The Law and Management of Building Subcontracts, Second Edition

559 Pages·2007·3.056 MB·English

by  John McGuinness(auth.)

The Law and Management of
Building Subcontracts
The Law and
Management of
Building Subcontracts
Second edition
John McGuinness BSc, MSc, FCIOB
© John McGuinness 2004, 2007
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permission of the publisher.
First edition published 2004 by Athena Press
Second edition published 2007 by Blackwell Publishing Ltd
ISBN: 978-14051-6102-2
Library of Congress Cataloging-in-Publication Data
McGuinness, John.
The law and management of building subcontracts / John McGuinness.
– 2nd ed.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-1-4051-6102-2 (hardback : alk. paper)
ISBN-10: 1-4051-6102-7 (hardback : alk. paper)
1. Construction contracts–England. 2. Subcontracting–England.
3. Construction contracts–Wales. 4. Subcontracting–Wales. 5. Construction
industry–Management. I. Title.
KD1641.M39 2007
346.4202’2–dc22
2006029934
Acatalogue record for this title is available from the British Library
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Permission to reproduce relevant conditions from the following are acknowledged: General Conditions of
Contract (MF/1), Form of Sub-contract, by The Institution of Engineering and Technology; CIC Novation
Agreement, by The Construction Industry Council; and CLLStandard Form of Novation, by the City of
London Law Society.
Contents
Definitions xi
Preface xiii
1 Tenders 1
Introduction 1
Contract of tender 2
Obligation post-tender 3
Nature of the tender 6
Amended tenders and other pre-contract requests 7
2 Contract 10
Formation 10
Work contracted for 10
Discrepancies between documents 17
Conclusion of a contract 18
Acceptance by signature 20
Acceptance by conduct 21
Letters of intent 24
Subject to contract 33
Capped price or expenditure 35
Incorporation of terms – general principles 41
Incorporation of terms – contractor’s proposals 58
Waiver 60
New terms 63
Terms arising in the course of dealing 64
Failure to make express provision within an agreement 66
Failure to conclude an agreement 67
When terms are left to be agreed 72
Unconscionable behaviour 83
3 Subcontractors Selected by a Third Party 89
Introduction 89
Pre-tender discussions 90
Specified subcontractor 91
Novation 93
Naming and nomination 98
Difficulties in third party selection 103
4 Programming of the Subcontract Work 105
Programme for work 105
Programming differing trades 107
Programming off-site or pre-site works 111
v
vi Contents
Programme changes and amendments 114
Alternative arrangements 116
Programme where the subcontract period is not defined 117
Programming following delay 118
Subcontractor’s programme 120
Extensions of time 121
Financial planning 125
Extensions of time under other subcontract arrangements 126
Coordination 126
5 Organisation and Management of the Subcontract 127
Introduction 127
Enquiry and tender 128
Post-tender, pre-subcontract 129
The subcontract 132
Pre-site and off-site works 133
On-site work 137
Payment 141
Completion of the works 143
6 Design Development 146
General considerations 146
The right to develop the design 147
Limit of responsibility 149
Design changes by the specifier 153
Interface of design responsibilities 154
Construction Design and Management Regulations 155
Aims and objectives of the subcontractor’s designer 156
Subcontractor’s design under JCT 157
Further design information 158
Programming design development 160
Contractor’s Design Submission Procedures 161
Payment for design 162
Shop or fabrication drawings 162
Supports and fixings 163
Temporary works 164
Consultant designers as subcontractors 166
Finalisation of the Sub-Contract Agreement 168
7 Instructions and Variations 170
The right to change 170
Nature of change 171
Instructions outside the subcontractor’s competence 173
Pre-priced variations 173
Nature of instructions 176
Types of instruction 177
Who may instruct 178
Post-contract instructions 178
Instructions relating to subcontractor design 180
Instructions to vary programme 183
Contents vii
The effect of instructions 183
Implementation of instructions 184
Instructions requiring a change to work already carried out 184
Necessary instructions 185
Instructions resulting from discrepancies within the documents 187
Timing of instructions 188
Instructions other than in writing 190
Instructions by third party 193
Directions to cease work 194
Duty to warn that instructions may give rise to defective work 196
Duty to install to manufacturer’s instructions 197
Instructions where there is no provision within the subcontract 199
Acceleration agreements 200
Instruction to omit the remaining work 203
Instruction to use supplementary labour 204
8 Valuation of the Works 206
Introduction 206
Valuation of variations 209
Contractor’s directions 222
Pre-priced variations 223
Enhanced rates 225
Loss and/or expense 226
Prolongation 233
Underutilised resources 234
Delay 236
Acceleration 237
Global claims 240
Quantum meruit 244
Pre-valued prolongation costs 246
Works carried out by others 247
Costs arising out of the preparation of an account 248
Costs in pricing variations 249
9 Payment 251
Requirements of the HGCRA 251
Application of the HGCRAin practice 252
Payment mechanism 254
Sum due to the subcontractor 259
Specific provisions in the SBCSub and ICSub forms 260
Specific provisions under other standard forms 268
Retention 270
Discounts 275
Capped price or expenditure 279
Withholding payment 281
Repayment of sums overpaid 287
Works carried out off site 287
Settlement 288
Payments under several subcontracts 294
Pay-when-certified clauses 295
viii Contents
Pay-when-paid 298
Interest 301
Financing costs 308
Payment of an adjudicator’s decision 312
