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Acknowledgement

First, I would like to express my gratitude with all my heart to Almighty god for giving me the
courage and the strength to complete this assignment. As far as I concern I think it is my
fortune following the course Quantity Surveyor at British College of Applied Studies. I think
BCAS is one of the institute seeks to give the best and updated knowledge in theory and
practice in the fields. This is the place where the future of all the students are lightened up.
Success behind the institution is always the result of the hard and dedicated services and of
all the personnel guiding its destinies. Behind all of this, there is always a person who guides
the institution in able manner. I would like to give my special gratitude to
Mrs. Mifaza Rizvi who was our course instructor, who was instructing us in a friendly
manner to achieve the target while fulfilling our knowledge. I want to remember my
class mates who were very co-operative while the group discussions which were another
way of gaining knowledge.

MM.Matheen
B/QS/07/13

Contents
Task 1.1 Discuss how/in what circumstances the law of tort applies to construction projects. 3
Task 1.2 Extract the legal positions of the parties in the given scenario.................................4
Task 1.3 Detail the remedies available under breach of contract............................................6
Damages in Contract Law...................................................................................................6
Duty to mitigate loss........................................................................................................... 7
Heads of damages.............................................................................................................. 8
Liquidated damages........................................................................................................... 9
Repudiation....................................................................................................................... 10
Rescission......................................................................................................................... 11
Specific performance........................................................................................................12
Task 2.1 Implied terms are significant in building contracts. Evaluate with appropriate
examples.............................................................................................................................. 14
Task 2.2 Discuss the importance and reasons for formation of standard forms of contract.. 15
Task 2.3 Identify the legal significant of BOQ in the formation of construction contracts......19
Task 3.1 Identify the ADR methods used in SRI LANKA in settling the disputes in the course
of construction process.........................................................................................................20
Task 3.2 Select Arbitration as one of the crucial methods of ADR and assess the pros and
cons of the method...............................................................................................................26
Task 4.1 Detail the legal and ethical responsibilities of the construction professionals to
develop a better contract administration...............................................................................27
Task 4.2 what do you mean by professional negligence? Discuss the consequences of
professional negligence in construction projects..................................................................28
Conclusion........................................................................................................................... 31
References........................................................................................................................... 32

Task 1.1 Discuss how/in what circumstances the law of tort


applies to construction projects.

(Class Room Activity)

Task 1.2 Extract the legal positions of the parties in the


given scenario.
For a contract to be legally binding it must contain some essential elements:

Offer:
Acceptance
Intention to create a legal binding
Consideration

Consideration means something which is of value given by a person in exchange for a


promise made to him. It is the element of exchange. And also in English law love, affection,
gaming, and betting are not considered as a consideration. A bare promise does not create a
legal duty as the English law defines that the promise has to give something in return for the
promise of the promisor in order to convert a bare promise made in his favour into a binding
contract.
The definition by lush J. in Currie vs. Misa (1875), : Some right ,interest, profit or benefit
accruing to the one party, or some forbearance, detriment, loss or responsibility given,
suffered or undertaken by the other.
Consideration divided into 3 parts.

Executory consideration: when a promise is made in return for another promise


Executed consideration: when one party performs his part and expects the other
party to perform his part.
Past consideration: When it is made subsequent to the completion of a particular
transaction

For the given task the Past consideration is much important to discuss. Because Ivor
Building Contractors employed saman and appu as the subcontractors to do a task,
but they were demanding additional 2500 charges for the completion of the project.
But they were accepted to do the work for 6000. In that time that was an Executory
consideration. After that they expected in last minute additional charges, the Ivor
agreed to pay. But in front of the law he was no need to pay, and also he could go for
some dispute resolution. Because he had a legal binding with subcontractors
(assumed) for the fixed price of 6000. Anyhow he was accepted. After the completion
he refused to pay the additional charge that he accepted to pay of 2500.
Here we have to see the past similar cases and about the rules with regard to consideration.
1. Consideration must not be past: Re McArdle (1951), Lampleigh v Braithwaite [1615]
2. Consideration need not to be adequate nut must be sufficient: There is no
requirement that the consideration must be market value, providing something of
value is given eg 1 given in exchange for a house would be valid. The courts are not
concerned with whether the parties have made a good or bad bargain: Chappell v
Nestle [1960]

3. Consideration must move from the promise: f a person other than the promisee is to
provide the consideration; the promisee cannot enforce the agreement: Tweddle v
Atkinson [1861]
4. An existing public duty will not amount to valid consideration: Where a party has a
public duty to act, this cannot be used as consideration for a new promise: Collins v
Godefrey (1831), unless the promisor goes beyond their duty: Glasbrook Bros v
Glamorgan County Council [1925], Ward v Byham [1956]
5. An existing contractual duty will not amount to valid consideration: If a party has an
existing contractual duty to do an act, this act can not be used as consideration for a
new promise: Stilk v Myrrick [1809], Unless the party goes beyond their existing duty:
Hartley v Ponsonby [1857], or if they confer a practical advantage: Williams v Roffey
Bros [1990], If the existing contractual duty is owed to a 3rd party this may be used
as valid consideration for a new promise:New Zealand Shipping v Satterthwaite
[1975], Scotson v Pegg [1861]
6. Part payment of a Debt: Part payment of a debt is not valid consideration for a
promise to release the debt in full: Part payment of a debt is not valid consideration
for a promise to release the debt in full: Pinnel's case 1602, Foakes v Beer (1883-84)

