Civil Engineering Construction Contracts 2nd Edition

398 Pages·1999·17.465 MB·English

by  O'Reilly, M. P

Civil engineering
construction
contracts
Civil engineering
construction
contracts
Michael O'Reilly
SECOND EDITION
T I Thomas Telford
Published by Thomas Telford Publishing, Thomas Telford Ltd, 1 Heron Quay,
London E14 4JD
URL: http://www.t-telford.co.uk
Distributors for Thomas Telford books are
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First published 1996
This edition 1999
Appendix 2 is Crown copyright and reproduced by kind permission of Her Majesty's
Stationery Office
A catalogue record for this book is available from the British Library
ISBN: 978-0-7277-2785-5
© M. O'Reilly & Thomas Telford Limited 1999
All rights, including translation, reserved. Except as permitted by the Copyright, Designs
and Patents Act 1988, no part of this publication may be reproduced, stored in a retrieval
system or transmitted in any form or by any means, electronic, mechanical, photocopying or
otherwise, without the prior written permission of the Publishing Director, Thomas Telford
Publishing, Thomas Telford Ltd, 1 Heron Quay, London E14 4JD
This book is published on the understanding that the author is solely responsible for the
statements made and opinions expressed in it and that its publication does not necessarily
imply that such statements and/or opinions are or reflect the views or opinions of the
publishers. While every effort has been made to ensure that the statements made and the
opinions expressed in this publication provide a safe and accurate guide, no liability or
responsibility can be accepted in this respect by the author or publishers
Typeset by Pier Publishing, Brighton
Printed and bound in Great Britain by Bookcraft (Bath) Ltd
Contents
Preface ix
Table of cases xi
Table of statutes and statutory instruments xxv
Chapter 1 Introduction 1
1. The use and importance of contracts in civil engineering 1
2. The variety of construction contracts 2
3. Housing Grants, Construction and Regeneration Act 1996 3
4. Further issues relating to the procurement of works of civil
engineering 4
Chapter 2 General principles of contract law 7
1. Formation of contract 7
2. Variation of contract 11
3. Identifying the terms of the contract 12
4. The interpretation of contracts 15
5. Exclusion, limitation and indemnity clauses 18
6. Contracts and formality 19
7. Ending contracts 20
8. Legal personality and agency 23
vi Civil engineering construction contracts
Chapter 3 The scope and quality of the agreed work 25
1. Documents used to describe the scope of civil engineering
works 25
2. Questions and ambiguities regarding the scope of the
contract works 28
3. Varying the scope or description of the works 31
4- The required quality and performance of the works 35
Chapter 4 Payment in accordance with the contract 39
1. The price 39
2. Payment process—the provisions of the HGCRA 1996 42
3. Conditional payment clauses 48
4. Interest 48
5. Referring payment matters to adjudication 49
Chapter 5 Time for performance 51
1. The importance of time obligations 51
2. General obligations as to time 51
3. Extensions of time 53
4- Liquidated damages for late completion 55
5. Alternatives to liquidated damages for delay 58
Chapter 6 The contract and third parties 61
1. The doctrine of privity 61
2. Contract (Rights of Third Parties) Act 1999 62
3. Collateral and direct warranties 64
4- Assignments 66
5. Novation of contract 68
6. Sub-contracting and vicarious performance 69
Chapter 7 Miscellaneous matters associated with civil
engineering contracts 73
1. Access, permits and cooperation 73
2. Plant and materials 76
3. Termination clauses and suspension of performance 77
4. Contract administration 81
5. Bonds and guarantees 83
Contents vii
Chapter 8 Extra-contractual entitlements 85
1. Contractual and extra-contractual bases for payment 85
2. Misrepresentation 85
3. Restitution 88
4. Entitlement under a collateral or additional contract 90
5. Tortious liability for losses caused by a contractor 90
Chapter 9 Civil engineering professional services contracts 93
1. The application oftheHGCRA 1996 93
2. Formation of design and professional services contracts 94
3. The terms of the agreement 94
4- Delegation of design and consultancy services 97
5. Professional negligence: a failure to exercise reasonable skill 97
and care 97
6. Personal liability of consultants acting for a company 100
7. Examples of professional service obligations 100
Chapter 10 Civil engineering claims: entitlements and
evaluation 105
1. Formulating claims 105
2. Statements of claim and response 107
3. Set-off and counterclaim 109
4- The evaluation of claims 111
5. Interest and finance charges claims 114
6. Prolongation, delay and disruption claims 115
7. Claims for defective work 116
8. Limitation 119
Chapter 11 Dispute resolution 121
1. Negotiated settlement 121
2. Adjudication 123
3. Conciliation, mediation and similar processes 132
4- Expert determination 133
5. Arbitration 134
6. Litigation 142
Chapter 12 Particular types of civil engineering contract 149
1. Traditional contracts 149
viii Civil engineering construction contracts
