTransportLtd.8Speakingofanothercase,9itwassaid:

wheninthecontextofabreachofcontractonespeaksof‘termination’whatismeantisnomore than that the innocentpartyor, in somecases,bothparties are excusedfrom further performance. Damages, in such cases, are then claimed under thecontract, so that what reason in principle can there be for disregarding what thecontract itself says about damages, whether it ‘liquidates’ them or limits them, orexcludesthem?

Thisseemstobeaclearreinforcementoftheviewthattherecanbenocontinuingliabilitytopayliquidateddamages,butdamagesalreadyaccruedarerecoverable.Standardformsofbuildingcontractstatethegroundsonwhicheitherpartymayterminatethecontractor’semploymentunderthecontract.Manyofthegroundsforterminationundertheprovisionsofthecontractarenotbreachesthatwouldentitletheemployertoterminate,savefortheexpress provision. It is thought that an employer who terminated using the contractprovisionsisrestrictedtorecoveringtheamountsstipulatedinthecontract.10

Currentbuildingcontractsdonotappeartoallowthecontinueddeductionofliquidateddamagesaftertermination.Inanyevent,thecircumstancessetoutinthequestionsuggestthat,evenif thecontractor’semploymentwasnot terminated, liquidateddamageswouldnotbedueuntilafurthermonthhadpassed,becauseatthedateofterminationthedateforcompletionhadnotbeenreached.

171Cananemployersufferingnoactuallossstilldeductliquidateddamages?Thewholeideaofliquidateddamagesisthatitisapre-estimatedamountwhichthepartieshave agreed shall be paid on the occurrence of some event. In relation to constructioncontracts,theeventisusuallyfailurebythecontractortocompletebythecompletiondatespecified in the contract. If therewas no such agreement in construction contracts, theemployerwouldbeobliged to take legalaction through thecourts to recoverany lossessufferedasaresultofthelatecompletion.Thatwouldinvolveprovingthatthecontractorhadacontractualdutytocompletebyacertaindate,thatthecontractorfailedtocompleteand the amount of loss that the employer suffered as a direct result. To achieve thatthroughthecourtsorevenarbitrationwouldbetime-consumingandexpensive.Inordertoavoid that situation, the parties agree, and standard form construction contracts havespecialclausesstating,thatanagreedsumwillbepayableintheeventoflatecompletion.Thesumisusuallyexpressedasperweekorperday.

It isestablished that the summustbeagenuinepre-estimateof lossasviewedat thetimethepartiesenteredinto thecontract. Inotherwords, itmustbe theemployer’sbestestimateofthelosswhichwouldbesufferedifthecontractordelayscompletion.Itdoesnotmatter if the likely loss is difficult to estimate and the employer can onlymake aninformedguess.Oncethesumisinthecontractandthecontractisagreed,theemployermayrecoverthesumifthecontractordefaults.Theemployerisfreetorecoverlessthantheamountstatedbutnotmore.Theemployerdoesnothavetoprovetheloss;thatisthewhole purpose of liquidated damages. Therefore, the employermay recover the wholesumforthewholeperiodinwhichthecontractorisindefaultofcompletion,evenifthereisnolossoreveniftheemployermakesaprofitasaresultofthelatecompletion.11

172Ifanemployerhasenteredintotwoseparatecontractswiththesamecontractor,isitentitledtoset-offliquidateddamagesdueononecontractagainstpaymentduetothecontractorontheothercontract?Set-offiswhentwopartiesowemoneytoeachother.SupposepartyAowespartyB£200andpartyBowespartyA£500.PartyBcanpaypartyA£300,andpartyBissaidtohaveset-offonedebtagainst theother, leavinganetpaymentdue. It frequentlyoccurs in theconstructionindustrywhenacontractorpaysasub-contractorforworkdonebutreducestheamountbecausethesub-contractorhascausedadelayordonesomedamagewhichthecontractorwillhavetopaytogetrepaired.Thistypeofset-offistermed‘equitable’.Thetypeofset-offwhichissetoutinacontractbetweentheparties(forexample,liquidateddamages)istermed‘contractual’.

Therulesofset-offarequitecomplicated,butthegeneralruleisthatequitableset-offcanonlyoccurbetweentwopartiestothesamecontract.Therefore,ifacontractorowesmoneytoasub-contractorononecontract,itisnotusuallypermittedtoreducetheamounttotakeaccountofmoneyowingfromthesub-contractoronanothercontract.Section10oftheUnfairContractTermsAct1977alsoappearstoexcludethis.

However, there are exceptions to this rule. InGeldofMetaalconstructie NV v SimonCarves Ltd, 12 Carves was the main contractor, entering into two sub-contracts withGeldofonthesameproject.Geldofdeliveredequipmentinthefirstcontractandrenderedits invoice.The second, installation, contractwas terminated before completion.Geldofcommencedlegalactionforrecoveryoftheamountinvoiced,andCarvessaidthatithadthe right to, and did, set-off three separate amounts. The first was for defects in theequipment,thesecondwasforliquidateddamagesundertheinstallationcontractandthethirdwasfordamagesinconnectionwithGeldof’srepudiationoftheinstallationcontract.There was a clause in the first contract which allowed Carves to set-off ‘any amountslawfullydue…whetherunderthisPurchaseOrderorotherwise’fromGeldof.

The Court of Appeal allowed the set-offs even though therewere two separate sub-contracts involved. It is instructive to note that the final phrase in the above-mentionedclausewas not enough on its own to allow the cross-contract set-off. In arriving at itsconclusion,thecourtappliedthefollowingtest:Theremustbeacloseconnectionbetweenthetwocontracts,anditmustbeclearlyunjusttoallowthepaymentoftheclaimwithouttaking into account the cross claim or set-off. The court decided that the two contractswerecloselyconnected,becausethecontractorandthesitewerethesameineachcaseandthewarranty under the first contractwas linked to performance in the second contract.Moreover,Geldofhadlinkedthesub-contractsbyrefusingtocontinueperformanceonthesecondcontractuntilpaymenthadbeenmadeonthefirst.

TheCourtspentsometimeconsideringthemeaningof‘anyamountslawfullydue’.Theoriginaltrialjudgehaddecidedthatthewordsdidnotincludeunliquidateddamages.TheCourtofAppealdisagreed.Thejudgeresponsiblefortheleadingjudgmentsaid:

does the phrase ‘all amounts lawfully due’ mean amounts which have beenadjudicatedoragreedtobedue,ordoesitmeanamountswhichareclaimedtobedueand which are recognised or recognisable at law? It seems to me that either ispossibleasamatteroflanguage,butthatbusinesssenseandtheintendedwidthoftheclausepointstothelatterconstruction.

Thisshowsthereadinessofthecourtsnowadaystogiveasensiblebusinessinterpretationtowordsinacontract.

Although this was a case between contractor and sub-contractor, a similar situationcouldarisebetweenarchitectandclientinthefairlycommonsituationwhereanarchitectandcliententerintoseparatecontractsforseparateprojects.

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173Whydocontractorssometimessaythattheemployercannotdeductpenalties?The terms ‘liquidated damages’ and ‘penalty’ are often used as though theymeant thesame thing,withcontractorsoftenreferring to the‘penaltyclause’,but theyareentirelydifferent things.Liquidateddamagesare intended tocompensate theemployer,and theyshouldbeagenuineattempt topredict thedamageslikelytobesufferedasaresultofaparticularbreach(usuallythecontractor’sfailuretocompleteontime).Ontheotherhand,apenaltyisasumwhichisnotatallrelatedtoprobabledamagesbutratherisinsertedasathreat,adeterrentorapunishment.Thecourtswillenforceliquidateddamagesbutnotapenalty.13Itisthereforeofgreatimportancetoestablishwhetherasuminthecontractisliquidateddamagesorapenalty.Thecourtspaynoregardtotheterminology,norindeedtowhetherthepartieshaveagreedthesum,butonlytoitstruenature.

Thereisamassofoldcasesaboutthistopic,butmorerecentlytheCourtofAppealsetoutfourprinciplestodifferentiateliquidateddamagesfromapenalty:14

Theparties’intentionsmustbeidentifiedbyexaminingthesubstanceratherthantheformofwordsused.

Asumwouldnotbeapenaltywhereagenuinepre-estimateoflosshadbeencarriedout.

Thecontractshouldbeconstruedatthetimethecontractwasmade,notatthetimeofthebreach.

Itwouldbeapenaltyiftheamountwasextravagantorunconscionablecomparedtothegreatestforeseeableloss.

Thegreatestdanger isprobablywhere thebuilding is tobecompleted insectionsandaseparateliquidateddamagessumistobeinsertedforeachsection.Caremustbetakenthateach sumbears a suitable relationship to its section.The insertionof the same sum foreachsectionmaysuggest thatsomeorallsuchsumsarepenalties,onthebasis that ifasumisappropriateforonesectionitcannotbecorrectinregardtoanotherverydifferentsection. It should be noted that it is comparatively unusual for a sum expressed in acontractasliquidateddamagestobeheldbythecourtstobepenalties.

174Isittruethatwherethereisaliquidateddamagesclause,byimplicationtheremustbeabonusclauseinthesameamountforearlycompletion?Thisiswhatmaybetermeda‘constructioncontractmyth’.Acontractormaysometimestrytomakethisargumentinordertoavoidhavingtopayliquidateddamages,onthebasisthattheliquidateddamagesclauseisinvalidwithoutacorrespondingbonusclause.Thereisnotruthandnolegalauthoritywhateverinthatview.Theemployermaydecidetohaveabonusclause,butthatisentirelyunconnectedtoaprovisionforliquidateddamagesandtheamountsneednotberelated.

If a bonus clause is included, its structure will depend on the requirements of theemployer.Often,suchaclausewillprovideforarelativelymodestpaymentifthecontractcompletion date is beaten by a few days, increasing to significantly larger sums if thecontractor succeeds in achieving earlier completion dates. However, it should beremembered that if a bonus clause is inserted, the contractor will probably requestconstructioninformationmuchearlierthanusualonthebasisthatitneedsitearlierifitistoearnthebonus.Itwillbedifficulttoresistthisargument.ItisdifficulttoseehowtheinformationreleasescheduleinSBCcansithappilybesideabonusclause,andsomeotherclauseswouldrequireamendmentalso.Therearesomecontracts,ofcourse,whichmakespecialprovisionforbonusclauses.

175InSBC,ifanemployerwantstobeabletorecoveractualdamagesforlatecompletion,isitsufficientthattheliquidateddamagesentryinthecontractparticularshasbeenfilledinasNA(notapplicable)?Liquidateddamagesareinsertedinstandardbuildingcontractstoavoidthenecessityfortheemployertoprovethedamagesufferedasaresultoflatecompletion.Thepartiesagreethat if the contractor is late for reasons which do not entitle it to an extension of thecontractperiod,theemployermayrecoverordeductafixedsumforeverydayorweek,asthecasemaybe,bywhichthecontractorexceedsthecontractualcompletiondate.Iftheemployerwantstorecoveractualdamages,thatinvolvesareversiontothepositionwhichwouldexistiftherewasnoliquidateddamagesprovision.

Merely stating in the contract particulars that the rate of liquidated damages is NAwould not remove the liquidated damages provision from the contract. In SBC, theprovisioniscontainedinclause2.32.Clause2.32.2referstoliquidateddamagesattheratestatedinthecontractparticulars.Therefore,iftherateofliquidateddamagesisstatedasNAorevenifallreferenceisremovedfromthecontractparticulars, thiscanonlymeanthattherateisnotapplicable.Inotherwords,thereisnoamountofliquidateddamages.Therefore,althoughtheemployermaybeentitledtoliquidateddamagesinprinciple,thereisnoamounttobecharged.Thecontractistobefilledinbythecontractadministratoronbehalf of the employer, and all such entrieswill be interpreted contra proferentem (i.e.againsttheemployer).Thereisstillprovisionforliquidateddamages,albeitamountingto£nil,andthatisexhaustiveoftheemployer’sremediesforlatecompletion.15

176Doesitmakesensetoincludeinthecontractthewayinwhichliquidateddamageshavebeencalculated?Sometimes an employer is tempted to put an explanation of liquidated damages in thecontract.Thereasongivenisthatbyshowingthecontractorthatthesumisagenuinepre-estimateofloss,thecontractorwillbedissuadedfrommakingclaimsthatitisapenalty.

Thisreasonisflawed.First,itisveryrareforasumstipulatedasliquidateddamagestobe challenged purely on the ground that it is too great. Where challenges occur theyusuallyrelatetothesamesumofmoneybeingallocatedtoverydifferentsectionsoftheWorks. Second, it commonly occurs that it is difficult, indeed virtually impossible, tocalculateliquidateddamages,andonlytheroughestguesscanbegiven.Thatisnobarinlawtothesumbeingproperliquidateddamages,16butitwouldbeimpossibletoexplainthe calculation for the benefit of the contractor. Third, to include in the contract thecalculationofliquidateddamageswhenthecontractdoesnotexpresslyrequireitissimplyaninvitationtothecontractortotrytoupsetthesumbychallengingit.Therefore,farfromavoidingchallenge,itactuallypromotesit.

177CantheemployerstillclaimliquidateddamagesifoccupationoftheWorkshasbeentaken?Architectsandcontractorsalikeoftenlabourunderthemistakenimpressionthatoncetheemployer occupies the Works no further liquidated damages can be levied. Indeed,occupation is often wrongly equated with practical completion. An examination of thedefinitionsofpracticalcompletiongivenbythecourtsshowsthatthecriteriaarewhethertheWorks,exceptforminoritems,arecompleteandwhetherthereareanyvisibledefects.Whethertheemployerisorisnotinoccupationisnotafactor.

The recent case of Impresa Castelli SpA v Cola Holdings Ltd17 gives some usefulguidance.ThecontractwastheJCTStandardFormofContractwithContractor’sDesign1998.Disputesaroseandthepartiesmadenofewerthanthreeseparatevariationstothecontractterms.Inparticular,theliquidateddamagesamountwasdoubledandthedateforcompletionwasamendedthreetimes.Significantly,itwasagreedthattheemployer(Cola)couldhaveaccesstothehotelinorderforittobefullyoperational.

The contract finished late, and Cola claimed liquidated damages of £1.2 million.Impresa challenged that amount, arguing that Cola had taken partial possession and,therefore,theliquidateddamagesshouldbeconsiderablyreduced.Significantly,thecourtdecided that therewasnothing to suggest thatpartialpossessionhadoccurred. Itwouldhave been quite simple to have referred to ‘partial possession’ in any of the threeagreements,ifthatiswhathadbeenintended,andthesituationwouldhavebeendifferent(see question 199), but there was no such reference. Instead, the court concluded thatclause23.3.2(whichwasvirtuallythesameasclause2.5ofthecurrentDBandclause2.6of SBC) had been operated,which allowed the employer to use and occupy theWorkswith the contractor’s consent. The court decided that occupation is a lesser form ofphysical presence on the site than possession. Therefore, the full amount of liquidateddamageswasrecoverablebyCola.

Sometimes there is no agreement at all, but the employer, perhaps frustrated atcontinuingdelays,simplydecidestomovein.Thecourtshaveheldthatsuchoccupationdidnotprecludethedeductionofliquidateddamages.18

178UnderSBC,ifpracticalcompletioniscertifiedwithalistofdefectsattached,cantheemployerdeductliquidateddamagesuntiltermination(whichoccurredlaterduetothecontractor’sinsolvency)?Clause2.32.2ofthecontractspecifiesthattheemployermaygivenoticethatpaymentofliquidateddamagesisrequiredorthatliquidateddamageswillbedeductedfromthedateonwhichthecontractorshouldhavecompletedtheWorks(oranysection)untilthedateofpractical completion. Practical completion marks the date on which the contractor hascompleteditsobligationtoconstruct theWorks,andthereforetheemployerisnolongersufferinganydamageduetonon-completionafterthatdate.

AlthoughthejudgeinTozerKemsley&Milburn(Holdings)LtdvJJarvis&SonsLtd&Others19 referswithout criticism to a schedule of defects added to the certificate ofpracticalcompletion, it isestablished thatacertificateofpracticalcompletioncannotbeissuedifthereareknowndefectsintheWorks.20

Therefore, it is clear that thecertificateofpractical completion shouldnothavebeenissuedwhiletherewereknowndefectsintheWorks.Inthisinstance,itwouldprobablybeopen to the employer to seek adjudication or arbitration on the basis that the practicalcompletioncertificatehadbeenwronglyissued.Iftheadjudicatororarbitratoragreed,theemployer would be entitled to recover liquidated damages until the date of practicalcompletion as properly certified. If termination due to the contractor’s subsequentinsolvency occurred after practical completion, it would be irrelevant so far as thecalculationofliquidateddamageswasconcerned.Iftheemployerdoesnottakethisstep,thecertificateisthecut-offpointforliquidateddamages,andsofarasthelistofdefectsisconcerned,itwouldbesubsumedintodefectsoccurringduringtherectificationperiod.21

179Iftheemployertellsthecontractorthatliquidateddamageswillnotbededucted,canthatdecisionbereversed?More often than one might expect, an employer will tell a contractor that liquidateddamageswill not be deducted either at all or for part of the contractor’s delay. This isusually done because a contractor is complaining bitterly about life in general and thecontract in particular, and the employer isworried that the contractormay simplywalkaway from the project if faced with the prospect of huge liquidated damages. Thecontractorwouldbewrongtodothatandliablefordamages,butcompletingtheprojectwitha freshcontractorand trying to recoverdamages from theoldcontractorwouldbetime-consumingandtraumaticfortheemployer.

Sometimes an employerhasbeenknown to state that liquidateddamageswill not bedeductedinsteadofthearchitectgivinganextensionoftimethatisclearlydue.Thatkindofconductisaskingfortrouble.Itderivesfromthefalsenotionthatthecontractor,ifnotgiven an extension of time, cannot subsequentlymake a claim for loss and/or expense.Theactualresultisthattimeprobablybecomesatlargeandthecontractorcanstillmakean application for loss and/or expense if it is so minded. One thing is certain: Theemployershouldnotsaythatliquidateddamageswillnotbedeductedandthenundergoachangeofmind.

That is what happened in London Borough of Lewisham v Shephard Hill CivilEngineering.22ThecontractinthatcasewastheICE6thEdition,buttheprincipleholdsgood for JCT contracts also. The case was actually an appeal to the court from thedecisionofanarbitrator.ItwasallegedbeforethearbitratorthatLewishamoritsengineerhad assured Shephard on several occasions that liquidated damages would not berecovered.Apparentlytheseassurancesweregivenorallyandnotconfirmedinwriting.Atthe time of the arbitration the liquidated damages stood at a considerable sum – about£550,000.Shephardcontendedthatasaresultoftheseassurances,theyhadpaidtheirsub-contractors without deducting damages, which they otherwise would have done. Thearbitratornotedthattheengineer’sfinalextensionoftimewasnotgivenuntilabouttwoyears after substantial completion of the Works, and Lewisham did not claim theliquidateddamagesexceptbywayofacounterclaimafterthearbitrationhadbegun.

In all the circumstances, the arbitrator concluded that Lewisham did make therepresentationsaboutliquidateddamages.ThearbitratorthereforeheldthatLewishamwasestopped(prevented) fromclaiming liquidateddamages, thebasisof thatdecisionbeingthewell-knownprinciplethatifonepartytoacontractmakesarepresentationtotheotherthatitwillnotenforceparticulartermsofthecontractandiftheotherpartyreliesonthatrepresentationtoitsdetriment,thefirstpartywillbeestoppedfromlatertryingtoenforcethat particular term. Shephard had relied on Lewisham’s representation to its detrimentwhenithadpaiditssub-contractorswithoutdeduction.Thecourtheldthatthearbitratorhadjurisdictiontodecidetheissue.

On the assumption that the representations were given as alleged, the decision wasclearly correct. An important point was that Shephard had relied on the representation

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whendecidingtopayitssub-contractorswithoutdeduction.Thatwasaveryclear-cutcaseofreliance.Evenifpaymentofsub-contractorswasnotanissue,mostcontractorswouldbeabletoshowthattheyhadacteddifferentlyasaresultofarepresentationnottodeductliquidateddamages.

SuisseAtlantiqueetc.vNVRotterdamscheKolenCentrale[1966]2AllER61.

ExparteSirWHarteDyke.InreMorrish(1882)22ChD410.

(1895)72LT832.

[1913]AC143.

WilliamsonvMurdoch[1912]WAR54.

(1886)4NZLR84.

(1901)17TLR461.

[1980]1AllER556.

Harbutt’sPlasticineLtdvWayneTankandPumpCoLtd[1970]1AllER225CA.

ThomasFeather&Co(Bradford)LtdvKeighleyCorporation(1953)52LGR30.

ClydebankEngineeringCovDonJoseYzquierdoyCastenada[1905]AC6.

(2010)130ConLR37.

Watts,Watts&CoLtdvMitsui&CoLtd[1917]AllER501.

JeancharmLtdvBarnetFootballClubLtd(2003)92ConLR26.

TemlocLtdvErrillPropertiesLtd(1987)39BLR30.

DunlopPneumaticTyreCoLtdvNewGarage&MotorCoLtd[1915]AllER739.

(2002)87ConLR123.

BFIGroupofCompaniesLtdvDCBIntegrationSystemsLtd(1987)CILL348.

(1983)4ConLR24.

WestminsterCorporationvJJarvis&Sons(1970)7BLR64.

WilliamTomkinsonandSonsLtdvTheParochialChurchCouncilofStMichael(1990)6ConstLJ319.

30July2001unreported.

Chapter20

Lossand/orexpense

180Mustthearchitectorquantitysurveyorconsiderfurtherlossand/orexpenseinformationprovidedbythecontractorafterthequantitysurveyorhaspreparedthefinalaccount?Architectsfrequentlymoanaboutcontractorswhosubmitclaimsforlossand/orexpenseat the lastminute. There can be nothingmore lastminute than after the contractor hassubmitted all the documents required under the contract, the quantity surveyor hasprepared thefinallyadjustedcontractsum,commonlyknownas the‘finalaccount’,andthearchitecthasgivenittothecontractor.Ifalltheothercriteriahavebeensatisfied,thereis nothing to prevent the architect issuing the final certificate almost immediately.Sometimes, a contractor will submit a loss and/or expense submission just before thearchitectissuesthefinalcertificate.UnderSBC,thearchitecthasjusttwomonthstoissuethefinalcertificateaftersubmissionofthefinalaccounttothecontractorifthecertificateofmakinggoodhasalreadybeenissued.Isthearchitectjustifiedinsimplyrejectingthelate submission and issuing the final certificate, or must the submission be consideredevenifittakeslongerthantwomonths?

InacasedealingwithanearlierJCTcontractonsimilarterms,thecourtsaid:

Icannotacceptthatthecontractterms,properlyconstrued,prohibittheprovisionandreceiptoffurtherinformation,documentation,ordetailsaboutdirectlossandexpenseafterthesix-monthperiodfollowingpracticalcompletion.Suchastringenttime-barwouldinmyviewrequiretobeexpressedinclearandunambiguouslanguage,whichIhavebeenunabletofindinthecontractterms.Onthecontrary,thewordingof[theclause inquestion] suggests that [thesub-contractor]arecorrect in theircontentionthat the statutory [sic – the learned judge clearly meant contractual] provisionssimplyprovideatimetabletowhichthepartiesareexpectedtoadhere.1

Thisappearstosuggestthatthearchitectshouldconsiderlatesubmissionsregardinglossand/or expense. Another court has suggested that the relaxation of the contractualtimetablemustbeundertakenreasonablybythecertifierandissubjecttoanyexpressorimplied termsagreedby theparties.2 Inpractice thatdoesnotget thearchitectvery far,becauseonlyacourtwillbeabletodefinitivelysaywhatisreasonableinanyparticularcircumstances.

Theprovisionofdocumentsnecessaryfortheadjustmentofthecontractsumisoneofthe three criteria which must be satisfied before the two-month period, in which thearchitectmust issue the final certificate, starts to run. Therefore, it is arguable that thesubmissionoffurtherinformationaboutdirectlossand/orexpensehasthepotentialtore-start the two-month period running again. If the architect rejects the information out ofhandandissuesthefinalcertificate,thecontractormayconsiderthatthereisadisputeandrefer it to adjudication immediately. That may be the best outcome; otherwise thecontractorcancontinuesubmittinginformationatintervalsformonths.Alternatively,thearchitect may take a short period to consider whether the information appears to addanythingtowhatwaspreviouslysubmitted.Ifno,thefinalcertificateshouldbeissued.Ifyes,thearchitectshouldconsidertheinformationand,ifappropriate,ascertain,orinstructthe quantity surveyor to ascertain, the loss and/or expense. Thatwill also necessitate a

revisedfinalaccountfromthequantitysurveyor.

