150 Contractual Problems and Their Solutions, 2nd Edition

, by J. Roger Knowles (James R. Knowles, Construction Contract Consultants)

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ISBN: 9781405120708 | 1405120703
Cover: Hardcover
Copyright: 5/1/2005

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This book considers 150 problems that regularly arise in building contracts and provides a detailed explanation as to their answers. It cites key parts of legal decisions as authority. The new edition includes some 50 new problems, and revised solutions to a third of the problems to take account of recent case law.

Preface

Design

(22)

What is the difference between a fitness for purpose responsibility and an obligation to exercise reasonable skill and care?

(3)

Where a contractor/subcontractor's drawings are `approved', `checked', `inspected', etc. by the architect/engineer and subsequently an error is discovered, who bears the cost - the contractor, subcontractor or employer? If the employer bears the cost can he recover the sum involved from the architect/engineer?

(4)

Who is responsible for co-ordinating design? Can a main contractor be legitimately given this responsibility even though he has no design responsibility?

(1)

Can a contractor be held responsible for a design error where the employer appoints an architect and no provision exists in the contract for the contractor to undertake any design responsibility?

(1)

Can a main contractor be responsible if a nominated/named subcontractor's design is defective?

(2)

Must a contractor notify an architect/engineer of defects in his design?

(2)

Where an architect/engineer includes a new product in his design following advice from a manufacturer and the product proves to be unsuitable, is the architect/engineer liable to the employer for his losses?

(1)

Where an architect/engineer approves or accepts a subcontractor's drawings, how long can he take before an entitlement to an extension of time arises?

(1)

Where is the line to be drawn between an architect/engineer's duty to design the works or a system and a contractor or subcontractor's obligation to produce working shop or installation drawings?

(1)

Where an item of work has been properly provided for in the Employer's Requirements but is missing from the Contractor's Proposals, can the contractor claim extra payment for doing the work on the grounds that it was never included in the contract price?

(2)

Is the contractor entitled to payment for design in full when the design work has been completed or should payment for design costs be spread over the value of work as and when it is carried out?

(2)

On a design and construct project where the architect is novated from the employer to the contractor, is there any impediment upon the contractor's ability to recover from the architect loss he suffers due to architect design errors which occurred during his employment by the employer?

(2)

Tenders

(15)

Where an employer includes with the tender enquiry documents a site survey which proves misleading, can this be the basis of a claim?

(5)

If, after tenders have been received, the employer decides not to proceed with the work, are there any circumstances under which the contractor/subcontractor can recover the costs associated with tendering?

(2)

Where a contractor/subcontractor submits a tender on request which is ignored, does he have any rights?

(2)

Where a design and construct procurement method is employed, who is responsible for obtaining outline planning consent and full planning consent - the employer or contractor/subcontractor?

(1)

If an architect/engineer, acting as employer's agent in a Design and Construct contract approves the contractor's drawings and subsequently errors are found, will the architect/engineer have any liability?

(1)

Does an employer have any liability for not sending a subsoil survey which is in his possession to tendering contractors, the absence of which leads a successful contractor to significantly underprice the risk of bad ground?

(2)

Where a tender enquiry requires tenders to remain open for acceptance for a specific period of time, can a contractor or subcontractor who has submitted a tender as required withdraw the tender before the period expires without incurring a financial liability?

(1)

If a subcontractor submits a lump sum estimate to a contractor to carry out the subcontract work, and it is unconditionally accepted, can he later change the price on the basis that the lump sum was only an estimate?

(1)

Extensions of Time

(22)

Does a contractor or subcontractor lose entitlements to extensions of time if he fails to submit the appropriate notices and details required by the contract?

(4)

Are minutes of site meetings considered by the courts to be adequate notices of delay required by extension of time clauses?

(1)

What is meant by a contractor or subcontractor having to `use constantly his best endeavours to prevent delay'?

(2)

If the architect/engineer issues a variation after the extended completion date but before practical completion, can an extension of time be granted or will liquidated damages become unenforceable?

(2)

If work is delayed due to two or more competing causes of delay, one of which is the responsibility of the contractor/subcontractor or a neutral event and the other is a result of some fault of the architect, engineer or employer, is there an entitlement to an extension of time or loss and expense?

(6)

Is a notice which does not quote contract clause numbers adequate or does the contractor/subcontractor risk losing his contractual rights where these references are omitted?

