December
2001
Contents
What is Lawbuild?
Who are you?
News and views
Tips and tricks
A glossary of construction law
expressions: A is for ...
Introducing our featured article
Site unseen: some practical
problems associated with ground
conditions
How to contact Lawbuild (or unsubscribe)
What
is Lawbuild?
Lawbuild is a specialist construction
law practice offering expert advice and services to anyone
carrying out or lending money for construction, and to any
buyer, seller, landlord or tenant of recently built or refurbished
property. We are experienced, thorough and professional.
Our aim is to save clients time and money, and our charges
are very reasonable.
Lawbuild is equally at home with contracts
for services and with any non-specialist contract.
Lawbuild's Principal, David Lewis, has more
than 25 years' experience in construction law.
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Who are you?
We are sending this newsletter to a number
of people we know in the property and construction sectors
and the legal profession, and to selected members of BNI
(Business Network International). Even if you don't instantly
recall the names "Lawbuild" and "David Lewis" (though we
hope you will), the chances are that you have met us before,
and probably in the past few months.
We hope you will find this newsletter of
interest to you, but if you prefer not to receive future
issues you may easily "unsubscribe" by emailing us to that
effect.
In any event, please feel free to forward this newsletter
to anyone else who you think may like to receive it.
And we shall be glad to add that person to our mailing list
for future newsletters (we plan to do one every couple of
months or so) if you or they will send us their email address.
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News
and views
Site deaths up 30% since safety rules
introduced. Annual deaths on British construction sites
have risen from 81 when planning supervisors came on board
in 1995, to 106 in 2001. This new (and compulsory) member
of the design and construction team has nothing to do with
town and country planning but was introduced by the 1994
CDM regulations - The Construction (Design and Management)
Regulations, to give them their full name - to promote safe
design and a health and safety plan for most projects.
Because these EU-required site safety rules don't seem to
be reducing the carnage on our building sites, leading construction
industry reformer Sir John Egan is recommending their overhaul.
Does this mean that planning supervisors will be abolished?
Not necessarily: the CDM regulations follow closely their
parent EU directive, and it may be that planning supervisors
and the rest of the CDM paraphernalia are with us for keeps.
Small print could mean big losses. The Unfair
Contract Terms Act 1977 (UCTA) invalidates unreasonable
limitations and exclusions of liability in standard written
terms of business, which can leave contractors with unlimited
liability to developers. In Watford Electronics v. Sanderson
the Court of Appeal found an IT supplier's exclusion
and limitation to be reasonable. Lord Justice Chadwick
said that where experienced businessmen representing substantial
companies of equal bargaining power negotiate an agreement,
they should be taken to be the best judges of the commercial
fairness of that agreement. The court should in these circumstances
be slow to intervene to substitute its own judgment.
The Court of Appeal's decision should give
pause to developers who haven't bothered in the past to
resist exclusions or limitations in standard form contracts,
believing that in any dispute it would be easier to argue
that they fell within UCTA and were unreasonable. This
approach, never wise, would be even less wise following
Watford Electronics v. Sanderson.
Leading City solicitors Norton Rose are being sued for more
than £1m by the New Millennium Experience Company (NMEC)
on the grounds that they allegedly gave bad advice,
forcing the Dome operator to pay compensation to a contractor.
In 1997 NMEC terminated its contract with roofing contractor Koch Hightex, who
were to supply a PVC roof membrane. NMEC opted instead for the Dome's famous
Teflon roof. Advised by Norton Rose, NMEC fought Koch Hightex's claim but ended
up paying costs of £8,000 and paying £1.3m to settle the case last year.
NMEC is now suing Norton Rose for £1,293,200 in damages, which includes Koch
Hightex's legal fees of £200,000, its loss of profit and its own legal fees
of £250,000, paid to Norton Rose during the litigation. NMEC accuses Norton
Rose of drafting a contract which allowed Koch Hightex to recover loss of profits
or overheads from NMEC on termination and of giving negligent advice during
Koch Hightex's court battle.
The writ says that it was essential that contracts could
be terminated "without cause", and that any compensation
payable to contractors on the termination of letters of
intent or contracts should be limited to the cost of work
done. NMEC claims that the Koch Hightex contract failed
to meet this requirement.
A Norton Rose spokesperson said: "Norton
Rose and its insurers are defending vigorously the proceedings
that have been commenced by NMEC. A defence has been served
already."
How did the World Trade Center collapse? The
terrorist attacks on Manhattan and the Pentagon on 11 September
2001 will continue to have enormous human, political, military,
and world-historical consequences. And the collapse of
the twin towers of the World Trade Center may also have
significance for the construction industry.
Tim Wilkinson, Lecturer in Civil Engineering
at the University of Sydney, has noted that
photographs of the south tower just as it is collapsing
show clearly that the building is falling over to the left,
whereas the north tower collapsed directly downwards, on
top of itself. While the likely cause of failure of
both towers was the combination of impact and subsequent
fire damage, it is possible (says Wilkinson) that a storey
on only one side of the south tower initially collapsed,
resulting in the "skewed" failure of the entire
tower.
