Sample Law Paper on Contract Law/ Administration: Dollar Construction Ltd

  1. INTRODUCTION

The fact pattern in this case raises a number of pertinent issues for determination. First, whether Dollar Construction Ltd (hereinafter “Dollar”) has breached the construction contract by failing to update its master programme to Newton University (“the University”). Secondly, what is the status of the master programme and subsequent changes thereto? Thirdly, whether Dollar is entitled to an extension of time, based on weather related issues. Fourthly, whether Dollar is entitled to an extension of time, based on recent discovery issues of antiquities. Fifthly, whether Dollar may be entitled to an extension of time, based on future major scheme design changes by the University.

Sixthly, whether the University is entitled to a claim of liquidated damages and if so, to what extent. Seventhly, whether Dollar would be entitled to an extension of time, based on the late issue of some of the drawings for the superstructure construction. Eighthly, whether there exists a binding contract between the University and Dollar by virtue of the letter of intent executed between the two parties. Ninthly, what is the proper basis of payment of fees for work done? Tenthly, what legal framework would govern the issues that Dollar and the University have been unable to agree on vide the contract. Eleventhly, whether the performance bond indicated in the tender documentation is enforceable and if so, what is the effect of the failure by Alpha Design and Project Management Partnership (hereinafter “Alpha”) to make arrangements in that regard.

Twelfthly, what is the effect of the failure to complete and sign the warranty from sub-structure sub-contractor to the University? Moreover, what are the implications, if any, of errors noted by Dollar between the construction drawings, the specification and the bills of quantities. In addition, what steps could the University take to remedy the inadequacies in Dollar’s design portion specification for the lift installations? Lastly, what duty, if any, does Dollar owe to the university in respect of quality and workmanship and whether Dollar has breached that duty.

  1. ANALYSIS
    • Whether Dollar has breached the contract by failing to update its master programme

Under the Society of Construction Law Delay and Disruption Protocol, a contractor is duty bound to furnish the employer a copy of a detailed master programme which must have sufficient information on the project. In addition, the contractor must update the master programme on intervals of one month or less.

In this case, it is clear that Dollar has breached its obligations under Protocol since it has not been frequently updating its master plan, hence the reason why the University and its architecture are unable to determine the progress and the completion date of the project.

  • The status of the master programme and subsequent changes thereto

Under the Joint Contracts Tribunal (JCT) Standard Form of Building Contract, 2016, a contractor should supply the Architect with two copies of its master programme as soon as would be practicable after the contract has been entered into. The long-standing position enunciated in a number of authorities, the earliest being the case of Merton v Leach, is that a contractor’s master programme containing dates becomes ineffective once the contractor fails to perform the contract in strict adherence with the dates set out in the master programme.

As the facts of this case disclose, Dollar has not been following its master plan, neither has it availed the same, together with the relevant amendments to the University and to Alpha. Accordingly, the master programme has lost its contractual validity, unless the University (being the innocent party) chooses to ratify the said changes and agree to Dollar’s new timelines.

  • Whether Dollar is entitled to an extension of time based on weather related issues

JCT, 2016 recognizes exceptionally adverse weather conditions as a relevant event to the construction contract. To determine the existence of exceptionally adverse weather, the Contractor has to conduct an assessment of the weather event and the consequences thereof (Pickavance, 2016). If the assessment reveals that the weather event is exceptionally adverse, delay arising from the weather becomes a risk of the employer and not the contract as it amounts to Force majeure. As such, a Contractor becomes entitled to an extension of time whenever it becomes impossible to discharge contractual duties by reason of exceptionally adverse weather (Pickavance, 2016).

In the circumstances, Dollar would not be liable for breach of contract if it can prove that its delay or extension of time arises from exceptionally adverse weather.

  • Dollar’s extension of time based on recent discovery issues of antiquities.

Clause 3.24 of the JCT, 2016 places an obligation upon a contractor to inform the Architect of the existence of antiquities and fossils. The effect of discovery of antiquities is to suspend the performance of the contractual obligations of the contractor to ensure that the antiquities are not destroyed in the process of construction (Burr, 2018). This principle has been affirmed in a number of UK judicial decisions, the most recent being the leading case of Bluewater Energy Services BV v Mercon Steel Structures BV and others. On this basis, Dollar would be entitled to seek for an extension of time or waive its obligations, depending on the nature of the antiquities discovered.

  • Dollar’s extension of time based on future major scheme design changes by the University.