181Whatexactlyisaglobalclaim?Atypicalglobalclaimiswhereacontractorputsinaclaimforlossand/orexpensealongthe following lines: ‘The architect has issued 125 architect’s instructions requiringvariationsandallthoseinstructionsresultedinadelaytothecompletiondateof35days.Thecostoftheoverrunis£XXX.’Thedifficultyfacingthecontractoristhatthereisnomechanismforworkingouthowmuchofthetotalamountthecontractorallowedforeachinstruction,soifitcanbeshownthatsomeofthearchitect’sinstructionshadnoeffectonthecompletiondate,theclaimfallstotheground.

Whenmaking a claim either at common law for damages or under a standard formcontract for lossand/orexpense, it isusuallynecessary for thecontractor toproveeachpart of the claim by relevant evidence. Therefore, in the example noted above, thecontractorshouldseparateeacharchitect’s instructionandprovideevidenceof theeffectofeachseparateinstructiononthecompletiondate.Sometimesacontractorwilllumptheentire claim together, including both prolongation and disruption, compounding theproblem.

However, thereare somecircumstances inwhicha ‘global’claimmaybeadmissible.This principle also applies to extensions of time. The case which is usually cited insupport of the global approach is J Crosby & Sons Ltd v Portland UDC.3 This case,decidedundertheICEConditionsofContract(4thEdition),establishedthecriteriaforavalidglobalclaim.

Thecourtheldthataglobalapproachcanbejustifiedonlyinthosecircumstanceswherea claim depends ‘on an extremely complex interaction in the consequences of variousdenials,suspensionsandvariations’andwhere‘itmaywellbedifficultorevenimpossibletomakeanaccurateapportionmentof the total extra costbetween the several causativeevents’.Inthoselimitedcircumstances,thecourtsaid,thereisnoreasonwhyanarchitect,engineerorarbitrator

should not recognise the realities of the situation and make individual awards inrespect of those parts of individual items of the claimwhich can be dealtwith inisolationandasupplementaryawardinrespectoftheremainderofthoseclaimsasacompositewhole.

Thisdoesnot,ofcourse,relievethecontractorofproducingsubstantiatingevidenceandprovingeachheadofclaim.What itdoes isenable thearchitectorquantitysurveyor toadopt a commonsense method of ascertaining certain complex claims where it isimpossibleortotallyimpracticabletoprovethecostresultingfromeachindividualitem.Thecourtwentontosay:

Theeventswhicharethesubjectoftheclaimmustbecomplexandinteractsothatitisdifficultifnotimpossibletomakeanaccurateapportionment.Itisverytemptingtotaketheeasycourseandtolumpall thedelayingeventstogetherinordertojustifythe totaloverrunor total financial shortfall.Thatargument is justifiableonly if thealternativecourseisshowntobeimpracticable.

It isdoubtful that theCrosbydecisioncanbereliedupon inmostcases.Contractorsarefacedwithrealdifficultiesifthefactsareactuallyinterconnectedinsuchacomplexway

thatitisnotpossibletoseparatethemintodifferentheadsofclaim.Itisinequitableifanemployer responsible for justoneoccurrence resulting inaclaim,andforwhichaclearcauseandeffectcanbedemonstrated,ismorelikelytobemadetosuffertheconsequencesthananemployerwhohasbeen thecauseofmanyevents, allofwhichare inextricablyboundtogether.Perhapsbecauseofthis, thecourtshavecontinuedtoallowclaimstobemadeonaglobalbasis.4

It may be sufficient if the contractor sets out the claim in enough detail so that theemployerknowswhatisbeingclaimed,andinmanycasesitmaybethattheemployercanquitereadilycalculatetheamountthecontractorshouldbepaidwithoutthenecessityofthecontractorhavingtojumpthroughhoopsinordertoseparatetheclaimintoitsvariouspartsforthepurposeofallocatingavaluetoeachpart.

Thebasicpositionisthatthecontractorisentitledtoputitsclaiminanyrationalway,buttheremaybedifficultiesinprovidingthenecessaryevidenceiftheclaimispresentedonaglobalbasis.Theneedforarationalpresentationhasbeenre-statedinanAustraliancase.5Itheldthatwheretheconnectionbetweencauseandlossisnototherwiseapparent,each aspect of the connectionmust be set out, unless the probable existence of such aconnectioncanbeshownbyevidenceorbyargument,orunlessitcanbeshownthatitisimpossibleorimpracticablefortheconnectionstobeitemisedfurther.

ThesubjectofglobalclaimswasexaminedagainfrombasicprinciplesbytheScottishcourts in John Doyle Construction Ltd v Laing Management (Scotland) Ltd.6 Thisjudgmentre-emphasisesthepointthatforaglobalclaimtosucceed,theemployermustberesponsibleforallthemajorcausativefactors.Thatisapointoftenoverlookedwhensuchclaimsaremade.

ThereisnothingintheSBC,ICorICDformsofcontractrequiringthearchitecttogivethe contractor the benefit of any doubt where claims are concerned. It is rather thecontractor’stasktoprove,onthebalanceofprobabilities,thatwhatitassertsiscorrect.Itistemptingforacontractorwhoisfacedwithsubstantialdelaystotryandsecureatleastsome additional payment by making a very broad-based global claim, but unless thearchitect and quantity surveyor are both half asleep, the chances of such a claimsucceedingareveryslim.

182Howcanacontractorclaimfordisruption?Disruptionhasalwaysbeenverydifficult toestablishwithanyprecisionandevenmoredifficult to ascertain inmonetary terms,which iswhy thegreatmajorityof contractor’sclaims are based on prolongation of the contract period. Prolongation is easier tounderstandandaneasier claim tomakeand todealwith, althoughnot if all parties areacting strictly in accordance with the terms of the particular standard form contract.Commonly,acontractor’sclaimfordisruptionreliesoncomparinganticipatedwithactuallabourcosts.Thisapproachislackinginanykindofmeritandithasbeenveryseriouslycriticised in thecourts.7The inescapable fact is that theremaybemany reasons for thecosts of labour being greater than the contractor anticipated at tender stage, other thanreasonsforwhichtheemployerorthearchitectcanbeheldaccountable.

Anacceptablemethodofevaluatingdisruptionistocomparethevaluetothecontractoroftheworkdonepermanduringaperiodofnodisruptionwiththevaluepermanduringthe disrupted period and then to apply the ratio obtained to the total cost of labouraffected.8Itisobviousthatifthismethodistowork,itmustbepossibletoisolateaperiodfreefromdisruption.Thecomparisonmustrelatetosimilarwork.

Disruptionoftenaffectsnon-criticalpartsofaproject,butnot to theextent that thoseparts become critical in programming terms. That is why it is difficult to formulate aconvincingclaim.Itisusuallynecessarytodealwitheachinstanceseparately.Thelayingofspecialistflooringincertainpartsofabuildingmaynotbecritical,andtheremaybesomuch float that architect-induced delays do not cause the activities to become critical.Nevertheless, there may be serious costs involved as a result of the delay. In suchinstances, the contractor should provide its claim for each instance as a separate item,comparingthetimeitshouldhavetakentodotheworkwiththetimeactuallytaken.

183Whyareoverheadsandprofitdifficulttoclaim?Ifacontractorwaskeptonsiteforlongerthanthecontractperiod,itusedtobeacceptedthatthecontractorwouldbeabletorecoveroverheadcostsandlossofprofitforthewholeoftheperiodofdelay,providedthatthedelaywasnotduetoitsownfault,ofcourse.Thatviewisnolongercorrect,andtherecoveryofheadofficeoverheadsisnowquitedifficult.Theusualbasisofclaimforrecoveryofheadofficeoverheads isnot that thecontractorhas actually lost the overhead sum, but that it has lost the opportunity to recover itsoverheads in thepriceof another contract bybeingkepton the site after theoverheadsallocatedtothatparticularcontracthavebeenexhausted.Thebasisoftheclaimisthatthecontractorallocatesapercentageofheadofficeoverheadstoeachproject.Forexample,ifheadofficeoverheadsare£18,000perannumandthecontractorhasthreeprojectsofthesamecontractpriceeachlasting12months,itwillwanttorecover£6,000overheadsfromeach project and it will add that amount to each price. If one of the contracts lasts 14monthsinsteadof12months,thecontractorwillbelookingtorecoveroverheadsfortheextratwomonths(i.e.£1,000),whichitcouldhaveearnedifithadanotherprojectofthesamesizeimmediatelyfollowingthefirst.

It follows logically that the contractor must be able to show that it had other workwhichitcouldhavedoneduringthedelayperiod.Otherwise,intheabsenceofanydelay,therewouldhavebeennochanceofcontributionfromanothercontractduringtheperiodand therefore no loss.9 There are two kinds of overhead costs. Head office overheadsincludenot only costs of staff engagedupon individual contracts, but also suchgeneralitems as rent, rates, light, heating, cleaning; personnel costs for clerical staff andtelephonists;andgeneralcostssuchasstationeryandofficeequipment.Itisimportanttodistinguishbetweenthesetwoelementsofoverheadcosts,howevercalculated.Onesetofoverheadcostsarecostswhichareexpendedinanyevent–rates,electricityandthelike.Theotherismanagerialtimewhichisdirectlyallocabletotheprojectandtonoother.

Oneverycontract,delayordisruptionmayleadtosomeincreaseindirectheadofficeadministrativecostsrelatingnotonlytoanyperiodofdelaybutalsototheinvolvementofstaff engaged in dealingwith the problems caused by disruption. For example, contractmanagers may have to spend more time in organising additional labour, revisingconstruction programmes, securing staff, ordering additional materials, arranging planthireandsoon.If,however,theywouldnothavebeenfullyemployedbutforthedelay,thecontractormay face difficulties in recovering such costs, since it will be argued that itwouldhave incurred thesecostsaspartof itsheadofficeexpenditure inanyevent.Thecourtshaveheld:

it is for [the contractor] to demonstrate that he has suffered the loss which he isseeking to recover… it is for [the contractor] to demonstrate, in respect of theindividualswhosetimeisclaimed,thattheyspentextratimeallocatedtoaparticularcontract.Thisproofmust include thekeepingofsomeformof record that the timewas excessive, and that their attention was diverted in such a way that loss wasincurred. It is important, in my view, that [the contractor] places some evidencebefore the court that there was other work available which, but for the delay, hewouldhavesecured,butwhich,infact,hedidnotsecurebecauseofthedelay;thus

heisabletodemonstratethathewouldhaverecoupedhisoverheadsfromthoseothercontracts and, thus, is entitled to an extra payment in respect of any delay periodawardedintheinstantcontract.10

Theproblemwasthatthedelaywasnotsufficienttostopabuildingcontractorofthesizeandstandingoftheoneinvolvedinthatparticularcasefromtenderingforotherwork.Therecoveryofheadofficeoverheadsaspartofprolongationcostsislikelytobedifficultinfuture where large contractors are concerned. Indeed, it is always difficult for anycontractortoshowthatithasbeenpreventedfromusingitsworkforceonanotherprojectbecausethecurrentprojectisdelayed.Inmodernconstructionpractice,muchifnotalloftheworkforcewillbesub-contracted,andthetypesofoperativesengagedduringaperiodofdelayattheendofacontractarelikelytoworkinthefinishingtradesandnottheearlytradesneededforanewproject.Thesupervisorswilloftenbefinishingforemen.

Theuseofformulaeforcalculatingheadofficeoverheadsandprofitwasnotapprovedby the High Court in Tate & Lyle Food and Distribution Co Ltd v Greater LondonCouncil11 especially if the contractor fails to take advantage of other more accuratesystems that are available. This case throws doubt on the legitimacy of charging apercentage to representheadofficeoranymanagerial timespentasa resultofdelayordisruption, at least in the absence of specific proof. It was held that expenditure ofmanagerial time in remedying an actionable wrong done to a trading company wasclaimableatcommonlawasaheadof‘specialdamage’.Theactualclaimfailedbecausethe company had kept no record of the amount of managerial time actually spent onremedyingthewrong,andaccordinglytherewasnoproofof theclaim.TheHighCourtrefusedtospeculateonquantumbyawardingapercentageofthetotaloftheotheritemsoftheclaim.Inordertomakeaclaiminvolvingeitheroverheadlevelsorprofitlevels(orboth), it appears that actual overheads and profits must be identified, not merelytheoreticalorassumed levels. If ‘direct lossand/orexpense’ is theequivalentofwhat isclaimableasdamagesforbreachofcontractatcommonlaw,thecommonlawprinciplesmustapply.Thatisnottosaythatnocontractorcaneverclaimlossofoverheadsorprofit,butitisnotbyanymeansasstraightforwardasonceassumed.

184Canacontractorclaimforlossofopportunity?In deciding suchmatters as extensionsof time and loss and/or expense, the architect isoften involved in trying to decide what caused a delay or what caused losses to beincurred.Thisiscalled‘causation’.Itisadifficulttopicthattakesintoconsiderationtheactualcauseofanoccurrenceor,alternatively,thedirectresultofaparticularhappening.

Taketwosimpleexamples.Inthefirstone,avariationisorderedwhichnecessitatestheplantlyingidleforsomedays.Theplantisneededfortheoriginalwork,butataverylatestagetheworkisvariedandsotheplantisnotneeded.Supposetheplantishiredin.Thecontractor’shirecharges, subject toany re-lettingor theplantowneracceptinganearlyreturn, would be a direct loss and therefore reimbursable, because the loss is clearlycausedbythefirstvariation.

Inthesecondexample,avariationsubstitutesslatesforrooftiles.Afterthecontractorhasorderedthenewslates,problemsareencounteredattheslatequarrythatinterruptthesupplyofslatessothatthesupplierisinbreachofthesupplycontract.Thecontractormaysaythatthecauseofthedelayisthevariation:Ifthevariationhadnotbeeninstructed,theoriginal roof tiles would have been available on time. The contractor would be quitewrong to say that.Thedelayanddisruption to the contractWorks consequentupon theinterruptionofsupplyareonlyindirectconsequencesofthevariation.Theyareinfactthedirectconsequencesofaninterveningevent–thesupplier’sbreach.Insuchacase,itisforthecontractortolook,ifanywhere,tothesupplierforrecompense.

Matterscangetevenmorecomplexifacontractorclaimsthelossnotofsomething,butof theopportunity todosomething;forexample, theopportunity toworkinaparticularwayortotakesomeactionthatwouldhaveearnedthecontractormoremoneyorperhapssavedmoney.Acontractormayoftensay:‘IfyouhadnotdoneX,Iwouldhavebeenableto doY, and as a result of your actions, I have lostmoney.’This is a clear questionofcausation,butitalsocallsintoquestionwhetheritisinevitablethatthecontractorwouldhavebeenabletodoY.Apersonmaybuyaraffleticket,butiftheylosetheticketitdoesnotautomaticallyfollowthattheyareentitledtoclaimforthemaximumprizetheymighthavewon.Acourtwilllookatthechancesofthathappening.

InAldgateConstructionCoLtdvUnibarPlumbingandHeatingLtd,12thecourthadtoconsider the cause of a loss and also take into account an alleged loss of opportunity.Aldgate was a developer which usually developed properties in pairs because it waseconomicaltodoso.Moreover,itwasnotinthehabitofborrowingmoneytodevelop;itreliedongeneratingitsowncapital.Inthisinstance,itemployedUnibartoworkonapairofproperties.OneofUnibar’ssub-contractorscausedafirebyuseofablowtorch.Asaresult,oneofthepropertiessufferedseveredamage.Theotherpropertyhadalreadybeensold.Therewasaninevitabledelaywhileinsuranceinvestigatorsandotherswentontothesite, and eventually the insurers paid a sum of money to Aldgate. During this period,Aldgate was prevented from continuing its development business in the usual way. Itbought a single property and started developing, but it diverted its resources ontoreconstructing thedamagedpropertywhenit receivedthe insurancemoney.Itcontinueddeveloping the single property and a further single property after that.Aldgate claimeddamages for loss of opportunity to carry out dual property development and thus earn

moremoney.Afterareviewofthelawonthistopic,thecourtconcludedthatthechainofcausation

wascontinuous fromthe initialcause (the fire) to the inabilityofAldgate topurchaseadualpropertyfordevelopment.Inall thecircumstances,Aldgatewasheldtohaveactedreasonably.ThequestionwaswhatthechanceswerethatAldgatewouldhavecontinuedbuying dual properties if no fire had occurred. The court assessed the chance in thisinstance as 50 per cent. Even though it may be very difficult to assess the loss ofopportunity,thecourtwilldoitsbest.

185Istheresuchathingas‘beneficialoccupation’,andisthearchitectobligedtocertifypracticalcompletioniftheemployertakespossessionoftheWorks?If the employer takes possession of a project before the architect certifies practicalcompletion,acontractormayarguethattheemployercannotrecoverliquidateddamagesforthesubsequentperioduntilpracticalcompletioniscertified.Itissaidthattheemployerhasthebenefitofoccupyingthepremises(hence‘beneficialoccupation’),andthewholepurpose of liquidated damages is to compensate the employer if occupation cannot beachievedbytheduedate.Thereappearstobenobasisinlawforthatview.Wherethereisno express provision for partial possession, there is case law to suggest that liquidateddamagesmayberecoveredeventhoughtheemployerhasoccupiedtheWorks,providedthatpracticalcompletionhasnotbeencertified.13

Somestandardformcontracts(forexampleSBCclause2.6)permitanemployertouseand/oroccupypartoralloftheWorksifthecontractorconsents,butthisoccupationdoesnot affect the contractor’s exclusive possession of the Works, nor does it affect thecontractor’sobligationsorentitlementswithregardtoliquidateddamages.14Thepositionislikelytobedifferentifthereisprovisionforpartialpossessioninthecontract,andtheemployer,withthecontractor’sconsent,hastakenpartialpossessionofthewholeoftheWorks.

186Whydocontractorsuseformulaeforcalculatingclaims?It is clear from the answer to an earlier question that it is not easy for a contractor torecover lost overheads and profit. Even where a contractor can make out a claim inprinciple,itisbynomeanseasytocalculatetheamountofoverheadsandprofitinawaywhichwillconvincethearchitectorthequantitysurveyorcarryingouttheascertainment.Formulaehavebeenappliedby thecourtsoccasionally.Theyappear togivearelativelyeasyway of calculating overheads and profit without the necessity of proving the sumclaimed in theusualwaybygivingan itemisedbreakdown.Formulaeassumeahealthyconstruction industry and that the contractor has finite resources so that a delayononeprojectwillpreventitfrombeingabletotakeonotherwork.Duringarecession,thatmaynotbethecase.Inaddition,ifthecontractor’sworkloadisnotheavyorifthecontractorissubstantial,itwillhavedifficultyshowingthatadelaycausedittolosetheopportunitytocarry out otherwork.Butwhen the construction industry is buoyant or booming at thematerialtime,aformulaapproachmaybeacceptable.15Double-recoveryisadangerwhenusingformulae,particularlyinrespectofdirectlyengagedadministrativestaff.Ifsomeorall of the prolongation period is caused by complying with instructions to carry outadditional work, the contractor will have recovered an appropriate proportion ofoverheads.

Aformulawillnotbeacceptableifthereisadangerthatitwilloverstatetheactuallossto the contractor, and the formula should be backed up by supporting evidence – forexample, the tender make-up and the head office and project records and accounts –showingactualandanticipatedoverheadsbefore,duringandaftertheperiodofdelay.Anyformula should be used with caution by the contractor, and it should be treatedsuspiciouslybythearchitectandquantitysurveyor.Thebest-knownformulaisprobablytheHudsonformula,althoughitisnotideal.Thecourtshavesometimesreferredtotheuseof this formulawhenactuallyusinganotherslightly lesswell-knownbutbetter formula,theEmdenformula.TheEmdenformulaisasfollows:

Wherehequalstheheadofficepercentagearrivedatbydividingthetotaloverheadcostandprofitof thecontractor’sorganisationasawholeby the total turnover;c equals thecontractsuminquestion;cpisthecontractperiodandpdequalstheperiodofdelay,thelasttwobeingcalculatedinthesameunits(e.g.weeks).

This formula can be useful as an approach where actual costs of head office staffdirectly engaged upon the individual contract are not obtainable. In that case, theproportionofthecontractor’soveralloverheadcoststhatcanbeshownfromitsaccountstobespentuponstaffdirectlyengagedoncontractscanbesubstitutedfortheelementhtoobtain a rough and ready approximation of the cost of staff engaged on the particularcontractduringtheperiodofdelay.However,thisapproachdoesnotmakeanallowanceforthecostofgreaterstaffinvolvementcausedbydisruptionduringtheoriginalcontractperiod.

187Whatare‘interestandfinancecharges’whichthecontractoristryingtoclaim?Under the direct loss and/or expense provisions of the JCTForms, and probably undersimilarly worded provisions in other standard forms, interest and finance charges formpart of a claim for loss and/or expense.The charges amount to the loss of interest thatmight have been earned if the money claimed had been invested; in other words,compensationforthelossofuseofmoney.Thebasisoftheinterestandfinanceclaimisthatthecontractorshouldbecompensatedforthefactthatthelossand/orexpensewouldhavebeenincurredsometimebeforeascertainmentandcertificationbythearchitect.Itisimportanttounderstandthattheinterestisnottobeconsideredasinterestonadebtbutasa constituent part of the loss and/or expense claimed.16 The courts have decided thatfinancechargesshouldbecalculatedonacompoundinterestbasis.17

Thedateatwhichsuchinterestandfinancechargesstarttorunisavexedquestion.Thecontractor may contend that it is the date on which it makes its application and thearchitectknowsthatthereisafinancemattertoconsider.Thearchitectmaysaythattheoperativedateisthedateonwhichsufficientinformationisavailabletoenabletheinteresttobeconsidered. It is sometimesargued that,whenever thearchitectmayascertain, therealityisthatthecontractorisbearingthefinancingchargesofthewholeamountwhichisultimatelyascertainedasdue,andinthemeantimetheemployerhasfulluseofthemoney.It is thought that the better view is that the period commences when the architect hasreceived all the information he or she requires to ascertain. The matter is in thecontractor’shands.Anydelaybetweenmakingapplicationandprovidingfullinformationistheresponsibilityofthecontractor,andthatshouldbetakenintoaccountindecidingontheoperativeperiodforcalculationoftheinterest.

188Canacontractorrecovertheprofessionalfeesofaconsultantengagedtoprepareaclaim?Althoughcontractorswilloften include thecostofpreparing theclaimwithin theclaimitself,thecontractorisnotusuallyentitledtoreimbursementforanycostsithasincurredin preparing the claim. The reason for that is that under SBC, IC, ICD and DB, thecontractor is not required to prepare a claim in the sense of a fully reasoned documentsuch as might be used in arbitration proceedings. The contractor is merely required tomake awritten application to the architect, backed up by supporting information. Thatoughtnottoamounttomorethananapplicationsettingoutthecircumstances,citingtheclause numbers and the relevant matters involved, and linking the two together. Thatshouldbesomethingthatanycontractorwhichhasgenuinelysufferedlossand/orexpensecould do without toomuch difficulty, although it will involve proper research into theoccurrencesgivingrisetothelosses.Therefore,feespaidtoso-calledclaimsspecialistsorto independent quantity surveyors or other professional advisers are not in principleallowableasaheadofclaim.Inarecentcasethecourtheldthat,inprinciple,aclaimforclaimpreparationcouldbeavalidheadoflossand/orexpense.Howeverthecourtdidnotgiveanyreasoningforthisconclusionanddidnotactuallyallowmuchcompensation.18

If a claim proceeds to arbitration or litigation, the contractor is entitled to claim itscosts,whichwill includethecostofgettingtheclaimintotherightformforarbitration.On a summons before a court to review taxation of costs of an arbitration which wassettledduringthehearing,thefeesofaclaimsconsultantforworkcarriedoutinpreparingthe contractor’s case for arbitration (essentially, three schedules to thePoints ofClaim)wereallowedascostsofapotentialexpertwitnessinthearbitration.19

Theexpenditureofmanagerialtimeinremedyinganactionablewrongdonetoatradingcompanycanproperlyformthesubjectmatterofaclaimfor‘specialdamage’inanactionatcommonlaw.20Therefore,itispossiblethat,inprinciple,theremaybeaclaimforthecostofmanagerialtimewithinthecompanyspentonpreparingaclaim.Obviously,therecouldbenoelementofdoublerecovery,andsuchaclaimshouldnotbecoveredbyanyclaim for head office overheads. It is likely to be quite difficult for a contractor tosuccessfullymakesuchaclaim,andtherewouldbesubstantialhurdlestocross.Thecaseagainstrecoveryofthecostsofemployingaclaimsconsultantisthatsuchemploymentisunnecessary,andthereforethecostsdonotamounttomoneynecessarilyexpendedandsorecoverable.Itislikelythatacontractortryingtorecoversuchcostswouldbeputtoproofthat the particular circumstances were such as made the employment of a claimsconsultantessential.

