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Construction contracts
Chapter One The Law of Contract - Construction Contracts 1.0 Introduction
To be in the position of having to deal with the concept of the Contractor Design portion (CDP) one must be party to a binding construction contract. Therefore, it is opportune at this stage to outline in summary fashion, the Law of Contract as it applies in Scotland, offering some historical background and context, thus illuminating an understanding of the underpinning legal framework and principles applicable to a simple Building Contract, prior to more in-depth analysis of SBC/Q/Scot later in subsequent Chapters.
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a simple understanding on the requirement for an indication of unconditional assent to the proposal contained in the offer. When this unconditional assent is communicated to the offeror, a contract is duly formed. If a purported acceptance does not meet the terms of the offer, it is a deemed to be a counter offer, and there is therefore no contract.
I believe if one were to take all the cases, and they are many, it will be found that in all of them the law is raising an implication from the presumed intention of the parties with the object of giving to the transaction such efficacy as both parties must have intended that at all events it should have." In relation to a construction contract, many terms will be implied by acts such as the Housing Grants, Construction and Regeneration Act 1996 and the Sale and Supply of Goods Act 1994. In addition, many terms will be implied on a contractor in areas such as to the standard of work and fitness of purpose of materials, this will be discussed in more detail in later chapters with specific reference to SBC/Q/Scot though it may be argued that the use of standard forms renders the chance of implied terms unlikely as a result of proactively dealing with the 'usual' terms common to a construction contract.
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Architect Quantity Surveyor Engineers / Specialist Consultants Project Manager Clerk of Works Planning Engineer Contractor Sub-contractors
All of those as noted above will play a key role in the CDP process however this will be discussed in greater detail in subsequent chapters.
While there are some criticisms of industry standard forms there are few and it is difficult to argue against the advantages as noted above, in particular with regard to building contracts.
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is necessary to now focus upon the Standard Building Contract with Quantities for use in Scotland (Revised May 2006), which introduced the concept of the CDP via the JCT suite of Contracts introduced in 2005.
1.8 The Standard Building Contract with Quantities for use in Scotland (Revised May 2006) (SBC/Q/Scot)
It is essential to understand that this (SBC/Q/Scot) is based upon the JCT 05 Standard Building Contract as issued by the Joint Contracts Tribunal. The JCT's Memorandum of Association states that the main object of the company is: To develop, publish, procure the publication, revise and disseminate in both paper and electronic form suites of standard forms of contract and tender documentation and practice notes......" However, in Scotland most building contracts are entered into on the Scottish Building Contract Committee (SBCC) standard forms. The SBCC produce Scottish versions of the majority of the JCT standard forms, including the contract that heads this section. These days the SBCC versions are not published as Scottish Supplements to be read into the JCT form, they are now stand-alone contract documents[22]. The SBCC mirror the earlier JCT statement for the production of Scottish Contracts and is made up of a similar group of building industry stakeholder members as follows: Association of Consultancy and Engineering The Association of Scottish Chamber of Commerce The Convention of Scottish Local Authorities The National Specialist Contractors Council - Scottish Committee The Royal Incorporation of Architects in Scotland The Royal Institution of Chartered Surveyors in Scotland Scottish Building Scottish Casec The Scottish Executive - Building Division The Law Society of Scotland
The fact that each of the members of JCT will always have competing interests and viewpoints encourages the production of contracts by JCT, and subsequently SBCC, that are acceptable to Architects, Contractors and Employers. As detailed earlier Scots Law has its own peculiarities, as such the SBCC make changes to JCT contracts in order to bring them into line with Scots Law and Legal Process with all clause numbering remaining common through equivalent SBCC and JCT contract forms. The main areas of difference are brought about because of the Scots Law third party rights (common law) concept of jus quaesitum tertio and also Arbitration provision.