The two airliners hit the towers about three-quarters of the
way up their 110 storeys. Top British structural engineer
Gordon Masterson says that structural damage from these
impacts, and the searing heat of blazing aviation fuel,
then combined to bring down the top 20 or so floors. Masterson
says that each floor weighed 2,500 tonnes and that the accumulating
weight would have caused both buildings to collapse, floor
by floor, faster and faster.
According to Masterton, it is "entirely possible"
the hijackers knew where to hit. "The papers on the
design and construction of the World Trade Center are readily
available in the public domain and the perpetrators appear
to have had access to skilled resources in all sectors,
including piloting planes perhaps, so nothing would surprise
me," he said.
On Thursday 13 December at 9:00pm Channel 4 is screening
a one-hour documentary called "How the Twin Towers Collapsed", which describes
the construction of the World Trade Center and asks engineers whether the design
of the twin towers exacerbated the impact of the aerial strikes.
Return to Contents of this Newsletter
Tips and tricks
In this section of our newsletter we highlight some common problem
or procedure in the construction industry, and suggest ways
of tackling it. This issue's topic is for contractors who
wish (and who doesn't?) to avoid paying liquidated and ascertained
damages (LADs) for delay in completing the works. To do
this, you must establish one or more grounds for an extension
of time - "Relevant Events", in JCT terminology. And, as
always when doing anything under a building contract, it
is vital to read the contract and to comply with
its requirements.
If you are a contractor claiming an extension
of time for compliance with employer's or architect's instructions
under a JCT 98 contract, or for late instructions, you will
need to comply with all or some of this lengthy checklist:
1. Work
out which clause of the contract obliges the employer to
give the instruction: e.g. clause 12.3 of JCT 98 WCD, which
requires the employer to give instructions in regard to
the expenditure of provisional sums. [Our authority for
this is clause 25.2.1 of JCT 98 WCD.]
2. Give
the employer a written request for an instruction, information
etc. (RFI). An oral request at a site meeting is not enough,
even if minuted. [Clause 25.4.6.]
3. Give
the RFI not too long and not too short a time before the
instruction is needed to enable the contractor to complete
on time.
This is rather vague, to say the least. What the contract actually says is
this: "provided that such [request is] made on a date which having regard to
the Completion Date [is] neither unreasonably distant from nor unreasonably
close to the date on which it [is] necessary for [the contractor] to receive
the same". In this context "Completion Date" means the contractual date for
completion as so far extended. [Clause 25.4.6 of JCT 98 WCD. The corresponding
clauses of other JCT contracts may differ to some extent]
4. Give
the employer written notice as soon as it becomes reasonably
apparent to you that the progress of the works is being
or is likely to be delayed by the instruction. [Clause
25.2.1.]
5. Make
sure the notice identifies the Relevant Event (these are
listed in clause 25.4). [Clause 25.2.1.]
6. Give
- in the notice or subsequently - written particulars of
the expected effects of the Relevant Event. [Clause 25.2.2.1.]
7. Estimate
- in the notice or subsequently - the extent of any expected
delay in completing the works resulting from the Relevant
Event. [Clause 25.2.2.2.]
8. Keep
this information up-to-date by notifying the employer of
any changes. [Clause 25.2.3.]
Return to Contents of this Newsletter
A glossary of construction law expressions: A is for
...
Adjudication
A statutory dispute resolution method. The Construction Act (Part
II of the Housing Grants, Construction and Regeneration
Act 1996) allows any party to a building contract, subcontract
or appointment to refer a dispute to an adjudicator, who
must then be appointed within seven days and must reach
his decision within a further 28 days. The adjudicator's
decision is binding unless and until the dispute is resolved
by a judge or arbitrator.
Agreement for lease
An agreement between a landlord and a tenant for the letting of
premises. Often requires the landlord to procure collateral
warranties in favour of the tenant (and occasionally vice
versa), sometimes as a precondition for completing the
lease.
Agreement for sale and purchase
An agreement between a seller and a buyer for the sale and
purchase of a property. Often requires the seller to procure collateral warranties
in favour of the buyer, sometimes as a precondition for completing the sale.
Appointments
The agreements between clients and consultants (meaning any
architect, engineer, quantity surveyor, or planning supervisor). Main provisions
relate to the consultant's services, to fees, and where appropriate to the consultant's
duty to provide collateral warranties in favour of lenders, buyers and tenants.
Arbitration
Building contracts and subcontracts often require disputes
to be referred to arbitration instead of the courts.
The main problem with arbitration is that it can be difficult
or impossible to join other parties into the proceedings (e.g. where an employer
sues a contractor, the contractor may allege breaches of contract by a designer
or subcontractor and wish to join them as co-defendants). For this reason Lawbuild
omits arbitration clauses where possible.