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189Doesthecontractorhaveadutytomitigateitsloss?Ifthecontractorwishestoclaimlossand/orexpenseordamagesunderanyofthestandardformcontracts,ithasadutytomitigate(lessen)itsloss.Therefore,acontractorhasadutytodowhatitreasonablycantoreducetheamountofloss.Theprinciplesofmitigationarestraightforward:

Thecontractorcannotrecoverdamageswhichmayresultfromtheemployer’sactionsifitwouldhavebeenpossibletoavoidsuchdamagebytakingreasonablemeasures.

Thecontractorcannotrecoverdamageswhichhavebeenavoidedbytakingmeasuresgreaterthanwhatmightbeconsideredreasonable.

Thecontractorcanrecoverthecostoftakingreasonablemeasurestoavoidormitigateitspotentialdamages.

Thecontractorisnotobligedtodoeverythingpossible.Ifthatwasthecase,asuccessfulclaim for damages or loss and/or expense might be rare. The contractor need not doanythingmorethananordinaryprudentpersonwoulddointhecourseofbusiness.21

Obviously,formitigationtoberelevant,thecontractormusthavetheright,inprinciple,tothedamages.Itisimportanttounderstandthatafailuretomitigatewillnotgiverisetoalegalliability,butitwillreducethedamagesrecoverabletowhattheywouldhavebeenhadmitigatingmeasuresbeentaken.

For example, if the architect gave an instruction which resulted in a number ofoperativesstandingidleforafewdays,thecontractorwouldnotbeentitledsimplytokeeptheoperativesonsiteonfullpayuntiltheopportunityaroseforfullemploymentagain.Itwouldbeobligedtomakereasonableendeavourstousetheoperativeselsewhereonthatoranothersite.Thecostsincurredbythecontractoruntil,actingreasonably,itwasabletomovetheoperativesandthecostsofthemovewouldbelikelytoberecoverableaspartofaclaim.Inpractice,thecourtswouldnotexaminethecontractor’sattemptstomitigatetoocritically.Thecontractor’scostswouldprobablystillberecoverableifitactedreasonably,evenifthecontractor’sactionsresultedinanincreaseinitsloss.22

Theextensionoftimeclausesofmanystandardformcontractsrequirethecontractortouseitsbestendeavourstopreventdelayoccurringandtoreducetheeffectsofadelay.

Wherethecontractorisclaiminglossand/orexpenseunderastandardformcontract,itisfortheemployertodemonstratethattheclaimanthasfailedtomitigate.23Undermoststandard forms that is something which the architect would handle. In doing so, thearchitectwouldbeentitledtorequestreasonablesubstantiatinginformation.

190Isitpermissibletoclaimincreasedcostsbyreferencetonationalindices?Acontractormaking application for loss and/or expenseunderoneof the JCT standardform contracts will often submit what it believes to be a substantiating case. If thearchitectisnotsatisfiedthattheinformationprovidedisenoughtoreasonablyenableanopiniontobeformedaboutthevalidityoftheclaim,furtherinformationcanberequested.Many architects get stuck when faced with the question of increased costs. There isnothingparticularlymysteriousaboutthem,anditisbesttoconsiderthemfromthebasics.ThecontractorhascalculateditstenderonthebasisthatitwillbeabletogetonwiththeWorksinaccordancewiththeprogramme.Thepriceofallmaterialsatthetimetheywillberequiredandthecostofalllabourresourcesandequipmentistakenintoaccount.Ifthecontractorsuffersadditionalexpenditureonlabour,materialsorplantduetoincreasesincostduringaperiodofdelay,it isanallowableheadofclaim.Claimsonthisbasismayalsobesustainablewheredisruptionhasresultedinlabour-intensiveworkbeingdelayedandcarriedoutduringaperiodafteranincreasedwageaward.Whereaclaimofthiskindisbeingmadeinrespectofadelayincompletion, it isnotonlytheperiodofdelaythatshouldbeconsidered.Thecorrectcalculationwouldbe thedifferencebetweenwhat thecontractorwouldhavespentonlabour,materialsandplantandwhatithasactuallyhadtospendoverthewholeperiodoftheworkasaresultofthedelayanddisruptionconcerned.However,whenmakingthiscalculation,properallowancemustbemadefortherecoveryofanyincreasedcostsundertherelevantfluctuationsclausesinthecontract,ifapplicable.

A contractorwill often try to simplify such calculations by the use of some kind offormula or notional percentage, such as a national index. Such an approach is notacceptable, because the contractormust show that the increases in costs have been theconsequence of the cited occurrence, and the precise amount of loss and/or expensesustained therebymustbecalculated.Thiscanbecomequitecomplicated in thecaseofmaterials,because thecontractormustshowthat itcouldnot reasonablyhaveplaced itsorder earlier in order to avoid the increases. The proper calculation of increased costssufficienttosupportaclaimisnoteasy.Indeed,itisratheratediousexercise.Moreover,itmustnotbeassumedthatallworkandallmaterialsaftertheperiodofdelayorduringaprolongation period after the contract completion date will automatically suffer a priceincrease.Thatisanothertemptingshortcutwhichthearchitecthasadutytotheemployertoreject.

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191Thecontractorisdemandingtobepaid‘prelims’ontheextensionoftime.Howisthatcalculated?None of the standard forms of contract entitle the contractor to any payment as aconsequence of extension of time. The purpose of extension of time clauses is that theperiod of time available for carrying out the contract Works can be extended. Thecontractorwilllookinvainforanyreferenceinthecontracttomoneyinconnectionwithextensionoftime.Inshort,thereisnoconnectionbetweenthecontractor’sentitlementtoanextensionoftimeandanyentitlementtolossand/orexpense.24

There is no provision for the payment of ‘prelims’ in any of the standard forms.‘Prelims’ is short for ‘preliminaries’ (i.e. the first part of the bills of quantities orspecification).When a contractor talks about recovering its preliminaries, it means thepriceforthepreliminaryitemsthathasbeeninsertedinthebillsorspecificationaspartofthetenderprice.Thispreliminariespriceisofteninsertedasalumpsumorasapriceperweek.Obviously,alumpsumcaneasilybeconvertedintoaweeklyratebydividingitbythenumberofcontractweeks.

It was once very common, but now fortunately less so, for the architect to give acontractoranextensionoftimeandthenforthequantitysurveyortoascertaintheamountpayable to the contractor by multiplying the weekly amount of preliminaries in thespecification by the number ofweeks’ extension of time.As construction professionalsbetterunderstandtheirresponsibilitiesindealingwithlossand/orexpense,thispracticeisless common. It borders on negligence unless sanctioned by the employer in the fullknowledge of all its implications. The contractor can never be entitled to recover itspreliminariesas lossand/orexpense,much lessasa rateperweekofextensionof time,becausethecontractorisentitledtorecoveronlyitsactuallossesoractualexpenses–inotherwords, the amount it canprove it has actually lost or spent.25 It is not entitled torecoversomenotionalamountnor theamount insertedaspartof its tenderprice,whichmay,butmorelikelymaynot,bethesameasitsactualcosts.

Therefore,theanswertothisquestionis:

The contractor is not entitled to any money as a consequence of being given anextensionoftime.

Therefore,thereisnoneedtocalculateit.

Ifthecontractormakesavalidapplicationundertheclaimsclause(e.g.clause4.23ofSBCorclauses4.17and4.18ofIC),itisentitledtotheactualamountoflossand/orexpenseithassuffered.

192Isittruethatacontractorcannotmakealossand/orexpenseclaimunderMW?Strictlyspeaking,thatiscorrect.TheonlyclauseinMWthatmentionslossand/orexpenseisclause3.6.3.ItprovidesthatifthearchitectissuesaninstructionrequiringanadditiontooromissionfromoranyotherchangeintheWorksortheorderortheperiodinwhichtheyaretobecarriedoutandthereisafailuretoagreeapricebeforethecontractorcarriesouttheinstruction,theinstructionmustbevaluedbythearchitect.

Thearchitectisrequiredtovaluetheinstructiononafairandreasonablebasisusinganyprices in the priced document. Significantly, the valuationmust include any direct lossand/orexpensethatthecontractorhasincurredasaresultofregularprogressoftheWorksbeingaffectedbythecontractor’scompliancewiththeinstruction.Thegroundsonwhichthearchitectcanincludelossand/orexpenseareobviouslyquiterestricted.

It is clear from thewordingof clause3.6 that the architect’s inclusionof loss and/orexpenseinthevaluationdoesnotdependonanyapplicationbythecontractor.Indeed,theonly time the contractor is expressly required to provide information to the architect isunder clause 4.8.1, where the contractor must provide all documentation reasonablyrequiredforcomputationofthefinalcertificate.

In calculating the valuation, the architect will no doubt ask the contractor forinformation.Indeed,inpracticemostcontractorswillprovideinformationintheformofanapplicationforpaymentonamonthlybasis.Although thecontractdoesnotprecludesuchapplications,itdoesnotconferanystatusuponthem.Thearchitectmaytakenoticeofor ignore the informationasheorshedeemsappropriate,becausetheonlyfactor thearchitect needs to take into account is the priced document, whether that is a pricedspecification,workschedulesorascheduleofrates.Itisentirelyamatterforthearchitecthowthelossand/orexpenseiscalculated.Manyarchitectslinktheamounttothelengthofanyextensionoftimethathasbeengivenonaccountofarchitect’sinstructions.Althoughonecanseesome logic in thisapproach, there isno justification forarrivingat the lossand/or expense bymultiplying the number of weeks by the amount the contractor hasinserted in thepriceddocumentas itsweeklypreliminariescost.Lossand/orexpense isthe equivalent of damages at common law.As such, the damagesmust be proved; thearchitectmust secure thenecessaryevidence to showhowmuch loss thecontractorhasactually incurred. At best, the preliminaries figure in the priced document is thecontractor’s best estimate at tender stage. It may be an under- or an overestimate. Itcertainlywillnotrepresentactualcosts.

ThetermsofMWcontainnomechanismtoenablethecontractortomakeaclaimforlossand/orexpense.MWdoesnothave theequivalentofclause4.23ofSBCorclause4.17 of IC. Therefore, the contractor cannot make a claim under the contract for lossand/orexpenseforinformationreceivedlate.Allisnotlost,however.Thereisabsolutelynothing to stop thecontractormakingaclaimat common law in suchcases,basing theclaim on a breach of contract by the employer and claiming damages. Such action hasreceivedjudicialblessing.26Thearchitectcannotdealwithsuchclaims,becausetheyareoutside the contractmachinery.Theymust be handled by the employer. If the architect

receives sucha claim, itmustbe forwarded to the employer immediately.Thearchitectshould refrain from expressing any view about the claim unless consulted by theemployer.Theoretically,theemployershoulddealwiththematterbyseparatelegaladviceand, if appropriate, pay the money directly to the contractor without an architect’scertificate.

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193Towhatextentisacontractorobligedtoprovideinformationrequestedbythearchitectorquantitysurveyorinconnectionwithlossand/orexpense?Itisanormalpartoflegalorarbitrationproceedingsthatpartiesengageinthedisclosureof all relevant documents to each other. However, that is not the case in adjudication,where the parties can choosewhat information they provide to the adjudicator. Inmostcases,thepartiesobviouslyonlygivetheadjudicatortheinformationwhichsupportstheirparticular argument. Further information is only revealed either in order to refutesomethingtheotherpartyhassaidorbecausetheadjudicatorhasspecificallyrequestedit.

The case of Transport for Greater Manchester v Thales Transport and Security Ltd(No.1)27 concerned a contract which expressly provided that information was to berecordedandgiven to theotherparty,Transport forGreaterManchester (TGM).Thalesmadeaclaimforextensionoftimeandpaymentofover£42million,andTGMaskedforvarious documents. When Thales failed to provide the documents, TGM started legalproceedingsforwhatiscalled‘specificperformance’.

Specific performance is, as the name suggests, a request by one party to a contractaskingthecourttoordertheotherpartytodosomethingwhichthecontractrequirestobedone.The court has discretionwhether or not to order specific performance.The courtwillnotusuallyorderspecificperformanceifdamageswouldbeanadequateremedyorifconstant supervisionby the court is necessary to ensure that theorder is carriedout. Inmostcases,damageswillbeanadequate remedy,and thereforespecificperformanceofcontractualobligationsisnotoftenordered.

In this case, the contract clearly provided that Thales would maintain accurateinformationforatleast12yearsinaformsuitableforinspection.Thecontractwentontogive a very detailed list of the information and to provide that TGMwere entitled, onreasonable notice, to inspect and copy any of the records. Damages would not be anadequate remedy, becauseTGM required the information to check the claim.The courtgrantedtheapplicationandordereddisclosureoftherelevantdocuments.

Thecourtmadeclearthatspecificperformanceofthiskindwillonlybeorderedwherethedocumentsrequiredareverypreciselydescribed,sothatthecourthasnodifficultyincheckingthatthepartyhascompliedwiththeorder.Ifthereisadisputeaboutwhetheradocumentexists,ifitsdescriptionisnotpreciseenoughorifthedocumentisprotectedbyprivilege(forexamplelegaladvice),specificperformancewillnotbeordered.

A passage from SkanskaConstructionUK Ltd v The ERDCGroup Ltd [2003] SCLR 296 quoted inCantrell &AnothervWright&FullerLtd(2003)91ConLR97.

Cantrell&AnothervWright&FullerLtd(2003)91ConLR97.

(1967)5BLR121.

SeeforexampleNauruPhosphateRoyaltiesTrustvMatthewHallMechanicalandElectricalEngineersPtyLtd&Another(1992)10BCL178;Bernard’sRugbyLandscapesLtdvStockleyParkConsortiumLtd(1997)82BLR.

JohnHollandConstruction&EngineeringPtyLtdvKvaernerRJBrownPtyLtd(1996)82BLR83.

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[2002]BLR393.

LondonBoroughofMertonvStanleyHughLeachLtd(1985)32BLR51.

WhittalBuildersCoLtdvChester-Le-StreetDistrictCouncil[1996]12ConstLJ356(thefirstcase).

JFFinneganvSheffieldCityCouncil(1988)43BLR124.

AMECBuildingLtdvCadmusInvestmentsCoLtd(1997)13ConstLJ50.

[1982]1WLR149.

(2010)130ConLR190.

BFIGroup ofCompanies Ltd vDCB Integration SystemsLtd (1987)CILL348;Herbert ConstructionUK Ltd vAtlanticEstatesplc(1993)70BLR46.

ImpresaCastelliSpAvColaHoldings(2002)87ConLR123.

StModwenDevelopmentsLtdvBowmer&KirklandLtd(1996)14-CLD-02-04.

FGMinterLtdvWelshHealthTechnicalServicesOrganisation(1980)13BLR7CA.

Rees&KirbyLtdvSwanseaCityCouncil(1985)5ConLR34CA.

WalterLilley&CoLtdvMackay&Another(2012)143ConLR79.

JamesLongley&CoLtdvSouthWestRegionalHealthAuthority(1984)25BLR56.

Tate&LyleFoodandDistributionCoLtdvGreaterLondonCouncil[1982]1WLR149.

LondonandSouthEnglandBuildingSocietyvStone[1983]1WLR1242.

MelachrinovNicholl&Knight[1920]1KB693.

GarnacGrainCoIncvFaure&Fairclough[1968]AC1130.

HFairweather&CoLtdvLondonBoroughofWandsworth(1987)39BLR106;MethodistHomesAssociationLtdvMessrsScott&McIntosh,2May1997unreported.

FGMinterLtdvWelshHealthTechnicalServicesOrganisation(1979)11BLR1;(1980)13BLR7CA.

LondonBoroughofMertonvStanleyHughLeachLtd(1985)32BLR51.

(2012)146ConLR194.

Chapter21

Sectionalcompletion

194ThecontractisSBC,whichincludesprovisionforsections.Theemployerwantstorearrangethesections.Canthatbedonewithanarchitect’sinstruction?Thefactthatthecontractistobecarriedoutinsectionswasagreedbetweentheemployerandthecontractorwhentheyexecutedthecontract.Inotherwords,thesectionsareatermofthecontract.Therefore,inordertochangethesectionsitisnecessarytohaveafurtheragreement between employer and contractor. It is not something the employer canunilaterally decide, any more than the employer can unilaterally decide to reduce thecontractsumby20percent.

Still less can the sections be changed by the architect through the medium of anarchitect’sinstruction.Apartfromanyotherconsideration,thearchitectisnotempoweredbythecontracttoissueaninstructiontothateffect.Therefore,anysuchinstructionwouldbevoid.

If the employer wishes to rearrange the sections, the contractor’s consent must besought.Evenwherebothparties agree, the changecannotbe achievedbyan architect’sinstruction. If the contractor is willing, the employer must organise the drafting of aspecialaddendumtothecontractsettingoutthevariationagreedbetweenthepartiesandanyothermattersthatarisefromthechange(forexample,itwillbenecessarytoamendtheliquidateddamages).Bothpartiesmustsigntheaddendum.

195ThecontractisSBCinsections.Thedatesforpossessionandcompletionhavebeeninsertedforeachsection.Section2cannotstartuntilsection1isfinished.Isittruethatpossessionofsection2mustbegivenontheduedateevenifitisthecontractor’sownfaultthatsection1isnotfinished?Thisisacommonproblemwhenthecontract isdividedintosections,eachwithitsowndate forpossessionandcompletion,but twoormoreof the sectionsare interdependent.For example, a refurbishment projectmay be divided into three sections, but section 2may be dependent on section 1 in a practical sense, because the contractor cannotphysically be givenpossession of section 2 until section 1 has been completed.That isusually because the occupants of section 2 have to be moved to section 1 when it isfinished.Usually,thedatesforpossessionandcompletionofeachsectionareinsertedintothe contract as a series of dates. The date for completion of section 1 and the date forpossessionofsection2willprobablybeseparatedbyaweekorsotoallowoccupantsandfurnituretobemovedfromonesectiontoanother.

Ifsection1isnotfinishedbythecompletiondate,evenifthecontractorisatfault,thecontractor is still entitled to take possession of section 2 on the appointed date in thecontractparticulars(seeclause2.4ofSBC)becausethat iswhat thepartieshaveagreedandinsertedinthecontract.Ifitisphysicallyimpossibleforsuchpossessiontotakeplace,theemployerwillbeinbreachofcontract.Thecontractoris,therefore,correct.

Whereaprojectissplitintosections,anyextensionsoftimemustbegiveninrespectoftheparticularsectionaffectedbythedelayingevent.Thereisnoprovisionthatthedelayinone section will affect another. Therefore, even if the whole of the delay to section 1entitlesthecontractortoanextensionoftime,itwillbeonlysection1thatisextendedandnotsection2.

Ifthecauseofthedelayisentirelythefaultofthecontractor,thearchitectmaysaythatthecontractor,beingresponsiblefor thedelay tosection1, isclearlyresponsiblefor thedelaytosection2also,anditcannotexpecttotakepossessionofsection2onthedatesetoutinthecontractparticulars.Thisapproachisverycommonbutwrong.Thecauseofthedelaytopossessionofsection2isnotthecontractor’sdelaytosection1,butthefactthatthe two sections are linked. If theywere not linked, the contractor’s delay to section 1would not affect section 2. One of the difficulties where the dates for possession andcompletion are simply set out as a series is that there is nothing towarn the contractoraboutthelikelyproblem.

Therearetwoprobablesupplementaryissues:Thefirstiswhetheranythingcanbedonetoavoidtheprobleminnewcontracts;thesecondiswhetheranythingcanbedonewherethesituationoutlinedinthequestioniscurrentlyinplace.

Toavoidtheproblemisrelativelystraightforward.Theemployermustclearlyshowthelinks in the sections. The contract particulars should be amended to delete the currentsettingout against ‘Sections:DatesofPossessionofSections’, and in itsplace,oronaseparate but properly attached and signed sheet, section 1 would have a date for

possessionandadateforcompletion;section2wouldnothaveadateforpossession,butrather the statement, ‘The date for possession is x days after the date of practicalcompletion of section 1’.Therefore, a delay to completion in section 1 (fromwhatevercause)wouldbereflectedinthedateofpossessionofsection2.Therewouldbenobreachofcontract,becausesection2couldbegiventothecontractorontheduedate.Thedatefor completion of section 2would not be inserted, but rather thewords, ‘The date forcompletion is x weeks after the date that possession of this section was given to thecontractor’. It is difficult to see the grounds on which the contractor could make anyfinancialclaimontheemployerfordelaystosection1thatcauseadelaytothepossessionofsection2ifthismethodofsettingoutthedateswasimplemented.Ithasbeensaidthatthedates forpossessionandcompletioncannotbeentered in thisway,because theyarenotactualdates.Thatwouldbe to take thewording too literally.The important thing isthat thewording enables the dates to be unerringly calculated, albeit not until practicalcompletionofsection1hastakenplace.

Rectifyingthesituationifproperprovisionhasnotbeenmadeisslightlymorecomplex.If there is provision for the employer to defer possession of any of the sections by theappropriate amount, the employermust do so and the contractor will be entitled to anextensionoftimeandprobablywhateveramountoflossithassufferedasaresultofthedeferment of possession. If there is no deferment provision or if the delay exceeds theperiodofdefermentallowedunderthecontract,thesituationappearstobethatthereisabreach of contract which, dependent upon circumstances, may be a repudiation. Thecontractorwouldbeentitledtorecoverasdamagestheamountoflossithassuffered.Iftherewasnoprovisionforthedelaysituationinthecontract,thearchitectwouldbeunabletomake any extension of time, and the contractor’s obligationwith regard to section 2would be to completewithin a reasonable time. Therefore, liquidated damages for thissectionwouldnotberecoverable.

SBCandICnowprovideforsuchbreachestobedealtwithbyextensionoftimeandlossand/orexpenseunderSBCclauses2.29.6and4.24.5andICclauses2.20.6and4.18.5,respectively. The amount payable to the contractor, whether by virtue of a loss and/orexpenseclauseinthecontractorasdamagesforthebreach,maynotbesubstantial.Thecontractorwouldhavetodemonstratealoss,andthesituationissimplythatsection2hasbeenpushedbackintime.

196Ifthearchitectgivesanextensionoftimeforsection1andallthesectionshavedatesforpossessionwhichdependuponpracticalcompletionoftheearliersection,isthearchitectobligedtogiveasimilarextensionoftimeforeachsection?Ifsectionsarelinkedsothatthedateforpossessionofeachsectiondependsonthedateofpractical completion of the earlier section, difficulties can arise. Some of the problemsarising from linked sections have been explored in the previous question, togetherwithsomewaysofdealingwiththem.