In terms of contract law, once an agreement has been made based on an employer’s offer and the same accepted by the contractor, any variation to the agreement must be approved by the contractor. Under Clause 3.9 of the JCT Contract, an employer cannot issue an instruction demanding change of the design of works without the approval of the contractor. At the same time, the clause demands that the contractor should not unreasonably deny or withhold consent.

The case of Martifer UK Limited v Lend Lease Construction (EMEA) Limited is instructive as to the meaning of a change or variation in construction contracts. In that case, the Supreme Court held that any alteration addition or omission, change in design, quantity or quality amounts to change.

Accordingly, Dollar would be entitled to an extension of time, or even to a reasonable objection, to the University’s intention to make future major scheme design changes.

  • The University’s entitlement to a claim of liquidated damages

Claims for liquidated damages are made where the contractor is in clear breach of contract. (Thomas and Wright, 2016). Payment or deduction of liquidated damages at an interim stage can only be valid in exceptional cases where the damages are a reasonable representation of an estimated future foreseeable loss.

Where an event that negatively affects the completion, date occurs without fault on the part of the contractor, the contractor becomes entitled to an extension of time by the employer. In such cases, liquidated damages may not be recovered by the employer. Indeed, the JCT makes a provision to the effect that upon a contractor’s failure to complete the construction work by the agreed date, the architect must issue a certificate of non-completion, and that certificate is deemed cancelled by any extension of time given by the employer.

In Octoesse LLP v Trak Special Projects Ltd, the defendant was engaged by the defendant to construct residential houses in London, vide an amended JCT Intermediate building contract. Practical completion took place after the original contract completion date. After the practical completion, the defendant requested an extension and was subsequently granted 9 and a half weeks’ extension. When the defendant issued a final payment certificate, the claimant gave a pay less notice, deducting liquidated damages amounting to £89,250. The claimant’s decision prompted the defendant to institute adjudication proceedings, contending that the notice issued by the claimant purporting to deduct liquidated damages was illegal. The adjudicator, while finding merit in the defendant’s argument, quashed the pay less notice. Aggrieved by the adjudicator’s decision, the claimant challenged the decision in Court. The Court, however, dismissed the claimant’s appeal and held that the extension of time by the claimant waived its right to liquidated damages.

Turning to the facts of the instant case, it emerges that the contract between the draft contract between Dollar and the University did not stipulate the amount payable by Dollar or deductible from Dollar’s contract amount as liquidated damages. Moreover, the basis for which the claim for liquidated damages appears to be pegged is one that is beyond Dollar’s control or wrongdoing. This is because, as already discussed elsewhere above, Dollar is legally entitled to an extension of time owing to weather related issues, recent discovery of antiques, among other issues pointed out by the architect. Therefore, the University may not be able to recover liquidated damages from Dollar.

  • Dollar’s entitlement to extension of time based on the late issue of some of the drawings for the superstructure construction

Clause 2.11 stipulates that a contractor shall have the right to receive from the architect all the information listed in the Information Release Schedule (IRS). This includes drawings of the subject construction. Where an architect is unable to furnish the documents listed in the IRS, he/she should explain the situation to the employer, upon which the latter should negotiate with the contractor to vary or extend the deadline.

In the circumstances, Dollar is not at fault in delaying the issue of some of the drawings for the superstructure, Alpha is. As such, Dollar has a right to demand an extension based on the indication as to time given by Alpha to the University.

  • The contract between the University and Dollar by virtue of the letter of intent executed between the two parties.

As a principle in construction contracts, where parties decide to operate based on a letter of intent pending finalization and execution of their contract, the letter of intent may be construed as a binding contract based on the wording employed by the parties. (Chappell,2015). In the same vein, the fact that a party has performed their obligations under a letter of intent does not automatically lead to a binding contract where none exists (Blackwell, 2015).

In Arcadis Consulting (UK) Ltd v AMEC (BSC) Ltd, the Court opted enforced the terms of a letter of intent where the contractor and the employer had not yet finalized their contract. Therefore, the conduct of the parties as well as the words employed in the letter of intent determine the validity or otherwise of a letter of intent.

The fact that Dollar and the University did not execute the contract does not, by and in itself, mean that the two are not bound by a contract. The manner in which the letter of intent was worded was so detailed that it formed the basis on which Dollar started the construction. In the peculiar circumstances, the University may be estopped from denying the existence of a valid contract between it and Dollar.

  • The proper basis of payment of fees for work done

Where a construction contract is silent as to the manner in which contract fees are to be paid by the employer, the longstanding contractual principle of quantum meruit, which is part of the law of restitution applies (Haar, 2017). For a contractor to succeed in a quantum meruit claim, they ought to demonstrate by way of cogent evidence that the employer requested them to offer the services on which their claim is founded (Davenport and Durham, 2013).

