Construction Law - Construction Planning, Programming, and Control - Essay Example

Construction Law 490795) Introduction The construction industry is a very large industry that employs organisations and professionals of differentbackgrounds. For the effective working of a construction project a close synergy should exist between different consultants, contractors, professional advisors and ultimately the clients. The annual output of the UK construction industry is pegged at approximately 114 billion pounds which constitutes 9% of the Gross Domestic Product. (GDP). (Construction Planning, Programming and Control, 2008) Although the UK construction industry has been capable of delivery large number of project there remains a general dissatisfaction in the overall performance of the industry. The feedback from the client is also on the negative side as projects are unpredictable regarding delivery time, budgets always exceeding the initial estimated and quality of work failing to meet industry standards. (Department of Trade and industry, 1998)A lot of time is also lost in trials and litigations thereafter. Another problem is that the industry is highly fragmented with a lot of players thus leading to loss of continuity in working and delay in assessing ones exact scope of work. It is with respect to these ambiguities that a proper study of the English Contract Law needs to be done prior to entering into an agreement. English Contract Law A contract is a set of promises made by one party to another party, the breach of which could enter both the parties into a dispute. The clauses in the contract would then act as a sort of remedy of the performance to be undertaken. Some of the terms relevant to the English Contract Law are (i) The Proof of the Promise: This is achieved by the idea of objective intention. This would in effect be the intentions of the concerned parties that an external observer like a court would decide when this matter is referred to it. A case which illustrates this idea is that of the ‘Smith v. Hughes (1871). This involved the claimant making a sale of oats to the defendant who bought these to feed his horses. Horses require old oats since newly harvested oats can cause digestion problem for the horses. However it later came to light that the oats were not old enough to feed the horses. The defendant subsequently refused to pay any money to the claimant. The critical point in this judgement is for the judge to decide whether the sale of oats by the claimant unreasonable when he was offering to sell old oats and how could one possibly decide whether the oats were old enough to feed horses. (Tilbury Nadine, 2006) (ii) The Form of the Promise: This requires an offer to be made by the promisor and an unconditional acceptance on the part of the promise. An example to this case is the Moran v. University College Salford. In this case the plaintiff Mr. Moran, claims that on June 29, 1993 UCS had entered into a written agreement with him to accept him for a degree course in physiotherapy for the year September/ October 1993 and in violation of that agreement, UCS had refused to accept him for the course. (Tilbury Nadine, 2006) (iii) Parties to the Promise: Privity- This idea of privity means that a contract as a general rule cannot impose obligations arising from contract violations on any other persons except the parties that are privy to it. (iv) Breach of Contract- To prove that a breach of contract has happened one must argue and prove that a contract existed in the first place, plaintiff fulfilled all contractual obligations, there was a breach of contract and that the plaintiff suffered damages. (v) Mitigation of Breach- There is several ways in which a contract might have been breached. Misrepresentation of facts, mistakes committed in execution and stress or undue influence. This refers to situations in which a defendant might enter into a contract due to threat or fear of safety of their near and dear ones. An example of this case being that of Barton v. Armstrong (Tilbury Nadine, 2006) The legal advice and contract laws as far as construction is concerned cover the following gamut of terms 1. Contractual, Commercial and Procurement Advice (Report by the Comptroller and Auditor General, 2001) (i) Clear advice regarding drafting, selection and interpretation of engineering standards. This also covers terms of professional engagement, warranties and clarity on supply scope. (ii) Risk identification at the time of tendering through a pre-contract review (iii) Investigating the recovery prospects of the projects and discharging and assigning sub-contracts. (iv) Methods to maximise operative efficiency and reduce overhead costs. (v) Create a whole encompassing figure to control number of claims made against the clients. 