(1)

Where delays occur to the main contract works due to the time taken to correct latent defects in a nominated subcontractor's work after the subcontract works have been completed, does this give the main contractor the right to an extension of time if the contract makes provision for extensions of time due to delays on the part of nominated subcontractors?

(1)

Can an architect/engineer grant an extension of time after the date for completion has passed?

(2)

When an architect/engineer is considering a contractor's application for an extension of time, can he reduce the period to which the contractor is entitled to reflect time saved by work omitted?

(1)

Where a contractor's progress is behind programme, will he be entitled to an extension of time where the progress and completion is affected by exceptionally adverse weather but would not have been so affected if work had been on programme?

(2)

Global Claims

(8)

Will a claim for an extension of time and the recovery of loss and expense which does not precisely detail the period of delay and the amount claimed in respect of each claim matter causing delay (i.e. a failure to link cause and effect) fail?

(8)

Liquidated and Ascertained Damages

(20)

What is the difference between liquidated damages and a penalty?

(1)

If the employer suffers no loss as a result of a contractor's delay to completion, is he still entitled to deduct liquidated damages?

(1)

If a delay is caused by the employer for which there is no specific entitlement to an extension of time expressed in the extension of time clause, will this result in the employer losing his right to levy liquidated damages?

(2)

Are liquidated damages based on a percentage of the contract sum enforceable?

(1)

Where liquidated damages are expressed as so much per week or part thereof, and the contractor overruns by part of a week only but is charged a full week's liquidated damages, are the courts likely to consider this is a penalty and therefore unenforceable?

(1)

If the architect or engineer fails to grant an extension of time within a timescale laid down in the contract, will this prevent the employer from levying liquidated damages?

(2)

If the contractor delays completion but no effective non-completion certificate is issued by the architect/engineer under a JCT contract, will this mean that the employer loses his right to deduct liquidated damages?

(2)

Can a subcontractor who finishes late have passed down to him liquidated damages fixed under the main contract which are completely out of proportion to the subcontract value?

(2)

What is meant by `time at large'? How does it affect the employer's entitlement to levy liquidated damages for late completion?

(1)

Can a contractor challenge the liquidated damages figure included in a contract as being a penalty and unenforceable after the contract is signed? If so, will it be a matter for the employer to prove the figure to be a reasonable pre-estimate of anticipated loss?

(2)

If liquidated damages to be enforceable must be a reasonable pre-estimate of loss, how can public bodies or organisations financed out of the public purse be capable of suffering loss?

(1)

If liquidated damages become enforceable and hence an entitlement to unliquidated damages arises, can the unliquidated damages be greater than the liquidated damages?

(1)

Where a contract includes a single liquidated damages amount for failing to complete the whole of the works by the completion date, what entitlement does the employer have to claim from the contractor who has failed to complete parts of the work by the milestone dates written into the contract?

(1)

Is it possible to include in a subcontract an all embracing sum for liquidated and ascertained damages for delay to completion?

(2)

Programme

(8)

Where a contractor submits a programme which is approved or accepted by the architect/engineer, is he obliged to follow it or can he amend it at his own discretion?

(1)

Is a subcontractor obliged to follow a main contractor's programme?

(1)

Who owns float time in the contractor's programme, the architect/engineer or the contractor?

(3)

What is the effect of making the programme a contract document?

(3)

Payment

(44)

Where a contract requires the contractor to give a guaranteed maximum price does he have any grounds for increasing the price above the guaranteed maximum?

(2)

Where a subcontract provides for 2 1/2% cash discount, does this mean that discount can only be deducted if payment is made on time or may the discount be taken even if payment is made late?

(2)

Under what circumstances are contractors/subcontractors entitled to be paid for materials stored off site as part of an interim payment or payment on account?

100

(1)

Can a contractor force an employer to set aside retention money in a separate bank account?

101

(4)

If an employer became insolvent what liability does the contractor have for paying subcontractors who are owed money when no further sums are forthcoming from the employer?

105

(1)

Can a contractor/subcontractor legitimately walk off site if payment isn't made when due?

106

(3)

Where a contractor undertakes work which he considers should be paid for on a daywork basis and submits daywork sheets as required under the terms of the contract to the architect/engineer, if the daywork records are not signed by the architect or engineer, how does this affect the contractor's entitlement to payment?

109

(1)

Can an architect/engineer sign a daywork sheet and then refuse to certify the sums involved for payment? Is a quantity surveyor entitled to reduce the hours included on a signed daywork sheet if he considers them unreasonable or excessive?