There is no gainsaying the fact that the University retained the services of Dollar. It is also not in dispute that prior to the disagreement as to the issue of payment, Dollar had performed part of its obligations under the construction contract. Since both the contract and the letter of intent were silent on what recourse is available to the parties, Dollar is entitled to apply the principle of quantum meruit so as to determine the amounts due and owing to it from the university.

  • The legal framework governing the issues that were not agreed upon

Where parties are unable to agree on critical terms regarding their construction contract, the law may, where possible, imply those terms by way of default provisions. In this case, the lacuna left by the Dollar’s failure to attest to certain method would lead to the application of the JCT, 2016 and other relevant statutes.

  • The enforceability of the security bond

Where a contract stipulates for performance bonds, that provision must be adhered to strictly (Chappell, 2015). An architect’s duty to obtain a bond depends on the stipulations of their contract with the employer. Where that contract creates the obligation to obtain the bond, their failure to do so would lead to liability for professional negligence.

The terms of the contract between the University and Alpha obligated the latter to arrange for the provision of a bond by Dollar. That failure amounts to negligence on the part of Alpha.

  • Failure to complete and sign the warranty from sub-structure sub-contractor

Where a collateral warranty is not completed and executed, both the warranty itself and its terms fail and cannot be relied on. It was so held in Parkwood Leisure Ltd v Laing O’Rourke Wales & West Ltd.

  • The errors between the construction drawings, the specification and the bills of quantities

Clause Clauses 2.14 of the JTC allows correction of errrors in bills of quantities, including omissions, among others, by way of variation (Keating, 2015). Therefore, Dollar has a right to have the Bills varied accordingly.

 

 

 

  • steps to remedy the inadequacies in Dollar’s design portion specification for the lift installations.

Inadequacies, just like errors, may be rectified by way of variation (Sweeney, 2018). On this basis, the University could seek to have a variation of the Bills so as to remedy the inadequacies in Dollar’s design specification with respect to lift installations.

  • Dollar’s duty in respect of quality and workmanship and whether Dollar has breached that duty.

The Supply of Goods and Services Act entrenches important provisions with respect to the manner in which a contractor should carry out its duties under a construction contract. Mainly, they should do so in a workmanlike manner and the goods and equipment used in the construction should meet the standard prescribed under the contract (Sweeney, 2018).

Based on these duties, Dollar’s failure to employ an exclusive site manager could be described as poor workmanship if the University can prove that the management of two concurrent projects by Dollar’s site manager affects the quality of the construction. Dollar’s failure to correct the workmanship issues complained of would amount to actionable breach of contract.

 

 

 

 

 

References

Arcadis Consulting (UK) Ltd v AMEC (BSC) Ltd [2016] EWHC 2509.

Blackwell, W. (2015). MacRoberts on Scottish construction contracts. West Sussex, United Kingdom: Chichester.

Bluewater Energy Services BV v Mercon Steel Structures BV and others [2014] EWHC 2132 (TCC).

Burr, A. (2018). Delay and disruption in construction contracts. Abingdon, Oxon: Informa Law from Routledge.

Chappell, D. (2015). Construction contracts: Questions and answers. Place of publication not identified: Routledge.

Davenport, P., & Durham, H. (2013). Construction claims. Annandale, N.S.W.: Federation Press.

Joint Contracts Tribunal (2016), Standard Form of Building Contract, United Kingdom.

Haar, R. T. (2017). Remedies in construction law. Abingdon, Oxon: Routledge, an imprint of the Taylor & Francis Group.

Keating, D. (2015). Keating on construction contracts. London: Sweet & Maxwell.

Martifer UK Ltd v Lend Lease Construction (EMEA) Ltd [2015] ScotCS CSOH_81 (19 June 2015).

Merton v Leach (Stanley Hugh) Ltd 1985 32 BLR 51).

Octoesse LLP v Trak Special Projects Ltd [2016] EWHC 3180 (TCC).

Parkwood Leisure Ltd v Laing O’Rourke Wales & West Ltd [2013] EWHC 2665 (TCC).

Pickavance, K. (2016). Construction law and management. Place of publication not identified: Crc Press.

Supply of Goods and Services Act, 1982

Sweeney, N. J. (2018). Construction Law update. S.l.: Wolters Kluwer.

The Society of Construction Law. (2017). The Society of Construction Law Delay and Disruption Protocol. United Kingdom.

Thomas, R. W., & Wright, M. (2016). Construction contract claims. Basingstoke, Hampshire: Palgrave Macmillan.