Form of Contract
A contract creates a legally binding relationship between parties based on which parties can enforce each other to comply with the terms of the contract. In construction-related contracts, the clauses included by the parties in the contract resulted in outlining the rights and liabilities of parties in case of an issue. The contract law plays a crucial role in the construction industry which touches the lives of every citizen. The built environment is filled with a wide range of laws and legal relations which involve the efforts from contractors, designers, analysts, professionals, labours, and others. Parties are required to study construction law and understand its elements in order to understand misleading language which most standard construction contacts contain in order to understand their rights and obligations (Kelleher Jr et al., 2014). The purpose of this report is to outline the rights and obligations of Florence Lee in the contract formed with the contractor along with the rights and obligations of the contractor. This report will evaluate different form of contracts to analyse the type of contract formed between Florence Lee and Sun and Moon Construction via a traditional procurement route. This report will critically analyse the rights and duties of parties in case a defect was found within a key element after practical completion of the project work based on the terms given in the construction contract. This report will also evaluate the legal rights and obligations after the expiry of the defects rectification period. Lastly, this report will evaluate how these risks can be mitigated within law while citing relevant case laws
In this case, Florence Lee has entered into a lump sum contract with Sun and Moon Constructions which is a traditional means of procuring construction and still one of the most common forms of construction-related contracts. The traditional procurement route is also referred as ‘design bid build’ which is considered as the most used method of procuring building works (Hughes, Champion and Murdoch, 2015). This is a common process which is used by parties to start their building work. In this process, the client first appoints consultants to design the project. This design is prepared in details by the party which include thorough information about the project and its aspects. These details include information such as work schedules, bills of quantities, design plans, drawings, type of material used and others. The contractors are then invited by the client to submit tenders for the contraction project. These tenders are usually submitted based on a single-stage, competitive basis. These are also referred as traditional contracts. In these contracts, the contractor is not responsible for the design of the construction project, other than temporary works. However, there are certain traditional contracts in which the contractor has to design specific parts of the works based on which the liability can be imposed on the contractor. There are various types of contracts in construction law which are classified based on the type of contract strategy (procurement approach) which they support (Allen and Iano, 2013). These contracts include traditional procurement, design-and-build procurement, management procurement and partnering with other collaborative arrangements.
Rights and Liabilities of Florence Lee and the Contractor
In the lump sum contract, the contractor is paid a single lump sum prince for all the work which is agreed before it begins (Suprapto et al., 2016). In this scenario, this form of contract is selected by Florence Lee because the project is well defined, tenders are sought, and there is no requirement of significant changes in the project. Based on these factors, the contract is able to accurately price the work which will be carried out in the construction project. This form of contract is not suitable in case the work is not defined; however, Florence Lee has provided that the development is to be low size which will be no more than three storeys. Moreover, it is also provided that the development will include brick and glass clad with pitched tiled roofs. The terms of the lump sum contract outline the rights and liabilities of each party. The Sum and Moon Construction is hired by Florence Lee in order to complete the construction project as per the project guidelines. The guidelines which Sun and Moon Construction have to follow are clear, and the company is not required to make any significant change in the project on its own. Florence Lee has experienced in large development projects based on which the contractor is only hired to complete the project as per given guidelines. This form of contract is selected by the parties because it is easier to define the rights and obligations of both parties (Bunni, 2013). It avoids ambiguity from the contract and sets the guidelines straight between the parties.
Florence Lee is the developer of the project based on which she is the person who seeks a profit from development of the land either by selling a development or by holding the developed property. The rights of Florence Lee are generated based on the contract formed with the contractor. Florence Lee has hired Sun and Moon Construction to complete the project as per the guidelines based on which she has the right to receive the work as defined to the contractor. She also has the right against the contractor that the work is complete with the time mentioned in the contract document. Florence Lee has the liability to make the payment to Sun and Moon Construction after the development of the project is completed. She is obligated to make the payment to the contractor when the work is completed, and since the parties have entered into a lump sum contract, the payment will be made in lump sum as well after completion of the project (Clough et al., 2015). Florence Lee has the right to receive the work as per the instruction mentioned by her in the contract.