2. Contract Law Claim, Preparation of Damages and Report Appraisal (Report by the Comptroller and Auditor General, 2001) (i) This assesses the legal validity of a claim that is being made and the net financial value of the particular claim. (ii) Draft a plan as to contents of a claim in case the delivery date is delayed and the loss that occurs due to the disruption of schedule. Latham Report This is a report that was drafted by Sir Michael Latham in 1994 titled ‘Constructing the Team’. This is considered as one of the most influential reports to have emerged highlighting the concerns and problems being faced by the UK construction industry. (Hughes Will & Maeda Yauyoshi, 2002) This is now being served as a benchmark to asses problems in the construction industry across the globe. Before this report was published Sir Michael had brought out an interim report in December 1993 titled ‘Trust and Monies’. This highlighted the trust deficit that existed in the construction industry between different contractors and sub-contractors. This also brought out the level of wariness that existed between different contractors that resulted in deferred payments and projects not being completed on time. This prevailing work culture resulted in poor standards of work leading to high level of client dissatisfaction. (Construction Planning, Programming and Control, 2008) Constructing the Team This is also known as the ‘ Latham Report’ and the sole purpose of the report was to find method in producing a more conducive work culture for more productive work so that unnecessary time lost in legal formalities and litigations could be avoided. The report in particular reviewed the procurement methods and the agreements that were made in a contract. This also defined in detail the roles and responsibilities that came under the purview of all the contractors, sub contractors and the client. (Construction Planning, Programming and Control, 2008) This report had been prepared keeping in mind the specific nature and structure of the construction industry and the need to have a harmonious working relationship between different departments so that the quality of the work is not compromised and there is certain degree of equality and accountability involved. The report specifically addresses the terms related to (i) The specific requirements which are desired by the client. Better options if any could be advised but proper approval of the recommended procedure must be obtained as some sort of waiver before proceeding with the work. This therefore removes unnecessary disputes once the work is over since everything regarding the inclusions and exclusion is properly documented and can be submitted as proof if there is any dispute arising.( Report by the Comptroller and Auditor General, 2001) (ii) The procurement methods that are being used by the fabricator or the subcontractor. This is because some items need to be procured with great care to avoid contamination which might not be visible on initial delivery. Hence quality of the product needs to be ascertained on delivery at site. Also, some companies refuse to entertain products that are procured from China and some Asian countries. This needs to be strictly adhered to. (iii) The design process must be according to suitable building code that is acceptable both to the client and the manufacturer. This building code should of course be according to the acceptable methods practised by the industry in general. (iv) The construction process must not be an outdated method. The latest construction methods that are more economical and also provide an efficient safe design need to be followed. These issues need to be sorted out with the client prior to start of work. .( Report by the Comptroller and Auditor General, 2001) (v) Contractual issues should also be sorted out so that disagreements if any should be thrashed out before beginning the work. A sort of middle ground that proves a win-win situation to both the client and the manufacturer needs to be worked out.( Report by the Comptroller and Auditor General, 2001) (vi) Disputes arising during the course of the work should be addressed in a proper manner so that the dispute stated can be suitably studied and addressed by the client. For eg: The impact of a new requirement that could be stated by the client during the course of work could be checked by the vendor. If the impact is minor this could be absorbed. If however the changes force the contractor in making major changes this could result in the vendor making a ‘change order’ claim under which he could list out the additional scope and the cost that would be incurred for the same. Disputes not resolved through mutual consent would however need to be proceeded legally. The report consisting of 130 pages contains 30 recommendations to the construction industry to improve its functioning in meeting customers’ requirements. These can be summarised as follows (Construction Planning, Programming and Control, 2008) (i) The policies followed by successive governments define the state of the construction industry as wrong policies can adversely affect the construction industry. The industry on its part should react positively to any constructive steps taken up the government. Tax cuts if provided to boost the construction sector should encourage the industry in increasing its quality of work to infuse greater investment. (ii) An intense competition for work should increase the quality of the work and reduce the overall cost since a number of players would be vying for the same project. (iii) Although the number of players was significant, lack of co-ordination between different departments meant that increased demands were not being met. (iv) There was an obvious lack of competent firms entering the industry and this was reflected in the quality of work that was being generated by the industry. Firms with suspect credentials that have not proved their worth have been highly unsuccessful in executing projects. This has led to delays and ultimately major losses. (Construction Planning, Programming and Control, 2008) (v) Another problem in the construction industry is the