Task 01
"Although not essential, it is common practice when procuring a building to appoint the contractor on a standard-form building contract."(Murdoch J and Hughes W (2008) p101).
But some parties, particularly in housing construction market, use ad-hoc contracts which are prepared based on their own terms to suite their own needs.
JCT, NCE, FIDIC, ICTAD are examples of standard-form of contracts.
Discuss why standard-form contracts should be preferred over ad-hoc contracts.
Task 02
ABC Construction Ltd receives a letter from XY Developers:
Re: The Design and Construction of XY Homes
We refer to your tender dated 7th June 2014 regarding the construction of XY Homes. As per the decision taken by our board of directors, it is our intention to award carrying out of subject works to you. However, as certain decisions still pending with the board regarding Employer Supply Materials, further negotiations will be carried out in order to agree the final contract price. You are instructed to mobilize immediately as timely completion is paramount. Please be informed that the damages for delay will be Pounds 50 per day.
Yours faithfully
Richard Butler
Chief Executive
XY Homes
ABC Construction Ltd started mobilizing and made arrangements by sending purchase orders to material suppliers and letter of intents to sub-contractors. When ABC Construction Ltd requested the advance payment be paid, XY Homes refused claiming there was no contract existing.
Analyse the situation and advise ABC Construction Ltd.
Task 03
Once parties enter in to a contract they need to identify precisely what obligations it imposes on them. For that they need to understand the terms it includes. There are three types of contractual terms included in contracts:
i. express terms which are contained in the main contractual document itself
ii. those (also express terms) contained in other documents to which the main contract document refers
iii. terms which are implied by law
iv. legal liability under the law of tort.
Explain the main obligations that construction contracts impose on parties with reference to above different types of terms and the liability.
Task 04
Part II of the Housing Grants, Construction and Regeneration Act 1996defines 'construction contract' as any agreement in writing, or evidenced in writing, under which a party does any of the following:
- Carries out construction operations.
- Arranges for others to carry out construction operations (for example through sub-contracts).
- Provides labour for the carrying out of construction operations.
Most of the standard forms of Construction Contracts include the following documents;
i. Articles of Agreement
ii. Particular and General Conditions
iii. Specifications
iv. Drawings
v. Bills of Quantities
vi. Schedules.
Explain the significance of above documents with reference to the definition of 'construction contract' in Part II of the Housing Grants, Construction and Regeneration Act 1996.
Task 05
"It is well known that The Contracts (Rights of Third Parties) Act 1999 grantees the third party's rights unlike earlier days. In the meantime several requirements have to be fulfilled in the contract and therefor the application is limited. Under the construction contract the customers may sue the contractor directly along with seller of the building. It is necessary to ensure the third party's right under the construction contract in terms of ensuring quality and sound construction. In the meantime is criticized there is no useof the above Act where the Act cannot be applied if its jurisdiction has not been recognized in the contract and the restrictions imposed in the Act.It could be criticized that still there is no development in law for the protection of the third party's rights".
Critically examine the provisions of The Contracts (Rights of Third Parties) Act 1999 and comment its application in the construction contract.
a) FIDIC Standard Form of International Construction Contract (the Red book 1999)
b) JCT Standard Form of Building Contract Private Edition with Quantities 2011