Standard Forms Of Contract And Avoiding Disputes In The Construction Industry Are Crucial For Smooth Operations. (70 Characters)

You are still working with Anyway Construction Limited (a main contractor organisation) and have been appointed as the head of the contracts management division of the company. The company is currently undertaking a project in Edgbaston in Birmingham which is facing some challenges. Your director fears the project is likely to delay, go over budget or finish with poor quality of work due to these challenges.

A.After completing the BNV7127 module, you know that standard forms of contracts used in the construction industry have been designed to ensure the three key requirements of project success (time, cost and quality) are met. Meeting these requires a mechanism for allocating roles to prevent disputes which will have a negative effect on projects. From your knowledge of contracts, analyse the implications of the roles of the parties to a construction contract in relation to avoiding disputes relating to one of the following:

Time
Quality
Cost
You are required to use contract clauses, legislation, cases and academic references (where appropriate) to support your analysis (Word Count, 700 Words).

B.An incident has occurred on the project site due to negligence on the part of workers on your site. During the excavation works on November 20th, cables running through the site were (mistakenly) cut by your team and this led to power outage affecting shops and other dwellings within the area. One of the shop owners on the street has written a formal letter to your manager regarding a suit he is preparing against your company for the negative effect of your negligent action on his business. He is claiming 50,000 for the damage caused to his goods and for the lack of business as the shop had to close for a day.
Your manager wants you to analyse the situation and advise on the legal implications of the action of the site team (Word Count 700, Words).

C.Your manager wants to set up a contract with a sub-contractor and wants to know which Alternative Dispute Resolution (ADR) mechanism to adopt for the contract.
You are required to discuss two forms of ADRs and their suitability for managing disputes between a main contractor and a sub-contractor. As part of your answer, your manager wants you to draft an ADR clause which can be inserted into the contract.
 

The importance of following standard forms of contract in the UK construction industry

A.The standard forms of contracts used in the construction industry of UK are designed in a manner so as to make certain that the three basic requirements for the success of the project are proper met, and these three are time, cost and quality. These are crucial for avoiding any disputes which could have a negative impact over the project. In order for the parties to avoid disputes under construction contract, there is a need to follow the time aspect. There is a need for the contracting parties to abide by the time frame provided in the contract otherwise a dispute would be raised. Thus, the parties need to avoid any kind of delays in order to avoid conflict being raised between the parties (Haar, Levine and ‎ Laney, 216).

At the end of the day, the construction contracts are merely contracts and thus there formation requires the presence of basic elements of contract, which are provided under the common law of contract. These include offer, acceptance, consideration, clarity, consent, capacity and intention of the parties (Clarke and Clarke, 2016). In context of the time element, it is important for the parties to state in a clear manner in the contract the time map or the important dates related to the construction project. In case there is an ambiguity in this, the same could result in the contract being inoperable. Also, where the time period covered under the contract is not followed properly, the other party can bring an action of breach of contract and claim damages from the other party, in form of monetary compensation (Stone and Devenney, 2017). The best option in this regard is to follow the standard forms of contract and the details of time as are required under such contracts, to be followed (Haar, Levine and ‎ Laney, 216). There is a need to follow the standard provisions regarding time in the JCT Standard Building Contracts, which includes headings like adjustment of completion date. Stating this clearly would help in avoiding disputes, which could be raised due to lack of clarity on this issue. There is a need to structure the provisions of time and delay extensively. This is in context of possession of site, progress of work, completion of work and the like (Law Teacher, 2018). 

In order to avoid any kind of dispute from being raised between the parties, the standard contract form provides the parties to clearly state the starting date, the date of completion, the accessing date and if required, any sectional completion. Both the JCT and the NEC provide the damages to be awarded for the late competition of project by the contractor. It is crucial for the parties to thus provide these details in a clear manner and follow them properly to avoid any dispute being raised in the future. The contractor needs to submit the master programme for the execution of work, whilst the NEC requires a more detailed set of documents in this regard. It is thus important to adopt one of these and follow them properly, to avoid the chances of breach of contract being raised (NEC, 2017). Under the Construction and Regeneration Act, 1996, the contracting parties are given with a statutory right for referring their disputes to adjudication (UK Legislation, 2017).  So, instead of doing to the court, the parties should opt for alternative dispute resolution method to resolve the matter. 