Chapter Two Design Liability - Common Law / Contractual Comparison 2.0 Introduction
If one is to fully understand the obligations of contracting parties operating under the CDP option of SBC/Q/Scot then it is essential to understand where liability should lie in the event of design failure. Architects, Engineers and of course Contractors hold common law obligations with regard design duties many of which will vary from that as prescribed by the CDP process, therefore this chapter will attempt to provide contrast and significant detail on the standard of care and professional standards expected in the delivery of construction design. In essence SBC/Q/Scot, even with its optional CDP recital, is a traditional procurement
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methodology. This would mean that the standard of care to be observed by the any design team would be that of 'reasonable skill and care', similarly contractors would be expected to carry out works with due skill and care while using good quality materials. It is therefore useful to look at this in more depth and compare to other standard form contractual obligations with regard to design with comparison to those obligations that clearly exist at a common law level. Contractors who deliver design will unavoidably be faced with being judged against one of three standards: An obligation to deliver a design that is fit for purpose An obligation to deliver a design using reasonable skill and care An obligation to deliver a design to a standard specified in the contract.
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contains any contrary express terms. This is because while it will be fairly easy for a court to imply the higher standard of obligation into any package deal contract, this will not over-rule any contrary express terms and one must be clear that both current JCT and SBCC Design & Build contracts hold specific contrary express term at clause 2.17.1. This clause makes it clear that any main contractor's liability goes no further than that which would be incurred by an architect or.other appropriate professional designer holding himself out as competent to take on work for such design". SBC/Q/Scot deals with this at clause 2.19.1 and replicates this for CDP works which will of course be discussed in more detail throughout this dissertation. In addition, both ICE 7 and GC/Works/1 have similar terms and it should be noted that these terms reduce or limit the contractors design duties to 'reasonable skill and care' and furthermore does not extend to a warrant that the completed works will be fit for their intended purpose. In complete contrast, the concept of Partnering and the ACA standard form at Clause 3.1 guarantees fitness for purpose.
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contractual drawings are afforded protection at clause 2.17.3 on proviso that, at the time of uncovering any non-compliance between these documents and legal requirements, prompt notification is given to the contract administrator. This will be discussed in more depth in the following chapter in relation to how this applies when the CDP optional recital is used. One final note with regard reasonable skill and care must be made in respect of the fact that the obligation is not limited to the substantive design, this refers to the need to apply this standard of care to his choice of what he is to design. This became an important issue in the case of Platform Funding Ltd v Bank of Scotland plc (formerly Halifax plc)[42] where a surveyor produced a professionally competent valuation but in doing so based it on the wrong premises. This means that the designer has this same obligation with regards interpreting his client's requirements in deciding on how to progress the production of any design.
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The Schedule The Contract Bills The Agreement and Conditions together with (if applicable) the Employer's Requirements the Contractor's Proposals the CDP Analysis
Construction contracts
One final clause worthy of mention, in relation to express obligations and terms, is clause 2.19.3 which enables contracting parties to concur and insert, within the contract particulars, a financial limit with regard to contractor liability for part of employer liabilities associated with any defective design, design work to dwellings is excluded.
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Obligation to Check
Contractors are often provided with partially complete designs by architects, something which is often overlooked by contractors as an area of significant risk in terms of forgetting to check design integrity. Often the impact of this will be to lead the contractor towards a design solution that will in effect mean he has completed a design partly chosen by the Architect, this may be seen as completing what is termed as an embryo design prepared by others. The case of Cooperative Insurance Society Ltd v Henry Boot (Scotland) and Others[50] deals with this issue: someone who undertakesan obligation to complete a design begun by someone else agrees that the result, however much of the design work was done before the process of completion commenced, will have been prepared with reasonable skill and care. The concept of 'completion' of a design necessityinvolves a need to understand the principles underlying the work done thus far and to form a view as to its sufficiency" However, as the contract in this case was JCT 98 and we are focussing on SBC/Q/Scot one must highlight the difference afforded under the latter form of contract. As a result of clause 2.13.2 any contractor undertaking CDP works is afforded some protection in that he is relived of responsibility for the contents of the employer's requirements, and also any prior duty to check the contained design. It is noted that JCT introduced this clause and its effect as a result of feeling unease, brought about by the Henry Boot case.[51]
Chapter Three The Contractor Design Portion - Contractual Process 3.0 Introduction
As discussed earlier, it was JCT 05 and subsequently SBC/Q/Scot that enabled the employer to give to the contractor portions of design work. Clearly this decision will be one taken by the project architect with the expressed authority of the employer. One must be mindful of the engagement of architect with client and the personal contract that it creates in that, unless he expresses otherwise, he will indeed expect the architect to the design work he has been appointed to do. It is worthy of note that in the case of Moresk Cleaners v Thos Henwood Hicks[52] the court held that an architect who required a contractor to design a concrete floor had no implied employer authority to delegate his design responsibility notwithstanding the complexity or specialist nature of the element of the works. This prompts some of the key questions set by this dissertation, when does it become mis-use of the CDP option to allocate elements of design work to the contractor? Are there specific design elements that should remain sacred to the architect? Are some architects simply using the CDP tool as a method to offload responsibility and thus bid for projects at a reduced fee level to secure work? Moreover, the requirement for express authority to be provided by the employer prior to the allocation of CDP elements is an excellent starting point and key indicator of the need to follow the contractual protocol and process of the CDP procedure with rigour while retaining a clear understanding of the various contractual obligations that flow from the contract. This chapter will now discuss and outline the processes and requirements of successful application of CDP contractual protocol. In essence, it is suggested that the CDP process is akin to the SBC/D&B in that employer sets out his need via a set of requirements to which the contractor responds with a proposal to meet the identified employer requirements.
