Construction Contracts: Law and Management, Third Edition

1 Construction ContractsThis is a fully revised Edition of the UK s leading textbook on the law governingconstruction contracts and the management and administration of those the legal principles involved are an aspect of general contract law, the practicaland commercial complexities of the Construction industry have increasingly made thisa specialist new Edition is up to date with recent cases and developments in the law as itstands at July 2000. It takes full account of the effects of the Housing Grants, Construction and Regeneration Act 1996, the Arbitration Act 1996, the Contracts (Rightsof Third Parties) Act 1999 and the changes in the legal system brought about by theWoolf reforms. The coverage of financial protection, particularly bonds and guarantees,the Construction (Design and Management) Regulations, Construction insurance, andtendering controls has been extended and amplified.

2 All of the common standard-formcontracts have been revised in recent years and the text takes account of these particular, more use is made of the New Engineering Contract and the GC/Worksfamily of contracts, especially where these contain specific differences from JCT 98,IFC 98 and ICE than providing a commentary on standard-form contracts, the approach is to introduce the general principles that underlie contracts in Construction , illustratingthem by reference to the most important standard forms currently in use and to thepractical issues arising in Construction cases. Practitioners consultants, builders,clients and lawyers will find this an extremely useful reference work, providing in-depth explanations for all of the features found in contemporary Construction contracts,with reasons. It is a key text for Construction undergraduates and postgraduates aswell as for those taking the RIBA Part III and CIOB Part II authors are at the University of Reading John Murdoch in the Department ofLaw and Will Hughes in the Department of Construction Management & ContractsLaw and ManagementThird EditionJohn Murdoch and Will HughesFirst published 1992 by E & F N SponSecond Edition published 1998 Third Edition published 2000 by Spon Press11 New Fetter Lane, London EC4P 4 EESimultaneously published in the USA and Canada by Spon Press29 West 35th Street, New York, NY 10001 This Edition published in the Taylor & Francis e-Library, Press is an imprint of the Taylor & Francis Group 1992, 1996, 2000 John Murdoch and Will HughesAll rights reserved.

3 No part of this book may be reprinted or reproduced or utilized in any formor by any electronic, mechanical, or other means, now known or hereafter invented, includingphotocopying and recording, or in any information storage or retrieval system, withoutpermission in writing from the publisher makes no representation, express or implied, with regard to the accuracy of theinformation contained in this book and cannot accept any legal responsibility or liability for anyerrors or omissions that may be Library Cataloguing in Publication DataA catalogue record for this book is available from the British LibraryLibrary of Congress Cataloging in Publication DataMurdoch, contracts: law and management / John Murdoch and Will Hughes. 3rd bibliographical references and 0-419-26170-2 (hbk : alk.)

4 Paper) ISBN 0-419-25310-6 (pbk : alk. paper)1. Construction contracts Great Britain. I. Hughes, Will, PhD. II..M87 '078624 dc21 00-058781 ISBN 0-419-26170-2 (hbk)ISBN 0-419-25310-6 (pbk)ISBN 0-203-18498-X Master e-book ISBNISBN 0-203-18507-2 (Glassbook Format)ContentsContentsvIntroductionixCa sesxiStatutesxxiiiGlossaryxxv1UK Construction industry nature of the nature of professionalism in nature of methods92 Roles and services conditions in professional services documentation233 General of general in general approaches to general contracting404 Design and of design and build of the JCT design build form (CD 98) of CD in design and to design and build55viCONTENTS5 Management contracting of management of MC in management to management contracting696 Construction of Construction management of Construction management of risk in Construction to Construction management817 procurement and contract of risk in Construction with risk through methods of procurement choice958 Tendering and contract meaning of Construction formation of contracts by made by tender1199 Liability in contract and by in tort for negligence14510 Contractor s of and of materials15511 Employer s s obligations under JCT Responsibility for the contract for site and safety166viiCONTENTS12 Responsibility for duties in responsibility for design17313 s obligations after of time18614 s obligation to

5 The contract money20815 Contractors claims for loss and claims and for contractual of claims21716 Insurance and and guarantees23017 Role of the contract Contract administrator as the employer s administrator as independent adjudicator24618 Health and safety of the CDM of the CDM of the for the prevalence of legal basis of contractual of of sub-contractors268viiiCONTENTS20 for employer selection of of nominated of nominated sub-contractors29221 Financial remedies for breach of meruit Non-payment as a contractual remedy30622 Defective buildings and subsequent in Statutory forms of legal protection31623 Suspension and determination of of for breach at common under JCT 98 and related on neutral of contract33524 Non-adversarial dispute to nature of Construction role of the contract of dispute alternative dispute resolution procedures34525 Adversarial dispute or litigation?