Key elements of a contract and avoiding breach of contract

Where a dispute is raised, in cases of delay, there is a need to analyse the fault of the parties. When it so happens that a contractor is delayed owing to two events in which one is his own fault and one is the risk of the employer, the employer gets the entitlement to extension of time. This approach was given in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 ConLR 32, QBD (TCC). As per this approach, in cases where the contract is silent on the entitlement of contractor to extension of time, the contractor-risk event and the employer-risk event become concurrent, where both of these cause delay in the construction work. And in such cases, the contractor is entitled to be given an extension of time for entire period. Thus, the employer needs to avoid such instances where they make a mistake, along with the contractor, as the project would be extended for the entire period. This is particularly a negative implication as along with time, resources also have to be deployed to correct the mistake, which results in additional costs. Another key aspect which has to be avoided by the employer is for their delay to take place before the contractors, as that would result in the contract being given their float, instead of being deprived of the same, as was held in Royal Brompton Hospital National Service Trust v Hammond & Ors (No. 9) (2002) EWHC 2037 (TCC) (ICLG, 2017). Another important aspect is London Borough of Merton v Stanley Hugh Leach Ltd which provided that architects have to consider the events which could result in delays and for grant of proper extension of time. This is particularly in context of the clause 2.29 mentioned relevant events (Law Teacher, 2018). 

B.The main issue of this case revolves around the legal implications owing to the accident which took place on the company under the tort law of negligence.

Negligence is covered under the common law of tort, which denotes a civil wrong done. In negligence, there is a breach of duty of care owed by one person to another person which results in injury or harm to the other person, particularly when the risk of harm was foreseeable in a reasonable manner (Turner, 2013). When a case of negligence is made by the plaintiff before the court, the court awards them with damages for such harm caused, which could be both physical and economical (Greene, 2013). It is not easy to establish a case of negligence and the plaintiff is required to show before the court that there was presence of certain key elements, like the duty of care being owed, the breach of it, harm or injury being caused, reasonable foreseeability of harm or injury, proximity between parties, and direct causation (Best, Barnes and Kahn-Fogel, 2014).  

Legal implications of negligence under the common law of tort

For establishing a duty of care, reference needs to be placed on the leading matter of Donoghue v Stevenson [1932] UKHL 100, or as is known as the “Snail in the Bottle” case. In this case, Donoghue had been served with ginger beer bottle at a cafe, which was purchased by her friend, and the same had been manufactured by the defendant. Upon drinking the concoction, Donoghue fell sick and sued the defendant, as the bottle had a dead snail in it. The court held the presence of duty of care for defendant towards the plaintiff as there was both proximity and reasonable foreseeability of such harm (Kolah, 2013). A contaminated drink is bound to make the consumer ill; the consumer manufacturer relationship has proximity; and there was also direct causation here as the plaintiff fell sick due to the defendant’s failure in upholding his duty (Statsky, 2011). 

The next step is to show is that this duty was contravened and it resulted in harm for the other party. In this matter, reference needs to be made to Paris v Stepney Borough Council [1951] AC 367. In this case, the defendant was aware that the plaintiff was blind in one eye, and still they failed in making available the necessary safety gear to the plaintiff. When the plaintiff was carrying on the work for the defendant, a rusty bolt fell in his eye and blinded him completely. This was seen as a breach of duty of care by the defendant, resulting in significant injury for the plaintiff, which was not remote (Martin and Lancer, 2013).

Vicarious liability is also a crucial principle based on which the employer can be made liable for the acts of the employee, provided they are undertaken within the scope of employment by the employee (Lunney and Oliphant, 2013).

In the given case study, the workers were undertaking the work on the site, and so anything they did there became the responsibility of the company due to the principle of vicarious liability. It was their duty to carry on the work in a careful and diligent manner, as not doing so was reasonable foreseeable to cause economic and physical harm to the parties in proximity to such site. When they mistakenly cut the wire, resulting in power outrage, any loss which reasonably resulted from this would be the liability of the company. The economic loss sustained by the shop owner would thus be the liability of the company. And where the shop owner brings a case before the court, he would have to be awarded the claimed upon amount of damages. 

Vicarious liability in the construction industry

Thus, the company would be liable to pay the shop owner, the sum of 50,000 towards the damages incurred by them, owing to the negligence of workers, which becomes the liability of the company due to operation of principle of vicarious liability. However for the opportunity loss, damages cannot be claimed. Thus, it is advised to the company to pay the claimed upon amount, and avoid the costs of litigation.  

C.Alternative Dispute Resolution (ADR) is the manner of solving disputes, by adopting certain forms of it, without going for a formal mode of litigation. The two key forms of ADR are arbitration and mediation (Nolan-Haley, 2013).