As I mentioned above, Re McArdle (1951) case is important to extract the scenario that has
given, in that case
Majorie McArdle carried out certain improvements and repairs on a bungalow. The bungalow
formed part of the estate of her husband's father who had died leaving the property to his
wife for life and then on trust for Marjories husband and his four siblings. After the work had
been carried out the brothers and sisters signed a document stating in consideration of you
carrying out the repairs we agree that the executors pay you 480 from the proceeds of sale.
However, the payment was never made.
Held: The promise to make payment came after the consideration had been performed
therefore the promise to make payment was not binding. Past consideration is not valid.
In the scenario Ivor also refused to pay more than 6000 to the saman and appu for
the work completion of carpentry. When saman and appu go for the litigation the
court will take the reference of Re McArdle (1951) case and it will declare that the Ivor
no need to pay. Because of the past consideration is not a valid.
But here another point can be argued, that is the saman and appu are deserving money for
their work. But An existing contractual duty will not amount to valid consideration, the Stilk v
Myrrick [1809] case also referred that based on public policy as if the claimants were already
bound to do it, then the defendant no need to pay for extra money.
And also as Hartley v Ponsonby [1857] case if the claimants had gone beyond their
existing contractual duty they have to be paid. But here no like that situation was
held.

Task 1.3 Detail the remedies available under breach of


contract.
Damages in Contract Law
Damages in contract law are a legal remedy available for breach of contract. Damages are
an award of money to compensate the innocent party. The primary purpose of damages in
contract law is to place the injured party in the position they would have been in had the
contract been performed.
Addis v Gramophone [1909] AC 488 House of Lords: The claimant was employed as a
manager by the defendant. The defendant in breach of contract dispensed with his services
and replaced him with a new manager. The claimant brought an action for breach of contract
claiming that the level of damages should reflect the circumstances in which he was
dismissed damaged his reputation and ability to find suitable employment.
Held: Contract law seeks to put the parties in the position they would have been in had the
contract been performed. He was therefore limited to claiming wages and loss of
commission during the contractually agreed notice period. There was no right to exemplary
damages or damage to reputation in contract claims. Such claims would have to be action in
the law of tort.
Lord Atkinson: In many other cases of breach of contract there may be circumstances of
malice, fraud, defamation, or violence, which would sustain an action of tort as an alternative
remedy to an action for breach of contract. If one should select the former mode of redress,
he may, no doubt, recover exemplary damages, or what is sometimes styled vindictive
damages; but if he should choose to seek redress in the form of an action for breach of
contract, he lets in all the consequences of that form of action: Thorpe v. Thorpe. One of
these consequences is, I think, this: that he is to be paid adequate compensation in money
for the loss of that which he would have received had his contract been kept, and no more.
An award of damages in contract law is subject to the application of the rules on causation,
remoteness and a duty to mitigate loss.

Causation: The Monarch Steamship v Karlshamns Oljefabrika [1949]


Remoteness: Under the rules of remoteness of damage in contract law set out in
Hadley v Baxendale, a claimant may only recover losses which may reasonably be
considered as arising naturally from the breach or those which may reasonably be
supposed to be in the contemplation of the parties at the time the contract was made:
Hadley v Baxendale (1854)

Duty to mitigate loss


The claimant is not permitted to allow their losses to mount up. They are under a duty to take
reasonable steps to reduce their loss:
Payzu v Saunders [1919]
By the terms of the contract, the defendant was to deliver goods to the claimant on a
monthly basis and the claimant was to pay for the goods within one month of delivery. The
contract was to run for nine months. The claimant received the goods at a discounted price
because he had committed to purchase from the supplier over the nine month period. The
claimant was late in making the first installment (This amounted to a breach of warranty not
entitling the defendant to repudiate the contract). The defendant refused to continue with the
original contract but told the claimant that he would deliver the goods in future if the claimant
paid cash on delivery and would still let him have the goods at the discounted price. The
claimant rejected this offer and purchased the good elsewhere at a higher price. He then
sued the defendant claiming the difference between the contractually agreed price and what
he actually paid for them.
Held: The claimant was not entitled to damages. He was given the opportunity to purchase
at the discounted price but rejected this. He was under a duty to take reasonable steps to
mitigate his loss. The offer was a reasonable one and one which the claimant could easily
have complied with.

Pilkington v Wood [1953]


The claimant purchased a house which turned out to have a defective title. Shortly after the
purchase he, obtained employment elsewhere and needed to relocate. He had difficulty in
selling the house due to the defect in title He brought an action against his solicitor for his
negligence in failing to notice the defect.
Held: The solicitor was liable for the difference in value between what it was worth without
the defect and what it was worth with the defect. However, he was not liable for the added
loss caused by the need to move as it was not in the reasonable contemplation of the parties
that he would move so soon after sale.
On the issue of mitigation: The claimant was entitled to sue the vendor, although the court
held there was no duty to sue the vendor in order to mitigate their loss arising from the
defendants negligence.