lack of trained professionals. Candidates that have gone through a proper training program prior to joining the industry are recommended to improve overall quality. (vi) There is also an element of suspicion between members of the construction fraternity. This does not improve the work culture of the industry. (vii) Most contractors or subcontractors who enter the construction industry do not have sufficient capital to improve their level of efficiency. Money is not being invested into new machinery and outdated methods of manufacture are decreasing overall quality of the work. (viii) Contractors who are always conscious of claims that might potentially emerge in the future are hesitant in walking the extra mile. This leads to a half hearted approach to work affecting the end product. Latham thus advocated a list of points that affect the planning, production and the construction cost. These include (i) Laying down a set of principles that formed the basis of all modern contracts (ii) Improving the procedure of bringing out tenders and evaluating these tenders on quality as well as the price. (iii) Target to reduce construction cost of 30% by the year 2000.( Construction Planning, Programming and Control, 2008) (iv) The contract terms should be fair and one that can be achieved by the contractor following the standard construction procedure. (v) The contractor should be protected in some way from insolvency by the creation of trust funds. (vi) Fewer disputes between parties to be fostered through partnering and mutual give and take policy. (vii) This also formulated the publication of reports from 12 working groups in areas such as client contract review, training of personnel and partnering between involved parties. Housing Grants Construction and Regeneration Act 1996 Housing Grants Construction and Regeneration Act 1996, part II came into being on 1st May 1998 under ‘The Scheme for construction Contracts (England & Wales) Regulations 1998”. This defines in detail legislation that comes under Section 104 in the Act. (Housing Grants Construction and Regeneration Act 1996 (Part II), 2010)This includes (i) All building and civil works including any repair and maintenance and also works undertaken during scaffolding operations, painting and site cleanup operations. (ii) The agreement in construction procedure that have been accepted by the consultant who is represents the client. (iii) Contracts with only ‘Labour-only’ contracts. (iv) Contracts that could be of any cost. The lists of exclusion are as follows (i) Off site manufacturing processes (ii) Contracts that covered residential areas. (iii) Contracts initiated by private financing The main provision of the act entails the following (i) Under the provisions of the Act, there is a statutory right to direct disputes to adjudication. This is meant to provide a rapid resolution by a third party. The adjudication should be accepted as binding unless one of the concerned parties think otherwise and take up the matter with the courts. Section 108 of the Act says (a) The concerned party should be able to pass on an order to refer the dispute to adjudication at any point of time. (b) The contract must provide a schedule for appointing an adjudicator within seven days of the dispute being served with a notice. (c) The time period of seven days can be increased provided both the concerned parties agree. (ii) A mechanism must be put in place in determining at what stage of the progress in work the next schedule of payment is due. The due date for payment can be interpreted as the date when certificate for payment is issued per contract agreements or a claim is made by the payee to that effect. If the work is to last for a period greater than 45 days then payment is provided in instalments and if it is less than 45 days the due date is within 30 days upon completing the work or on the payee making a claim for the contract amount.( Housing Grants Construction and Regeneration Act 1996 (Part II), 2010) (iii) The construction contract shall incorporate a frame work for the payer to issue a money due notice to the payee five days after the due date. (iv) Section 11 of the Act bars the payer from refusing payment of the contract after the due date unless a notice of intention has been provided for the same. A formal notice would thus have to be provided seven days before the payment due date. (Housing Grants Construction and Regeneration Act 1996 (Part II), 2010) (v) When the concerned parties do not come into an agreement regarding the final date of payment then the Act stipulates that the final date becomes 17 days from the payment due date. (Housing Grants Construction and Regeneration Act 1996 (Part II), 2010) Reference Lists 1. “Construction Planning, Programming and Control”, The Construction Industry, October 2008, p.p 3-7 2. Department of Trade and industry 1998, “Rethinking Construction”, Report of the Construction Task Force, Available at: http://www.constructingexcellence.org.uk , [Accessed 1st jan 2011] , p.p 3-6. 3. “Hughes Will & Maeda Yauyoshi”, “ Construction Contract Policy: Do we mean what we say?”, July 2002, p.6 4. “Housing Grants Construction and Regeneration Act 1996 (Part II) “, capital & Asset management, Building Contract Directive, April 2010, p.p 1-7 5. Report by the Comptroller and Auditor General, “Modernising Construction”, , January 2001, p.3 6. Tilbury Nadine, “Introduction to English Contract Law”, Bielefeld University, 2006, p.32 Read More