In arbitration, the disputes between the contractor and sub-contractor are solved by referring the matter to an arbitrator, or arbitration panel. In the construction industry, often the construction contracts cover an arbitration clause, which provides the name of the arbitrator, or the manner in which the arbitration panel would be adopted. The decision of arbitration is known as the arbitration award and this has to be followed by the parties (Gramberg, 2006). Where the construction contract provides for arbitration to be used for solving the disputes, the matter has to be referred to the arbitration before litigation is adopted. An example of adjudication clause which can be included in the contract is given below (CIArb, 2017):

“Within 7 days of the Notice the Referring Party shall refer the dispute to the adjudicator” 

There are a number of merits and demerits of opting for arbitration as a method of solving disputes. The merits include the confidentiality and privacy of matter, as these are not recorded publically as is done with litigation; it not only saves times, but also the costs; and the arbitrator can be selected by the disputes parties based on their choice. The demerits of arbitration include the lack of arbitration award being legally binding, as is the case with the court orders; a person cannot appeal against arbitration award and would have to make a case before the court, which beats the advantage of this method being cost and time efficient; and often this process replicates court procedures, making it a lengthy process (Ware, 2016).

The other form of ADR which can be opted in cases of disputes in construction industry is mediation. In this form, the parties in the dispute take the matter before a mediator, who attempts to solve the dispute through the use of different negotiation skills and techniques. As is the case with arbitration, this form also is cost effective and confidential. And again, the decision of mediator cannot be imposed upon the parties, which means that the dispute has to be taken to the court for the same to be resolved. The choice of mediator can also result in another dispute, which is not a problem in arbitration cases, as in cases of dispute, the parties to arbitration chose one arbitrator each and these chosen arbitrators mutually chose the final arbitrator, making an arbitration panel of three arbitrators (Kramer, 2016). 

References 

Best, A., Barnes, D.W., and Kahn-Fogel, N. (2014) Basic Tort Law: Cases Statutes and Problems. 4^th ed. Frederick, MD: Wolters Kluwer Law & Business.

CIArb. (2017) Dispute Resolution Clauses. [Online] CIArb. Available from: https://www.ciarb.org/docs/default-source/das/contract-clause.pdf [Accessed on: 19/12/17]

Clarke, P., and Clarke, J (2016) Contract Law: Commentaries, Cases and Perspectives. 3^rd ed. South Melbourne: Oxford University Press.

Gramberg, G.V. (2006) Managing Workplace Conflict: Alternative Dispute Resolution in Australia. New South Wales: The Federation Press.

Greene, B. (2013) Course Notes: Tort Law. Oxon: Routledge.

Haar, R.T., Levine, M., and ‎ Laney, A. (2016) Construction Insurance and UK Construction Contracts. 3^rd ed. Oxon: Routledge.

ICLG. (2017) Construction & Engineering 2017. [Online] ICLG. Available from: https://iclg.com/practice-areas/construction-and-engineering-law/construction-and-engineering-2017/england [Accessed on: 19/12/17]

Kolah, A. (2013) Essential Law for Marketers. 2^nd ed. United States: Kogan Page Limited.

Kramer, H. S. (2016) Alternative Dispute Resolution in the Work Place. New York: Law Journal Press.

Law Teacher. (2018) Time And Delay Related Provisions Under JCT. [Online] Law Teacher. Available from: https://www.lawteacher.net/free-law-essays/contract-law/time-and-delay-related-provisions-under-jct-contract-law-essay.php [Accessed on: 19/01/18]

Lunney, M., and Oliphant, K. (2013) Tort Law: Text and Materials. 5^th ed. Oxford: Oxford University Press.

Martin, J., and Lancer, D. (2013) AQA Law for AS Fifth Edition. 5^th ed. Oxon: Hachette UK.

NEC. (2017) A comparison of NEC and JCT. [Online] NEC. Available from: https://www.neccontract.com/getmedia/3d1b7c3f-097d-4504-8b1f-5a944dbc19dc/A-comparison-of-NEC-and-JCT.pdf.aspx [Accessed on: 19/12/17]

Nolan-Haley, J.M. (2013) Alternative Dispute Resolution in a Nutshell. 4^th ed. Minnesota: West Academic.

Statsky, W.P. (2011) Essentials of Torts. 3^rd ed. New York: Cengage Learning.

Stone, R., and Devenney, J. (2017) The Modern Law of Contract. 12^th ed. Oxon: Routledge.

Turner, C. (2013) Unlocking Torts. 3^rd ed. Oxon: Routledge.

UK Legislation. (2017) Housing Grants, Construction and Regeneration Act 1996. [Online] UK Legislation. Available from: https://www.legislation.gov.uk/ukpga/1996/53/contents [Accessed on: 19/12/17]

Ware, S. (2016) Principles of Alternative Dispute Resolution. Minnesota: West Academic.