Heads of damages
There exist various heads of damage in contract law under which an amount can be claimed
to reflect different types of loss. These include loss of bargain, reliance loss, discomfort or
disappointment, inconvenience, diminution of future prospects, speculative damages and
liquidated damages.
Reliance loss: Where it is difficult to quantify the position the claimant would have been in it
may be possible to recover expenses incurred in reliance of the contract:
Anglia Television v Reed [1971]
The claimant, Anglia Television, engaged Oliver Reed to play the leading role in a television
play. Subsequently Reed pulled out and Anglia was unable to find a replacement. They
abandoned the play but had incurred expenses amounting to 2,750.
Held: Whilst damages generally seek to put the parties in the position they would have been
in had the contract been performed, the parties may elect to claim reliance loss and recover
expenses incurred in an abortive transaction. Thus Anglia was able to recover their
expenses from the defendant.
Discomfort, disappointment: Damages to reflect discomfort and disappointment can only
be claimed where enjoyment was part of the bargain of the contract eg holidays or a meal
out or entertainment. This most commonly seen in holidays which fail to meet the standard
the holiday maker was lead to believe would be enjoyed:
Jarvis v Swan Tours [1972]
Mr Jarvis, a solicitor, booked a 15 day ski-ing holiday over the Christmas period with Swan
Tours. The brochure in which the holiday was advertised made several claims about the
provision of enjoyment relating to house parties, a friendly welcome from English speaking
hotel owner, a variety of skiruns, afternoon tea and cakes and a Yodler evening. Many of
these either did not go ahead or were not as described. Mr Jarvis brought a claim for breach
of contract based on his disappointment. At trial, the judge awarded him 30 damages on
the basis that he had only been provided with half of what he had paid for and that no
damages could be recovered for disappointment. Mr Jarvis appealed.
Held: Where a contract is entered for the specific purpose of the provision of enjoyment or
entertainment, damages may be awarded for the disappointment, distress, upset and
frustration caused by a breach of contract in failing to provide the enjoyment or
entertainment.
Jackson v Horizon Holidays [1975]
Mr Jackson booked a 28 day holiday in Ceylon for himself and his family through Horizon
Holidays. The hotel turned out to be unsatisfactory for various reasons relating to
cleanliness and provision of services. The tr ial judge made an award for the disappointment
suffered by Mr Jackson, but stated he could not take into account the disappointment
suffered by his wife and children since they were not party to the contract. Mr Jackson
appealed.

Held: Mr Jackson was able to recover for the disappointment suffered by his wife and
children. This amounts to an exception to the rule of privity of contract based on the decision
in Beswick v Beswick (1968)

Inconvenience
Where the claimant has been put to physical inconvenience rather than anger or
disappointment that the defendant has not met his contractual obligation, the court may
award a sum to reflect such inconvenience:
Bailey v Bullock [1950]
A solicitor failed to take action to recover the claimants house. As a consequence the
claimant and his wife had to move in with his in-laws for two years.
It was held that he was entitled to recover damages to reflect the inconvenience of having to
live in overcrowded circumstances.
Barry J emphasised that there is a distinction between mere annoyance or disappointment
at the failure of the other party to carry out his contractual obligation and actual physical
inconvenience and discomfort caused by the breach.

Diminution of future prospects


Where a breach of contract adversely affects the claimant's future prospects, for example a
contract promising training and qualifications, a sum can be awarded to reflect the loss:
Dunk v George Waller [1970]
The defendant engaged the claimant under a four year apprenticeship to train him as an
engineer. The defendant terminated the contract before the completion of the contractually
agreed time. The claimant bought an action for wrongful dismissal.
Held: The claimant had been wrongfully dismissed. He was entitled not only to his wages for
the remainder of the contractually agreed period, but also a sum to reflect his lack of training
and the loss of opportunities that the completion of the contract would confer.

Liquidated damages
Parties to a contract may legitimately agree the amount of damages to be paid in the event
of a breach and provide for this in their contract terms. This provides certainty to each party
so that they know exactly what they are liable to pay should they be unable to perform their
obligations. Such a clause will be enforceable by the courts only in so far as it is a genuine
pre-estimate of loss. If it is a genuine pre-estimate it is known as a liquidated damages
clause. If however, the amount specified in the contract is not a genuine pre-estimate but is
aimed at deterring a breach of contract or punishing the party in breach, this is known as a
penalty clause which is not enforceable:

Dunlop v New Garage [1915]


The claimant, Dunlop, manufactured tyres and distributed them to retailers for resale. The
contract between Dunlop and New Garage contained a clause preventing New garage from
selling the tyres below list price. In the event that they were in breach the contract specified
that 5/. would be payable for each tyre sold below the list price. The defendants sold some
tyres below the list price and the claimant brought an action for damages based on the
amount specified in the contract. The defendant argued that the relevant clause was a
penalty clause and thus unenforceable. The trial judge held it was a liquidated damages
clause and awarded the claimant 5/. per tyre. The Court of Appeal reversed this holding that
the clause was a penalty clause and awarded the claimant 2/. per tyre representing the
actual loss suffered. The claimant appealed to the House of Lords.
Held: The clause was a liquidated damages clause not a penalty clause.

Murray vs Leisure play Plc. [2005]


Mr Morris was employed as Chief Executive Director. His employer dismissed him with 7
weeks notice. Under the terms of his contract of employment he was to be given 12 months
notice or paid 12 months salary in lieu of notice. Mr Murray sought to enforce this clause and
the employer argued the clause was unenforceable as a penalty. The trial judge followed the
principle in Cine Bes and held that in determining a penalty account had to be taken of Mr.
Murray's duty to mitigate his loss and therefore held the clause to be a penalty.
Held: The clause was not a penalty. The sum may have been generous but was not
unconscionable and may have taken into account the difficulty in obtaining alternative work
of equal value.