110

(1)

Where a contractor/subcontractor includes an unrealistically low rate in the bills of quantities, can he be held to the rate if the quantities substantially increase?

111

(2)

Can a debtor enforce acceptance of a lesser sum in full and final settlement?

113

(3)

How can subcontractors avoid pay when paid clauses?

116

(4)

Once the value of a contractor/subcontractor's work has been certified and paid can it be devalued in a later certificate?

120

(2)

Can a contractor deduct claims for overpayments levied on one contract from monies due on another in respect of a subcontractor's work?

122

(1)

When a contractor completes significantly early may the architect/engineer legitimately delay certification to match the employer's ability to pay from available cashflow?

123

(2)

Is an employer entitled to pay a nominated subcontractor direct when the main contractor is insolvent?

125

(4)

Where an architect/engineer undercertifies, is the contractor/subcontractor entitled to claim interest?

129

(3)

Can an architect/engineer refuse to include an amount of money in a certificate in respect of materials stored on site if the contractor or subcontractor cannot prove he has good title to the materials?

132

(2)

Can an employer refuse to honour an architect/engineer's certificate and so delay payment?

134

(3)

Where a cheque is issued in respect of construction work undertaken, can it be stopped before it is honoured if it subsequently becomes obvious that the work is defective?

137

(1)

Where agreement is reached whereby one party to a construction contract agrees to pay the other a sum of money, can the paying party refuse to make the payment on the grounds that he was financially coerced into the agreement?

137

(3)

Variations

140

(16)

Where a contractor/subcontractor submits a quotation for extra work which is accepted, is the accepted quotation deemed to include for any resultant delay costs?

140

(2)

Can a contractor/subcontractor be forced to carry out a variation after practical completion?

142

(1)

Where work is omitted from the contract by way of a variation can a contractor/subcontractor claim for loss of profit?

143

(1)

Where work is given to another contractor is there liability to pay loss of profit?

144

(2)

Where due to a variation a contractor has to cancel an order for the supply of material can he pass on to the employer a claim received from the supplier for loss of profit?

146

(2)

How are `fair' rates defined?

148

(3)

When do quantum meruit claims arise and how should they be evaluated?

151

(3)

Can the issue of a variation to the work ever have the effect of creating a separate or replacement contract?

154

(2)

Loss and Expense

156

(47)

Where a contractor/subcontractor is granted an extension of time, is there an automatic right to the recovery of loss and expense?

156

(1)

Where a contractor/subcontractor successfully levies a claim against an employer for late issue of drawings, can the sum paid out be recovered by the employer from a defaulting architect/engineer?

157

(2)

Will a contractor or subcontractor substantially prejudice its case for additional payment if it fails to keep adequate accurate records?

159

(1)

When a contractor/subcontractor fails to serve a proper claims notice or does not submit details of the claim as required by the contract, can the architect/engineer legitimately reject the claim?

160

(5)

With a programme shorter than the contract period, can the contractor/subcontractor claim additional payment if, because of the timing of the issue of the architect/engineer's drawings, he is prevented from completing in accordance with the shortened programme?

165

(3)

Where a contractor submits a programme (which is accepted or approved) showing completion on the completion date written into the contract, must drawings be issued in good time to enable the contractor to carry out the work at the time and in the sequence indicated on the programme?

168

(2)

Is a contractor/subcontractor entitled to recover the cost of preparing a claim?

170

(3)

Will the courts enforce claims for head office overheads based upon the Hudson or Emden formulae or must the contractor be able to show an increase in expenditure on head office overheads resulting from the overrun?

173

(9)

Where a delay to completion for late issue of information has been recognised, are loss and expense or additional cost claims in respect of extended preliminaries properly evaluated using the rates and prices in the bills of quantities?

182

(2)

Once it is established that additional payment is due for prolongation resulting from employer delays, should the evaluation relate to the period when the effect of the delay occurs or by reference to the overrun period at the end of the contract?

184

(1)

When ascertaining contractor's claims on behalf of employers how should consultants deal with finance charges which form part of the calculation of the claim?

184

(3)

Is a contractor/subcontractor entitled to be paid loss of profit as part of a monetary claim?

187

(1)

Is a contractor/subcontractor entitled to be paid acceleration costs as part of his monetary claim?