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requirements may include the following:
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Partially completed or 'concept' designs that the contractor is to complete. Site location for the proposed CDP works, an employer require to be specific with regards location e.g. precast concrete stairwells or glazed walkways as opposed to those that may be left more to the contractor's imagination such as a sprinkler water storage tank. A process or procedure must be detailed, if relevant, to allow the contractor to notify of any potential part wall notification disputes arising from any contractor designed site boundary deep-foundations or party wall works. Site waste removal requirements should be detailed allowing the contractor to comply with any site waste removal or auditing requirements therefore assisting with client and contractor obligations under The Site Waste Management Plans Regulations 2008[54]. Details of the exact purpose of the building and the work to be designed by the contractor should be considered worthy of inclusion. The case of J Murphy & Sons Ltd v Johnston Precast Ltd[55] highlights the importance of this, it involved a sub-contractor installing pipework which was not suitable for an 'alkaline environment' and being held to not be liable for the eventually defective pipework as a result of being unaware of this requirement. Mechanism for the adjustment of Provisional Sums. Planning restrictions or notes should be included, however the contractor will be prudent to check for himself in respect of this bearing in mind his already detailed obligations in these matters. While the contractor is under a duty to find out about the site in order for him to professionally undertake his allocated design works, the employer may consider it to include site information and the extent to which it may be relied upon the contractor mindful that express or implied warranty may be provided to the contractor as to the sufficient nature or accuracy of the information[56]. It may be prudent to request information or a list in relation to sub-contractors or consultants whom the contractor will use to carry out design works on their behalf, this assuring compliance with clause 3.7.2. Information on how the employer would like to see the contractor's proposals and analysis presented and required information to be contained will assist in the future evaluation of valuations. Design submission procedures as detailed at clause 2.9.3, schedule 1, should detailed and any variance or amendment to them should be clearly outlined. Exact definition as to the standard of quality to be achieved, as per chapter two section 2.4 of this dissertation and the already cited cases of Rolls Royce and also Conoco Phillips Petroleum Co Ltd[57]. Under SBC/Q/Scot there is no requirement for 'approval' of any contractor design, there is the ability for the architect to comment as he says fit however. It may be argued that to an architect may seek to approve elements which may impact on aesthetics to ensure that the employer receives what he or she wants, going any further than this may be straying into matters that are the responsibility of the contractor. The case of Crown Estates Commissioners v John Mowlem & Co. Ltd[58] held that elements required to be to the satisfaction of the architect automatically become and an employer risk item following the issue of the final certificate. Therefore while it may make sense to include for employer approval of items such as colour schemes or door finishes one must take great care in matters where subsequent liability or potential risk may lie e.g. fire protection of void spaces. Finally, any employer who wishes to invite contractor led alternative specification proposals should ensure that this is set out clearly within the employer's requirements.
It cannot be stressed how important it is for any employer to ensure the accuracy and of any design information included within the employer's requirements, compliance with this is vital as a result of the already detailed exclusion of responsibility and implied duty as per clause 2.13.2. From the items as noted as worthy of inclusion in any employer's requirements documentation it is clear that this must be considered fully by clients and must not be dismissed as irrelevant because there is no set guidance with regard suggested content. It is therefore essential to provide enough information so as to prevent any misunderstanding and thus heighten the chance of the client receiving exactly what he wants from the CDP works as allocated while integrating fully with all other employer led design works.