Theproblemswereplacedbefore the court inLibertyMercianLtdvDean&DyballConstructionLtd.1Inthatcase,thepartiescontractedundertheJCT98formofcontract.Thedateforpossessionofthefirstsectionwasfixed,butthedateforpossessionofeachfollowing section dependedon the date of practical completion of the previous section.However,and this iswhatgave therealpotential fordifficulty, thecompletiondatesforeachsectionwerefixed.Consequently,whenthecontractorwasindelayforeightweeksinthefirstsection,thearchitectgavefourweeksextensionoftimeforthefirstsectionandfourweeksextensionforeachfollowingsection.Therefore,therewasaperiodofculpabledelay to the first section of four weeks, for which the employer deducted liquidateddamages amounting to £48,000. The problem for the contractor was that it then founditself in a period of culpable delay for each succeeding section, because the date forpossessionwasdelayedbyuptoeightweekseachtimebutonlyfourweeksextensionoftimehadbeengivenineachcase.Thecontractorarguedthatforeachsectionafterthefirstsection,theextensionoftimeshouldreflecttheinitialeight-weekdelaytothefirstsection,which irretrievably fixed the date of possession of the following sections. The courtdecided that liquidateddamageswere recoverable forall theweeksofculpabledelay ineachsection.Thecourtreferredtowhatitcalledthe‘criticalfeatureofthiscontract’:

namelythatthebuildingworkswerealwaysgoingtobecarriedoutsequentially,andthattheworkononesectioncouldnotstartuntiltheworkontheprevioussectionhadreached practical completion or (in certain instances) the stage of completionidentified in the sectional completion schedule. It is plain from that schedule, andfromthesectionalcompletionagreementasawhole,thatbothsideswereawarethatculpable delay of 4 weeks on section 1 would automatically mean that work onsections2,3,4and5wouldstart4weekslate.

InanoldcaseaboutaprojecttobecompletedinsectionswhichwasheardbytheHouseofLords,ahospitalwastobebuiltinthreephasesorsections.2Therewasaprovisionthatthethirdsectionwastocommencesixmonthsafterthecertificateofpracticalcompletionofsection1wasissued,butalsothatitmustbecompletedbyaspecifieddate.Thatwastherootoftheproblem;section1wasindelay,whichdelayedtheissueofthecertificateof practical completion and thus delayed the commencement of section 3. But as thecompletiondateforsection3wasfixed,theperiodavailableforthecontractortocarryouttheworkonsection3waseffectivelyreducedfrom30monthsto16months.Therewas

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provision in the contract for nomination of certain sub-contractors, and the contractorrequestedtheemployertonominatesub-contractorswhocouldcarryouttheirworkwithinthereducedperiod.Theemployerwasunabletodosoandarguedthat theremustbeanimplied termthat thesection3completiondatemustbeextendedby theamountofanyextension of time given to the contractor in respect of the section 1 delay. The courtrefusedtoimplyatermsuchastheonerequested.Thatmeantthatthepartieswouldhavetonegotiateanextensiontothecompletiondateofsection3witharesultingincreaseinthecontractsum.Clearly,theunfortunateresultwasnotforeseenbytheparties,andinthisinstancetheemployersufferedadditionalcosts.Hadthedelaynotbeenaslong,theresultmighthavebeenashortened,butmanageable,workperiodforsection3.ThecourtintheLibertyMerciancasedoesnotseemtohavereferredtothisearliercase.

[2008]EWHC2617(TCC).

Trollope&CollsLtdvNorthWestMetropolitanRegionalHospitalBoard(1973)9BLR60.

Chapter22

Practicalcompletionandpartialpossession

197Ifthearchitecthasissuedacertificateofpracticalcompletionwith150defectiveitemslistedandthecontractorisnotremedyingthemwithinareasonabletime,whatcanbedoneaboutit?

The leading case on the requirements for practical completion1 states that practicalcompletion cannot be certified if there are known defects in the Works. Therefore, acertificate issued with 150 defective items listed is, on its face, void or, perhapsmoreaccurately,voidableifeitherpartyappliestoanadjudicator.Anadjudicatoroughttofindthatthecertificatewasnotproperlyissued,andthecontractorwouldbeobligedtorectifythedefectsbeforeacertificatecouldbeproperlyissued.

If neither party seeks adjudication on the matter – and in practice the contractor isunlikely to do so because the certificate carries various advantages – the defects willbecomepartofthedefectstobedealtwithduringtherectificationperiod.

If thecontractordoesnot rectifywithina reasonable time, thearchitectmay issueaninstructionrequiringthedefectstobemadegood,followedbyacompliancenoticeunderSBCclause3.11orICclause3.9.Ifthecontractordoesnotcomplywithinsevendays,theemployermayengageothers,andalltheadditionalcostsincurredbytheemployerwillbedeductedfromthecontractsum.Alternatively,iftheemployeriscontenttowaituntilaftertheendoftherectificationperiod,thedefectscanbeaddedtothescheduleofdefectsanddealtwithintheusualway.

198Isthecontractorentitledtoacertificateofpracticalcompletionaftertermination?The certificate of practical completion indicates that the contract Works are almostcomplete,thattherearenoknowndefectsandthatonlyminorthingsremaintobedone.Whentheemploymentofthecontractoristerminatedunderthecontract,whetherbytheemployerorbythecontractor,theWorkswillneverreachpracticalcompletionunderthatparticularcontract.TheonlywaytocompletetheWorkswillbefortheemployertoenterintoanewcontractwithanothercontractor.ThenewcontractwillnotbefortheWorksasincludedintheoriginalcontract,butonlyforthebalanceoftheWorks.

When thenewcontract is completed, the architectwill issue a certificate of practicalcompletionfortheWorksincludedinthenewcontract.Thecertificatewillbeissuedtotheemployerwithacopy to thenewcontractor, and itwill referonly to thebalanceof theoriginalWorks.Theoriginalcontractorwillnotreceiveacopyofthiscertificate,becauseitwasnotconcernedinthenewcontract.Norwilltheoriginalcontractorreceiveacopyofa certificate of practical completion of theWorks in the original contract, because theywerenevercompleted.

Itissurprisinghowoftenarchitectsandcontractorsgetconfusedaboutthis.

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199Cantheemployertakepartialpossessionofthewholebuildingsothatthearchitectneednotcertifypracticalcompletion?Theanswer to thisquestiondependson the termsof thebuildingcontract.UnderSBC,DB,ICandICD,theemployermaytakepartialpossessionofanypartoftheWorksifthecontractor agrees, and once partial possession has been taken, practical completion isdeemedtohaveoccurredinrespectofthoseparts.Itisunusual,tosaytheleast,forpartialpossession to be taken of thewhole of theWorks. Itmay sometimes happenwhen theemployer is anxious tomove in to thebuildingbut the criteria for practical completionhavenotbeensatisfied,andthereforethearchitectcannotissueacertificatetothateffect.It has been held that if partial possession is taken of thewhole of theWorks, deemedpracticalcompletionofthewholeoftheWorksoccurs.2

Theeffect is that regular interimpaymentsend, liability for liquidateddamagesends,thecontractor’sobligation to insure theWorksends, therectificationperiodcommencesandthefirsthalfoftheretentionmustbereleased.Allthisfollowsjustassurelyasifthearchitecthadbeenabletocertifypracticalcompletion.Presumably,atsomelaterdatethecriteriafortheissueofacertificateofpracticalcompletionwillbesatisfied.Itmayseemotioseforthearchitecttocertifyatalaterstage,becauseallthepracticalconsequencesofpracticalcompletionhavealreadybeenset inmotion.However, thecontractobliges thearchitect todoso,andthereisnothinginthecontractwhichremovesthisdutyoncetheprescribed criteria have been satisfied. The subsequent issue of the certificate by thearchitect does have one very useful function. It records the date on which, in thearchitect’s opinion, practical completion occurred.Alternatively, if the architect decidesnot to issue such a certificate, it is a breach of the architect’s obligations under thecontract, but it is difficult to see what if any consequences would flow from it. Thearchitectcouldeasilyrecordhisorherviewaboutwhenpracticalcompletionwouldhavebeencertifiedbysendingalettertotheemployer.

WestminsterCorporationvJJarvis&Sons(1970)7BLR64.

SkanskaConstruction(Regions)LtdvAnglo-AmsterdamCorporationLtd(2002)84ConLR100.

Chapter23

Termination

200Thecontractorisrunningovertime.Thearchitecthasover-certified.Arethereanyproblemsiftheemployerwishestoterminate?An architect who certifies more than the amount properly due to the contractor isnegligent and in breach of the contractual obligations to the employer by which thearchitectundertook toadminister thecontract.All thestandard formsofcontractpermitthearchitecttocertifyonlythoseamountsproperlydue.Becausepaymentcertificatesarecumulative, the architect should be able to retrieve the situation in the next certificate.Obviously,thatwouldnotbethecaseiftheemployerterminated,thecontractorwentintoliquidation,orthecertificateinwhichtheover-certificationtookplacewastheoneissuedafterpracticalcompletion.Interimcertificatesarenotintendedtobepreciselyaccurate.Ithasbeenwellsaidthattheyareessentiallyameansbywhichthecontractorisassuredofsomecashflowthatroughlyapproximatestotheworkcarriedout.1

It isdoubtfulwhether theemployerwouldhavegrounds to terminate thecontractor’semploymentsimplybecausethecontractorwasrunningovertime.UnderJCTcontracts,thearchitectwouldhavetobesatisfiedthatthecontractorwasfailingtoproceedregularlyanddiligently.However,forthesakeofthisquestionletussupposethatthereareadequategroundstoterminate.Thearchitectwillbeobligedtoconfirmthattotheemployer.Thenthe architect has no option but to inform the employer that there has been some over-certificationandthatitwouldbebettertowaituntiltheworkonsitehascaughtupwiththeamountcertified.Howlongthatwillbewilldependonthedegreeofover-certificationandtherateatwhichthecontractoriscurrentlyworking.

Of course, the employer can always go through the termination procedure and thenreclaim theover-certified amount, togetherwith anyother balancedue, after theWorkshave been completed by others. In doing so, however, the employer would have tochallengethearchitect’scertificate,probablyinadjudication.Thiswouldbeanadditionalcost which, if the adjudicator found in favour of the employer, the employer wouldassuredlytrytorecoverfromthearchitect.

In practice, instances of over-certification tend to be unusual and concern relativelysmallamounts,usuallyasaresultofthevaluationofdefectivework.Itisthearchitect’sresponsibilitytonotifythequantitysurveyorofalldefectssothattheywillnotbevalued.Inanyevent,certificationisentirelytheprovinceandresponsibilityofthearchitect.2Thatiswhyarchitectsshouldnotsimplyacceptvaluationsfromquantitysurveyorsandblindlytransferthevaluationfigurestothecertificate;theyshouldaskforasimplebreakdownofthevaluation.Itisnotthearchitect’sjobtodothevaluationagain,butthearchitectshouldhaveenoughinformationtobesatisfiedthatthevaluationlooksaboutright.

201TerminationtookplaceunderSBCduetothecontractor’sinsolvency.Cantheliquidatorinsistthatfullpaymentofanybalanceplusretentionisimmediatelypayable?Termination due to the contractor’s insolvency is covered by clause 8.5 of SBC. Theemployermayterminateatanytimebywrittennotice.Theinterestingpointisthatunderclause8.5.3.1,theprovisionsofthecontractthatrequireanyfurtherpaymentorreleaseofretentioncease toapplyas soonas thecontractorbecomes insolvent, even ifnowrittennoticehasbeengivenbytheemployer.

Thatmeans thatalthough theemployermaybeslowin takingaction to terminate thecontractor’s employment, the employer’s duty to pay is at an end except as set out inclauses 8.7.4, 8.7.5 and 8.8. It should be noted, however, that there is no longer anyprovisionforautomatictermination.

Theseclausesstipulatethatanaccountmustbedrawnupofwhateverbalancemaybedue from employer to contractor, or vice versa as the case may be, after taking intoaccount all the costsof finishingoff, includinganydirect lossordamagecaused to theemployerbythetermination.Thismustbedonewithinareasonabletimeaftercompletionof the Works by another contractor and the making good of defects. If the employerdecidesnottocompletetheWorksusinganothercontractor,astatementofaccountmustbe drawn up and sent to the original contractor after the expiry of six months fromtermination.

Itisnotunknownforliquidatorstothreatenemployerswithproceedings,eitherdirectlyormoreusuallythroughtheservicesofspecialistinsolvencysurveyors,ifpaymentofallmoneyisnotmadeimmediately.Thiscontractnowmakesclearthatthenormalpaymentprovisionsareatanend.Therefore,ifacertificatehasalreadybeenissued,theemployernolongerhasanyobligationtopaythesumcertified.Ifacertificateisdue,thearchitectno longer has a duty to certify. The employer or the architect should respond to theliquidator or the surveyor, referring to the contract clause as the reasonwhyno furtherpaymentwillbemadeuntilthefinalstatementofaccountisprepared.

In thesecircumstances, theemployerwilloftenhavedelayedpaymentofacertificatebecause it is suspected that the contractor is about to become insolvent. Indeed, theemployer’s failure to pay and the failure of others may be the very reason why thecontractoreventuallybecomesinsolvent.Therefore,atthedateofinsolvency,notonlyisacertifiedamountoutstanding,butitmayhavebeenoutstandingforaconsiderabletime.Isthe employer bound to pay such a sum on the basis that the employer cannot takeadvantageofitsownbreachofcontract(failingtopayacertifiedamountontime)?Theanswer to thequestionseems tobe that theemployer isbound topaymonies thatwereoutstanding at the date of the insolvency. The use of thewords ‘which require furtherpayment’appearstosupportthatview,becauseapaymentthatisoverdueisnota‘furtherpayment’, but rather a payment that ought to have beenmade already.The point is notbeyonddoubt, and in practice the courtsmaybe reluctant to order such paymentwhenthereisnorealisticchanceofitbeingrecoveredlaterbecausethecostofcompletionofthe

Worksmayprovetobemorethanthecashstillretainedbytheemployer.

202AfterterminationmusttheemployerinvitethreetenderstocompletetheWorks?Itiscommonlyassumedthatitisnecessarytoinvitethreetendersandtoacceptthelowesttendererwhenhavingworkcarriedout incaseswhere thecostwillbereclaimed.In thebestofallpossibleworlds,thatisindeedsoundpractice.However,circumstancesdoalterthat assumption. It must not be forgotten that where an employer has terminated thecontractor’sengagement,thereasonwhytheemployerisinthepositionofhavingtogetthe work done by another contractor is because the first contractor was in default orperhapsbecameinsolvent.Thatconsiderationwillalwaysbeafactorforacourt.

Therearemanyinstanceswherethekindofworktoberemediedrequiresaparticularkindofspecialistorissofragmentedandofsomanyvariedtradesthatitisimpracticaltoseektendersanditismoreimportanttoensurethattheworkiscompetentlycarriedout.InthecaseofWestv IanFinlay&Associates,3 the issuewasremedialwork,butsince thecostoftheworkwaspartofthedamageswhichtheWestsclaimedfromthearchitect,theprincipleisthesame.Threeofthecontractorsontheoriginallistdeclinedtotenderfortheremedialwork.Twoof theoriginal contractors agreed to tender, and another contractorwas added to the list. Following tendering, two contractorswere about £100,000 lowerthanthethirdcontractor.Thenoneofthetwolowestwithdrewitstender,leavingjusttwocontractors.Variousaspectsofthelowesttenderercausedconcernandinvestigationswerecarriedout.Asaresult,itwasdecidedthatthehigherofthetenderersshouldbeaccepted.Thisdecisionwasquestionedby thearchitect,whoargued that itwas the lowest tenderwhichshouldbeconsideredwhendamageswereawarded.

The court went through the facts surrounding the acceptance of the tender andconcluded that theWests had done everything reasonable to obtain the best tender in adifficult tendering climate. In this case, several firmswould not touch the job, and theWestswere facedwith engaging a contractor and proceeding as quickly as possible orengaginginaveryprotractednegotiationandpossiblyre-tendering.

Architects are often in the position of having to engage others to complete work ordefectsonbehalfoftheemployer,andtheyshouldnotundulyagoniseaboutcompetitivetenderingifitisnotreallypracticableinallthecircumstances.

203Howcananemployergetridofacontractorwhoseemsincapableofproducinggood-qualitywork?Theproblemofacontractorbeingunabletoreachthespecifiedqualityseemstocropupwith increasing frequency. The architect will condemn thework again and again until,eventually,somethinglessthanwhatisspecifiedmaybeacceptedoutofsheerfrustration.Moststandardformcontractscontainadequatemeanstoenablethearchitecttocontrolthequality of the work. For example, SBC in clause 3.18 gives the architect considerablepowers to order the removal from site ofwork not in accordancewith the contract, toallowdefectiveworktostaywithanappropriatedeductiontothecontractsum,toordervariations,andtoinstructopeningupofotherportionsoftheWorksinordertocheckthattherearenosimilarinstancesofdefectiveworkelsewhere.Ultimately, thearchitectmayissueadefaultnotice,andtheemployermayterminatethecontractor’semploymentif itconsistently fails to rectify work. The problem is that there is nothing in any of thestandard formcontractswhichallows the architect to formaview that the contractor isincapableofproducinggood-qualityworkand tosimplybanish thatcontractor fromthesite.The contract assumes that the contractor is capable of goodwork.The clauses aredesignedtoensurethatthearchitectcanobligethecontractortoproducethatgoodworkandnotsomeinferiorwork.

There is anassumption that thearchitecthascarefullychecked thecapabilitiesof thecontractor before inviting it to tender, requesting references from other architects asnecessary.Often,therealityisthattheemployerwillinsistonaparticularcontractorbeingincludedinthelistbecausethecontractorhaslobbiedforinclusionandindicatedthatitiscapable of producing a low tender figure.The architectwill no doubt have advised theemployer that such a contractor, aboutwhich little is known,will very likely cause theexpenditureofmoremoney than is savedby the low tender.Somearchitectshavebeenknowntoterminatetheirengagementsatthatpointontheperfectlysensibleviewthattheycannot administer a contractwhere the contractor is appointed against their advice, andthereforetheirworkinadministeringthecontractislikelytobemuchmoredifficult.

Theway to deal with such contractors is in the contract, asmentioned above.Whattendstobemissingisthecorrectstrategytoadopt.Everycontractshouldstipulatethatassoon as it becomes clear that the contractor is having difficulty achieving the specifiedstandards,thecontractorshouldbeinstructedtoremovethedefectiveworkfromsite.Thismust be done in each instance of defective work. Very soon, one of two things willhappen.Either thecontractorwillseethat thereisnot theslightestpoint in tryingtogetawaywithslipshodworkand itwill takeserioussteps to improve itsperformance,oracontractorwhoisincapableofproducingdecentworkwillstarttoarguethatthearchitectis being unreasonable and looking for a standard which is in excess of what is in thecontract.Suchacontractormaywellappealtotheemployer,anditissurprisinghowoftenanappealbywhattheemployertakestobeanexperiencedcontractorissuccessfulwhenjudgedagainstwhatthecontractortermsthearchitect’s‘airy-fairyideas’.Iftheemployereverstartstoacceptthecontractor’sviewsagainstthearchitect,itistimeforthearchitectto consider terminating his or her engagement. It is essential to strictly adhere to thestrategysetoutaboverightfromthebeginningoftheprojectonsite.Ifitisnotpractised

until it becomes crystal clear that what appeared to be some slips in standard by thecontractor are actually its best work, the contractor may be able to argue with somejustification that if work of a certain standard was accepted without comment, it isunreasonabletosuddenlyimposeahigherstandard.Theoldadage‘startasyouintendtocontinue’hasmuchtorecommendit.

204Inwhatcircumstancescananemployerterminateonthegroundsoffailuretoproceedregularlyanddiligentlyevenifthecontractdoesnotrequirethecontractortodoso?Most JCT contracts contain a clause requiring the contractor to proceed regularly anddiligently.MWdoes not contain that kind of clause, but nevertheless the contract doesallow the employer to terminate the contractor’s employment if it fails to proceedregularlyanddiligently. Itmayseemstrange thatacontractorcanhavenoobligation towork regularly and diligently, but yet there is a clause allowing for termination if thecontractor fails todoso.Thatcombinationhasalreadybeenconsideredby thecourts invariouscases,anditwasconsideredagaininLeanderConstructionLtdvMulalley&CoLtd.4Inthatcase,Leanderwassub-contractedtoMulalleyforgroundworksonMulalley’sownterms.TheyprovidedthatLeander’semploymentcouldbeterminatedif itfailedtoproceed regularly and diligently, but they did not expressly require Leander to workregularlyanddiligently.

Mulalley held back money from Leander on the basis of two withholding notices.Leandertookactioninthecourttorecoverthemoney,andMulalleyarguedthatLeandershouldhaveworkedinaccordancewiththedatesintheActivitySchedule.Althoughthosedateswerenotcontractuallybinding,Mulalleymaintainedthattherewasanimpliedtermin the contract that Leander would work regularly and diligently, and the dates in theActivitySchedulewerethebestwayofmeasuringthat.

Animpliedtermisonethat isnotwrittenintothecontractbutwhichacourtwillsaymustbeimpliedintoit.Thecourtswillonlydothatincertaincases.Forexample,atermmaybeimpliedif thecontractwillnotworkwithout itor if it issoobviousthata thirdpartywouldsaythat,ofcourse,itisincluded.However,thecourtswillnotimplyatermjustbecausetheythinkitisreasonabletodosoorbecausetheythinkitwillimprovethecontract.Termswillnotbe implied if thereare express (specific,usuallywritten) termscoveringthesamethings.

In thiscase, thecourt refused to imply the termwhichMulalley requiredbecause thecourt said it was not necessary to so in order to make the contract work. It workedperfectlywellwithoutit.

ThesamecanbesaidaboutMWandMWD.Althoughinthosecontractsacontractorwhofailstoproceedregularlyanddiligentlymayfaceitsemploymentbeingterminated,thefailureisnotabreachofcontract.Itsfailurewouldnotbegroundsforterminationatcommon law, but only because the contract has an express clause dealing with it.Therefore, such failure cannot be cited in support of some other claim against thecontractor.

205UnderSBC,isittruethatthecontractorcansimplywalkoffsiteiftheemployerfailstopay?Itissurprisinghowoftenacontractorwillsimplystopworkbecauseitisnotbeingpaid.Generally,itissmallcontractors,perhapsoperatingunderMW,whoaremostpronetothiskindofaction,butithascertainlybeendonewithmuchlargercontracts.Itisdifficultnottohaveconsiderablesympathywithacontractorwhosays,quitereasonably,thatthereisno point in doing furtherwork if it has not been paid forwhat has already been done.Nevertheless, the lawdoesnotgenerallyallowthecontractorsimplytostopworkifnotpaid.

Under SBC, the remedy available to the contractor if the employer fails to pay acertificate is to issue a seven-daywritten notice under clause 4.14 and then to suspendperformanceofall itsobligations ifpayment isnotmade.5Additionallyoralternatively,the contractormay simply issue a default noticeprior to terminationof its employmentunderclause8.9.1.1.Inanyevent,thecontractorisentitledtorecoverinterest,usuallyat5percentaboveBankofEnglandbaserate.IfaJCTcontractisnotbeingused,theinterestrateis8percentabovethebaserate.6

What is often forgotten by an employer is that the contract does not remove thecontractor’scommonlawrights.Quitethereverse.Clause8.3.1expresslypreservesboththe employer’s and the contractor’s other rights and remedies. It is established that ifpaymentismadesoirregularlyandinadequatelythatthedayarriveswhenthecontractorhasno confidence that itwill everbepaid again, it amounts to a repudiatorybreachofcontract.The contractormay accept the repudiation, bring its obligations to an end andrecoverdamages.7

Morerecently,inCJElvinBuildingServicesLtdvPeterandAlexaNoble8itwasheldthat the employer was in breach of contract not only by refusing to pay sums as theybecame due, but also by threatening to make no further payment until the job wascompleted.ThecontractorwasthereforejustifiedinsuspendingtheWorks.Indeed,itwasclearfromthejudgmentthatthejudgeconsideredthatthecontractorcouldhaveacceptedtheemployer’sbreachasrepudiation.

Therefore,thenexttimeacontractorwalksoffsiteforlackofpayment,botharchitectandemployershouldthinkcarefullyaboutwhetherthecontractorissimplyexercisingitscommonlawrights.

206Whatdoes‘repudiation’ofacontractmean?Repudiation iswhenoneparty to a contractmakes clear bywordsor actions that it nolongerwishes tobeboundby thecontract. It isa seriousbreachofcontract, sometimesreferredtoasabreachofaconditionofthecontractorbreachofafundamentalterm.Atypicalexampleofrepudiationwouldbeifacontractorsimplywalkedoffsiteandrefusedtoreturnorifaclientpreventedthearchitectfromenteringthesite.However,repudiationisofnoeffectuntilacceptedbytheotherparty.

