Legal Issues in Construction Contract: Risks, Variations, and Suspension

Construction finally began on the tasting room in mid November 2018 but Mr Andre was concerned that the height of the ceiling and location of the feature stairwell would not accommodate all of the state of the art equipment he had bought. Mr Andre called his Engineer at Elite Engineers Limited (EEL) and asked him to change the design of the tasting room to make sure it could accommodate the new equipment.

Problem question

Please answer the following questions. Yes or no answers to the below questions are not acceptable. Please explain each of your answers with reference to the contract NZS 3910:2013, the class materials, the relevant chapters of Thomas Kennedy-Grant and the cases distributed in class (if any).

Issue One

1. Who bears the risk of bad weather under this construction contract? Please explain. If you consider both parties bear some risk of bad weather, please explain why you hold that view.

1. PDL wishes to claim an extension of time due to the circumstances described above that delayed PDL from commencing work on Site:

(a) Please explain the steps that PDL should take in relation to claiming its extension of time. Please make reference to the relevant clauses in NZS 3910:2013 in your answer.

(b) You can assume that PDL has claimed an extension of time for the period between 30 July 2018 and 6 August 2018. If you were the Engineer to the Contract, would you grant the extension of time for that period? If your answer is no, what period would you grant the extension of time for? Please explain your answer.

Note any assumptions you have made and/or any further information you may require.

2. In relation to your answer to 2(b) above, is PDL entitled to compensation for time-related costs? Please explain.

Issue Two

3. In relation to the change in design of the tasting room, what are the requirements of ordering a variation? Please make reference to the relevant clauses in NZS 3910:2013 in your answer.

4. What principles apply to the valuation of variations? Please make reference to the relevant clauses in NZS 3910:2013 in your answer.

ASSIGNMENT TWO: PART 2 (15 marks total)

Short answer questions

1. Pick 3 common forms of pricing arrangements, and describe the key features for each. (3 marks)

2. Payment Schedules must be issued in a format that meets the Construction Contracts Act 2002 (CCA) requirements. What are these requirements and which section of the CCA can these requirements be found? (2 marks)

3. What is the difference between ‘Joint and Several Liability’ and ‘Proportionate Liability’? (2 marks)

4. Explain two benefits of the Construction Contracts Act 2002 payment regime for each of the Payer and Payee. Where applicable, include the relevant section of the CCA: (4 marks)

(i) the Payer; and

(ii) the Payee.

5. What are the consequences for the Contractor of Contract Works being legitimately / validly suspended under NZS 3910:2013? (4 marks)

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ASSIGNMENT TWO: PART 3 (15 marks total)

Problem Scenario:

Splash Enterprises Limited (SEL) is a company which specialises in the development of swimming complexes. SEL wants to develop a new water theme park in central Auckland called “Splashin’ Safari”. At the end of 2019, after months of going through concepts with a leading architecture firm, SEL sends out a Request For Tender (RFT) to commence the tendering process. Gray Construction Limited (GCL) is the only company to submit a tender, and so is selected as contractor for the “Splashin’ Safari” project.  

SEL and GCL enter into a construction contract on NZS 3910:2013 General Conditions, with no amendments (the Contract). Under the Contract, possession of the Site (and commencement of the construction period) is set for 6 January 2020.

SEL was responsible for conducting specified enabling works (i.e. excavation work) and SEL and GCL agreed that possession of the Site could not be granted until these enabling works were finished. SEL engaged Excavation Plus Limited (EPL) to conduct the enabling works (again under an unamended NZS 3910:2013 construction contract).

EPL’s team had a particularly celebratory new year holiday and failed to complete the enabling works by 6 January 2020. SEL notified GCL that it would let GCL know when the enabling works were finished and that it could not grant possession of the Site until then (which did not happen until 5 March 2020).

GCL emailed the Engineer to the Contract requesting a suspension of the Contract Works due to them not receiving possession to the Site.

Questions:

With reference to the relevant clauses in NZS 3910:2013 and law, please discuss:

1. How the Engineer should respond to GCL’s suspension request;

1. The remedies available to GCL and how these are assessed (including as to both time and cost); and

2. Whether GCL can cancel the contract and why/why not.