Repudiation
Repudiation is a remedy available for breach of contract. Repudiation involves bringing an
end to the contract. It is only available for breach of condition as oppose to breach of
warranty:
Bettini v Gye (1876)
Bettini agreed by contract to perform as an opera singer for a three month period. He
became ill and missed 6 days of rehearsals. The employer sacked him and replaced him
with another opera singer.
Held: Bettini was in breach of warranty and therefore the employer was not entitled to end
the contract. Missing the rehearsals did not go to the root of the contract.

Poussard v Spiers (1876)


Madame Poussard entered a contract to perform as an opera singer for three months. She
became ill five days before the opening night and was not able to perform the first four
nights. Spiers then replaced her with another opera singer.
Held: Madame Poussard was in breach of condition and Spiers were entitled to end the
contract. She missed the opening night which was the most important performance as all the
critics and publicity would be based on this night.
It may also be available for breach of an innominate term, where the breach substantially
deprives the claimant of the whole benefit of the contract.

Rescission
Rescission is an equitable remedy available at the discretion of the judge. Rescission seeks
to place the parties back in their pre-contractual position and thus represents an unraveling
of the contract. Rescission is available where a contract is voidable as a result of a vitiating
factor such as misrepresentation, undue influence or duress. The right to rescind may be lost
if the claimant affirms the contract, where a third party acquires rights in the goods, through
lapse of time or where restitutio in integrum is not possible.
Car & Universal Credit v Caldwell [1964]
Mr Caldwell sold his Jaguar car on 12th Jan to a rogue, Norris, who had paid 10 cash
deposit and left another car as security and gave a cheque for 965. The following day Mr
Caldwell went to cash the cheque and discovered it was fraudulent and the car left as
deposit turned out to be stolen. Mr Caldwell reported the incident to the police and used his
best endeavours to co-operate with the police to find Norris in order to rescind the contract of
sale. He also contacted the Automobile Association to try to locate the car. Norris had
acquired a voidable title to the car as the contract was induced by fraudulent
misrepresentation. Norris sold the car on to a third party on 15th Jan. The question for the
court was whether the actions taken by Mr Caldwell were sufficient to avoid the contract.
Held: Mr Caldwell had successfully rescinded the contract. He had taken all steps possible
to demonstrate that he no longer wished to be bound by the contract. He should not be
prejudiced by the fact that his endeavours failed to locate Norris.

Long v Lloyd [1958]


The claimant purchased a lorry from the defendant. The lorry was advertised in a newspaper
which described the lorry as being in exceptional condition. The claimant phoned the
defendant to arrange a viewing and was told it was in first class condition. He went to view it
the following day and was told it was capable of doing 40 mph and 11 miles to the gallon.
The claimant test drove it and found that the speedometre was not working and he had to
pull a wire for the accelerator as this was not working also. The claimant still decided to

purchase the lorry. On the first journey the claimant noted certain faults with the lorry and
contacted the defendant who offered to pay half the repairs. The claimant accepted this.
However, on a further journey the lorry broke down completely and the claimant wished to
rescind the contract and brought an action against the defendant for innocent
misrepresentation.
Held: By accepting the offer of payment for half the repairs when he became aware of the
defects, the defendant had lost his right to rescind as he had affirmed the contract.

Specific performance
Specific performance is an equitable remedy available at the discretion of the judge. It is an
order by the court requiring one party to perform their contractual obligation. Whilst it is often
said that contracts are made to be performed and parties should be held to their contractual
obligations, the courts are often reluctant to order a party to unwillingly perform the contract
and specific performance is only available in limited circumstances. In considering whether
to grant specific performance the courts look to whether damages would be an adequate
remedy, the type of contract and whether equity requires such an order.
1. Where damages are an inadequate remedy:
Nutbrown v Thornton (1805)
Cohen v Roche [1927]
If the claimant could adequately be compensated by an award of damages for the breach of
contract, the courts are unlikely to order specific performance.

2. Type of contract
Specific performance is most commonly ordered for contracts for the sale of land
The courts are unlikely to order specific performance for contracts for personal service.
3. Equity: Clean hands
Walters v Morgan (1861)
Lamare v Dixon (1873)

Injunctions
Injunctions are another form of an equitable remedy available only at the discretion of the
judge. There are three types:

Interlocutory or interim (temporary injunction until a court hearing)


Prohibitory (a court order that a party must not do something)
Mandatory (an order that a party must do something)

There is an overlap between mandatory injunctions and specific performance which has
been recognised by the courts. The courts will not grant an injunction in circumstances that
would in effect be an order for specific performance where it would not generally be allowed:
Page One Records v Britton [1968]
However, this does not prevent the ordering of a prohibitory injunction which may be an
indirect way of ensuring compliance with contract:
Lumley v Wagner (1852)
The court may sever terms and only order an injunction in respect of partial obligations:
Warner Bros v Nelson [1937]

Task 2.1 Implied terms are significant in building contracts.


Evaluate with appropriate examples.

