REUTERS | Radu Sigheti
February 22, 2017

In vogue again: construction management

While speaking to a client last week, I had an odd feeling of deja vu; I’m sure you have all experienced it at some point. I was listening to a client recalling a recent conversation with their construction director.

Currently at the end of the first stage of what they had hoped would be a two-stage design and build (DB) project, where the contractor would shoulder the bulk of the risk, they were now struggling to get the contractor to agree the price and terms for the main contract.

Feeling rather backed into a corner but reluctant to ditch the contractor at this stage and start again, the director had decided that the best way forward was to switch to construction management (CM). Continue reading →

REUTERS | Anindito Mukherjee
February 21, 2017

Legal and equitable assignment arguments delivered through the mail

Gosh, O’Farrell J’s judgment in Mailbox (Birmingham) Ltd v Galliford Try Construction Ltd is enough to make your head hurt.

While the adjudication enforcement principles appeared relatively simple, the court had to grapple with the question of whether Mailbox had the right to refer a dispute to adjudication in the first place. That means there is a lot in the judgment about legal and equitable assignment (had Mailbox assigned the benefit of the building contract to its funder, and then taken a re-assignment of those rights, or not), so reading it was a bit like being back studying law! Continue reading →

REUTERS | Navesh Chitrakar
February 17, 2017

Time waits for no man: an important decision on delays in construction contracts

The Court of Appeal’s judgment in Carillion Construction Ltd v Emcor Engineering Services Ltd and another is an important decision concerning a standard form construction contract, the JCT Domestic Sub-Contract (known as DOM/2). The court confirmed an earlier TCC decision that delays can only be calculated by extending the period of time allowed for practical completion, not by creating a new period.

The effect of this decision is that contracting parties to the DOM/2 will be faced with uncertainty as to the commercial implications of a delay that arises after the date for completion has already passed. One party is likely to receive a windfall in this scenario, but it will be nearly impossible to predict in advance who this will be.

Now that the commercial implications of the clause have been highlighted, the JCT may well reconsider the manner in which delays are calculated so as to bring into alignment the period of culpable delays with the period of liability. Continue reading →

REUTERS | Thomas Peter
February 15, 2017

Our take on the new ACE Professional Services Agreement, 2017 edition (PSA 2017)

The process leading to the 2017 edition of the main ACE form of appointment and related documents started two or three years ago. It arose in part because of a persistent market response that the 2009 editions (as revised) were too consultant friendly and perhaps not easy to use in terms of layout and style.

We had to come up with a solution that was logical, user friendly and allocated risk in a balanced way – normally placing it with the party best able to manage the risk in question; or, in keeping with the Government Construction Strategy, managed in a way that requires the parties to collaborate in identifying risks early and in finding an appropriate solution. We needed also to reflect modern trends such as BIM and Soft Landings.

What follows are a few examples to illustrate how we have sought to achieve this.  Continue reading →

REUTERS | Srdjan Zivulovic
February 14, 2017

Is it easier to succeed with a default payment notice claim in Scotland than in England?

At the end of last month, I blogged about payment and pay less notices following Alexander Nissen QC’s judgment in Surrey and Sussex Healthcare NHS Trust v Logan Construction (South East) Ltd. This blog is also about payment and pay less notices, but this time I’m looking north of the border, to the Sheriff Appeal Court’s judgment in Trilogy Services Scotland Ltd v Windsor Residential. Continue reading →

REUTERS | Bob Strong
February 13, 2017

Valuing variations under a construction contract

This, the penultimate post in my series on variations, discusses valuation. In particular, the differences in approach construction contracts take to valuing variations and the implications of this, both during the project and in the assessment of tenders.

Construction contracts adopt two quite different approaches to the pricing of variations:

  • Using rates derived from a breakdown of the contract sum.
  • Using a separate schedule of rates or prices.

This distinction is often overlooked (or not fully appreciated), but it lies at the heart of a number of problem situations that arise in the valuation of variations.

Firstly, I will outline the two different methods to pricing variations before considering the implications of the distinction and the problems each gives rise to. Continue reading →

REUTERS | Kacper Pempel
February 8, 2017

“Mens rea” in calls under on demand security instruments

The beauty of an on demand bond or standby letter of credit is that the beneficiary can call the security instrument and pocket the money without having to prove that the contractor (or sub-contractor) is actually in default or owes the money. It is a separate, independent agreement between the beneficiary and the provider of the security, often a bank, which creates a primary obligation on the bank to pay out on first demand. Continue reading →

REUTERS | Toby Melville
February 7, 2017

What notice? Did I forget something?

Given the “draconian consequences” of getting the timing under the Construction Act 1996 wrong, I can only imagine what a sinking feeling a party must experience when it realises that it hasn’t served a payment or pay less notice on time. In Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd, it is likely to have happened to the employer’s agent on a Friday evening one day late last summer.
Continue reading →

REUTERS | Jumana ElHeloueh
February 6, 2017

Employer couldn’t recover overpayments made to contractor

The Court of Appeal’s decision in Graham Leslie v Farrar Construction Ltd concerned whether an employer could recover a £300,000 overpayment for build costs made to a contractor. While the principles the court applied are well-established and generally uncontroversial, the outcome – that the employer could not recover the overpayment – may be surprising to many operating in the construction industry. Continue reading →

REUTERS | Vasily Fedosenko
February 2, 2017

Paying your fair share: when can an adjudicator decide more than the notified sum must be paid?

Kersfield Developments (Bridge Road) Ltd v Bray & Slaughter Ltd is the latest authority in a line of cases providing guidance on interim payments in construction contracts under the Construction Act 1996.

While a wide number of arguments were deployed in the case, perhaps the most interesting point for construction practitioners is that it offered the first judicial guidance on the meaning and effect of sections 111(8) and (9) of the Construction Act 1996. Continue reading →