Mitigating Risks within Law
The developer has the right to receive the property or development as per the instruction mentioned in the design while specifying it to the contractor. Another key right available for Florence Lee is the mechanism which can be used by her to hold the contractor liable in case the development is not made as per the given instruction. In H W Nevill (Sunblest) Ltd v William Press & Sons Ltd (1981) 20 BLR 78 case, the court viewed this right as sensible because it avoids conflict between parties (Tolson, 2014). As per this right, Florence Lee can tell the contractor that a mistake has been made in the design after which the contractor has to make changes on its own. In case Florence Lee has made a mistake in the design, then she has the liability to pay the contractor to make changes in the design. She is also liable in case of negligence in the design an injury is suffered by her. Liability is imposed on Florence Lee under the Contract (Rights of Third Parties) Act 1999 in case of a tort. This liability is also recognised by the court in the judgement of Henderson v Merrett Syndicates Ltd [1994] UKHL 5 case (Giliker, 2013).
The primary duty or liability of the contract is the work must be completed as defined by the client. It must also be completed within the time frame decided by the parties in the construction contract. The primary right of the contract is to receive the payment after completing the work as agreed upon in the contract or in instalments as decided by the parties. Sun and Moon Construction has the right to do everything which is necessary to complete the work for the general purpose based on the design provided by the client. Since in this scenario, the parties have formed a lump sum contract, the client has the right to make changes in the project, and the contractor has to comply with such changes as long as those changes are within the general scope of the contract. The contractor has the right to get access to the site to complete the project. The court provided in Independent Broadcasting Authority v EMI Electronics Limited [1980] 14 B.L.R. 1 case that the contractor is provided a product to the client rather than a service based on which an obligation is imposed on the contractor to ensure that the product is of satisfactory quality and fit for the purpose (Patten and Saunders, 2018).
Conclusion
Moreover, the contractor is not obligated for negligent actions of the client made in the design as long as the contractor has not committed the negligence itself. Along with the client, the contractor is also obligated to comply with the mechanism in order to avoid conflicts as discussed in H W Nevill (Sunblest) Ltd v William Press & Sons Ltd case (Tolson, 2014). In case a mistake is made by the contractor in the construction, then the client can bring it to the notice, and the contractor has to make changes to improve his/her mistakes. The contractor has can be held liable for negligence if a duty of care is not maintained by him. In this case, Sun and Moon Construction has failed to maintain a duty of care which resulted in causing damages to Florence Lee. The damages are not too remote, and they are caused directly due to the actions of the contractor, based on which the contractor can be held liable for negligence and liability can be imposed (SCM (United Kingdom) Ltd v WJ Whittall & Son Ltd [1971] 1 QB 337) (Todd, 2017).
In this case, the Project Manager has found a defect in the work done by Sun and Moon Construction. A lump sum contract was formed between the parties in which Florence Lee has clearly mentioned all the details regarding the project. It was mentioned that the development is to be low rise which must not be more than three storeys. It must be completed with brick and glass clad with pitched tiled roofs. The Contract Administrator/Project Manager found out that the roof tiles are not according to the terms mentioned by Florence Lee in the construction contract. This defect was found within a key element of the development. This defect was found after practical completion of the project work. In this scenario, the normal way to obtain a remedy is by bringing legal action against the contractor through adjudication, arbitration or litigation. However, in this scenario, the defect is not major, and it will be unsuitable for Florence Lee and the Contractor to bring a legal suit to receive remedy. The construction contract provides a mechanism for a stipulated period; the client may notify the defect and the contractor can return to the site to make good of such defect at its own expense.
This approach was seen sensible by the court in H.W. Nevill (Sunblest) v William Press and Son case. The contract formed between Florence Lee and Sun and Moon Contraction did not contract a clause regarding this mechanism, however, it did not limit the right of the client. Florence Lee can still give the contractor the opportunity to return to the site and rectify the defect at its own expense to avoid legal consequences. In case Florence Lee failed do this, then she runs the risk of recovering nothing from the contractor other than nominal damages. It is considered that she has failed to mitigate its loss, unless there are extenuating circumstances as provided by the court in Woodlands Oak Ltd v Conwell [2011] EWCA Civ 254 case (Dawson, Lau and Bulut, 2013). In the judgement of Oksana Mul v Hutton Construction Ltd. [2014] EWHC 1797 (TCC) case, the court provided various extenuating circumstances in which the client can recover after failing to notify within reasonable time. The court provided that if the contract did not have express contractual right, then the money cannot be recovered for defect unless, the contractor found guilty of fraudulent behaviour or it is based on facts of the case. In this case, Florence Lee has learned about the defect made by the contractor, and she can ask the contractor to remove the defect at own expense in order to avoid legal consequences.
