Legal Issues in Construction

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  Introduction   The industry of construction is very vast in UK, which sometimes contributes to 10 percent of the total GDP of the country. Many commercial issues have been grappled with it, all of them were in sharp focus by the critical climate of economy, since the mid of 2008. The essential nature of a contract can be encapsulated by different definitions.

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One definition which is very well understood in the context of business is considered it as an agreement which give rise to the obligations and the rights thereto, which are enforceable and recognized by the law. The parties to contract are free, since the foundation of contract is on agreement, freedom in the wide limits for agreeing on the obligations to which they wanted to be bounded. Doctrine of the freedom of contract is stated the same. This results in the bounding of the parties to contract at any rate in the context of commerce with the obligation of fulfillment, no matter whether appropriate or not. The doctrine of freedom gives the corollary that no person can be forced to enter into a contract. In the context of business it can be understood as about the terms of contract, if either party to the agreement can set aside, no matter how costly or inconvenient it is for other party and in the terms of money and wasted time. It is possible to walk away and stop the negotiation even the work has done in the proposed contract’s anticipation. The parties in law are bounded when the contract is conclude. If a party cannot comply with the liability made of the contract, the other party of the contract can seek for the redress. This can be done, if needed, by compensation of losses in monetary terms due to the failure, the enforcement of the right to pay, or in some circumstances in which sufficient redress can’t be provided an by an order due to which obligations are performed by the party. as An example when a consultants is failed in the performance of the services he/she is obliged to provide, the client of the said party can seek for the compensation of damages borne for obtaining the cost involved in the substitute performance i.e. services of other consultant. If the employer cannot perform the work he is obliged to by the contractor, the payment can be recovered in the form of debt. Concurrent liability in both tort and contract Every professional is owed to their clients a combination of duties such as fiduciary, statutory, tortious and contractual and to third parties the tortious duties. There have been a lot of cases, with relation to the concurrence of the responsibilities, especially in the field of medicine, which places doctors in contract for having concurrent responsibility and for physical injury in tort to their patients. Concurrent liability also covers financial losses as in the case of Henderson v Merrett Syndicates 1995, in which there were many cases which involve the underwriting members of the names of Lloyds who sue their managing agents. In such cases the accountants, auditors and bankers had a significant effect. In a lot of circumstances there is adequate proximity existed between the professional and client for finding a coextensive care in tort. This still does avoid or exempt from the circular question about the scope determination of the duty in tort that is often focused on the inquiry of the terms agreed upon under contract to be done. Therefore for overcoming the deficiencies usage of tort will not work. Another point worth noting is that, in a contract the claim made in tort does no increase the obligations of the professional usually. The same is in the construction in which the contractual duties of the structural engineers is included in checking of the sufficiency of the fixing details and the drawings but this is not extended to the literal supervision of the fixings’ installations. If the contractual duties of these engineers are clear, these duties did not extend in the inclusion of supervision in a duty of care in tort. General responsibilities and duties and liability issues: Professional duties contain three major areas which are as follows:

  1. Express and Implied terms i.e. Contractual
  2. Statutory duties
  3. In the tort of Negligence

The duties to the client would be found on as well as derived from the implied or express terms of the appointment clearly in most of the situations. It would be necessary to recognize from the beginning accurately what the role of the professional advisor was in bringing a claim or securing a claim. As an example, if the standard form of appointment is adopted, it often works as a reference to a schedule of some form or other which contains work stages of the professional advisers about the work description. This needs completion as it will give the point of start I the determination of the role of the consultant and thereby provide their obligations. If as an example, a problem rises with the building then the identification of the specific service is needed, which should have been performed by the professional advisor and which has not been performed sufficiently. It is needed that the claim should be particularized and should not be treated simply, for example the guaranteeing of end product by Architect – i.e. creation of a building which is free from defects completely, as the claim is based. The building’s defects or problems cannot be simply listed out and asserted that is the fault of the Architect due to the general failure of performance in his duties via the doctrine of res ipsa loquitur. The fact is remained that is the complete particularization of the claim in proper manner is the obligation of the claimant including the identification of particular areas of the consultant’s failure or was wanton the care of them. Claim A Claim is a statement of relief desired through a civil judicial proceeding where one party sues another for a wrong done, or to protect a right or to prevent a wrong. A statement of claims contains the legal documents. In modern construction field, contracts have been performing a greater share of role in claims against constructions. The books of law require the clauses contained in it, to be followed with regards to several factors involved in the post contract administration. When a claim is submitted by the contractors, the relevant contract clauses have to be referred by them that are in accordance with the contract between the parties. The claims without the reference of relevant clauses are considered as invalidated. It is, therefore, mandatory for the contractors of a project to form conditions of contract. A contract means a bilateral agreement made prior to the execution of works with mutual understanding, in a construction project, between two or more parties. Most of times, claims are generated by the contractor to the client. For the employers, claim exhibit an enhanced cost of the project and conversely a claim can be a source of further earning for contractors, from the budget of the project.