When facedwitha repudiatoryact, the innocentpartyhas twooptions. It can simplyaffirmthecontract(inotherwordsitcancarryonwiththecontract)andclaimdamagesforthebreach.Sometimesaffirmationisnotanoption,aswhenthecontractorwalksoffsiteandrefusestoreturn.Alternatively,theinnocentpartycanaccepttherepudiationandclaim damages.When repudiation is accepted, it puts an end to the obligations of thepartiesunderthecontract.Itdoesnotbringthecontracttoanend.9

Iftheotherpartyintendstoaccepttherepudiation,itmustdosopromptlyanditmustbecarefulnot todoanythingwhichcanbe interpretedasanaffirmationof thecontract.However, a party is entitled to seek legal advice before deciding whether to accept arepudiation,eventhoughthatmaytakealittletime.Insomecasesit isquitedifficult todecidewhetherrepudiationhastakenplace,particularlywheretheactionmaybeopentodifferent interpretations.Forexample, failure topayan invoicecannotbe repudiation ifthesum isnotdue. If thepartywhichsubmitted the invoice thenpurports toaccept theallegedrepudiationandstopswork,itwillitselfbeinrepudiatorybreach.10Delayonthepartofacontractorwillonlyberepudiatoryiftimeisoftheessence.Sincetimeisrarelyifeverof the essence in constructioncontracts, anemployer is likely tobe in repudiatorybreachifpurportingtoacceptacontractor’sdelayasarepudiation.11

207Cannoticeofterminationbesentbyfaxore-mail?UndertheSBC,IC,ICD,MWandMWDformsofcontractwithRevision2,thereareveryclear provisions for the giving of notices. Clause 8.2.3 of SBC requires every noticereferredtointheterminationprovisionstobegiveninaccordancewithclause1.7.4.Thisprovides that notices must be given by hand or by Recorded Signed For or SpecialDeliverypost.IC,ICD,MWandMWDhaveprovisionsinsimilarterms.Theseprovisionsseemtoprecludetheuseoffaxore-mail.

Before Revision 2 was introduced in 2009, the requirement was for service of suchnoticesbyactual,specialorrecordeddelivery.WhereaJCTcontractearlierthanRevision22009isconcerned,orindeedanyotherstandardformwhichrefersto‘actualdelivery’,itseemsthatdeliverybyfaxore-mailisacceptable.UnderIFC98,adefaultnoticepriortodeterminationwasgivenbyfaxandheldtobevalidlyserved:12

Afax,itseemstome,clearlyisinwriting;itproduces,whenitisprintedoutontherecipient’smachine,adocument,andthatseemstomeisclearlyanoticeinwriting.The question is, is that actual delivery? It seems to me, if it has actually beenreceived, it has been delivered. Delivery simply means transmission by anappropriatemeanssothatitisreceived,andtheevidenceinthiscaseisthatthefaxhasactuallybeenreceived.Thereisnodisputeastothat.

Anothercourtheldthatanoticeofarbitrationwhichwasservedbye-mailwasalsovalidlyserved.Animportantconsiderationinthatcasewasthatthenoticewassenttoane-mailaddresswhichtherecipienthadindicatedwasitsonlye-mailaddress.13Inthatcase,therewas no dispute that the e-mail constituted ‘writing’, and the judge made no commentaboutthatashemighthavebeenexpectedtodoifhehaddisagreed.Onthatbasis,thereseemsnoreasonwhyanoticeshouldnotbevalidlyservedbye-mail,provided that thecontractconcerneddoesnotexpresslyrequirethenoticetobeservedinsomeotherform.ItisnotknownwhethereitherofthesecasesinfluencedtheJCTtore-worditsprovision.Othercourtshavesinceacceptede-mailsasnotificationinwritingofvariouskinds.14

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208Isacontractor’sterminationunderaJCTcontractvalidifaddressedtothearchitectbutcopiedtotheemployer?TheterminationprovisionsinthetraditionalJCTcontractsareverysimilar.SBCprovidesinclause8.9thatincertainspecifiedcircumstancesthecontractorcangivetheemployeranoticespecifyingdefaultsorspecifyingevents.Thedefaultsare,briefly, if theemployerfailstopayamountsduetothecontractor,interfereswiththeissueofacertificate(ofanytype), assigns the contractwithout the contractor’s consent, or fails to complywith theCDMRegulations.

The events are if, before practical completion, the Works are suspended for acontinuous period specified in the contract particulars (usually twomonths) because ofcertainarchitect’sinstructions,oranyimpediment,preventionordefaultoftheemployer.Inthecaseofeitherthedefaultortheeventnotice,thecontractstatesthatthe‘Contractormaygive to theEmployer’. If thedefaultoreventcontinues for14days, thecontractormayterminate itsemployment‘byfurthernotice to theEmployer’. If thecontractstatesthat anoticemustbegiven to theemployer, then it clearlywillnotbeavalidnotice ifgiventosomeoneelse.

Theinterestingquestionhereconcernsanoticewhichisaddressedtothearchitectbutofwhichtheemployerhasbeengivenacopy.Doesthegivingofacopytotheemployeramounttothesameasgivingthenoticetotheemployer?Thecontractexpresslyreferstothegivingofthenoticetotheemployer.Ifthearchitectreceivesanoticeaddressedtothearchitectandpurportingtobeaterminationofthecontractor’semployment,itcannotbeavalidnoticeunder the contract, because the architect is not the employer; it is nomorevalid than if the notice was addressed to and received by the employer’s brother. Thearchitectortheemployer’sbrotherwouldbeentitledtothrowthenoticeawaybecauseitisnotanoticeissuedinaccordancewiththecontract.Itcannotmakeanydifferencethattheemployer receives a copy of the notice. The employer is simply receiving a copy of anotice which is not issued in accordance with the contract. Although copied to theemployer,itisnotaddressedtotheemployerandcanbelikewisethrownaway.

SutcliffevChippendaleandEdmondson(1971)18BLR149;SutcliffevThackrah[1974]1AllER859.

RBBurdenLtdvSwanseaCorporation[1957]3AllER243.

[2013]EWHC868(TCC).

[2011]EWHC3449(TCC).

Thisreflectss.112oftheHousingGrants,ConstructionandRegenerationAct1996(asamended).

TheLatePaymentofCommercialDebts(Interest)Act1998.

DRBradley(CableJointing)LtdvJefcoMechanicalServices(1989)6-CLD-07-19.

[2003]EWHC837(TCC).

PhotoProductionLtdvSecuricorTransportLtd[1980]1AllER556.

CFWArchitects(afirm)vCowlinConstructionLtd(2006)105ConLR116.

MartinJohnHayesandLindaHayest/aOrchardConstructionvPeterGallant[2008]EWHC2726(TCC).

ConstructionPartnershipUKLtdvLeekDevelopments[2006]EWHCB8(TCC).

BernuthLinesLtdvHighSeasShippingLtd(2006)1Lloyd’sRep537.

14 GoldenOceanGroupLtdvSalgaocarMiningIndustriesPVTLtd&Another[2012]3AllER842;ProtonEnergyGroupSAvOrlenLietuva(2013)150ConLR72.

Chapter24

Disputes

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209Whatisadisputeordifferenceunderthecontract?SBCclause9.2statesthatifa‘disputeordifference’arisesunderthecontractandeitherpartywishestoreferittoadjudication,theSchemewillapply.Referencetothedefinitionsinclause1.1 indicates that theSchememeansPart1of theSchedule to theSchemeforConstructionContracts(EnglandandWales)Regulations1998.OtherJCTcontractshavesimilar clauses, as do other standard form construction contracts. The Scheme, inparagraph1(1),statesthatanypartytoaconstructioncontractmaygivewrittennoticeofintentiontorefera‘dispute’toadjudication.Therefore,itisofthegreatestimportancethatan identifiabledisputehasarisenbefore itcanbereferred toadjudication;otherwise theadjudicator will not have the jurisdiction to deal with it. It might be thought that theexistence or otherwise of a dispute would be fairly obvious, but questions have oftenarisenbasedontheargumentthatthereferencetoadjudicationhasbeenpremature,donebeforethedisputehascrystallised.Forexample,acontractormaylodgeaclaimwithanarchitectstatingthatitexpectsareplywithintwoweeks,andhavingreceivednoresponsewithin theallotted time, it issuesanoticeofadjudicationciting thearchitect’s failure todecidethesubjectmatteroftheclaim.Thefirstquestiontobeconsiderediswhethertherewasadisputewhenthenoticewasissued.Wasitreasonableforthearchitecttorespondintwo weeks? If it was not reasonable, there was no dispute and the adjudicator has nojurisdictiontodecidethematter.Needlesstosay,thiskindofquestionhasbeenthesubjectofverymanyactionsthroughthecourts.Fortunately,afterreviewingthelegalauthorities,the courts have formulated a series of propositions to assist in decidingwhether or notthereisadispute:

Theword‘dispute’whichoccursinmanyarbitrationclausesandalsoins.108oftheHousing Grants Act should be given its normal meaning. It does not have somespecialorunusualmeaningconferreduponitbylawyers.

Despite the simple meaning of the word ‘dispute’, there has beenmuch litigationover the years as to whether or not disputes existed in particular situations. Thislitigation has not generated any hard-edged legal rules as to what is or is not adispute. However, the accumulating judicial decisions have produced helpfulguidance.

Themerefactthatoneparty(whomIshallcall‘theclaimant’)notifiestheotherparty(whom I shall call ‘the respondent’) of a claim does not automatically andimmediatelygiverisetoadispute.Itisclear,bothasamatteroflanguageandfromjudicialdecisions, that adisputedoesnot ariseunless anduntil it emerges that theclaimisnotadmitted.

The circumstances from which it may emerge that a claim is not admitted areProtean.Forexample,theremaybeanexpressrejectionoftheclaim.Theremaybediscussions between the parties fromwhichobjectively it is to be inferred that theclaim is not admitted. The respondent may prevaricate, thus giving rise to theinferencethathedoesnotadmittheclaim.Therespondentmaysimplyremainsilentforaperiodoftime,thusgivingrisetothesameinference.

Theperiodoftimeforwhicharespondentmayremainsilentbeforeadisputeistobeinferred depends heavily upon the facts of the case and the contractual structure.

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Where thegistof theclaim iswellknownand it isobviouslycontroversial,averyshortperiodofsilencemaysufficetogiverisetothisinference.Wheretheclaimisnotifiedtosomeagentoftherespondentwhohasalegaldutytoconsidertheclaimindependentlyandthengiveaconsideredresponse,a longerperiodof timemayberequiredbeforeitcanbeinferredthatmeresilencegivesrisetoadispute.

Iftheclaimantimposesupontherespondentadeadlineforrespondingtotheclaim,thatdeadlinedoesnothavetheautomaticeffectofcurtailingwhatwouldotherwisebe a reasonable time for responding.On the other hand, a stated deadline and thereasonsforitsimpositionmayberelevantfactorswhenthecourtcomestoconsiderwhatisareasonabletimeforresponding.

If the claim as presented by the claimant is so nebulous and ill-defined that therespondentcannotsensiblyrespondtoit,neithersilencebytherespondentnorevenan express non-admission is likely to give rise to a dispute for the purposes ofarbitrationoradjudication.1

ThesepropositionswereapprovedbytheCourtofAppealinCollins(Contractors)LtdvBalticQuayManagement(1994)Ltd.2Manycourtshaveobservedthatitwillbeobviousinmostcaseswhenthereisadispute,andtherequirementthattheremustbeadisputewillnot be interpreted with legalistic rigidity. It has also been said that when the phrase‘disputeordifference’isused,itislesshard-edgedthanusingtheword‘dispute’alone.3

210Isapersonactingasanexpertwitnessimmunefromactionsfornegligence?Intheoryanyonecangiveexpertevidenceinarbitrationorincourtproceedings.Allthatisnecessaryisthatthe‘expert’isknowledgeableandexperiencedaboutthetopic.Therefore,anexperiencedbricklayercouldgiveexpertevidenceaboutthestandardofbrickworkonaproject,aplastereraboutplasterworkandanarchitectabout thewayanarchitectshoulddealwith aproject –orwhat is commonlyknownas ‘goodpractice’.There are certainarchitects andothers forwhomacting as an expertwitness is a substantial part of theirpractices. One must of course be wary of doing nothing but act as an expert witness,because an architect who was no longer in active practice may lack the credibilityrequired. One has only to read the scathing comments by the judge about one of theexpertsinRoyalBromptonHospitalNHSTrustvHammond&Others(No.7)4 toseethedanger.

Nevertheless, it sometimes falls toanarchitectwho isnotparticularlyexperienced incourt togiveexpertevidence,andarecentcasebeforetheSupremeCourt(formerlytheHouseofLords)shouldbenoted.InJonesvKaney5thecourthadtoconsiderwhetheranexpert witness was immune from actions for negligence. In other words, if an expertwitnessisnegligentinpreparingareportorgivingevidence,canthepartyaffectedbythenegligencetakelegalactionagainsttheexperttorecoveranylosses?

ThefactsofthecaseareunimportantandconcernedaroadtrafficaccidentinwhichMrJoneswasinjured.ThecrucialpointswerethattheclinicalpsychologistexpertwitnessforMr Jones, Dr Kaney, prepared reports. The other party admitted liability, and all thatremainedwas the amount of damages. Itwas alleged thatKaneyhadbeennegligent inagreeing to the termsof a joint report,which resulted in Jones having to settle for lessdamages. Jonesbroughtanaction fornegligenceagainstKaney,but shesaid that,asanexpert witness, she enjoyed immunity from actions for negligence. The High Courtagreed,butinviewoftheimportanceofthequestionitgrantedpermissionforanappealdirectlytotheSupremeCourt.

The Supreme Court confirmed that it is in the public interest that judge, jury, andwitnesses, including expert witnesses, are all granted civil immunity. The immunity ofexpertwitnesseshaslastedforover400years.Afteralongandthoroughconsiderationoftheposition,theCourtdecidedbya5to2majoritythatexpertwitnesseswouldnolongerhave immunity fromaction forbreachofduty, although theywould still enjoyabsoluteprivilegeinrespectofclaimsfordefamation.

211Canamediatorbecalledasawitnessaboutthesubjectofthemediation?Nodoubtapersonappointedtoactasamediatorbelievesthatheorshecannotbecalledas a witness to give evidence about what transpired at the mediation. That is partlybecause theparties toamediationalmost invariablyagree that themediation iswithoutprejudicetotheirrightsandremediesifthemediationweretofailandthepartiesresortedtothecourts.Inaddition,themediatorispartytoconfidentialdiscussionswitheachparty.

Themediation process can take various forms. In general, themediator will receivedocuments concerning the dispute from both parties, and theywill probably alsomakeoral submissions at the commencement. The mediator then meets with each partyseparately to discuss the strengths and weaknesses of their cases. When the mediatorbelievesthatbothpartiesarereceptivetosettlement,generallybecausethemediatorhasmadebothawareoftheirweaknesses,ameetingofbothpartieschairedbythemediatorisarranged.Inmanyinstances,asettlementisreachedandputintowritingatthatmeeting.Mediationscommonlytakeuptoadaytoruntheircourse.

InFarmAssistLtd(inliquidation)vSecretaryofStatefortheEnvironment,FoodandRuralAffairs,6 thepartieshadengagedinamediationin2003whichwasfollowedbyasettlementagreement.Sometimelater,FarmAssistallegedthat theagreementhadbeenenteredintoundereconomicduress(economicduresshasbeendiscussedinquestion27).The Secretary of State wished to call the mediator to give evidence about what hadtranspiredatthemediation,includingtheprivatediscussionswiththemediator,andFarmAssisthadnoobjection.However,themediator,asolicitor,didobjectandappliedtothecourt tohave thewitnesssummonssetasideon thegrounds thatamediationagreementhad been entered into between the two parties and the mediator which precluded herattendancetogiveevidenceinlitigation.Inanyevent,theevidencewasconfidentialandlegallyprivileged.

Thejudgeheldthatmediationisconfidentialamongallparties.Therefore,evenif thepartieswaive the confidentiality, themediator can insist upon it.The courtwill usuallyupholdthisexceptwhereevidenceofconfidentialmattersisnecessaryintheinterestsofjustice. Thewithout prejudice privilege is between the two parties, who canwaive theprivilege;itisnotaprivilegeofthemediator.Anyotherprivilegeattachingtodocumentsshowntothemediatorisnotwaivedbythewaiverofthewithoutprejudiceprivilege.Inthis instance,becausethedisputewasabouteconomicduress inregardto thesettlementand not about the subject matter of the mediation, the mediator could be called as awitness.

However,themediatorinformedthecourtthatshedidfiftymediationsayearandshecouldnotrememberwhattranspiredatthemediationinquestion.Moreover,shehadnotretainedanypersonalnotes.Thecourtbrushedthataside,sayingthatmemoriesareoftenjoggedwhendocuments are produced towitnesses. It is clear that themediator usuallycannot be called about the subject matter of the mediation unless the situation isexceptional. In this instance, itwasnot the subjectmatterwhichwas indisputebut thesettlementitself.

212Isitacceptabletosuggesttothenominatingbodywhomtonominateasadjudicator?Whenapartydecidestoseekadjudicationofadisputeunderaconstructioncontract,thefirststageistosendanoticeofadjudicationtotheotherparty,andthenext,orsometimesconcurrent, stage is to appoint an adjudicator. The adjudicator may be named in thecontract, or the contract may state the name of the body which is to nominate theadjudicator. Under the Scheme for Construction Contracts (England and Wales)Regulations 1998, if no nominating body is chosen, the referring partymay chose anynominatingbody.Mostnominatingbodieshave theirown formwhichmustbe filled inandsubmittedtogetherwithafee,afterwhichthebodychoosesanadjudicatorfromtheones on their list and nominates that person. Often, a referring party will notify thenominating body of persons they do not wish to see nominated, and it is rare that anominatingbodywillignoresuchobjections–itiseasiertonominatesomeonetowhomneither party has raised early objections. A referring party will sometimes ask thenominating body to nominate an adjudicator with particular qualities, such as legalexpertiseorexperienceincostingordesign,oronewhohasbeenengagedonanearlieradjudicationonthesameproject.Whatisunusualisforapartytosuggestthenameofanadjudicatortothenominatingbody.

InMakers UK Ltd v London Borough of Camden,7 solicitors for the referring partydecided that the adjudicator should be legally qualified. They discovered that someonetheyconsideredtobesuitablewasonthepanelofadjudicatorsoftheRIBA,andhavingascertained that he was available, they suggested to the RIBA that he should benominated.TheRIBAdidso,andinduecoursetheadjudicatoracceptedtheappointmentandproceededtomakeadecision.Camdenarguedthatthedecisionwasvoidbecausetheadjudicatorhadnotbeenproperlyappointed.Camdencontendedthattherewasanimpliedterm to the effect that neither party should try to unilaterally influence the nominatingbodywhenchoosingtheadjudicator.Thiscontentionwasrejectedbythecourt,whichheldthattheRIBAwaswellabletodecidewhethertotakenoticeofrepresentations,andtheremaywellbetimeswhenrepresentationswerehelpful.

Therefore, it seems that although there is nothing to stop a referring party fromsuggestingthenameofanadjudicator,itwillberelativelyraretodoso.

213Ifthecontractordoesnotliketheadjudicatorwhohasbeennominated,canitaborttheprocessandseekthenominationofadifferentadjudicator?A party wishing to refer a dispute to adjudication obviously wants to have the bestadjudicator it can get, but it is reliant on the nominating body to nominate one. Thepreviousquestiondealtwithwhetheronemightsuggest thenameofanadjudicator; theansweris‘Yes’,butthenominatingbodyisentitledtonominateanypersononitspanelofadjudicators.

InLanesGroupplcvGallifordTryInfrastructureLtd,8thecourtconsideredwhetheraparty,havingsoughtthenominationofanadjudicator,canaborttheprocessbyfailingtoserve a referral and start again with a new application for nomination of a differentadjudicator. The court decided that if it was a statutory adjudication (i.e. under theHousing Grants, Construction and Regeneration Act 1996 [as amended]), the referringparty could abort the reference and start again. The submission of the notice ofadjudication and the nomination of an adjudicator did not start time running; theadjudicator had no jurisdiction until the referral was served. That will be the positionunder any of the standard forms of contract unless used in connection with residentialoccupiers,becausetheexistenceofanadjudicationclauseisaresultofthe1996Act.

However, it seems that if itwasmerely a contractual adjudication (i.e. in accordancewithanadjudicationclauseagreedbythepartiesandnotimposedbylegislation),afailuretoserveareferralwouldamounttoarepudiationoftheadjudicationagreement,andtherighttoadjudicatewouldbelost.

214Anadjudicatorhasbeenappointedwhomtheemployerhasnotagreed.Whatcantheemployerdoaboutit?Theadjudicatorcanbeappointedinvariousways.SBChasprovisioninclause9.2.1andinthecontractparticularsfortheadjudicatortobenamed;thatis,thepartieshavedecidedon the namebefore entering into the contract.There is also provision for the parties tosimplyapplytooneofseveralbodiesthatmaintainpanelsofadjudicatorsandwhichwillundertake(foramodestfee)tonominateanadjudicatorwhohaspassedthecriteriasetbythat particular body. The RIBA, RICS and CIArb are typical nominating bodies. Ofcourse, there is nothing to stop the parties simply agreeing the name of an adjudicatorwhenthedisputearises.Ifthepartiescanagreeaname,thatisbyfarthebestwaybecausetheadjudicatoristhenapersonwhombothpartiestrusttomaketherightdecision.

Puttingthenameinthecontractinadvanceappearstohavethesameeffect,butitdoeshave some serious disadvantages. An adjudicator chosen in advance, perhaps severalmonthsorevenyearsbeforerequired,maynotbeavailablewhenrequiredduetoholidays,illness,retirementorevendeath.Theadjudicatormaybeadmirableinverymanyrespectsbutnotsuitedto theparticularproblemthatarises.Forexample, thepartiesmaychooseMr X, who is an architect, but the eventual dispute may concern structural steel orelectricalservices.Whenapplyingtoanominatingbody,thedangeristhatthepartiesarestuckwithwhoeverisnominated,unlesstheybothobjectandagreetoasktheadjudicatortostepdowninfavourofanotheroftheirchoosing.

Therefore,theanswertothisquestiondependsonwhatthecontractsaysor,ifthereisno standard contract,what theScheme forConstructionContracts (England andWales)Regulations1998says.

It isessentialthattheadjudicatorisappointedinstrictconformitywithanyprocedurethat is laiddown.If therelevantprocedurehasbeencompliedwith, there isnothing theemployercandoaboutit.Theadjudicatormustbeaccepted.Obviously,ifthereisagoodreason to object, for example if the adjudicator has a link with the other party, theappointmentcanbechallenged.If theadjudicatordoesnotstepdown, theemployercanagree to proceed with the adjudicator without prejudice to the contention that theadjudicator lacks jurisdiction on the grounds of actual or apparent bias or an apparentbreach of the rules of natural justice. That position can be tested in the courts if theadjudicator’sdecisionisadversetotheemployer.

If theproperprocedurefor theappointmentof theadjudicatorhasnotbeenobserved,theemployerisonfirmgroundtochallenge,andtheadjudicatorshouldresignassoonasitisestablishedthattheappointmentisflawed.

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215Isitpermissibletoreferseveraldisputestoadjudicationatthesametime?This is a fairly commonquestion. Ingeneral the answer is ‘No’, butwhat constitutes asingledisputemaybeopentointerpretation.InWitneyTownCouncilvBeamConstruction(Cheltenham) Ltd,9 the council entered into a JCT Design and Build Contract 2005(Revision22009)withBeamfor thedesignandconstructionofanewcommunityhall.Disputesaroseandwerereferredtoadjudication,whichwasconductedundertheScheme.ThedisputewassetoutintheNoticeofAdjudicationasfollows:

WhatvalueisduetoBeamfromthecouncil?

WhatvalueisduetoBeamfromthecouncilunderandinconnectionwiththedraftJanuary2011account?

WhatvalueisduetoBeamunderandinconnectionwiththefinalstatementofMarch2011?

Whatisthetimeortimesforpayment?

WhatsumisduetoBeamasinterest?

IsBeamentitledtorecoveritscosts?

IsBeam entitled to such further or other sums from the council as the adjudicatordecides?

Itwasagreedbybothparties that theSchemeallowsonlyonedispute tobe referred toadjudication at the same time (some other contracts allow several disputes). Theadjudicator’s decisionwas substantially in favour ofBeam.The council refused to pay,andwhenBeamappliedtoenforcethedecisionthroughthecourt,thecouncilarguedthattheadjudicatorhadattemptedtodecideseveraldisputesandsohadnojurisdiction.