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research project or build theory or philosophy[59]. It may be explained further as being the infrastructure within which research is conducted. Put simply, the research paradigm will provide the foundations of the research, therefore it must be viewed as critical that the most appropriate theory is selected if value is to be added and ultimate success achieved.
Phenomenology
Phenomenology takes an inductive approach to research by attempting to gain an understanding of the meanings people attach to events. forwarded the view that the world and reality are not objective and exterior, but that they are in fact a social creation with meaning being given to it by humans. Thus phenomenology is often used as a way of understanding the reality or perhaps the reality working behind them"[60] As detailed earlier, phenomenology is an inductive approach involving one collecting data and developing thoughts, ideas and theory from the analysis of qualitative data collected during the research process. Within the context of this research topic phenomenology was the most appropriate research paradigm. This was as a result of wanting to understand the deep feelings and views held by those involved. It is viewed as a soft method of research and an explicitly more touchy-feely approach to research. The main features of this type of qualitative approach are: It involves the search for significant themes running through disparate sources. It results in a holistic understanding of the situation: of the factors involved and how they interrelate, identifying the less obvious issues as well as those, which initially grab your attention. It demands that you take your informants seriously in their own language, and from their own point of view, superseding your own personal and project related preconceptions while your gathering data, no matter how legitimate these preconceptions may be. It seeks to discover how people understand the situation or issue you are investigating, and how that understanding guides their actions. It seeks to develop knowledge by linking the accounts people give to an underlying body of theory.
Secondary Data
A full review of available literature was carried out in order to understand fully the concept of CDP Works and it's related legal obligations and supply evidence of current thinking on the subject matter. In turn this enabled a clear evaluation of the situation within the chosen case study area as a result of having a clear theory to test collected data on. It is therefore clear that the literature review forms the foundations on which the research has been built. It should be noted that all literature results and findings were constantly reviewed in order to provide the necessary impetus required in building theory relevant to the aims and objectives of the research.
Primary Literature
This area was limited to the reviewing of: Project Progress Meeting Minutes
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Financial monitoring reports / Claim Documentation Employers Requirements & Contractor's Proposals
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Secondary Literature
This involved a review of available and relevant publications on the subject matter, such as: Academic Books. Legal Journals . Academic Journals Relevant Case Law
Tertiary Literature
Normal sources of tertiary literature such as abstracts, bibliographies and catalogues were reviewed. In addition University electronic information sources were utilised to obtain information from data bases such as Westlaw and I-Law.
Semi-Structured Interviews
Semi-structured interviews were conducted on a one-to-one basis. This provided the opportunity to ask questions relevant to the subject matter, with the added attraction of allowing the interviewee the opportunity to divulge further information after their initial response. Digital recording of interviews was proposed, but it was stressed that if any participant were not at ease then the recorder would be promptly switched off. However the sample did include many that have at one time undertaken research and understood the benefits the researcher would gain from taping the interview. Interviews lasted around 30 minutes and were carried out within a relaxed and cordial office atmosphere with minimal distraction. In total xxx interviews were carried out with some of the main actors from the contracting parties. Selection was based on knowledge and understanding of current CDP issues generally and how they impact on the overall project management process. It should be noted that the sample included people from a cross section of key informants from the Contractor, Designers and Client representatives. The following breakdown clarifies invited participants:
Director of Operations - Contractor (1) Contractor Project Managers. (2) Employer Project Manager (1) Professional & Technical Project Directors (2) Consultant Architect (1)
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A total of seven Key Informant interviews were carried out with a range of individuals to test the hypothesis. This approach differs from other forms of interview mainly because respondents are selected on the basis of their specialist knowledge, rather than being randomly chosen to sample the issues under investigation. It should be noted that the researcher was involved with many of the main players on a day-to-day basis, which allowed for the constant piloting of questions.
Practitioner-Researcher Observation
This method was available as a result of the author assuming the theoretical role of Practitioner-Researcher as detailed by Saunders et al[62] As a result of being involved in the current project procurement process allowed for constant observation and a clear understanding of the complexity the projects being undertaken and the CDP elements being carried out on them. Observation clearly allowed the researcher the ability to continually record, analyse and interpret people's behaviour and as a result was clearly of some benefit.
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