(Class Room Activity)

Task 2.2 Discuss the importance and reasons for formation


of standard forms of contract.
The law provides a wide measure of freedom of contract so that parties are generally free to
choose their own terms. In practice parties rarely have either the desire or the ability to work
out all the terms which are required to govern their contract. If certain provisions are not
specified there may be a case for terms to be implied. But this can lead to uncertainty and
disputes. A much more convenient course is to use a standard form of contract.
In the construction industry, contracts almost invariably contain a set of standard conditions.
But in addition many other contractual provisions must be specially formulated. Other
matters, such as the contract price and the time during which the work is to be carried out,
will be agreed between the parties. In its final legal form a building or engineering contract
usually consists of a complex combination of standard conditions and specially prepared
terms.
The advantages of using standard forms of contract instead of composing a contract
document afresh for each project are:
The rights and obligations of both parties are set out clearly and to the required degree
of detail;
Because of standardization, frequent users are familiar with the provisions in a particular
Form, resulting in a greater degree of consistency in their application
Because they are written by legal experts, ambiguities and inconsistencies are reduced
to a minimum;
The time and expense which would otherwise be incurred in preparing a fresh document
for each occasion is avoided.

Types of Standard forms of contract


ICTAD (Institute of Construction Training and Development).
JCT (Joint Contract Tribunal).
FIDIC (Federation International Des Ingenious-Conceals).
ICE (Institution of Civil Engineers).
ICTAD (Institute for Construction Training and Development)
The Institute for Construction Training and Development (ICTAD) is an organization set up
by the Government of Sri Lanka to develop and promote the domestic Construction Industry,
Contractors, Professionals, Work Force, etc. ICTAD has established itself as a recognized
and important constituent of the Construction Industry.

ICTAD standard forms several types .This types mainly SBD forms. This SBD forms mainly
four types.
Standard Bidding document for minor contracts ICTAD/SBD/03
o

Recommend for use on construction contracts up to Rs.10million.

Standard Bidding document for procurement of works ICTAD/SBD/01


o

Recommended for use on construction contracts between Rs.10 million and Rs. 150
million.

May be used for works of higher values which are not of a complex nature.

Standard Bidding document for major contracts ICTAD/SBD/02


o

Recommended for use on construction contracts over Rs.150 million and for
contracts of a lesser value, which are of a complex nature.

Standard Bidding document for design and build contracts ICTAD/SBD/04


o

Recommended to use for contracts where the contractor is responsible for the design
and construction of the works on specified approvals obtained from the employer.

The joint Contracts Tribunal (JCT)


The Joint Contracts Tribunal (JCT) was established in 1931 and has for 79 years produced
standard forms of contracts, guidance notes and other standard documentation for use in
the construction industry. The JCT has eight member bodies representing a broad section of
the industry and its users. These members include the British Property Federation, the
Construction Confederation, the Royal Institute of British Architects, and the Royal Institution
of Chartered Surveyors JCT widely used in the United Kingdom. The JCT several types are
available in 1931 to 2010.
Federation International design engineers Counsels (FIDIC)
The FIDIC forms of contract commonly used internationally. The conditions produced by the
international federation of consulting Engineers are intended for use internationally. They are
broadly based upon the ICE. The organization was founded in 1913 by France, Belgium and
Switzerland. The UK did not join until 1949. The first edition of the Conditions of Contract
(International) for Works of Civil Engineering Construction was published in August 1957
having been prepared on behalf of FIDIC and the FIBTP. The first edition of FIDIC
Conditions of Contract for Works of Civil Engineering Construction (use Red Book in the
following) was compiled in 1957, and later its second, third, and fourth edition were issued in
1963, 1977, and 1987 respectively.

Main types of contracts


Red Book Construction (for Building and Engineering Works)
Yellow Book E&M
Orange Book Design & Build and Turnkey
Silver Book EPC / Turnkey
This scenario suitable standard form of contract ICTAD /SBD/04. The ICTAD/SBD/04 totally
based on the design & build procurement method. In our project procurement method also
design and build method. The ICTAD/SBD/04 easily used for extension projects or law coast
projects. This ICTAD standard form based on the FIDIC standard form so the ICTAD
standard form recognized methods are available.
The standard form of contract important for the construction contract. The standard form of
contract is the legal and recognized document. This document main document of the
contract. While this document based total contract activities done. The construction contract
activities based on the law (Legally) and standard form of contract based on legal condition.
The construction contract main elements based on the construction activities based E.g. The
construction payment method. This method totally based project types. This case payment
there are several types available interim payment, advance payment, retention payment and
final payment this information totally based on the standard form of contract and contract
types. The construction contracts easily include this information. While standard form of
contract both parties( client and contractor) agreed document and legal document so
construction contract legally binding time no any problem.
Other important factor standard form of contract including construction activities major parts.
The construction contract preparation times easily prepared while based on the standard
form of contract done all the construction information included in the contract. The standard
form of contract following used following advantages are their
Slandered forms of contracts several types but some types are recognized. This recognized
types commonly use in the world. While the standard forms of contract common document
the entire person easily understand. E.g. the big scale project in France this project open
tendering but based on the FIDIC forms. While the FIDIC forms of contract internationally
recognized document. Other advantage this contract all the types of contractors applying the
several countries. This time no any conditions the contractors applying the contract based on
their country contract condition so this method not suitable. While the consultant or client
facing more problems. While they know the slandered forms of contract documents
(internationally recognized documents). But this contractors apply the contract based on
their country slandered documents this documents not understand the France client or
consultant.
In recent decades there have been many calls for the construction industry to adopt a single
standard form of contract. The advantages of using standard form contracts are that they
avoid much of the cost of a bespoke contract they reduce the cost of tendering enhance the
contractors confidence in the arrangement and contain fewer unforeseen anomalies.