2. Contracts with contractor's design 152
3. International turnkey (engineer-procure-construct) contracts 163
4- Contracts providing for a specialist management function 166
5. Term contracts 170
6. Concession (BOT) contracts 171
Chapter 13 The ICE Conditions of Contract—Measurement
Version (7th Edition, 1999) 181
1. Comparison with the 6th Edition 181
2. The scheme of the ICE Conditions of Contract 182
3. Commentary on the Conditions of Contract 185
Chapter 14 The Engineering and Construction Contract
(2nd Edition and Short Contract) 307
1. Introduction to the Engineering and Construction Contracts 307
2. The Engineering and Construction Contract (The NEC 2nd
Edition) 308
3. Commentary on selected core clauses in the main contract 312
4- The Engineering and Construction Short Contract 321
Chapter 15 Dispute resolution procedures 323
1. Introduction 323
2. The ICE Adjudication Procedure 1997 323
3. Arbitration Rules 332
4- The ICE Conciliation Procedure 340
Appendices 347
1. A survey of civil engineering standard form contracts 347
2. Housing Grants, Construction and Regeneration Act 1996,
Part II 351
3. The Scheme for Construction Contracts (England and
Wales) Regulations 1998 361
Index 373
Preface
This book is designed principally for construction professionals, although I
hope that non-specialist lawyers may also find it a useful introduction to the
subject. The first edition, published in 1996, was, I think, fairly well
received, and I am grateful to Thomas Telford for pushing me to write a
second edition.
In the three years since the first edition, construction law has undergone
a revolution. There have been many changes, some major, some minor:
amongst them, the introduction of the Arbitration Act 1996, the new
CIMAR Rules, the Woolf Reforms, the change of name and practice of the
courts which deal with construction, FIDIC's re-invention of its standard
form contracts and the House of Lords' decision to overturn 14 years of
Crouch. These are more than sufficient to warrant a new edition.
But it is Part II of the Housing Grants, Construction and Regeneration
Act 1996 which is really at the heart of the revolution. This legislation
came into force on 1 May 1998, and applies to all British construction and
allied contracts entered into after that date. The statute imposes a variety
of procedures associated with payment, but most important of all, it pro-
vides a speedy means of enforcing payment rights. Statutory adjudication
has been criticised by many, often unfairly, but the courts have, in recent
months, shown a robust determination to make the legislation work.
As a consequence of all these changes, most standard contract drafting
bodies have had to revise their forms. It is not easy to ensure that one always
has the latest edition to hand, but I hope that I have had some success in
keeping up. The book contains the full text of several new documents,
including the ICE Conditions of Contract, 7 th Edition, and the new ICE
Adjudication and Conciliation procedures.
x Civil engineering construction contracts
Many other changes are described in the text. One, in particular,
deserves mention, as it has caused some consternation as the book goes to
press in late 1999. I had anticipated that the Contract (Rights of Third
Parties) Bill would have been enacted by now; in the event, several new
amendments of significance for construction have been laid down for fur-
ther debate. In the text of the book, I have, nevertheless, called the Bill
'The Contract (Rights of Third Parties) Act 1999' in anticipation of its
imminent enactment and I express some confidence as to its eventual con-
tent. Readers will understand that I do not have a crystal ball, and I hope
that I may be forgiven if my presumption should backfire on me.
Table of cases
AMF International Ltd v. Magnet Bowling [1968] 1 WLR 1028 38, 313
Acsim (Southern) v. Danish Contracting and Development Co. Ltd
(1989) 47 BLR 55 (CA) 110
Afovos Shipping Co. v. Pagan [1983] 1 WLR 195 (HL) 78
Alan (WJ) & Co. v. El Nasr Export and Import Co. [1972] 2 All
ER 127 (CA) 38
Alfred McAlpine Homes (North) Ltd v. Property and Land
Contractors Ltd (1995) CILL 1130 117
Alfred McAlpine Construction Ltd v. Panatown Ltd (1998) 88 BLR
67 (CA) 64,113
Aluminium Industrie Vaasen v. Romalpa Aluminium [1976] 1 WLR
676 (CA) 76, 262
Amalgamated Building Contractors Ltd v. Waltham Holy Cross
UDC [1952] 2 All ER 452 (CA) 55
Amalgamated Investment And Property Co. v. John Walker & Sons
Ltd [1976] 3 All ER 509 22
Amstrad pic v. Seagate Technology Inc. (1997) 86 BLR 34 109
Anchor Brewhouse Developments Ltd v. Berkeley House
(Docklands Developments) Ltd (1987) 284 EG 625 91
Antaios Compania Naviera SA v. Salen Rederierna [1985] 1 AC
191 (HL) 16
Arbitration Award No. 2 (1985), CLY 1994, 58 (Mr Hawker,
arbitrator; on appeal to Yorkshire Water Authority v. Sir Alfred
McAlpine (1985) 32 BLR 114 213
Arbitration Award No. 5 (1989) CLY 1994, 98 (Mr Uff QC,
arbitrator; on appeal to the Court of Appeal: Humber Oil
Terminals Trustee v. Harbour and General (1991) 59 BLR 1
(CA) 210
Armagas v. Mundogas [1986] 2 WLR 1063 (HL) 24
Armour v. Thyssen Edalstahlwerke AG [1991] 2 AC 339 (HL)
(Scotland) 262