Architect
The principal designer.
Under traditional contracting the architect acts as contract
administrator during the construction period.
Assignment
The transfer of legal rights under an agreement; for example,
where an employer assigns a building contract (or, technically, the benefit
of the building contract) to a buyer of the site. Before the assignment can
take effect, the buyer must give notice to the contractor.
The effect of the assignment (continuing this example) is
that the buyer can now sue the contractor under the building contract. The
employer can no longer enforce the building contract; but he remains liable
to the contractor because the employer can't assign his liability without
the contractor's consent (he can only assign his rights or benefit).
Generally, if an agreement contains no prohibition or restriction
on assignment, each party may freely assign its benefit
in the agreement to whomever it pleases, and assignees may
assign further.
Return to Contents of this Newsletter
Introducing our featured article
In this our first newsletter we begin at
the bottom, with the literally fundamental issue of ground
conditions.
Until the law of gravity is repealed, buildings
will continue to rest on land, and the stability and utility
of every proposed new building will continue to depend upon
the condition of that land: its ability to support the structures
to be erected on it, and the extent to which it may be polluted
or contaminated.
Now read on ...
Return to Contents of this Newsletter
Site unseen: some practical problems associated with
ground conditions
Since 1st April 2000 whoever "caused or knowingly permitted"
the presence of contaminating substances is initially responsible,
under the Environmental Protection Act 1990 section 78F,
for carrying out necessary remediation works to contaminated
land. But if that person cannot be found, responsibility
lies on the owner or occupier of the land.
Where land is being developed under a construction
contract, it is important to allocate the risk of problematical
ground conditions between the developer and the contractor,
i.e. to decide whether or not the contractor shall remedy
those conditions at his own cost.
It is equally important for the construction
contract to say whether or not the developer is responsible
for any information he may have supplied to the contractor
about site conditions.
The various standard-form engineering contracts do attempt to
allocate these risks, though not always with crystal clarity.
The JCT forms of building contract, however, are silent
about them. It is common for standard-form contracts to
be amended, or for wording to be inserted in the contract
documents, to cover the risks. Otherwise, and generally
speaking, a design and build contractor is more likely to
bear the risk of adverse ground conditions discovered after
the start of works than a contractor working under a traditional
form of contract, under which these risks remain largely
with the developer.
Developers commonly appoint a site investigation consultant to
inspect the site and provide a report which will be included
in the contract documents. If adverse conditions appear
later that were not anticipated in the report the contractor
may argue successfully that he was entitled to rely on the
report.
The developer's appointment of the site investigation
consultant is frequently effected by correspondence: often
a bare letter which does not require the consultant to provide
warranties in favour of third parties (or to maintain any
professional indemnity insurance to cover his negligence).
When the property comes to be sold, the developer may provide
the buyer with a copy of the site investigation report.
If the report "clears" the site, the buyer will want to
be able to rely on it. But the report alone will usually
be of little or no benefit to the buyer (except as "comfort")
because there is no contract between the buyer and the site
investigation consultant.
Most buyers will therefore require a direct warranty from the
site investigation consultant. The developer, however,
may be unable to procure such a warranty if the appointment
does not require the consultant to provide one.
Consequently the developer
may have no alternative but to assign (i.e. transfer the
benefit of) the consultant's letter of appointment to the
buyer.
This will not necessarily satisfy the buyer,
who would probably prefer a formal warranty, executed as
a deed with a twelve-year limitation period (a letter of
appointment would normally be under hand and could be legally
enforced only during a six-year period) and with a covenant
by the consultant to maintain professional indemnity insurance
for a specified minimum sum during the limitation period.
Developers can minimise these problems: first,
by stating in the building contract that the contractor
carries the risk of unstable or contaminated ground conditions,
should make his own inspections, and should not rely on
any site investigation report commissioned by the developer.
Secondly, the site investigation consultant's
appointment should require him to provide warranties in
a specified form in favour of any lender, buyer or tenant
(with a clause permitting assignment of the warranty).
A developer should avoid relying on case law, which is far from
settled, to determine the allocation of ground condition
risks. It is much safer for the developer and contractor
if the building contract clearly allocates these risks and
allows the contractor to rely on a site investigation report;
and if the appointment of the site investigation consultant
expressly requires warranties in favour of lenders, buyers
and tenants in a specified form.
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How
to contact Lawbuild (or unsubscribe)
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All feedback is very welcome.
We would like to hear from you if you have any comments, queries, corrections
or suggestions!
Here's how to get in touch with us:
Email
newsletter@lawbuild.co.uk
(better than replying to the email enclosing this newsletter
because when we print your reply we'd rather not end up
printing the entire newsletter!)
Phone
020 8346 6424
Fax
020 8346 0745
Mobile
078 8775 7606
Post
David Lewis
Lawbuild, solicitors
37 The Grove
LONDON
N3 1QT
Website
www.lawbuild.co.uk