The contractors followed the same order or standard. This methods easily for the
construction activities E.g. the tendering the contractors based on ICTADSBD/04
prepare the tender document. So this time all the contractors based this form of
contract. The consultant easily handling the tender document. The forms of contracts
not use every contractor different methods prepare the documents. E.g. ICTAD/SBD /
04 acceptable for performance bond bank guarantees. But not use the stander forms
some time contractors use not acceptable matters. However, many advantages to be
gained by using a standard form of contract.

Sometime contractor client facing some problems in the payment matters. This time
consultant solves this problem based on the forms of contract while this document both
parties recognized document.
Some advantages are:

The standard form is usually negotiated between the different bodies that
Make up the industry. As a result the risks are spread equitably.

Using a standard form avoids the cost and time of individually negotiated
Contracts.

Tender comparisons are made easier since the risk allocation is same for each
Tendered. Parties are assumed to understand that risk allocation and their
Prices can be accurately compared.

Task 2.3 Identify the legal significant of BOQ in the


formation of construction contracts.

(Class Room Activity)

Task 3.1 Identify the ADR methods used in SRI LANKA in


settling the disputes in the course of construction process
1. Negotiation
Negotiation is thus a form of alternative dispute resolution. Broadly speaking, Negotiation is
an interaction of influences. Such interactions, for example, include the process of resolving
disputes, agreeing upon courses of action, bargaining for individual or collective advantage,
or crafting outcomes to satisfy various interests.
Negotiation involves two basic elements: the process and the substance. The process refers
to how the parties negotiate: the context of the negotiations, the parties to the negotiations,
the relationships among these parties, the communication between these parties, the tactics
used by the parties and the sequence and stages in which all of these play out. The
substance, however, refers to what the parties negotiate over: the agenda, the issues, the
options, and the agreement reached at the end.
In my selected site even though the contractors tried to solve the problem through the
negotiation, the owner of land didnt agree due to some reasons.
Advantage
i.

No cost

ii.

Least time

iii.

High confidentiality

iv.

No documentation to be maintained

v.

Both parties are win (win-win situation)

vi.

No such legal document & lawyer

Disadvantage
i.

Dispute is not analysed by a third party

ii.

Dispute is not technically evaluated

iii.

No any legal frame work

iv.

No specific proceedings how to conduct

Most of the Sri Lankan small projects are solving their disputes through this
Negotiation method. Some of the Big projects also using this method, Anyhow for
large scale projects it is not a suitable method always.

2. Mediation
Both sides are brought together, often in neutral surroundings, and encouraged by a trained
mediator to settle their dispute amicably. This is often use in neighbour disputes and in
family disagreement. Some of these schemes are operated by charities such as Mediation
UK.
A mediator is appointed jointly by the parties, and will normally meet with the together and
separately in an attempt to resolve the differences. It is a non-adversarial process which
tends to forge good relationships between parties. This, in turn might then pave the way for
shorter and possible less acrimonious arbitration or litigation.

Advantage
i.

Least cost

ii.

Least time

iii.

Third parties involvement is there as a facilitator

iv.

Free to discuss the issues

v.

Less preparation in document

vi.

Privacy can be maintained

Disadvantage
i.

Dispute is not analysed by a third party

ii.

Dispute is not technically evaluated

iii.

The

mediator

may

not

be

professional

for

the

issue

The Mediation is another famous method in sri lanka to solve the problems in construction
industry. By the Ministry of Justice of Sri Lanka has approved the mediation commission
under ACT, NO. 72 OF 1988. For more details about the Mediation commission please visit
below link:
http://www.justiceministry.gov.lk/index.php?
option=com_content&view=article&id=49&Itemid=64&lang=en

3. Conciliation
Conciliation is somewhat similar process to mediation. But the conciliator will actively
participate in the discussions between the parties offering views on the cases put forward.
There are no private meetings between the individual parties to the dispute and conciliator.
The conciliator will recommend how the dispute should be settled where the parties fail to
reach agreement. This is more informal method than mediation. No any legal background
and conciliator gives some advice.
Advantage
i.

It is free, independent and voluntary

ii.

It can result in a binding settlement

iii.

It avoids the stress of the legal process

iv.

Settlements can include elements not available at tribunal, for example references
and agreements to return property

v.

Conciliators are impartial and do not take sides

Disadvantage
i.

There is no sanction on either side for not conciliating, and it can be difficult to get
some parties to agree to conciliate

ii.

Complainants might not get an opportunity to meet with their employer face-to-face,
as most conciliation take place by telephone

iii.

Settlement requires the consent of both parties

In srilanka This Act may be cited as the Conciliation Boards Act, No. 10 of 1958.
Operation of this Act
(1) This Act shall be in operation in every village area and in such other areas as may be
determined by the Minister of Justice by Order published in the Gazette.
(2) This Act shall be in operation in any area determined by the Minister of Justice under
subsection (1) subject to such modifications of its provisions as may be set out in the Order
by which such determination is made.
(3) In subsection (1), the expression "village area" has the same meaning as in the Village
Councils Ordinance.