Inasignificantjudgmentforanyoneseekingadjudicationandforadjudicators,thecourtheld that there was actually only one dispute: What was due and owing to Beam?Therefore, theadjudicatorhad the jurisdiction tomake thedecision.After reviewingalltherelevantauthorities,thecourtsummedupthepositionlikethis:

Adisputearisesgenerallywhenandincircumstancesinwhichaclaimorassertionismadebyonepartyandexpresslyorimplicitlychallengedornotaccepted.

A dispute in existence at one time can in time metamorphose in to somethingdifferenttothatwhichitwasoriginally.

Adisputecancompriseasingleissueoranynumberofissueswithinit.However,adisputebetweenpartiesdoesnotnecessarily comprise everythingwhich is in issuebetween them at the time that one party initiates adjudication; put another way,everythinginissueatthattimedoesnotnecessarilycompriseonedispute,althoughitmaydoso.

Whatadisputeinanygivencaseiswillbeaquestionoffactalbeitthatthefactsmayrequiretobeinterpreted.Courtsshouldnotadoptanoverlegalisticanalysisofwhatthe dispute between the parties is, bearing inmind that almost every construction

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contract is a commercial transaction and parties cannot broadly have contemplatedthat every issue between the parties would necessarily have to attract a separatereferencetoadjudication.

TheNoticeofAdjudicationandtheReferralNoticearenotnecessarilydeterminativeofwhatthetruedisputeisorastowhetherthereismorethanonedispute.Onelooksatthembutalsoatthebackgroundfacts.

Whereonaproperanalysis,therearetwoseparateanddistinctdisputes,onlyonecanbereferredtooneadjudicatorunlessthepartiesagreeotherwise.Anadjudicatorwhohastwodisputesreferredtohimorherdoesnothavejurisdictiontodealwiththetwodisputes.

Whetherthereareoneormoredisputesagaininvolvesaconsiderationofthefacts.Itmay well be that, if there is a clear link between two or more arguably separateclaimsorassertions, thatmaywellpoint totherebeingonedispute.Auseful ifnotinvariable rule of thumb is that, if disputed claimNo1 cannot bedecidedwithoutdeciding all or parts of disputed claimNo2, that establishes such a clear link andpointstotherebeingonlyonedispute.

Problems sometimes arisewhen a contractor seeks adjudication to decide howmuch itshouldbepaid,butalsohowmuchextensionoftimeitshouldhave.Thoseareclearlytwounconnecteddisputes.However,ifacontractoraskstheadjudicatortodecidehowmuchmoneyitshouldbepaidbytheemployer,thatisonedisputeeventhoughtheadjudicatormayhavetodecidenotonlyhowmuchshouldhavebeencertified,butalsotheamountofextensionof time inorder to seewhat amountof liquidateddamages the employerwasjustified inwithholding.That isa fairlycommonexampleof theprinciple in thecourt’s‘ruleofthumb’setoutinitem(vii).

216Howimportantarethevarioustimeperiodsinadjudication?Theadjudicationprocessissettoaverystrictandtighttimetable.Theprocessisstartedbytheservingofanoticeofadjudication,andtheadjudicatormustbeappointedandthereferral served on the adjudicatorwithin 7 days.The adjudicatormust reach a decisionwithin 28 days of the date of the referral, but thatmay be extended by 14 days if thereferringpartyconsents,or toanydateprovidedthat it isagreedbybothreferringpartyand responding party. These are basic time periods under the Housing Grants,Construction and Regeneration Act 1996, but the Scheme for Construction Contracts(England and Wales) Regulations 1998 and the provisions of various procedures andstandard form construction contractsmay add additional times to those in theAct. Forexample,theJCTStandardFormofContract1998stipulatedthattherespondingpartyhad7daysfromreceiptof thereferral inwhichtorespond.Inacaseunderanothercontractwith the same provision, the court held that the adjudicator had absolute discretion toextendtheperiodforserviceoftheresponsebecausetheadjudicatorhadtherightunderthecontractto‘setaprocedure’.10

Thegeneralruleisthatwheretimeperiodsarespecified,theyareveryimportant,andfailuretoobservethemmayrendertheadjudicationprocessoranydecisionanullity.Forexample,ifthereferralisservedlaterthantheseventhdayafterthenoticeofadjudication,itwillbeinvalidandtheadjudicatorwillhavenojurisdiction.11However,thatquitestarkpositionwasmodifiedbyacourtwhenconsideringthesituationwherethereferralnoticehadbeenservedontimetotheadjudicatorandrespondingparty,buttheadjudicatorhadnotreceivedtheaccompanyingdocumentsuntilthreedayslater.12Thereferralwasheldtobe validly served. An important factor was that the responding party had received thereferralandtheaccompanyingdocumentsontime.

Theadjudicatormustreachadecision28daysafterthedateofthereferralnotice.Itisimportanttonotethatthisperiodstartsfromthedateofthenotice,notfromthedatethenotice is received by the adjudicator. Paragraph 19(3) of the Scheme requires theadjudicator todeliver a copyof thedecision to theparties as soon aspossible after thedecisionhasbeen reached.Therehasbeenconsiderablediscussionabout theposition iftheadjudicatorfailstoreachadecisionintimeorifthedecisionisreachedintimebutisnotdeliveredas soonaspossible.Theproblemhasbeen the subjectof several cases. Itnowappearssettledthattheadjudicator’sjurisdictiontomakeadecisioncomestoanendontheexpiryofthetimelimitifthelimitisnotalreadyextended.13Attemptsbyapartytoextendtheadjudicator’stimewillbeineffectiveiftheperiodhasalreadyexpired,becausesomethingwhichnolongerexistscannotbeextended.Sofarasdeliveryisconcerned,ifthe adjudicator reached a decision within the relevant timescale, a two-day delay indeliveringthedecisiontothepartieswasnotsufficienttorenderthedecisionanullity.14Themoral is to observe the time periods precisely as set out in the particular contractbetweentheparties.Ifthecontractspecifiesthataparticularprocedureshouldbeadopted,suchastheScheme,thenthetimeperiodsintheSchemeshouldbefollowed.Justbecauseacourthasallowedadayortwograceinaparticularcircumstanceisnoguaranteethatasubsequent courtwill not decide that the circumstances it has to consider aremarkedly

different.

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217Whatexactlyisafailuretoobservetherulesofnaturaljustice?The phrase is now usually associated with the work of an adjudicator, although theconcept applies equally to arbitrators who are obliged to act fairly and impartially ingiving each side a reasonable opportunity to put their case and to dealwith that of theotherside.Natural justiceisanobligationuponthosewithpowertoactwithproceduralfairnesswhen takingdecisionswhichaffectothers.Mostpeoplehavean instinctive feelfornaturaljusticeandcanreadilyseewhenitisbeingignored.Sofarasadjudicatorsandarbitratorsworkingintheconstructionindustryareconcerned,naturaljusticeincludes:

Actingimpartially,withoutbiasandingoodfaith.

Conductingproceedingsfairlyandgivingbothpartiestheopportunitytopresenttheircasesandtosufficientlycommentonthecontentionsandevidencepresentedbytheotherside.

Anadjudicatorisobligedtoactimpartially.15However,adjudicatorsareobligedtocometoadecision in28days from thedateof the referralunless the time is extended.Evenwhereanextensionofthe28daysisagreed,anadjudicatorwillnothaveagreatdealoftimetoconsiderthesubmissionsand,possibly,investigatetheissues.Workingtoatighttimetableisthenorm.Therefore,thecourtstendtointerpretthedutyofanadjudicatortocomplywith therulesofnatural justice flexibly.Thecourtswill rarely interferewithanadjudicator’sdecision.Buttheywillnotenforceadecisionifanadjudicatorhasbreachednaturaljusticetoanysignificantdegree.16

Telephonecallsbetweenonepartyandtheadjudicatorareeasilyconstruedasindicatingabiasonthepartoftheadjudicatorandshouldbeavoided.Mostadjudicatorsmakeclearwhenacceptingtheappointmentthattheywillnotaccepttelephonecallsfromeitherpartyunless such calls are initiated by the adjudicator as conference calls.Where a party isinexperiencedinthenicetiesofadjudication,theymighttelephonetheadjudicatorseekingadvice aboutprocedureor evenarguing their case.Anadjudicator receiving sucha callmust,ofcourse,declinetodiscussthematterandterminatethecallpolitelybutfirmlyandfollowupwithalettertobothpartiesconfirmingthecall, thelengthandwhatwassaid.Sometimesanadjudicatormaybelievethatitisquickerandeasiertotelephoneonepartywitharequestthantowritetoboth.Thismightbethecasewhereonepartyhasneithere-mailnorfaxfacilitiesandwritingwouldtaketoolong.Ifitisnecessaryforsuchcallstotakeplace, there isnoreasonwhy theyshouldcausesubstantial injustice.Theywillnotusuallyconstituteabreachofnaturaljustice,buttheymustbeconfirmedtobothpartiesasnotedabove.

Itisrarethatanadjudicatorwillfailtogivebothpartiesequalopportunitytoputtheircases. Itmayhappen,however,particularly if therehavebeennumerousexchangesandtheadjudicatorrefusestoconsideralatesubmission.Afailuretotakeintoaccountalltheevidencewillnotnecessarilyprecludeenforcementofadecisionifthefailureresultsfromanerroroflaw.17Itisabraveadjudicatorwhorefusestoconsideranysubmissionwithoutan extremely good reason. Such a reasonmight be where both parties have had equalchancetoputtheirpositions,theadjudicatorhasnotifiedthemthatnofurthersubmissions

are required,andoneof thepartiessubmitsa lengthyfurthersubmission justbefore theadjudicatorhastoreachadecision.

Someadjudicatorshaveseen theirdecisions invalidatedbecause theyhavedecided tolookintothedisputeandperformedcalculationswithoutreferencetotheparties.18Whereanadjudicatorbelievesthatthereareissueswhichthepartieshavenotproperlyaddressedinsubmissions,theseissuesshouldbereferredbacktothepartiestogetherwithanynewmatters the adjudicator thinks might be relevant. For example, adjudicators commonlycomeacrossalegalcasewhichappearsrelevantbutwhichneitherpartyhasmentioned.Insuch instances, the adjudicator should notify the parties and seek their views beforemakingthedecision.

218Isthearchitectobligedtorespondtotheadjudicationreferralonbehalfoftheemployerifsorequested?Thisisnotasunusualaquestionasmayseematfirstsight.Mostemployershavenoideaabout adjudication.When they receiveanoticeof intention to seekadjudication fromacontractor,theyimmediatelysendittothearchitectwhohasbeenhandlingtheprojectforthem.Nodoubt, if there is a projectmanager, the employerwill direct the notice thereinstead. But, whether project manager or architect, is there a duty to deal with theadjudication?Clearlytheansweris‘No’.

Sofaras thearchitect isconcerned,hisorherdutieswillprobably include taking thebrief,preparingdesigns,submittingforplanningandbuildingcontrol,preparingdetailedconstructiondrawingsandadministering thecontractwithall that thatentails, includingdealingwith contractor’s claims (usually at an additional fee). It is understood that thearchitectisskilledandexperiencedatdoingallthesethings.Butthearchitecthasneithertheskillsnorthetrainingtorunanadjudication.Thearchitectisnomorecapableofdoingthatthanrunninganarbitrationordealingwithcourtprocedures.Noneofthesethingswillbeamong theduties thearchitecthasagreed tocarryout. Importantly, thearchitectwillhavenoprofessionalindemnityinsurancetocoversuchwork.

Somearchitectsmayhavespecialexpertiseindealingwithadjudications,justassomearchitects have expertise at acting as expert witnesses or designing particular types ofbuildings. In that case, there is no reason why such architects should not run theadjudicationonbehalfoftheemployer(again,foranadditionalfee).Theyshouldalwaysrememberthat theadjudicationisbetweenthecontractorandtheemployer,notbetweenthecontractorandthearchitect,eventhoughthecontractormaybeinvokingadjudicationtoquestionanarchitect’sdecision.

Althougharchitectshavenodutytoruntheadjudicationfortheemployer,theyclearlydohaveadutytogivetheemployerbasicinitialadvicewhenthenoticeisbroughttotheirattention.Architectsshouldbecapableofdoingthat,anditwillusuallyconsistofadvisingtheirclientstoseekappropriatelegaladvicewithoutdelayinviewofthealarminglyshorttimescaleinvolved.

Architects, together with all the other consultants, certainly have duties to assist theemployer’s legal advisers by providing copy correspondence, drawings, and, ifappropriate,explanationsaboutvariousaspectsoftheproject.Anappropriatefeewillbechargeable, probably on a time basis. However, where the information required by theemployer’s legal advisers is more than merely factual (such as correspondence anddrawings),consultantsshould treadwarily. If theadjudicator’sdecisiongoesagainst theemployer, theemployer’s legaladvisersmaystart to lookverycarefullyat theopinionsandreportsprovidedbyconsultantstoseeiftheemployerhasameansofredressinthatdirection. It is not going too far to suggest that an architect or other consultantwho isaskedtoassistinthiswayshouldconsulttheirownadviserswithaviewtoprotectingtheirpositionsinthefuture.

Anarchitectrecentlyaskedwhetherornottherewasadutytoassisttheemployerinanadjudicationthathadbeencommencedbythecontractorsometimeaftertheemployerhad

decided to do without the services of the architect halfway through the project. Theemployer’s legal advisers were pressing the architect to attend meetings and even todecide matters of extension of time and loss and/or expense. In such situations, thearchitect has no duty other than providing the employer with copies of documents onpaymentofreasonablecopyingexpenses.Bydispensingwiththearchitect’sservices,theemployerwasnolongerrelyingonthearchitect’sskillandcare.Ifthearchitectwasaskedtoprovideawitnessstatementastofacts,itisarguablethatthearchitectcouldrefuse.Anarchitectaskedtogiveevidenceinarbitrationorlitigationcouldfaceasubpoenatodoso.Butanemployerwhohadsackedthearchitectwouldprobablyhavelittletogainbytryingtoforcethearchitecttogiveevidenceinsuchcases.

219Anadjudicator’sdecisionhasjustbeenreceived,anditisclearthatthepointsmadehavebeenmisunderstoodandtheadjudicatorhasgotthefactswrong.Canenforcementberesisted?Theshortanswertothisis‘No’,atleastnotonthosegrounds.Whenanadjudicatormakesa decision, the parties must carry out that decision within whatever timescale theadjudicatorhaslaiddown.Ifapartyfailstocarryoutthedecision,theotherpartyhastheright toapply to thecourt toenforce thedecision.Thedecisionofanadjudicator,whilenotquitesacrosanct,isatleastprotecteduntilthepartiesdecidethatoneortheotherwantstohavethedisputefinallydecidedinarbitrationorinlegalproceedings.

Adjudicators are human like the rest of us. Sadly, some adjudicators seem to have atenuous grasp of the law. Nonetheless, when an adjudicator has been nominated, orperhapsthepartieshaveagreedthenamebetweenthem,thatpersonistheoneentrustedtomake a decision on the merits of the dispute. It may well be that the adjudicatormisunderstandssomeofthepointsmade,andsomeparticipantsdonotmakethemselvesveryclear.On theotherhand, someparticipantsare representedbyexpertswhosubjecttheadjudicatortoabarrageofwords.

Itisnotunusualforanadjudicatortoreceivehalfadozenormoreleverarchfilesasthereferralandacoupleofsimilar-sizedfilesastheresponse,tosaynothingofamultitudeofsubmissions on jurisdiction. It is little wonder if some of the more subtle points areoverlookedinthisscenario.Again,itmustbesaidthatsomeadjudicatorsarenotgoodathandlingcleverpointsandgenerallytrytocometoadecisiononwhattheybelieveistheoveralljusticeofthecase.Ofcourse,thisisnotwhatanadjudicatorissupposedtodo.Anadjudicator, just like an arbitrator or a judge, is charged with applying the law, not apersonal gut feeling. LordDenningmay have been famous for his instinctive sense ofjustice,buthewasanexception,andinanyeventhecouldneverhavebeenaccusedofnotknowingthelaw.

Adjudicationwasnever intended for thiskindofdetailed argument. Itwasoriginallydevised as a method of getting a quick result for problems that regularly bedevil theconstructionindustry.Theprincipleisthatiftheadjudicatoranswerstherightquestioninthewrongway, thedecisionwillbeupheldby thecourts,but if theadjudicatoranswersthewrongquestioninthecorrectway,thedecisionwillbeanullity.Anotherwaytoputitisthattheadjudicatorcanansweronlythequestionaskedinthenoticeofintentiontoseekadjudication. Neither party can unilaterally introduce new questions; there can be nocounterclaims.Theonlyexceptionisiftheadjudicatorhastoansweraquestionthathasnot been asked in order to answer the question asked.19 Even if the adjudicator hasmisunderstood the facts or simply got them wrong, this is not enough to allowenforcementofthedecisiontoberesisted,althoughthedecisionmightwellbeflawed.20

Basically,itisamatterofpolicy.Adjudicationisaquickmethodofsettlingdisputesbutacomparativelycoarseremedy.Withthiskindofremedy,thepartieshavetoacceptthattherewill be rough justice and, occasionally, even bad errors. If themoney at stake is

sufficientlylarge,nodoubtthepartieswillseekasolutioninaforumthatcangivepropertimeandconsiderationtothearguments.

Themain acceptable grounds for resisting enforcement of a decision tend to concernwhethertheadjudicatorhadthejurisdictiontomakethedecision.Ifitcanbeshownthattherewas no jurisdiction, the enforcement can be resisted because there is no decision.Lackofjurisdictionisoftenduetoafailuretoanswerthequestionasked;theadjudicatorhasno jurisdictionfor thedecisionaboutanunaskedquestion.Lackof jurisdictionmayalsobeshowniftherewasnoclearlyidentifiabledisputeinbeingatthetimethenoticeofintentiontoseekadjudicationwasissued.Successfulchallengeshavealsobeenmadeonthebasisthattheadjudicatorwasinbreachoftherulesofnaturaljustice.Thiscanbequitecomplicated in practice, but in essence it refers to the need for each party to have anopportunity to put its case and the responsibility of the adjudicator not to discuss thedispute with one party in the absence of the other. Obviously, a decision will also bethrownoutifitcanbeshownthatanadjudicatorwasbiasedinfavouroftheotherparty.

220Cananadjudicatorusehisorherownexperiencetodecidethedispute?Onemight reasonably askwhat the point is of appointing an experienced and suitablyqualifiedconstructionprofessional toactasadjudicator if thatadjudicator isnotable tousethatexperienceandthoseskillsindecidingthedispute.Surelythatisthewholeideaofadjudication–aquickdecisionbyanexperiencedperson.

AScottishcaseconsidered theextent towhichanadjudicatorcanusehisorherownknowledgeandexperienceindecidingthedispute.21Thejudgeputthepositionlikethis:

Adistinctionalwayshastobedrawnbetweenthecasewheretheadjudicatoruseshisown knowledge and experience in order to inform his decision on the factual andlegal arguments presented to him by the parties, in which case there may be norequirementonhimtoobtainanyfurthercommentsfromtheparties–heis,afterall,chosen in part because he has such experience to bring to bear on the matters indispute indeciding thereference–and thecasewhereanadjudicatoruseshisownknowledgeandexperiencetointroducenewmatterswhichthepartieshavenotraisedandtodecidethecase,inpartatleast,onthebasisofthosematters,inwhichcaseheshouldmakehisintentionsknowntothepartiesandinvitetheircomments.

Inthatcase,theadjudicatorhadfailedtoidentifytheparticularexpertiseandexperienceofhisownthathewasbringingtothedispute,andhefailedtogivethepartiessufficienttime to provide adequate comment and correction to his proposed approach.Moreover,witnesses had already given evidence about the particular points, and the adjudicator’snotificationtothepartiesofhisproposedapproachshouldhavebeenmadethen,whenthewitnessescouldhaveshedlightonthesituation.

The knowledge and experience of an adjudicator will be a major reason for theadjudicator’snomination,andit isclearthatanadjudicatormayusethatknowledgeandexperience inmakingadecisionbasedon the evidence and the arguments advancedbyboth parties. However, an adjudicator may not, as in the Scottish case, use his or herknowledgeandexperienceto,ineffect,introducefactsforwhichthereisnoevidence.

221Cananadjudicatormakeadecisionaboutaninterimpaymentifitisthefinalaccountvaluewhichisbeingreferred?Itiswellunderstoodthatanadjudicatoronlyhasthepowertoconsiderthequestionwhichhasbeenreferred,thatis,thedisputeidentifiedinthenoticeofadjudication.However,ifitisnecessarytodecideotherthingsasstepsinreachingtheanswertothedisputereferred,theadjudicatorisentitledtoconsidertheseotherthings.Thereisanimportantdifferencebetweenthenameofadisputeandwhatthedisputeactuallyis.Forexample,itiscommonforcontractorsandotherstorefertothe‘penaltyclause’whenwhattheyactuallymeanisthe‘liquidateddamagesclause’.Thecourtsunderstandthisandregularlyhavetoanalyseasituationtodecidewhatthepartiesactuallymean.

The straight answer to this question is that an adjudicator cannot decide a questionaboutaninterimpaymentifitisthefinalaccountwhichhasbeenreferred.However,thefinalaccountandthelastinterimpaymentareoftenconfused.Thisseemstohaveoccurredin a casewhere the referring party, in its notice of adjudication, stated that the disputerelatedtothefinalaccountandthenrequestedtheadjudicatortoorderaspecificpaymentorsuchsumastheadjudicatormaydecide.22Theadjudicatorstatedthatthedecisionwasgiven in respect of an interim applicationbasedon the final account.The court hadnodifficultyindecidingthat theadjudicatorhaddecidedwhatwasreferred,whetheritwascalled the final account or the interim payment based on the current draft of the finalaccount. Each questionwill depend on particular circumstances, but it is clear that thecourtswilltakeacommonsenseapproach.

222Istheadjudicatorentitledtoawardinterest?In general, the answer to this question is ‘No’, but there are circumstances in whichinterestcanbeawarded.InPartnerProjectsLtdvCorinthianNomineesLtd,23CorinthianenteredintoaJCT98contractwithPartnerwherebyPartneragreedtoerectalargehousein London. Eventually, Corinthian terminated Partner’s employment and a series ofadjudications ensued. In the last adjudication, the adjudicator awarded £850,509 toPartner, which included a substantial sum as interest. Corinthian refused to pay on thegroundthattheadjudicatorhadnojurisdictiontoawardinterest:IfheawardeditundertheLatePaymentofCommercialDebts(Interest)Act1998,Partnerhadmadenosuchclaim;if he awarded it under clause 30.1.1.1, that clause only gave the right to interestwheresumshadbeencertifiedandnotpaid.Corinthianalsoclaimedthatanyordertopayshouldbestayed(postponed)becausePartnerwasunlikelytobeabletopaybackthemoneyifCorinthian took thematter further.BothPartnerandCorinthianhadbeendormant sincethetermination.

Thecourtordered thatPartnerbepaid the full amountawardedby theadjudicator. Itheldthattheadjudicatorhadnotawardedinterestunderthe1998Act,butratherbecausethenoticeofadjudicationhadexpresslyrequestedhimtodoso.Incalculatingtheinterest,theadjudicatorhaddecidedthatthearchitecthadunder-certified.Theadjudicatorhadthendecidedtheamountwhichshouldhavebeencertified.Becausetheamounthadnotbeenpaid, the adjudicator awarded interest under clause 30.1.1.1. The court said that theadjudicatorhadthepowertoopenupcertificatesandawardalargersum,andthatiswhathadhappenedhere.

The court refused to stay the order to pay. Several factors were taken into account:Partner’scurrentpositionwaslargelyduetoCorinthian’sfailuretopayit,Corinthianhaditselfbeentradingwhileinsolvent,andPartnergenuinelywishedtotradeoutofitscurrentindebtednessanditneededthemoneyawardedbytheadjudicatorifitwastodoso.

Therefore,althoughitcannotbesaidthattheadjudicatorhasafree-standingpowertoawardinterest,heorshewillhavepowerifthereferringpartyaskshimorhertodosoorif thecontractbeingconsideredexpresslyprovides for interest.However,merelyaskingtheadjudicatortoawardinterestwillnotautomaticallyentitletheadjudicatortoawarditinaccordancewiththeLatePaymentofCommercialDebts(Interest)Act1998,unlessthatisalsopartoftheclaim.