Basis of claims in construction industry

Claims are mostly resulted by the certain events under the contract. These events happen and end with making an entitlement of a remedy that is mentioned in the contract under the specific provision of terms. These events can be described in two types, first these are specified under the contract and they might happen to occur. While second, the events that occur due to a breach of specific condition provided in the contract, which entitles the claimant to get remedy in case of non availability or partial availability of such stipulations along with the claim, arising out of the contract on the basis of such conditions where some or one of the terms in the contract have been breached and not remedy is designated. The remedy is subject to the validity of claim and will be designated in accordance with the applicable law of contact. A valid claim under the applicable law of the contact is based on the applicability of certain legal rule or principle. If the claim is held valid, the remedy is due generally in a ‘just and equitable’ award keeping in view the circumstances that are specific to the case. The complete understanding of the entire needs and processes of the contract are crucial so that the risks of construction could be diminished that might result avoidable problems including litigation, claims, shoddy works and reworks along with loss of future business relations. The disputes related to construction might create several impacts that are disadvantageous. If these disputes are not appropriately managed, the result will occur in shape of project delays, undermining of team spirit, increased costs of projects and on the whole, the damage will occur in continuing business relationships. The appropriate sharing of responsibilities is a major element in terms of determination whether a specific contract of construction has to be recognized as a good contract. According to McCallum (2002), a good contract plainly informs a party about the steps to be taken and the responsibilities thereon. The contract also give detailed information to each party about their rights and if any one of the party fails to perform accordingly as defined, it determines the possible problems and gives a clear resolution and strikes the parties in such a way that proper allocation of responsibilities and risks could be determined. A good contract is indeed made of well drafted drawings and specifications that give the information to the contractors about what he has to do in order to earn the promised compensation. It also provides a way to determine if the objectives have been achieved. Causes of Disputes

SITE ISSUES

  • unfavorable site circumstances
  • essential approvals that might have not been attained or might have been obtained only subject to unforeseen stipulation
  • Archeological and civilizing discoveries of heritage
  • Inappropriate access to the site
  • Project site might be subject to non-validity of endorsement
  • Any ecological issue leading towards delay and additional expenditure such as nonstop rain and high speed wind.

DESIGN CONSTRUCT AND COMMISIONING ISSUES

· Design of the site is incompetent of delivering the service at predictable cost

· Construction actions take place during construction which delays the project from being delivered on time and on actual cost

· Commissioning tests which are needed to be accomplished for the commencement of provision of services might not be completely achieved.

· Design co-ordination on drawing and construct based project.

SPONSOR AND FINANTIAL ISSUES

· High interest rates might be unfavorable and influence the bid price

  • Lack of sponsorship to finance the project because of economic crisis
  • Tax rates variance in the policy by government before and after the end of project
  • Financial issues occurring because of change in ownership

OPERATING ISSUES

· Expected cost is less than required cost along with poor quality

· Design and construction quality is insufficient leading to higher repairs and renovation cost

· Change in production requirement outside the decided range

· Subcontractor does not succeed in supplying the necessary service.

POLITICAL AND SOCIETAL

· Change in policy by law during the proceeding of the project

· Change in rules during the construction of the project

· Extra approval needed during the construction of the project which is outside the contract such as labor strike and disputes.

EXCULPATARY CLAUSES ISSUES

· Indemnity Clauses

· Inspecting site prior to the contract’s award

· Liquidation Damages

· No delay’s damage

Construction Contracts

Disputes may come up when a property owner and a contractor become bound in construction contract. The terms of construction contracts usually define the way of resolving disputes, and also outline the duties and obligations of property owner and contractor. Significantly, the construction contracts will provide compensation if a promise is not performed by any of the party bounded in a contract.

Construction Delays

Delays are often experienced by the construction projects. There are some circumstances or unexpected situations which are not in control of owner and contractor. The question arises here is that if a delay in a project can occur, the owner can have recovery from the contractor or not.