4. Adjudication
Adjudication is the legal process by which an arbiter or judge reviews evidence an
argumentation including legal reasoning set forth by opposing parties or litigants to come to
a decision which determines rights and obligations between the parties involved. Three
types of disputes are resolved through adjudication.

1. Disputes between private parties, such as individuals or corporations.


2. Disputes between private parties and public officials
3. Disputes between public officials or public bodies

Advantages
i.

Least cost compare to litigation

ii.

The dispute is analysed in detail by an expert / professional

iii.

Least time

iv.

Produces more fair and consistent resolution

v.

Grounded in the public judicial system

Disadvantage
i.

Identified as a second class adjudication and not popular in terms of the long
procedures

ii.

Decisions markers are lack expertise in the area of disputes resolution

iii.

Results win- lose out comes

5. Arbitration
Arbitration proper is to be distinguished from various less formal process met in construction
contract. The essentials of arbitration are that there must be a dispute, which is referred to
and independent arbitrator for decision, usually after hearing the parties and receiving any
evidence they wish to put forward. His decision is final, subject to review by the court. When
parties arbitrate; they agree to be bound by the decision of one or more impartial arbitrators.
Each side is permitted to submit documents, witnesses and other evidence. The arbitrator
renders a decision after all the evidence has been heard. There is considerable debate
about the advantages of arbitration over litigation

Duties of the arbitrator

The arbitrator must confirm to certain minimum requirements (that the arbitrator should in
fact be unbiased and should act so as to convey this impression to the parties) of
fairness and impartiality.

He should give each party an opportunity of dealing with every relevant point.

He must take a sufficient note of the evidence and argument to enable him to determine
the issues and to deliver a reasoned award.

Advantages of the arbitration

Privacy: Arbitrations are held in private. Therefore, confidential business information of


both parties is kept privacy. But litigation process is cause damage resulting from
adverse publicity.

Expertise of the arbitrator: The decisions from Arbitration procedure tend to be more in
keeping with actual practice in the area under dispute because, arbitrator will be a
technical expertise person. In litigation, a judge lacking detailed technical knowledge
may be appointed.

The Arbitration procedure approach requires the agreement of all participates to a


resolution of the dispute. The emphasis is on the finding a business rather than a legal or
adversarial solution to dispute but in litigation it cant be.

It will probably narrow the scope of dispute and reduce the risk on gathering information
and synthesis the requirements for litigation.

Disadvantages of the arbitration

The parties must agree upon one of the Arbitration procedure method to resolve
where disputes arise.

The decisions of Arbitration procedure methods are not legal binding except
arbitration. But in litigation which legally is binding.

The awarding may be some sort of favourable for either party in Arbitration
procedure. But in litigation court will decide based on evidence presented together
with relevant legislation.

Arbitration procedure process awards have fewer enforcement remedies than


judgments in litigation.

In the arbitration process, if there is a panel of arbitration it will take more times to
hearing which can lead to delays in long cases

The parties need to pay arbitrators, medications and conciliators which add an
additional layer of the legal cost.

If agreement is not reached the process will be a waste of time, effort and expense.

The court will generally always be able to offer a sound opinion on a point of law. In
arbitration, the arbitrator may of course seek the opinion of the courts. But this could
easily overlook in which case a mistake could occur.

In arbitration, an arbitrator does not have the power to bring in to arbitration a third
party against his wishes. The courts are always able to do this.

In Sri Lanka, Arbitration also one of the famous dispute resolution method. Institute for the
Development of Commercial Law and Practice (ICLP), SRI LANKA NATIONAL
ARBITRATION CENTRE are the famous arbitration committees.

2. Litigation
All persons doing business in the jurisdiction of a court of law. Although it may be difficult for
lay persons to understand the system in place and the system may be costly, the law always
provides a mechanism to resolve a dispute.

Litigation is the process of solving the matter through the legislative courts. Litigation results
in a win or loss. Therefore one party will be happy while the other party will be unhappy
consequently often they become enemies for life. The process has lot of disadvantages in
comparison to the Arbitration because of its rigidity. Further the judge may not be able to
scrutinize the matter professionally with regard to the Construction Practices due to
inadequate knowledge of the field and thereby may take more time.

Advantage
i.

Final decision is not questioned or argued

ii.

Dispute is analysed in the frame of legal aspects based on the governed law

Disadvantage
i.

Sophisticated form of settlement

ii.

Very expensive

iii.

Time taken

iv.

Long procedures to follow

v.

No flexibility during the hearing

vi.

Everything may depend on that the reasonable person would do

Decision makers are not expert in the area of the dispute

This is the Final stage of the dispute resolution finding level. Commonly it is also
considerable method to solve the construction problems in Sri Lanka. It is suitable for small
to large scale projects.

Task 3.2 Select Arbitration as one of the crucial methods of


ADR and assess the pros and cons of the method.

(Presentation)

Task 4.1 Detail the legal and ethical responsibilities of the


construction professionals to develop a better contract
administration.

(Class Room Activity)

Task 4.2 what do you mean by professional negligence?