6 362 References367 Index371 IntroductionThis book is aimed primarily at students for whom the study of building or civilengineering contracts forms part of a Construction -based course. We have had in mindthe syllabus requirements for first degrees in Building, Civil Engineering, Architecture,Quantity Surveying and Building Surveying, as well as those of postgraduate coursesin Construction Management and Project Management. We have also assumed thatsuch students will already have been introduced to the general principles of Englishlaw, especially those relating to contract and tort. As a result, while aspects of thosesubjects that are of particular relevance to Construction are dealt with here, the readermust look elsewhere for the general legal producing this Third Edition , we have again been greatly assisted by the manyhelpful comments made by reviewers and users of its predecessor.

7 Nonetheless, ourbasic aim is identical to that which underpinned the first Edition : to provide an explanationof the fundamental principles of Construction contract law, rather than a clause-by-clause analysis of any particular standard-form contract. As a result, while we drawmost frequently upon JCT 98 for our illustrations of particular points, this merelyreflects the pre-eminent position occupied by that particular form of contract in the UKconstruction conclude by repeating our previous warning as to the dangers inherent in a littlelearning. Neither this book, nor the courses for which it is intended, seek to produceconstruction lawyers. The objective is rather to enable those who are not lawyers toresolve simple Construction disputes before they become litigious, and to recognizewhen matters require professional legal advice. It should be the aim of every constructionstudent to understand the legal framework sufficiently that they can instruct and briefspecialist lawyers, and this book is designed to help them towards that & D Maintenance and Construction Ltd v Pagehurst ConstructionServices Ltd [1999] CILL (J & JC) Ltd v Ancliffe [1978] 2 NZLR McAlpine Construction Ltd v Panatown Ltd (1998) 88 BLR v Schooling [1991] 3 All ER Building Products Ltd v W & C French ( Construction ) Ltd(1972) 16 BLR v Merton LBC [1978] AC , 316 Architectural Installation Services Ltd v James Gibbons Windows Ltd(1989) 46 BLR , 331 Archivent Sales and Developments Ltd v Strathclyde RegionalCouncil (1984)

8 27 BLR , 272 Arenson v Casson, Beckman Rutley & Co [1975] AC Investments Ltd v Elmer Contractors Ltd [1988] 2 All v McMillan & Lockwood Ltd [1991] 1 NZLR Energy Ltd v Lodge Sturtevant Ltd [1994] CILL Construction (Midlands) Ltd v Northampton DevelopmentCorporation (1975) 8 BLR Beatty Building Ltd v Chestermount Properties Ltd (1993)62 BLR Beatty Civil Engineering v Technical & General GuaranteeCo Ltd [2000] CILL Beatty Construction (Scotland) Ltd v Scottish Power plc[1994] CILL Bank plc v Fairclough Building Ltd (1994) 68 BLR Bank plc v Fairclough Building Ltd (1995) 76 BLR Pipeline Technology Ltd v Marton Construction Co Ltd[1992] CILL Developments (NI) Ltd v Gilbert-Ash NI Ltd (1998) 88 BLR House Development Ltd v Zimmcor (International) Inc,Zimmcor Co and Cigna Insurance Co of Europe SA-NV (1990)50 BLR 91, v Marriott (1864) 8 LT (A) & Son (Paddington) Ltd v CBF Residential Care &Housing Association (1989) 46 BLR , 305 Bernhard s Rugby Landscapes Ltd v Stockley Park Consortium Ltd(1997) 82 BLR Group of Companies Ltd v DCB Integration Systems Ltd [1987]CILL , 352xiiCONSTRUCTION CONTRACTSB ickerton v North West Metropolitan Regional Hospital Board[1977] 1 All ER Holdings Ltd v Robert J Wood & Partners (1979) 12 BLR and Fylde Aero Club Ltd v Blackpool BC [1990] 3 AllER Circle Industries plc v Holland Dredging Co (UK) Ltd (1987)37 BLR 40, , 91,203 Bolton v Mahadeva [1972] 2 All ER v York Corporation (1892) HBC 4th ed, ii, UK Ltd v Dahl-Jensen UK Ltd [2000] CILL (DR) (Cable Jointing) Ltd v Jefco Mechanical Services Ltd(1988) , 327 Bradley v Eagle Star Insurance Co Ltd [1989] 1 All ER & Ogden Ltd v Sheffield CC (1983)