188

(3)

Where a written claims notice is required to be submitted within a reasonable time, how much time must elapse before the claim can be rejected as being too late?

191

(1)

What methods of evaluating disruption have been accepted by the courts?

192

(2)

Can a claims consultant be liable for incorrect advice?

194

(2)

If a delay in the early part of a contract caused by the architect/engineer pushes work carried out later in the contract into a bad weather period causing further delay, can the contractor/subcontractor claim loss and expense resulting from the bad weather delay?

196

(1)

Who is responsible for the additional costs and delay resulting from unforeseen bad ground conditions -- the employer or contractor/subcontractor?

197

(3)

Where one party to a contract is in breach and the injured party incurs loss, what obligations are there on the injured party to mitigate the loss?

200

(1)

What is meant in legal terms by the words `consequential loss'?

200

(2)

Is it possible to include in a contract a daily or weekly rate which will be paid to the contractor in respect of loss and expense or additional cost resulting from delays caused by the employer?

202

(1)

Practical Completion and Defects

203

(14)

How are practical completion and substantial completion under the JCT and ICE conditions defined?

203

(2)

Where an employer takes possession of a building or engineering facility before all the work has been completed, can the contractor rightfully claim that practical completion or substantial completion has been achieved?

205

(3)

When does practical completion occur under a subcontract where the DOM/1 conditions apply?

208

(1)

Where at the end of the defects liability/maintenance period the architect/engineer draws up a defects list but due to an oversight omits certain defects and a second list is prepared after the defects on the first list have been completed, will the contractor/subcontractor be obliged to make them good?

209

(2)

Is a contractor/subcontractor absolved from any liability if the employer refuses him access to make good defects because he chooses to make them good himself?

211

(2)

Most subcontractors provide for the release of the final balance of retention only when the period included in the contract for correcting defects has expired and all defects under the main contract have been made good. If the main contractor or other subcontractors are dilatory in making good defects, is there any mechanism to enable the subcontractor to secure an early release of retention?

213

(1)

Can an employer recover from the contractor the costs involved where it became necessary to employ an external expert to demonstrate that work was defective?

214

(1)

Where a dispute arises between employer and contractor which includes defective work carried out by a subcontractor and is the subject of legal proceedings which are settled by the contractor making a payment to the employer, is the subcontractor obliged to reimburse the contractor for the cost of remedying defective work even though he considers the subcontract works contain no defects?

215

(2)

Rights and Remedies

217

(43)

Where a contractor/subcontractor whose tender is successful receives a letter of intent, is he at risk in commencing work or ordering materials or carrying out design? If the project is abandoned before a contract is signed will there be an entitlement to payment?

217

(4)

What obligation does a contractor, subcontractor or supplier have to draw attention to onerous conditions in his conditions of sale?

221

(2)

Are there any restrictions on an architect/engineer's powers where the specification calls for the work to be carried out to the architect/engineer's satisfaction?

223

(1)

If an estimate prepared by an engineer or quantity surveyor proves to be incorrect can the employer claim recompense?

224

(3)

When defects come to light after the architect/engineer has issued the final certificate, does the contractor/subcontractor still have a liability or can he argue that once the certificate has been issued the employer loses his rights?

227

(4)

Where a nominated subcontractor becomes insolvent after the nominated subcontract works have been completed, will the architect/engineer be required to nominate another subcontractor to remedy the defects with the employer bearing the cost, or will the main contractor `pick up the bill'?

231

(1)

Can the contractor in his order form impose conditions that take precedence over any conflicting conditions referred to in the subcontractor's acceptance?

232

(2)

Who is responsible if damage is caused to a subcontractor's work by person or persons unknown -- the subcontractor, contractor or employer?

234

(2)

How is the term `regularly and diligently' as used in the standard forms of contract to be defined?

236

(1)

Are there any circumstances under which a contractor/subcontractor could bring an action for the recovery of damages against an architect/engineer for negligence?

237

(2)

What is a contractor's liability to the employer for failing to follow the specification where it is impractical to take down the offending work?

239

(1)

Do retention of title clauses still protect a supplier or subcontractor where a main contractor becomes insolvent or have there been cases which throw doubt on their effectiveness?

240

(6)

Can the signing of time sheets which make reference to standard conditions of contract form the basis of a contract?

246

(1)

Can suppliers rely upon exclusion clauses in their terms of trading to avoid claims for supplying defective goods or claims based on late supply?