223Canthelosingpartyset-offmoniesowingagainsttheadjudicator’sorderrequiringpayment?The point of an adjudicator’s decision is that it is quick justice – onemight say roughjusticeattimes.However,itseemsthatmostparticipantsaccepttheadjudicator’sdecision.Althoughsomechallengethedecisioninthecourtsonthegroundsoflackofjurisdictionorbreachoftherulesofnaturaljustice,fewdecidetoreferthedisputeanewtoarbitrationorlegalproceedingsthroughthecourts.Variousmeanshavebeentriedtoavoidpayment,butthecourtshavebeenreluctanttoallowsuchattemptstosucceed.ThedecisionoftheCourtofAppealinFersonContractorsLtdvLevoluxATLtd24setsthetone:

The contractmust be construed so as to give effect to the intention of Parliamentrather than todefeat it. If thatcannotbeachievedbywayofconstruction, then theoffendingclausemustbestruckdown. Iwouldsuggest that itcanbedonewithouttheneedtostrikeoutanyparticularclause.

Thatcasewasdealingwithanattempt toavoidpaymentbyappealingtoaclause in thecontractwhichappearedtoprecludefurtherpayments.ItisclearthattheCourtofAppealwaspreparedsimplytoeffectivelyignoresuchaclause.Fromtimetotime,apartywilltryto avoid payment by trying to set-off from a payment ordered by the adjudicator apaymentitbelievesisduetoit.Manycaseshavebeenheardbythecourtsonthisbasis,andtheattitudeofthecourtshasbeentorefusetoallowset-offwhichwouldinterferewiththe adjudicator’s decision. In one case, the court ruled as inadmissible a set-off ofliquidated damages against the adjudicator’s decision that a sum was due under thecontract. Clause 41A.7.2 of the JCT 98 contract expressly stated that the parties mustcomplywiththeadjudicator’sdecision,andtherewasnoreferencetoanyrightofset-off.Anoticeofset-offhadbeenserved,butithadnotbeengivensevendaysbeforethefinaldate for payment (in accordance with the Scheme) stipulated by the adjudicator. Thenotice had in fact been issued only six days before the final date. The fact that it wasimpossibletoissuethenoticeearlierbecausetheadjudicatorhadallowedonlysevendaysfor payment cut no icewith the court.25 Theremay be instanceswhere a courtwill bepersuadedtoallowaset-offagainsttheadjudicator’sdecision,butsuchinstanceswillberare.

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224Thecourthasjustruledthattheadjudicator’sdecisionisanullity.Canthelosingpartyrefusetopaytheadjudicator’sfees?This is an interesting question, and the answer is that it all depends. Adjudicatorssometimeshavetroubleinrecoveringtheirfeesbecausetheyarenotentitledtowithholdthedecisionpendingreceiptofthefee,asanarbitratorisentitledtodo.Ontheotherhand,theparties toanadjudicationarejointlyandseverallyliablefor thefee; therefore, if theadjudicator fails to recover it from the losing party, the fee can be recovered from thewinner.

Theextenttowhichapartyisliablefortheadjudicator’sfees,evenwherejurisdictionischallenged,hasbeenconsidered ina recentcase,andanumberofguidelineshavebeenlaiddown:26

Therightoftheadjudicatortobepaiddependsonthecontractwiththeparties.

Even if a party challenged the adjudicator’s jurisdiction, continued participation intheadjudicationwouldgive rise toan impliedagreement topaya reasonable sum.Thatwouldusuallybebecausetherewasacontract,butitwouldalsobejustifiedonthebasisofunjustenrichment:Arespondingpartyhasbeenenrichedbyreceivingadecisionfromtheadjudicatoronwhichitcan,ifitwishes,rely.Theenrichmentisattheexpenseoftheadjudicator,whohasspenttimeandincurredcostdealingwiththesubmissions.Ifthebenefitisacceptedwithoutpayment,itisunjustenrichment.

Where the respondingparty challenges jurisdictionand takesno furtherpart in theadjudication,theadjudicatorwillstillhaveaclaimforfeesagainstthereferringpartyonthebasisthattheworkwascarriedoutatitsrequest.

Apartywhichsubsequentlyreliedontheadjudicator’sdecisionwouldbeboundbyitinanyevent.

Thecourtappearstohavebeenkeentodemonstrateanumberofdifferentwaysinwhichan adjudicator can claim fees. This suggests that even if the decision is a nullity, thereferringparty,ifnottherespondingparty,willbeliableforthefees,althoughthequestionis leftopenwhether thereferringpartycouldarguethat it isnot liable topayfees toanadjudicatorwhoseactioncausedthedecisiontobeanullity.Thatquestionhassincebeenaddressed,atleastinpart,inacasebeforetheCourtofAppeal.27

The court held that although the adjudicatormay have spent substantial time on theadjudication,thepartieshadnotagreedtopayforthetimespent,butratherforadecisionthatwas enforceable. In that case, the decisionwas held to be a nullity.However, it isimportanttostressthatthecourtjudgmentwasbasedonconsiderationofthecontract.Theadjudication was governed by the Scheme for Construction Contracts (England andWales) Regulation 1998 prior to their amendment. The adjudicator was found to be inserious breach of the rules of natural justice because he failed to deal with a specificdefence.Therefore,hisdecisionwasunenforceable.Thecourt tookintoaccountthat theSchemecarefullydefinesthecircumstancesinwhichtheadjudicatorisentitledtobepaid.The result is that where an adjudication has been carried out under the Scheme, the

adjudicatorisprobablynotentitledtobepaidifthedecisionisheldtobeunenforceable.However, that situation can be changed if the parties enter into an agreement with theAdjudicator which protects his fees, and the situation may not apply at all if theadjudicationisconductedundersomeotherprocedure.Thejudgmentleavesadjudicatorswith a serious problem: They have no power to decidewhether they have jurisdiction;therefore, if their jurisdictionischallengedtheymustmakeadecisionwhetherornot toproceed.Iftheyarewrong,theyrisklosingalltheirfees.

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225Ifthecontractorwantstotakemattersbeyondadjudication,whataretheprosandconsofarbitrationandlitigation?If the parties wish to achieve a final and binding decision, the choice is betweenarbitration and legal proceedings. Under the 1998 suite of JCT contracts, the defaultposition,ifnochoicewasmade,wastoarbitration.Thatpositionchangedwiththe2005JCT contracts, and now legal proceedings apply unless the contract particulars arecompletedtoshowthatarbitrationistobethedisputeresolutionprocedure.Thedecisiontodefaulttolegalproceedingsratherthanarbitrationisseenbymanyasabackwardstep,because arbitration has always been the tribunal of choice for technical matters.Employers aregenerallywell advised to complete the contractparticulars so as to referdisputestoarbitration.Itshouldbenotedthatifthepartieshaveagreedthatthemethodofdisputeresolutionwillbearbitration,attemptstouselegalproceedingsmaybeblockedbytheotherpartyinrelianceonsection9oftheArbitrationAct1996.28Section9providesthatthecourtmustgrantastay(postponement)oflegalproceedingsuntilthearbitrationisconcluded,unlessthearbitrationisnull,void,inoperableorincapableofbeingperformed.Underthe1996Act,thecourthasnodiscretionaboutthematter,andthesuccessfulpartyshouldrecoveritscosts.

Theadvantagesofarbitrationareusually:

Control – The parties can decide between themselves timescales, procedure andlocationofanyhearing.

Speedinreachingadecision–Thisdependsonthearbitratorandonthewilloftheparties,butagoodarbitratorshoulddealwithmostcasesinamatterofmonthsratherthanyears.

Technical expertise of the arbitrator – The fact that the arbitrator understandsconstruction should shorten the time schedule and may avoid the need for expertwitnessesifthepartiesagreethatthearbitratorcanusehisorherownknowledge.

Privacy – Only the parties and the arbitrator know the details of the dispute, theargumentsand the finalarbitrator’saward.Sensitivematterscanbekeptoutof thepubliceye.

Expense – In theory, arbitration should bemore expensive than legal proceedings,because theparties (usually the losingparty)have topay for the arbitrator and thehireofaroom.However,anefficientarbitratorwithappropriatetechnicalknowledgeusuallykeepsthecostsdown.

Appeal –The arbitrator’s award is usually final because the courts are reluctant toconsideranyappeal.29

Disadvantagesofarbitrationcanbe:

Arbitrator appointed by a third party – Parties who are in dispute often find itdifficult toagreeaboutanything.Therefore, thearbitratormaybeappointedby theappointingbody,andtheprocedure,thetimingandthelocationofthehearingroom

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maybedecidedbythearbitratorwiththeresultthatneitherpartyissatisfied.Slow process – If the arbitrator is not very good, the process may be slow andineffectiveandfail toproduceasatisfactoryresult.Theanswer is for theparties tochooseanarbitratorofknownreputation.

Arbitratornotnecessarilyanexpertonthe law–Thatmaybeacrucialpartof thedispute.Theresultmaybeapooraward.Theanswerisforthepartiestochoosethearbitratorwithcare.

Expense–Theparties(usuallythelosingparty)paythecostofthearbitratorandthehire of a room for the hearing. However, an efficient arbitrator can maximiseresources,includingtherooms.

Theadvantagesoflegalproceedingsareusually:

Judgeanexpertonthelaw–Therefore,thereshouldbenoworriesthatthejudgewillnotunderstandadifficultlegalpoint.

Experiencedjudges–ManyofthejudgesintheTechnologyandConstructionCourtshaveasoundunderstandingofconstructionmatters.

CivilProcedureRules–Theygovernlegalproceedingsandrequirejudgestomanagetheir caseloads and encourage pre-action settlement through use of the Pre-ActionProtocol.Thismayendinadjudicationratherthanlegalproceedings.

Speed–Itissaidthatcasescanreachtrialquickly,althoughpeoplewhohavebeenthroughthelegalsystemarerarelyconvincedaboutthis.

Multi-partyactions–Theclaimantcanjoinseveraldefendantsintotheproceedingstoallowinterlockingmattersanddefendantstobedecided.

Expense–Costsofthejudgeandcourtroomareminimal.Appeal – A dissatisfied party can appeal to a higher court. This may be a mixedblessing.

Thedisadvantagesoflegalproceedingsaresaidtobe:

Lackoftechnicalknowledge–Evenspecialistjudgesknowrelativelylittleaboutthedetailsofconstructionwork.

Nochoiceofjudge–Partiescannotchoosethejudge,andthejudgeappointedmaybeunsuitableforthecase.

Slowprocess–Casesoftentakealongtimetoresolve.Expense – Costs will be increased, because expert witnesses or a court appointedexpert witness will be required to assist the judge to understand relatively simplepoints,andalengthytimescaleandcomplexprocessesmayresultinhighcosts.

Appeal–Thepossibilityofappealsmaymakefinalitydifficultorslowtoachieveandresultinanunacceptablelevelofcosts.

Withtheadventofadjudicationasthemajor,albeitnotfinal,methodofdisputeresolution,lessconsiderationisbeinggiventothechoicebetweenarbitrationandlegalproceedings

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asthefinallybindingmethod.Thisisatopicwhicharchitectsshouldbecarefultodiscusswith theirclientsat the timeprocurementsystemsand thevarious formsofcontractarebeingconsidered.

AMECCivilEngineeringLtdvSecretaryofStateforTransport[2004]EWHC2339(TCC).

(2004)99ConLR1.

AMECCivilEngineeringLtdvSecretaryofStateforTransport(2005)101ConLR26CA.

(2001)76ConLR148.

(2011)135ConLR1.

(2009)125ConLR154.

(2008)120ConLR161.

[2011]EWHC1035(TCC).

[2011]BLR707.

CJPBuildersLtdvWilliamVerryLtd[2008]EWHC2025(TCC).

HartInvestmentsLtdvFidler&Another(2006)109ConLR67.

ChristopherMichaelLinnettvHalliwellsLLP(2009)123ConLR104.

RitchieBrothersPWCLtdvDavidPhilp(Commercials)Ltd[2005]BLR379.

StAndrewsBayDevelopmentLtdvHBGManagementLtdandMissJaneyMilligan[2003]ScotCS103;Barnes&ElliottLtdvTaylorWoodrowHoldingsLtd[2004]BLR111.

S. 108(2)(e) of the Housing Grants, Construction and Regeneration Act 1996 and clause 12 of the Scheme forConstructionContracts(EnglandandWales)Regulations1998(andtheNorthernIrelandandScottishequivalents).

DiscainProjectServicesLtdvOpecprimeDevelopmentsLtd(No.2)[2001]BLR285.

KierRegionalLtd(t/aWallis)vCityandGeneral(Holborn)Ltd[2006]BLR315.

PrimusBuildLtdvPompeyCentreLtd&SlidesilverLtd[2009]EWHC1487(TCC).

KarlConstruction(Scotland)LtdvSweeneyCivilEngineering(Scotland)Ltd(2000and2002)85ConLR59.

Bouygues(UK)LtdvDahl-Jensen(UK)Ltd(inliquidation)(2000)73ConLR135.

SGLCarbonFibresLtdvRBGLtd[2011]CSOH62.

OSCBuildingServicesLtdvInteriorDimensionsContractsLtd[2009]EWHC248(TCC).

[2011]EWHC3189.

(2003)19ConstLJT83.

AvoncroftConstructionLtdvSharbaHomes(CN)Ltd(2008)119ConLR130.

ChristopherMichaelLinnettvHalliwellsLLP(2009)123ConLR104.

SystechInternationalLtdvPCHarringtonContractorsLtd(2012)145ConLR1CA.

AhmadAl-NaimivIslamicPressAgencyIncorporated[2000]BLR150.

TheCounciloftheCityofPlymouthvDRJones(Yeovil)Ltd[2005]EWHC2356(TCC).

Tableofcases

Adcock’sTrusteesvBridgeRDC(1911)75JP241. 99AhmadAl-NaimivIslamicPressAgencyIncorporated[2000]BLR150. 318AlbertBartlett&Sons(Airdrie)LtdvGilchrist&LynnLtd[2009]CSOH125. 159AldgateConstructionCoLtdvUnibarPlumbingandHeatingLtd(2010)130ConLR190. 262AlexanderCorfieldvDavidGrant(1992)59BLR102. 144AlghusseinEstablishmentvEtonCollege[1988]1WLR587HL. 234AMECBuildingLtdvCadmusInvestmentsCoLtd(1997)13ConstLJ50. 176,260AMECCivilEngineeringLtdvSecretaryofStateforTransport[2004]EWHC2339(TCC);

(2005)101ConLR26CA. 297ArensonvArenson[1975]3AllER901. 87Argyropoulos&PappavChainCompaniaNavieraSA(1990)7-CLD-05-01. 237AsconContractingLtdvAlfredMcAlpineConstructionIsleofManLtd(2000)16ConstLJ

316. 63,180AtlasCeiling&PartitionCompanyLtdvCrowngateEstates(2002)18ConstLJ49. 19AtlasExpressLtdvKafco(ImportersandDistributors)Ltd[1989]1AllER641. 39AvoncroftConstructionLtdvSharbaHomes(CN)Ltd(2008)119ConLR130. 315BLHoldingsvRobertJWoodandPartners(1979)12BLR1. 82BabacompLtdvRightside[1974]1AllER142. 227BacalConstruction(Midland)LtdvNorthamptonDevelopmentCorporation(1976)8BLR88. 42BalfourBeattyCivilEngineeringvTechnicalandeneralGuaranteeCoLtd[2000]CLC252. 50BalfourBeattyConstructionLtdvTheMayorndBurgessesoftheLondonBoroughofLambeth

[2002]BLR288. 234BalfourBeattyLtdvChestermountPropertiesLtd(1993)62BLR1. 231Barnes&ElliottLtdvTaylorWoodrowHoldingstd[2004]BLR111. 306Bath&NorthEastSomersetDistrictCouncilvMowlem(2004)100ConLR1. 134BaxallSecuritiesLtd&AnothervSheardWalshawPartnership(afirm)&Others(2002)83

ConLR164. 164

BaylisvMayoroftheCityofWellington(1886)4NZLR84. 242

Bernard’sRugbyLandscapesLtdvStockleyParkConsortiumLtd(1997)82BLR. 257BernuthLinesLtdvHighSeasShippingLtd(2006)1Lloyd’sRep537. 293BFIGroupofCompaniesLtdvDCBIntegrationSystemsLtd(1987)CILL348. 251,263Blackpool&FyldeAeroClubvBlackpoolBoroughCouncil[1990]3AllER25. 1BlairvOsborne&Tomkins(afirm)&Another(1970)10BLR96. 129Blyth&BlythLtdvCarillionConstructionLtd(2001)79ConLR142. 54Bodill&Sons(Contractors)LtdvHarmailSinghMattu[2007]EWHC2950(TCC). 174Bouygues(UK)LtdvDahl-Jensen(UK)Ltd(inliquidation)(2000)73ConLR135. 311Bowmer&KirklandvWilsonBowdenPropertiesLtd,11January1986unreported. 144,150Bradley(DR)(CableJointing)LtdvJefcoMechanicalServices(1989)6-CLD-07-19. 291BritishGlanzstoffManufacturingCoLtdvGeneralAccidentFire&LifeAssurance

CorporationLtd[1913]AC143. 242BritishRussianGazette&TradeOutlookLtdvAssociatedNewspapersLtd[1933]2KB616. 182BritishSteelCorporationvClevelandBridgeCompany[1984]1AllER504. 10Brown&BrownvGilbertScott&Payne(1993)35ConLR120. 144Brown(CGA)vCarr&Another[2006]EWCACiv785. 123,149BrunoZornow(Builders)LtdvBeechcroftDevelopmentsLtd(1990)6ConstLJ132. 178BrunswickConstructionLtdvNowlan(1975)21BLR27. 65,105Bryant(C)&SonLtdvBirminghamHospitalSaturdayFund[1938]1AllER503. 40Burden(RB)LtdvSwanseaCorporation[1957]3AllER243. 199,285CalaHomes(South)LtdvAlfredMcAlpineHomesEastLtd[1995]EWHC7(Ch). 127CammellLaird&CovTheManganeseBronzeandBrassCo[1934]AC402. 194CampbellvEdwards[1976]1AllER785. 87Cantrell&AnothervWright&FullerLtd(2003)91ConLR97. 199,207,240,

255CarillionConstructionLtdvFelix(UK)Ltd(2000)74ConLR144. 39CFWArchitects(afirm)vCowlinConstructionLtd(2006)105ConLR116. 292CharlesBrown&CovNitrateProducers’SteamshipCompany(1937)58Lloyd’sRep188. 164ChartbrookLtdvPersimmonHomesLtd&Another(2009)125ConLR1. 50CityInnLtdvShepherdConstructionLtd[2008]BLR269. 224,228,238CJPBuildersLtdvWilliamVerryLtd[2008]EWHC2025(TCC). 305ClancyConsultingLtdvDerwentHoldingsLtd;AngloInternationalHoldingsLtd;Mardown

Ltd;CashtalPropertiesLtd;MountMurrayCountryClubLtd;CashtalDevelopmentsLtd[2010]EWHC762(TCC). 117

Clusky(tradingasDamianConstruction)vChamberlain,BuildingLawMonthly,April1995,p.6. 175

ClydebankEngineeringCovDonJoseYzquierdoyCastenada[1905]AC6. 244Collins(Contractors)LtdvBalticQuayManagement(1994)Ltd(2004)99ConLR1. 297ConsarcDesignLtdvHutchInvestmentsLtd(1999)84ConLR36. 149

ConstructionPartnershipUKLtdvLeekDevelopments[2006]EWHCB8(TCC). 293ConventHospitalvEberlin&Partners(1988)14ConLR1. 170,173ConwayvCrowKelsey&Partner(1994)39ConLR1. 87Co-operativeGroupLtdvJohnAllenAssociatesLtd[2010]EWHC2300(TCC). 119Co-operativeInsuranceSocietyLtdvHenryBootScotlandLtd(2002)84ConLR164. 42,124Co-operativeRetailServicesLtdvTaylorYoungPartnershipLtd[2002]1AllER(Comm)918. 89Council(The)oftheCityofPlymouthvDRJones(Yeovil)Ltd[2005]EWHC2356(TCC). 318CremdeanPropertiesLtdvNash(1977)244EG547. 41Crosby(J)&SonsLtdvPortlandUDC(1967)5BLR121. 256CrownEstatesCommissionersvJohnMowlem&CoLtd(1994)70BLR1CA. 212CrowshawvPritchardandRenwick(1899)16TLR45. 32CubittBuildingandInteriorsLtdvRichardsonRoofing(Industrial)Ltd[2008]EWHC1020

(TCC). 16DawberWilliamsonRoofingLtdvHumbersideCountyCouncil(1979)14BLR70. 219DeBeersUKLtdvAtosOriginITServicesUKLtd(2010)134ConLR151. 229DhamijavSunningdaleJoineriesLtd&Others[2010]EWHC2396(TCC). 178DiscainProjectServicesLtdvOpecprimeDevelopmentsLtd(No.2)[2001]BLR285. 307Douglas(RM)ConstructionLtdvCEDBuildingServices(1985)3ConLR124. 46DSNBSubseaLtdvPetroleumGeoservicesASA[2000]BLR530. 40DuchessofArgyllvBeuselinck[1972]2Lloyd’sRep172. 131DudleyCorporationvParsons&MorrinLtd,8April1959unreported. 170DunlopPneumaticTyreCoLtdvNewGarage&MotorCoLtd[1915]AllER739. 219,249EastHamCorporationvBernardSunley&SonsLtd[1965]3AllER619. 144EdwardLindenbergvJoeCanning&JeromeContractingLtd(1992)29ConLR71. 66ElvaniteFullCircleLtdvAMECEarthandEnvironmental(UK)Ltd(2013)148ConLR127. 83Elvin(CJ)BuildingServicesLtdvPeterandAlexaNoble[2003]EWHC837(TCC). 291EquitableDebentureAssetsCorporationLtdvWilliamMoss(1984)2ConLR1. 65ExparteSirWHarteDyke.InreMorrish(1882)22ChD410. 242Fairweather(H)&CoLtdvLondonBoroughofWandsworth(1987)39BLR106. 270

FarmAssistLtd(inliquidation)vSecretaryofStatefortheEnvironment,FoodandRuralAffairs(2009)125ConLR154. 299

FersonContractorsLtdvLevoluxATLtd(2003)19ConstLJT83. 315Finnegan(JF)LtdvFordSellerMorrisDevelopmentsLtd(No.1)(1991)25ConLR89. 72Finnegan(JF)vSheffieldCityCouncil(1988)43BLR124. 259FitzroyRobinsonvMentmoreTowersLtd(2009)125ConLR171. 104FormicaLtdvECGD[1995]1Lloyd’sRep692. 95GallaghervHirsch(1899)NY45. 176

GallifordTryLtdvMottMacDonaldLtdandRowenStructuresLtd(2008)120ConLR1. 8GarnacGrainCoIncvFaure&Fairclough[1968]AC1130. 269GeldofMetaalconstructieNVvSimonCarvesLtd(2010)130ConLR37. 248GeorgeFischerHoldingsLtdvMultiDesignConsultantsLtdandDavisLangdon&Everest

(1998)61ConLR85. 148,160GilbertAsh(Northern)vModernEngineering(Bristol)[1973]3AllER195. 77GlenvTheChurchWardens&OverseersoftheParishofFulham(1884)14QBD328. 207GlenlionConstructionLtdvTheGuinnessTrust(1987)39BLR89. 59GoldenOceanGroupLtdvSalgaocarMiningIndustriesPVTLtd&Another[2012]3AllER

842. 294Gray(SpecialTrusteesoftheLondonHospital)vTPBennett&Son(1987)43BLR63. 151GreaterLondonCouncilvClevelandBridge&EngineeringLtd(1986)8ConLR30. 154Greaves(Contractors)LtdvBaynhamMeikle&Partners[1975]3AllER99. 130HadleyvBaxendale(1854)9Ex341. 162Hall&TawseSouthLtdvIvoryGateLtd(1997)62ConLR117. 10HampshireCountyCouncilvStanleyHughLeachLtd(1991)8-CLD-07-12. 59,68Harbutt’sPlasticineLtdvWayneTankandPumpCoLtd[1970]1AllER225CA. 243HartInvestmentsLtdvFidler&Another(2006)109ConLR67. 305HedleyByrne&CoLtdvHeller&PartnersLtd[1963]2AllER575. 85,93HendersonvMerrittSyndicates[1995]2AC145,(1994)69BLR26. 87HenryBoot(Construction)LtdvMalmaisonHotel(Manchester)Ltd(1999)70ConLR32. 228HenryBootvAlstomCombinedCycles[1999]BLR123. 170HerbertConstructionUKLtdvAtlanticEstatesplc(1993)70BLR46. 263HickvRaymond&Reid[1893]AC22. 46HollandHannen&Cubitts(Northern)LtdvWelshHealthTechnicalOrganisation(1981)18