10 Completion 319
General principles 319
The effect of completion 320
Completion of the subcontract works 321
Practical completion 324
Sectional completion and partial possession 327
Beneficial use or occupation 329
Notification of completion 330
Special cases 331
Failure to complete on time 332
Guarantees 334
11 Breach of Contract 336
General principles 336
The subcontractor’s obligations for quality 336
The subcontractor’s obligations by reason of the specification 339
The subcontractor’s obligations for time 341
Loss and/or expense 346
Establishing the obligation 352
Temporary disconformity 353
Contractor’s right to rectify the subcontractor’s defects 359
Differing obligations 362
Interruption to the progress of subcontract works 363
Obligations of the contractor 364
Valuation and payment by the contractor 364
Omission of work to enable it to be done by another 365
12 Determination of the Subcontract 367
Introduction 367
Determination by agreement 368
Determination under the subcontract 368
Determination by the contractor 369
Determination by the subcontractor 380
Determination because of the contractor’s failure to pay 383
Determination on the grounds that progress is insufficient 385
Determination when time is of the essence 389
Determination by way of a term incorporated from another contract 390
Determination at common law 392
Wrongful and invalid determination 396
Suspension 397
13 Damages 401
General 401
Reasonable performance 402
The burden of proof 403
Contents ix
Where neither party is at fault 404
Damages from and to the subcontractor 405
Settlement between contractor and employer 406
Delay to the subcontractor’s work 411
Damages when delay due to two or more subcontractors 415
Undervaluation of the work 419
The measure of damages 420
Pre-ascertained damages 423
Failure to pay by the final date for payment 426
Damages where no agreed subcontract sum 428
Timing of entitlement 429
Damages for latent defects 432
Costs of an expert’s report 433
Recovery of preliminary costs 435
Contribution to head office overheads 440
Exclusion and limitation clauses 442
Loss of overheads and profit 445
14 Sub-subcontracts 447
Introduction 447
Incorporation of terms 447
The subcontractor’s obligations 448
The sub-subcontractor’s obligations 449
Instructions and variations 450
Payment 451
Determination 452
Disputes 452
Extension of time 452
15 Works Contracts under Management Contracting Arrangements 454
Introduction 454
Management contracting 454
Loss and/or expense by works contractor 455
Loss and/or expense by management contractor 458
Extension of time 459
Dispute resolution 460
Name borrowing 462
Adjudication/arbitration under the name borrowing provisions 468
Rights of third parties 468
16 The Legal Approach 470
Introduction 470
Construction of the subcontract 471
Obligations of the parties 474
17 Dispute Resolution 475
Nature of a dispute 475
What is a dispute 476
When does a claim become a dispute? 476
Claim or counterclaim 478
x Contents
Presenting a claim 480
Contractor’s difficulties – combining disputes under
differing contracts 483
Methods of dispute resolution 487
18 Adjudication 490
Introduction 490
The process 490
Nature of adjudication 491
Matters that may be referred 492
The parties to the adjudication 493
The referral 494
Notice of adjudication 496
Appointment of an adjudicator 498
Jurisdiction of the adjudicator 499
The response to the referral 501
Replies and further details 501
Costs of adjudication 502
The decision 503
Enforcement 504
19 Statutes 514
Introduction 514
The Housing Grants, Construction and Regeneration Act 1996, Part II 514
The Late Payment of Commercial Debts (Interest) Act 1998 522
Contracts (Rights of Third Parties) Act 1999 526
Table of cases 528
Index 538
Definitions
Contractor employing contractor or subcontractor
Employer ultimate employer under the head contract
Employer’s agent any person named in the main contract to represent the
employer
Head contract contract between the ultimate contractor and the
employer
Main contract contract between the contractor and another
Subcontract contract between the contractor and the subcontractor
Subcontractor employed party
CDM Construction (Design and Management) Regulations 1994
CECA/6th Civil Engineering Contractors Association Form of
Subcontract July 1998
CIC/Nov Agr Construction Industry Council Novation Agreement, for use
where the appointment of a consultant is to be novated
from an employer to a design and build contractor
CLL City of London Law Society standard novation agreement
DBSub/A JCT Design and Build Sub-Contract Agreement
DBSub/C JCT Design and Build Sub-Contract Conditions
DOM/1 The subcontract conditions for use with the Domestic
subcontract DOM/1 Articles of Agreement
GC/Works/1 General Conditions of Government Contracts for Building
and Civil Engineering Works
HGCRA Housing Grants, Construction and Regeneration Act 1996
IC Intermediate Building Contract for works of simple content,
issued by the Joint Contracts Tribunal Ltd
ICSub/A Intermediate Sub-Contract Agreement
ICSub/C Intermediate Sub-Contract Conditions
ICSub/D/A Intermediate Sub-Contract with subcontractor’s design
Agreement
ICSub/D/C Intermediate Subcontract with subcontractor’s design
Conditions
ICSub/NAM/A Intermediate Named Sub-Contract Agreement
ICSub/NAM/C Intermediate Named Sub-Contract Conditions
ICSub/NAM/IT Intermediate Named Sub-Contract Invitation to Tender
ICSub/NAM/T Intermediate Named Sub-Contract Tender
JCT The Joint Contracts Tribunal Limited
LADs Liquidated and ascertained damages
LPCDIA Late Payment of Commercial Debts (Interest) Act 1998
MF/1 Model Form of General Conditions of Contract, issued by
the Joint IMechE/IEE Committee
xi