247

(3)

What level of supervision must an architect provide on site?

250

(3)

Where a specification includes a named supplier `or other approved', can the architect/engineer refuse without good reason to approve an alternative supplier proposed by the contractor/subcontractor?

253

(1)

If a subcontractor is falling behind programme and in danger of completing late due to his own inefficiencies, can the contractor bring other labour onto the site to supplement the subcontractor's efforts to ensure completion on time?

254

(2)

Where a contract requires the parties to act in good faith, is it enforceable?

256

(1)

Can parties to a dispute be forced to submit the matter to mediation?

257

(3)

Adjudication

260

(25)

Will an adjudicator's award be enforced by the courts using a summary procedure?

260

(1)

Will the court enforce part only of an adjudicator's award?

261

(1)

When can it be said that a dispute has arisen giving rise to an entitlement for the matter to be referred to adjudication?

262

(1)

To comply with the Construction Act and be subject to adjudication, the contract must be in writing or evidenced in writing. Would reference in meeting minutes to the nature of the work and the submission of fee accounts in relation to work undertaken by an engineer be regarded as a contract evidenced in writing?

263

(1)

Can a dispute concerning verbal amendments to a construction contract be referred to adjudication?

264

(1)

Where a mediator is appointed in relation to a dispute in connection with a construction contract and the dispute is not resolved but referred to adjudication, is the mediator barred from being appointed as adjudicator?

265

(1)

Will a court enforce an adjudicator's award which is clearly wrong?

266

(1)

If a dispute is the subject of ongoing litigation, can one of the parties, whilst the litigation is in progress, refer the matter to adjudication?

267

(1)

Can an adjudicator withhold a decision from the parties until his fees are paid?

268

(1)

If an adjudicator issues a decision late, can it be enforced?

269

(1)

The Construction Act states that `a party to a construction contract has the right to refer a dispute arising under the contract for adjudication'. As this suggests disputes can only be referred one at a time, does this mean that a dispute regarding the variations and also delays will have to be the subject of separate references?

270

(1)

Where a compromise agreement relating to a dispute on a construction contract is itself the subject of a dispute, can it be referred to adjudication?

270

(1)

A matter in dispute can only be referred to adjudication once. Where an adjudicator's decision has been received relating to a dispute over sums included in an interim certificate in respect of variations, can a dispute relating to the value of those variations when included in the final account be referred to adjudication?

271

(1)

Will a clause in a construction contract which states that all disputes are subject to the exclusive jurisdiction of the Austrian Courts and Austrian Law, or the courts and law of another jurisdiction outside the UK, result in disputes falling outside the UK courts' power to enforce an adjudicator's award?

272

(1)

Are the parties entitled to challenge an adjudicator's fees on the grounds that they are unreasonably high?

273

(1)

Does a draft adjudicator's decision constitute a final decision?

273

(1)

Does an adjudicator who communicates with one party without disclosing the details of the communications to the other party risk his decision being nullified by the courts on the grounds that his conduct amounted to bias?

274

(1)

Can an adjudicator employ the services of an expert to assist in making a decision?

275

(1)

Where an adjudicator seeks legal advice to assist him in reaching a decision, is he obliged to reveal the advice to the parties involved in the adjudication?

276

(1)

Have the courts laid down any general guidelines as to how the rules of natural justice should be applied in respect of adjudication?

277

(2)

Where an adjudicator issues a decision involving the payment of a sum of money by the winning party to the losing party, can the amount paid be reduced or eliminated in compliance with a clause in the contract?

279

(1)

Where an adjudicator's decision provides for a sum of money to be paid by the employer to the contractor, can the employer deduct from the sum awarded liquidated and ascertained damages due under the contract?

280

(1)

Can a party to a construction contract, who is reluctant to have a dispute referred to adjudication, successfully argue that the adjudicator's decision should not be enforced as, due to the very restricted nature of the adjudication process, it is contrary to the European Convention on Human Rights?

281

(1)

Can the party that is successful in adjudication recover its costs from the losing party?

282

(1)

Where a contractor includes in its subcontract terms a clause which states that if a dispute is referred to adjudication the subcontractor, even if successful, will be liable to pay the contractor's costs, is such a clause enforceable?

283

(2)

Table of Cases

285

(11)

Subject Index

296

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150 Contractual Problems and Their Solutions, 2nd Edition

Summary

Author Biography

Table of Contents

Supplemental Materials