BLR80. 41HolmevBrunskill(1878)3QBD495. 50HowEngineeringServicesLtdvLindnerCeilingsPartitionsplc,17May1995unreported. 64

Hunt&OthersvOptima(Cambridge)Ltd&Others(2013)148ConLR27;(2014)155ConLR29CA. 93

ImpresaCastelliSpAvColaHoldingsLtd(2002)87ConLR123. 250,264InreWheatcroft(1877)6Ch97. 95IndependentBroadcastingAuthorityvEMIElectronicsLtdandBICCConstructionLtd(1980)

14BLR1. 132InsercovHoneywell,19April1996unreported. 176Ives(ER)InvestmentsLtdvHigh[1967]1AllER504. 150J&ADevelopmentsLtdvEdinaManufacturingLtd,ArmouraLtd&Others[2006]NIQB85. 2JamesLongley&CoLtdvSouthWestRegionalHealthAuthority(1984)25BLR56. 267Jarvis(J)&SonsLtdvCastleWharfDevelopments&Others[2001]1Lloyd’sRep308. 87

JeancharmLtdvBarnetFootballClubLtd(2003)92ConLR26. 247Jet2.comLtdvBlackpoolAirportLtd(2012)142ConLR1. 102JimEnnisConstructionLtdvCombinedStabilisationLtd[2009]EWHCB37(TCC). 185JohnBarkerConstructionLtdvLondonPortmanHotelsLtd(1996)50ConLR43. 233JohnDoyleConstructionLtdvLaingManagement(Scotland)Ltd[2002]BLR393. 257JohnHollandConstruction&EngineeringPtyLtdvKvaernerRJBrownPtyLtd(1996)82

BLR83. 257JonesvKaney(2011)135ConLR1. 297KaliszewskavJohnClague&Partners(1984)5ConLR62. 97KarlConstruction(Scotland)LtdvSweeneyCivilEngineering(Scotland)Ltd(2000and2002)

85ConLR59. 311KemblevFarren(1829)6Bing141. 77Kensington&Chelsea&WestminsterAreaHealthAuthorityvWetternComposites(1983)1

ConLR114. 151KierRegionalLtd(t/aWallis)vCityandGeneral(Holborn)Ltd[2006]BLR315. 307KochHightexGmbHvNewMillenniumExperienceCompanyLtd(1999)CILL1595. 77LanesGroupplcvGallifordTryInfrastructureLtd[2011]EWHC1035(TCC). 301LeanderConstructionLtdvMulalley&CoLtd[2011]EWHC3449(TCC). 289LibertyMercianLtdvDean&DyballConstructionLtd[2008]EWHC2617(TCC). 278LinnettMopaniCopperMinesplc(ChristopherMichael)vHalliwellsLLP(2009)123ConLR

104. 305,316LondonandSouthEnglandBuildingSocietyvStone[1983]1WLR1242. 268LondonBoroughofCamdenvThomasMcInerney&SonsLtd(1986)9ConLR99. 207LondonBoroughofHillingdonvCutler[1967]2AllER361. 45LondonBoroughofHounslowvTwickenhamGardenDevelopmentsLtd(1970)7BLR81. 22,24,28,80

LondonBoroughofLewishamvShephardHillCivilEngineering,30July2001unreported. 252LondonBoroughofMertonvStanleyHughLeachLtd(1985)32BLR51. 61,240,258,

272LondonCountyCouncilvVitaminsLtd[1955]2AllER229. 136LubenhamFidelities&InvestmentCovSouthPembrokeshireDistrictCouncilandWigleyFox

Partnership(1986)6ConLR85. 86,191MakersUKLtdvLondonBoroughofCamden(2008)120ConLR161. 300ManchesterCabinsLtdvMetropolitanBoroughofBury(1997)unreported. 12MartinGrant&CoLtdvSirLindsayParkinson&CoLtd(1984)3ConLR12. 222MartinJohnHayesandLindaHayest/aOrchardConstructionvPeterGallant[2008]EWHC

2726(TCC). 292McAlpineHumberoakvMcDermottInternationalInc(No.1)(1992)8ConstLJ383. 178McCutcheonvDavidMcBrayneLtd[1964]1WLR125. 29McGlynnvWalthamContractors&Others(No.3)(2007)111ConLR1. 146MelachrinovNicholl&Knight[1920]1KB693. 268

MethodistHomesAssociationLtdvMessrsScott&McIntosh,2May1997unreported. 270MichaelSalliss&CoLtdvECACalil(1987)13ConLR68. 88MidlandLandReclamationLtd&AnothervWarrenEnergyLtd(1997)EWHC375(TCC). 101Minter(FG)LtdvWelshHealthTechnicalServicesOrganisation(1979)11BLR1;(1980)13

BLR7CA. 87,266,271Monk(A)BuildingandCivilEngineeringLtdvNorwichUnionLifeInsuranceSociety(1991)

CILL669,CourtofAppeal(1992)62BLR107. 36MopaniCopperMinesplcvMillenniumUnderwritingLtd[2008]EWHC1331(Comm). 34MoreskCleanersLtdvThomasHenwoodHicks(1966)4BLR50. 119Morrison-KnudsenInternationalCoIncvCommonwealthofAustralia(1972)13BLR114. 41MotherwellBridgeConstructionLtdvMicafilVakuumtechnik&Another(2002)81ConLR

44. 182MottramConsultantsLtdvBernardSunley&SonsLtd(1974)2BLR28. 33Mowlemplc(formerlyJohnMowlemandCoplc)vNewtonStreetLtd[2003]89ConLR153. 38MowlemplcvStenaLinePortsLtd[2004]EWHC2206(TCC). 13MultiplexConstructions(UK)LtdvHoneywellControlSystemsLtd(2007)111ConLR78. 223MurphyvBrentwoodDistrictCouncil(1990)50BLR1. 88NauruPhosphateRoyaltiesTrustvMatthewHallMechanicalandElectricalEngineersPtyLtd

&Another(1992)10BCL178. 257Neville(HW)(Sunblest)vWilliamPress&Son(1982)20BLR78. 162NewIslingtonandHackneyHousingAssociationLtdvPollardThomasandEdwardsLtd

[2001]BLR74. 126,138Northern&ShellplcvJohnLaingConstructionLtd[2003]EWHCCiv1035CA. 47OceanChemicalTransportIncvExnorCraggs(UK)Ltd[2000]1Lloyd’sRep446. 7OldschoolvGleesonConstructionLtd(1976)4BLR103. 144OSCBuildingServicesLtdvInteriorDimensionsContractsLtd[2009]EWHC248(TCC). 313PacificAssociatesvBaxter(1988)44BLR33. 88PartnerProjectsLtdvCorinthianNomineesLtd[2011]EWHC2989. 313PeakConstruction(Liverpool)LtdvMcKinneyFoundationsLtd(1970)1BLR114CA. 227Pearce&HighvJohnPBaxter&MrsBaxter[1999]BLR101. 163,166PenwithDistrictCouncilvVPDevelopmentsLtd(2005)102ConLR117. 191,208PeriniCorporationvCommonwealthofAustralia(1969)12BLR82. 191,207PhotoProductionLtdvSecuricorTransportLtd[1980]1AllER556. 243,292PickardFinlasonPartnershipLtdvLock&Another[2014]EWHC25(TCC). 115PigottFoundationsvShepherdConstruction(1993)67BLR48. 221Pinnel’sCase(1602)5CoRep117a. 183PlantConstructionplcvCliveAdamsAssociatesandJMHConstructionServicesLtd[2000]

BLR137. 66PoseidonFreightForwardingCoLtdvDaviesTurnerSouthernLtd[1996]2Lloyd’sRep388. 7PrideValleyFoodsLtdvHall&Partners(2000)16ConstLJ424. 70

PrimusBuildLtdvPompeyCentreLtd&SlidesilverLtd[2009]EWHC1487(TCC). 308ProtonEnergyGroupSAvOrlenLietuva(2013)150ConLR72. 294RayackConstructionLtdvLampeterMeatCoLtd(1979)12BLR30. 174ReWhite(1901)17TLR461. 242ReYeardonWaterworksCo&Wright(1895)72LT832. 242Rees&KirbyLtdvSwanseaCityCouncil(1983)25BLR129. 207Rees&KirbyLtdvSwanseaCityCouncil(1985)5ConLR34CA. 226RegalianPropertiesvLondonDocklandDevelopmentCorporation[1995]1AllER1005. 30ReynoldsvAshby[1904]AC466. 219RhodiaInternationalHoldingsLtd&AnothervHuntsmanInternationalLLC[2007]EWHC

292. 101RichardRobertsHoldingsLtdvDouglasSmithStimsonPartnership(1988)22ConLR60. 157RitchieBrothersPWCLtdvDavidPhilp(Commercials)Ltd[2005]BLR379. 306RobinsonvHarman(1848)1Ex850. 111,156RotherhamMetropolitanBoroughCouncilvFrankHaslamMilanandCoLtd(1996)59Con

LR33. 99RoyalBromptonHospitalNHSTrustvHammond&Others(No.7)(2001)76ConLR148. 229,297RoyalBromptonHospitalNHSTrustvHammond&Others(No.8)(2002)88ConLR1. 63RuttlePlantHireLtdvSecretaryofStateforEnvironment,FoodandRuralAffairs[2009]

EWCACiv97. 115RuxleyElectronicsandConstructionLtdvForsyth[1995]3AllER268. 156SamuelsvDavis[1943]2AllER3. 130SGLCarbonFibresLtdvRBGLtd[2011]CSOH62. 312ShanklinPierLtdvDetelProductsLtd[1951]2AllER471. 157ShawtonEngineeringLtdvDGPInternationalLtd[2005]EWCACiv1359. 227Sinclair&AnothervWoodsofWinchesterLtd(No.2)(2006)109ConLR14. 125SkanskaConstruction(Regions)LtdvAnglo-AmsterdamCorporationLtd(2002)84ConLR

100. 158,283SkanskaConstructionUKLtdvTheERDCGroupLtd[2003]SCLR296. 225SmithvEricSBush[1989]2AllER514. 86Spurling(J)LtdvBradshaw[1956]1WLR461. 6StAndrewsBayDevelopmentLtdvHBGManagementLtdandMissJaneyMilligan[2003]

ScotCS103. 45,305StModwenDevelopmentsLtdvBowmer&KirklandLtd(1996)14-CLD-02-04. 264StentFoundationLtdvTarmacConstruction(Contracts)Ltd(1999)78ConLR188. 31SteriaLtdvSigmaWirelessCommunicationsLtd(2007)118ConLR177. 223,226,228StourValleyBuildersvStuart[2003]TCLR8. 183Stovin-BradfordvVolpointPropertiesLtd&Another(1971)10BLR107. 129SuisseAtlantiqueetc.vNVRotterdamscheKolenCentrale[1966]2AllER61. 242SutcliffevChippendaleandEdmondson(1971)18BLR149.

144,179,193,284

SutcliffevThackrah[1974]1AllER859. 199,284Sweett(UK)Ltd(formerlyCyrilSweettLtd)vMichaelWightHomesLtd[2012]EWMisc3

(cc). 51SystechInternationalLtdvPCHarringtonContractorsLtd(2012)145ConLR1CA. 317TamesideMBCvBarlowSecuritiesGroupServicesLtd[2001]BLR113. 19Tate&LyleFoodandDistributionCoLtdvGreaterLondonCouncil[1982]1WLR149. 261,267TemlocLtdvErrillPropertiesLtd(1987)39BLR30. 239,249ThomasFeather&Co(Bradford)LtdvKeighleyCorporation(1953)52LGR30. 243TokenConstructionCoLtdvCharltonEstatesLtd(1973)1BLR48. 203,207TozerKemsley&Milburn(Holdings)LtdvJJarvis&SonsLtd&Others(1983)4ConLR24. 251TraditionalStructuresLtdvHWConstructionLtd[2010]EWHC1530(TCC). 4TransportforGreaterManchestervThalesTransportandSecurityLtd(No.1)(2012)146Con

LR194. 273Treasure&SonLtdvMartinDawes[2007]EWHC2420(TCC). 138

Trollope&CollsLtdvNorthWestMetropolitanRegionalHospitalBoard(1973)9BLR60. 279TrusteesofAmpleforthAbbeyTrustvTurner&TownsendProjectManagementLtd(2012)144

ConLR115. 14TSGBuildingServicesplcvSouthAngliaHousingLtd(2013)148ConLR228. 27UniversityCourtoftheUniversityofGlasgowvWilliamWhitfield&JohnLaing

(Construction)Ltd(1988)42BLR66. 66VictoriaUniversityofManchestervWilsonandWomersleyandPochin(Contractors)Ltd

(1984)2ConLR43. 65,164VikingGrainStorageLtdvTHWhiteInstallationsLtd&Another(1985)3ConLR52. 131VonlynnHoldingsLtdvPatrickFlahertyContractsLtd,26January1988unreported. 176WalterLawrencevCommercialUnionProperties(1984)4ConLR37. 236WalterLilley&CoLtdvMackay&Another(2012)143ConLR79. 228,267WatesConstruction(London)LtdvFranthomPropertyLtd(1991)53BLR23. 33,174Watts,Watts&CoLtdvMitsui&CoLtd[1917]AllER501. 247WellsvArmy&NavyCo-operativeSocietyLtd(1902)86LT764. 230WestFaulknervLondonBoroughofNewham(1995)11ConstLJ157CA. 80WestvIanFinlay&Associates[2013]EWHC868(TCC);(2014)153ConLR1CA. 89,90,287WestminsterCorporationvJJarvis&Sons(1970)7BLR64. 162,251,281WhitevBlackmore[1972]2QB651. 6WhitevJones[1995]1AllER691. 87WhittalBuildersvChester-Le-StreetDistrictCouncil(1985)11ConLR40;[1996]12ConstLJ

356(thefirstcase). 24,258WhittalBuildersvChester-Le-StreetDistrictCouncil(1987)40BLR82(thesecondcase). 26WilliamHillOrganisationLtdvBernardSunley&SonsLtd(1982)22BLR1.

29WilliamTomkinsonandSonsLtdvTheParochialChurchCouncilofStMichael(1990)6Const

LJ319. 163,251WilliamsonvMurdoch[1912]WAR54. 242WillmottvBarber(1880)15ChD96. 150WitneyTownCouncilvBeamConstruction(Cheltenham)Ltd[2011]BLR707. 303WraightLtdvPH&THoldingsLtd(1968)13BLR27. 22YamSengPteLtdvInternationalTradeCorpLtd[2013]EWHC111(QB). 79YorkshireDaleSteamshipvMinisterofWarTransport[1942]2AllER6. 228YorkshireWaterAuthorityvSirAlfredMcAlpineandSon(Northern)Ltd(1985)32BLR114. 58Young&MartenLtdvMcManusChildsLtd[1968]2AllER1169. 130

Index

ACAStandardFormofContractforTermPartnering(TPC2002)27

acceleration91,179–82

access134

accordandsatisfaction182

adjudication194,195,206,238,295

adjudicator

agreement317

bias307,311

decisionof305–6,307,310–11,316

experienceof312

feesof316–17

jurisdictionof303,306,311,316–17

nominationof300,301,302

adjustmentofcompletiondateseeextensionsoftime

agent208

applicationforlossand/orexpense225,272

approvalseesatisfaction

arbitration86,252,267,293,317–20

ArbitrationAct1996318

architect83–106,254–5

actingforclientinadjudication308–9

claimagainst84–7

fees107–18

powers37,72,91

replacement75–6,100–101

ArchitectsAct199776

architect’sinstruction13–42,225,271

compliance138–9,281

definition133–4

empowered134,275

issue72–3,87,127,230–31

ratified137,139

signing134,135–6

arrange51

assignment30

beneficialoccupation263–4

bestendeavours101–2

billsofquantities170–72

bond

advancepayment174

performance48–52,77–8

bonusclause247–8

breachofcontract1,10,17,22,24,26,40,55,75,85,111,147,218

buildingsociety92

cashflow193

causation86,261–3

certificate72–3,190–212

errorson194,199–200

failuretoissue196,207–8

final184,193,196,203–6,210–12,254–5

frequency200–201

interim190,196,313

issueof206–7

makinggood50,206,254

negative191–3,202

non-completion241

practicalcompletion158,205,251,279,281–3

ofsatisfaction92–4

signing72

withdrawalof193–4

cheque183

CivilProcedureRules107

claim

commonlaw272

feeforconsidering108–10

feeforpreparing266–7

global255–8

ClaimForm96

clerkofworks141–2,151–2

CodeofConduct83,100

CodeofProcedureforSingleStageSelectiveTendering19962

completiondate57,232,244,277,278

computers61,233–5

conclusivity210–12

concurrentdelays227–9

conditionprecedent223–4

conflict53

consultants89

contract

administrationof44–5,65–81

binding16–17,31–2

consideration39,157

dateof18–19,48

deed49,97

documentsin69

essentialtermsof36

existenceof35–7

frustrationof69,178

if10,72

lawof3

oneroustermsin5–7

oral30,37

priorityofdocuments186–9

provisional11

quasi30

rejectionof21

retrospective19

signing18–19,48

simple10

unilateral10

wrong89–90

contractor’sdesignedportion(CDP)162

contractor’sinitiative122–3

contractor’sobligations38,42,68,110–12

Contractor’sProposals186–9

contractors,directlyengaged34–5

Contracts(RightsofThirdParties)Act1999218

contractualclaimseelossand/orexpense

contraproferentemrule249

co-operation27

co-ordination102–3

copyright100–101,108,127–30

Copyright,DesignsandPatentsAct1988127,128

cost

estimates32–3

increased269–70

courseofdealing29

criticalpath56,62,233

damages34,111,268,272

dayworksheets175–6

dayworks175–6

deception112

deed49,97

defects93,152–3,154–68,251,281

coveredup146–8

design98–100

measured178–9

rectificationof161–8,289

timelimitfor167–8

delay220,223–4,224–5,227–9

deletionofclause33–4

design65,119–32,214

build,and52–5,131–2,165–6,186–9

completing124–5

delegationof119–21

development121–2

reviewing126–7

discrepancies186

disputes

criteriafor296–7

general295–320

several302–4

disruption57,258–9

documents67–9

drawings65–9,95–6,104–6

duedate196

dueregard87–8

duty

absolute51

care,of7–8,85

economicduress38–40,299

economicloss7

e-mail293–4

Emdenformula265

employer

identityof19–20

judgmentof194–5

noticecopiedto294

employer’srepresentative71

Employer’sRequirements186–9

errorsondrawings65–7

errorsoncertificate194,199–200

escrow11

estimate32–3

estoppel32

exclusionofliability86

expertreport298

expertwitness297–8

extensionoftime23,34,57,59,60,61,182,223–40,270–71,278–80

fairness27

fax293

fees107–118

files94–5,96–8

finalaccount203–6,208–10,254–5,313

finalcertificate184,193,196,203–6,254–5

fitnessforpurpose130–32

float62–4

fluctuations198

foremanseepersonincharge

formulae264–5

forthwith45

frustration69,178

fullandfinalsettlement182–4

functusofficio241

funders48

generalcontractualmatters27–46

goodfaith27,40

guaranteedmaximumprice(GMP)38

HousingGrants,ConstructionandRegenerationAct199617,190,196,206,208,296,301,305

immunity297–8

impliedterms140,290

inconsistenciesseediscrepancies

indemnities101

informationfromthearchitect59

informationfromthecontractor38,232,240,272,273–4

injunction134–5

insolvency215,216,218,285–6

inspection73,143–53

insurance345,43

interest115–16,265–6,291,313–14

invoices115–16

LatePaymentofCommercialDebts(Interest)Act199831,115,117,314

LatentDamageAct198697

latentdefects163–4

legalproceedings267,317–20

letterofintent9–16,31,72

liaise102–3

licence101,108,128–9,158

lien107

LimitationAct198028,29,163

limitationperiod96

liquidateddamages135,219–21

litigationseelegalproceedings

LocalDemocracy,EconomicDevelopmentandConstructionAct200917

lossand/orexpense23,34,197–8,254–74

lossofopportunity261–3

lossofprofit176–7

maintenanceperiod64–5

ManagementBuildingContract(MC)31

ManagementWorksContract(MCWC)31

materials35,69,212,218–19

mediator298–9

minutesofsitemeeting134,225–6

misrepresentation18,40–42,104

MisrepresentationAct196741

mitigation160,267–9

monitor102–3

NationalBuildingSpecification6

NationalHouseBuildingCouncil92

nationalindices269–70

naturaljustice302,306–8,311,317

negligence14–16,50,55,80,85,199,204,297–8

netcontributionclause88–9

nominatingbody300,301–2

notice223,225,226,281,293,303

novation52–5,165–6

occupation250–51,263–4

offer

acceptance3,17,21,184

counter73

rejection3

withdrawalof21

omissionofwork125–6

onerousterms5–7

overcertification284–5

overheads259–61

ownership218–19

partialpossession158,282–3

partnering27–8,78–9

partneringcharter27–8

patentdefects163–4

paylessnotice111,193,196,202

payment

advance174–5

delayed286

direct214–16

failure290–91

notice196,208

penalty77,246–7

performancebondseebond

personincharge74–5

planningpermission82–4

possessionofsite22–6,34–5,235–6,277

defermentof23

postponement22–3,75.139–41

practicalcompletion158,205,251,279,281–3

pre-contract

issues9–21

minutes16–17

preliminaries5,197–8,270–71

prevention38,223,294

priceddocument272

priorityofdocuments186–9

privilege299

ProfessionalConsultant’sCertificateseecertificateofsatisfaction

professionalindemnityinsurers97

professionalopinion184,203

profit2,259–61

programme56–64,234–5

progress221–2

projectmanager70–72,201–2

promisetopay30,186

quality288–9

quantitysurveyor170–71,175,198,201–2,209,254

quantummeruit10,36

ratesandprices170–73

reasonable

skillandcare51,130–31

time45–6,230

endeavours101–2,268

recitals188

rectificationperiod161–8,281

regularlyanddiligently79–81,289–90

referral301,304

relevantevents235

reliance65–7,85,105,309

repudiation22,24,48,92,226,237,291,292,301

restitution30

retention

ofmoney33,173–4

oftitle218–19

satisfaction59,67–9,194–5

scheduleofdefects160,161,251,281

SchemeforConstructionContracts(EnglandandWales)Regulations1998295,300,302,303,305,317

sectionalcompletion275–80

set-off186,245,314–15

settingout73–4,155–6

settlement184–6,203–4

shopdrawings213–14

site

facilities17–18

investigation40–42

specification98–100

specificperformance273–4

staff103–4,202

StandardMethodofMeasurement6

standards81,131,150,194–5,289

stepinrights48–9

sub-contractors213–22

sub-contracts213–22

subpoena310

supervision149

SupplementalProvisions28

supplementaryagreement44–5

SupplyofGoodsandServicesAct1982130

surety49,175

suspensionofperformance190–91,291

tender1–8

considerationof3

errorin4

late1

low288

three287

unqualified73

withdrawalof3

terminationofemployment27–8,48,112–13,155,241–4,251,282,284–94

termsofengagement108–10,113,120,128,129,143,289

time

atlarge223,229–30

barred28–9

inadjudication305–6,307

oftheessence226–7

tort85

trust27,33,78–9,173–4

TrusteeAct1925173

TrusteeInvestmentsAct1961173

UnfairContractTermsAct197716,86,89,119,245

UnfairTermsinConsumerContractsRegulations199989

unjustenrichment316

valuation169–73,178–9,198–9,201,272,285

variation

terms,of60

work,of67–8,69,177

vicariousliability152

waiver202

warn,dutyto65–7

warranty41–2,47–9,157

work

covered146–8

omissionof125–6

openingup147,167,288

scopeof177–8

workmanship212