9 29 BLR Properties Ltd v Newton [1971] 3 All ER Kilpatrick Engineering Services v Mitchell ConstructionLtd (1973) 1 BLR , 310 Brightside Mechanical & Electrical Services Group Ltd v HyundaiEngineering & Construction Co Ltd (1988) 41 BLR and Commonwealth Holdings plc v Quadrex Holdings Inc[1989] 3 All ER Eagle International Airlines Ltd v Compagnie Nationale AirFrance [1975] 2 All ER Steel Corporation v Cleveland Bridge & Engineering Co Ltd[1984] 1 All ER Telecommunications plc v James Thomson and Sons(Engineers) Ltd [1999] BLR Westinghouse Electric Co Ltd v Underground ElectricRailways [1912] AC Zornow (Builders) Ltd v Beechcroft Developments Ltd(1989) 51 BLR , 182 Bryant & Sons Ltd v Birmingham Hospital Saturday Fund [1938] 1 All ER (Architectural) Ltd v Beaver Building Systems Ltd (1988) 42 BLR & P Haulage v Middleton [1983] 3 All ER (A) Ltd v Mowlem & Co plc (1990) 52 BLR v JA Berriman Pty Ltd (1953) 89 CLR , 276,327 Central Provident Fund Board v Ho Bock Kee (1981) 17 BLR 21(Singapore).

10 331 Chambers v Goldthorpe [1901] 1 KB Bros Ltd v Boswell [1936] 2 All ER Tunnel Group Ltd v Balfour Beatty Construction Ltd[1992] 2 All ER (Finchley) Ltd v Singer Sewing Machine Ltd (1968) 207 v Alfred McAlpine (Southern) Ltd (1986) 35 BLR Properties Ltd v Bucknall Austin Project ManagementServices Ltd (1996) 82 BLR OF CASESC hester Grosvenor Hotel Co Ltd v Alfred McAlpine ManagementLtd (1991) 56 BLR Joinery Ltd v John Mowlem & Co plc (1987) 42 v AJ Crump Ltd [1964] 1 QB v Woodman & Son (Builders) Ltd [1962] 2 QB District Water Trustees v Fidelity Deposit of Maryland1916 SC (HL) for Main Roads v Reed & Stuart Pty Ltd (1974) 12 BLR , 207 Computer & Systems Engineering plc v John Lelliott (Ilford) Ltd(1990) 54 BLR 1, Construction Co Ltd v Colgan Co Ltd (1984) 29 Hospital v Eberlin & Partners (1990) 14 Con LR Islands Shipping Co Ltd v Colson Builders Ltd [1975] v Green (1843) 11 M&W v Langdon (1841) 9 M & W Hotel (Newcastle) Ltd v Arup Associates (1997) 85 , 289 Cort v Ambergate, Nottingham, Boston & Eastern Junction RailwayCo (1851) 17 QB (Contractors) Ltd v Mid-Glamorgan CC (1997) 85 BLR Civil Engineering Ltd v Zanen Dredging and ContractingCo Ltd (1996) 85 BLR & Fairbairn Ltd v Tolaini Brothers (Hotels) Ltd [1975] 1 All ER Ltd v Carr (1987) 37 BLR (J) & Sons Ltd v Portland UDC (1967) 5 BLR v Pritchard (1899) 16 TLR Construction Ltd v Cawoods Concrete Products Ltd(1978) 8 BLR Estate Commissioners v John Mowlem & Co Ltd (1994) 70 BLR , 248 Crown House Engineering Ltd v AMEC Projects Ltd (1989) 48 BLR & F Estates Ltd v Church Commissioners for England [1988] 2 All ER , 312 Darlington BC v Wiltshier Northern Ltd (1994)