Discuss the consequences of professional negligence in
construction projects.
Damages for breach of contract are not the only means by which general principles of law
allow recovery of monetary compensation. There are a variety of other general principles
that can also provide monetary compensation, depending on the circumstances. In the
construction industry, one of the most commonly relied upon principles is the law of
negligence. The tort of negligence is not concerned with a breach of a contract, but with
wrongful acts. In fact, there need not be a formal contract at all, as long as it can be shown
that one person owed a duty of care to another and that the duty of care has been breached.
There are four basic requirements to establishing an action in negligence, namely that:

one person owes a duty to take reasonable care to another;


the duty of care has been breached;
the breach of duty caused injury or damage to another; and
The loss sustained was not too remote a consequence of the breach of duty.

Duty of care
The contractual obligations which parties owe to each other arise by reason of the decision
to enter into the contract with another person. It is only the other party to the contract who
can complain about a breach of the contract. A duty of care arises by reason of a decision to
undertake a particular activity, for example construct a building. People who are affected by
the activity will potentially be able to complain about a breach of a duty of care. The person
complaining may also have entered into a contract or may be a stranger. The law places
limits on the categories of people who can complain about a breach of a duty of care.
As noted above, there are a wide range of duties of care which one person may owe to
another. These may include a duty to maintain a safe working place or to provide a certain
professional standard of work.
Determining if a duty of care exists first requires the consideration of whether a party owes a
duty of care to one or more categories of person defined by the courts. Some categories,
such as between an employer and employee or professional and client, are well established.
However, the courts are able to create new categories by analogy to existing categories or
by consideration of various facts and public policy.
Breach of duty of care
Once it is found that a duty exists, it will be necessary to consider what standard is required
of the person owing the duty of care. This is subjective and is determined by considering
what a reasonable person would have done in the position of the person owing the duty of
care. The test is not what a perfect person would have done.

It should be noted that the standard of care may be deemed to be higher if the person is a
professional or holds themselves out as possessing a certain level of special skill. In that
situation, the standard required would be what that type of person would be reasonably
expected to have.

Causation
Once a breach has been established, it must be shown that any loss was caused, or at least
materially contributed to, by the negligent act. It may be that there are a number of parties
who materially contributed to the loss. Accordingly, damages may be apportioned according
to each person's liability.
Finally, any award of damages may be reduced to the extent that a person themself
contributed to the loss. This is referred to as contributory negligence.
EXAMPLES
The operation of the law of negligence is best illustrated by way of examples. The following
are potential situations for a principal, contractor or architect:

A superintendent gives incorrect information to a contractor digging a trench for


cables. The contractor fractures a water pipe and the neighbour's property floods.
The superintendent may be liable to the contractor for breaching a duty to give
correct information.
A contractor builds defective foundations for a house. The house is later sold by its
owner to a subsequent new owner who discovers significant structural issues with
the house which were unknown before that time. The contractor may be liable to the
second owner for his non-compliant workmanship, even though the contractor only
had a contract with the original builder.
A principal partially demolishes a building on its site and leaves it unsecured. The
building is left derelict and children play in it from time to time. This is to the
principal's knowledge. A fire is later lit by the children, damaging an adjoining
property. The principal may be liable to the adjoining property holder on the basis that
it had a duty to not damage neighboring property and this reasonably required, given
the children playing in the building, security measures to be taken.

CASE STUDY
Brickhill v Cooke [1984] 3 NSWLR 396
Facts

The prospective purchasers of a property engaged an engineer to inspect the


property and prepare a written report.
The engineer concluded that the property was structurally sound.
After the property had been purchased, the new owners discovered that the property
was not structurally sound and that the engineer had failed to identify five structural
defects.

Result

The engineer's failure to identify the structural defects, which should have been
apparent on any reasonable inspection, meant that the engineer failed to perform the
inspection with the reasonable degree of competence expected of a professional
engineer.
The engineer's duty of care in relation to negligence existed alongside the engineer's
contractual obligations.
This overlap between negligence and contract will be particularly apparent where a
contract expressly or impliedly requires a professional person to use due care and
skill.
The court ultimately determined that the engineer was liable to the new owners under
the terms of their contract.
The court also recognised that the engineer could be liable to the new owners in
negligence.

Conclusion
In this assignment, there are basic construction laws included in our task. Therefore, we got
some books from out site and referred some notes from those books. In my assignment
included five tasks as given below:
Law of tort application
Judging a situation problem with the scenario
Legal significance of the documents of a contract
Nature of dispute
Select the relevant resolution method to administer the disputes

Professional Negligence

I got all knowledge about Construction Law subject. This is the good opportunity for me.

References
A.V.ATKINSON, Civil Engineering Contract Administration, 2nd Edition 1992,
Published by Hutchinso &co. P(4-14) and (96-100)

JOHN UFF, Construction Law", 5th edition 1991, London Sweet & Maxwell. P(3945), (78-115), (210-245) and (328-350)

KELITH MANSON, Law For Building Practitioners, Published By B.T Batsford


Limited.

STEPHANIES OWEN, Law For The Construction Industry2nd Edition 1997, Publish
Pearson Education Limited.P(40-63)

E-lawresources.co.uk (no date)


(Accessed: 9 November 2016).

Available

at:

http://www.e-lawresources.co.uk/

Negligence
minter
Ellison (2008)
Available
at:
http://www.constructionlawmadeeasy.com/Negligence (Accessed: 9 November
2016).