Excusable Delays

The provisions of construction contract outline the particular cases where the contractor excuses for delay in project. The construction contracts usually have excuse delay which is caused by:

  • Situations caused by nature calamity
  • Issues and problems with labor
  • Changing in design or project by owner

Contractors are often provided by contracts an extended time if there is excusable delay. Typically, the contractor is required for giving the notice to owner with the reason of delay.

Acceleration of a Construction Contract

Acceleration may occur when the contractor is compelled by a property owner for the completing the project before time. But, it may conversely increase the price of contract because it than requires extra manpower for completing the project ahead of time.

Constructive Acceleration

Constructive acceleration may be occurred when the owner refuses the extension of time to the contractor for either reasonable request for time extension or an excusable delay. The contractor, through constructive acceleration, may recover for further expenses brought upon him for the refusal by owner. However, a contractor accelerates the performance actually and incurs additional costs for recovering under the doctrine of constructive acceleration.

Mechanic’s Liens

A material men’s lien or mechanic’s lien is referred to a technique used by the employed contractors to improve the real property for ensuring that owner of the property will pay them for materials and services performed. If the owner of property doesn’t pay for material or services, a court proceeding can be initiated by the mechanic for enforcing the lien often convincing property selling for paying for the materials and services. Dispute resolution methods The discussion about construction disputes from legal aspect is not supposed to be completed if would be done without discussing different dispute resolution methods. Some of them are discussed below: Architect/initial decision maker It is provided by some contracts that the initial decision maker is design professional. Even it is provided by others that the decision of design professional is binding all parties. The equation’s contractor side has felt over the year that these procedures are considered as unfair if design professional is working for the owner. Newer contracts therefore have the parties that decide either the design professional will resolve the disputes or not. Dispute resolution boards (DRBs) DRBs are now provided by many contracts which are consisted of senior/retired persons, who were involved actively in construction industry, like executives, managers, and project engineers. The truncated hearings are conducted by these individuals and then provide decisions in accordance with disputes that the parties bring before or during the projects. Though, the decisions of DRB is allowable in an arbitration setting or in a court, they are not often binding on parties. Mediation Mediation is considered as most satisfactory method for dispute resolution, whether it is applied during or after the completion of project. It can early occur in the process as parties are capable of organizing meditation and identifying a mediator which is agreed mutually. A mediation however is successful after the parties; their consultants and attorneys have had an opportunity of reviewing the project file of other side, and prepare whatever may be essential. Mediations are non-binding, a neutral mediator is involved by them to understand the position of each side and then settle the disputes between parties and bring them together. Arbitration Arbitration during the course of 80s and 90s was the considered as the most favorable form to resolve the disputes between parties in construction industry, at least when the owner was capable of dictating the dispute resolution form. Arbitration was speedy and economical both because the arbitrators and the parties both manage the schedule in accordance with their ease. There was no jury and appeal unless the parties were agreed. At last, the arbitration panel was consisted of people who have sufficient knowledge about the construction industry. Arbitrations in contemporary era have fallen in disfavor up to some extent, which is because of numbers of parties who complained that arbitrators just “split the baby”. They have also an objection to common practice that it is not necessary for an arbitrator to follow law but instead did equity, basically ignoring the contractual statutory and provisions and judicial law that governed the obligations and rights of the parties. Litigation It is a resolution of disputes in the court where every party is subjected to every form of discovery, like depositions, document production demands, admission request, and interrogations. Then, the parties have a trial by jury or by court. If parties are not satisfied with the outcomes, they have a right to appeal. Litigation historically has a reputation for being expensive and long process. That is the one main reason for why arbitration became a trend in construction disputes. However, arbitration has lost some of its luster at the same time; some federal courts and states made the process specifically less expensive and faster. Government claims procedures There are some requirements in the public sector that a contractor must file a government claim first and undergo the procedure of administrative hearing before proceeding to litigate or arbitrate their claims. Conclusion The law of obligations contains the law of torts and the law of contract. The obligations of a person mainly provide the basis on agreement in the law of contract. These are allocated just to the other party to the agreement but not to the persons in a general way. Obligations can be as rigid as well as comprehensive as the parties want and required by their agreements because the obligations allocated in the contract are based on the agreement. The obligations of a person are basically evaluated by general principles of law in the law of torts. Moreover, these are generally allocated to persons. They are articulated in the form of general standards of conduct because obligations allocated in the tort are compulsory as part of the general law. For instance, the obligation not to unjustly interfere with the use of a person or enjoyment of their land creates the basis of the tort of nuisance; the obligation to work out appropriate skill as well as care so as not to cause damage or injury to others creates the basis of the tort of negligence.  

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