The liability for latent defects survives at the end of the defect period because the defect is a breach of the contract and the parties cannot eliminate the liability of violating a contractual term mere based on the fact that a mechanism is given to deal with defects. Based on the common rights, Florence Lee has the right to hold the contractor liable for breaching the terms of the contract. Since she had mentioned everything in the contract regarding how the project show is developed, the contractor has breached the contract by failing to comply with the guidelines of Florence Lee, therefore, she can file a legal suit to mitigate the loss within law. A final certificate given in this scenario did not have the effect of extinguishing liability for defects which are discovered after its issue. JCT Final Certificates do not have this conclusive effect. In this scenario, the employer (Florence Lee) can rely on her common law rights which are provided in contract or tort law or both. The employer is also required to prove that the damages suffered are a result of the defect caused by the contractor (Taggart, Koskela and Rooke, 2014). It must be proven by Florence Lee that the contractor is responsible for the defect which in this case is easy because all the details of the project were given to the contractor before the starting of the project
Conclusion
Based on the above observations, it can be concluded that various rights and liabilities are imposed on Florence Lee and the Contractor based on the lump sum contract formed between the parties. Florence Lee has the right to receive the project as provided in details and within the time frame mentioned in the contract. She can also hold the contractor liable for negligence. She is obligated to make the payment after the work is completed. The contractor has the right to receive the payment and avoid the liability in case of the negligence of Florence Lee. If the defect was found after practical completion of the project, then Florence Lee can ask the contractor to make the defect right within appropriate timeframe at own expense of the contractor. If the defect is found after the defects rectification period, then Florence Lee can rely on her rights given in common law. She can file a legal suit against the contractor to recover money for the damages and the negligence of the contractor. These are different ways through which the issues raised in this case can be mitigated within law.
References
Allen, E. and Iano, J. (2013) Fundamentals of building construction: materials and methods. New Jersey: John Wiley & Sons.
Bunni, N.G. (2013) The FIDIC forms of contract. New Jersey: John Wiley & Sons.
Clough, R.H., Sears, G.A., Sears, S.K., Segner, R.O. and Rounds, J.L. (2015) Construction contracting: A practical guide to company management. New Jersey: John Wiley & Sons.
Contract (Rights of Third Parties) Act 1999
Dawson, P., Lau, V. and Bulut, V. (2013) Key considerations when defects are rectified by the owner. Construction Law International, 7(4), p.3.
Giliker, P. (2013) Tony Weir and the Law of Tort. Journal of European Tort Law, 4(1), pp.63-77.
H W Nevill (Sunblest) Ltd v William Press & Sons Ltd (1981) 20 BLR 78
Henderson v Merrett Syndicates Ltd [1994] UKHL 5
Hughes, W., Champion, R. and Murdoch, J. (2015) Construction contracts: law and management. Abingdon: Routledge.
Independent Broadcasting Authority v EMI Electronics Limited [1980] 14 B.L.R. 1
Kelleher Jr, T.J., Mastin, J.M., Robey, R.G., Smith, C. and Hancock, L.L.P. (2014) Smith, Currie and Hancock’s common sense construction law: A practical guide for the construction professional. New Jersey: John Wiley & Sons.
Oksana Mul v Hutton Construction Ltd. [2014] EWHC 1797 (TCC)
Patten, B. and Saunders, H. (2018) Professional negligence in construction. Abingdon: Routledge.
SCM (United Kingdom) Ltd v WJ Whittall & Son Ltd [1971] 1 QB 337
Suprapto, M., Bakker, H.L., Mooi, H.G. and Hertogh, M.J. (2016) How do contract types and incentives matter to project performance?. International Journal of Project Management, 34(6), pp.1071-1087.
Taggart, M., Koskela, L. and Rooke, J. (2014) The role of the supply chain in the elimination and reduction of construction rework and defects: An action research approach. Construction Management and Economics, 32(7-8), pp.829-842.
Todd, P. (2017) Security Interests in Mobile Equipment. Abingdon: Routledge.
Tolson, S. (2014) Dictionary of construction terms. Abingdon: Routledge.
Woodlands Oak Ltd v Conwell [2011] EWCA Civ 254
Conclusion
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