The other two issues relate to inconsistent lighting andelectrical wiring malfunctioning, both of which are attributed to the poorworkmanship of M&E, however, M&E blame it on the AT’s design. Inconstruction, defects can arise because the work was not carried out inaccordance with good practice or a particular design, or because the wrongmaterials have been used, matters under the responsibility of the Contractor(M). Alternatively, the Designer (AT) could be at fault, because aparticular design is not working in the manner that it should and the defectwill not be attributable to M. If an absolute sense of obligation isdesired under the contract, the Contractor would be obliged to provide and doeverything necessary for the proper completion of the work, this might not befair on M and therefore must be interpreted based on facts. However, itmay be argued that M had an express duty under the contract to givenotice to RP and BDB, if it was aware of inadequacy or discrepancy on thedesign portion (by AT) and hence would be liable1to some extent. If M is found liable fordefective works, it is necessary to determine the option available for thetenants to recover the costs towards painting works and remedial wiring /lighting works2under the provision of collateral warranty. Here, the warranty from M wasissued to BDB who will therefore be the provider / granter for collateralwarranties to the tenant. However, BDB enter into insolvency proceedings atthis point and may not be in a financial position to provide them, thecollateral warranties would not have any value (the granter having no resourceswhich could be called upon to make up for the losses).
However, the obligationunder collateral warranty is reliant on the specific performance of M(and not on BDB), it would be reasonable for the tenant to expect BDB to usebest endeavours3 torealize the warranty obligation from M. In addition, it is noted that ifBDB has professional indemnity insurance4coverage, the tenant could expect BDB to make good these losses under theumbrella of M’s collateral warranty5. Alternatively, if AT was liable fordefective design, it would be possible for tenants (assuming no FIR clause intenancy agreement) to claim under the Act 1999 or legal principle oftransferred loss.
Another option would be for RP (as owner of the property) toclaim for damages on all the remedial and rectification works against AT underthe Defective Premises Act 19726. 1. ConclusionIn summary, collateral warrantiesprovide tenants (and Employers) the option to sue for defective building worksand get relief from loss arising out of rectifying this work. If CC and M&Eare held accountable for poor standard of works, they will be liable for theincurred losses and rectifying defective works. For the loss of electrical equipment at constructionsite, tenant will need to raise a claim against CC with whom he has a directcontractual relation. In the case of M&E, the obligations under thecollateral warranty will have to be routed through BDB in the first instance orseek (if AT is liable for faulty design) recourse with the RP to claim damagesfor the loss incurred.
Word count for Part A of Coursework: 2121WordsPART B – ESSAY Question: Among otherthings, this module discusses a number of legislative or regulatory interventionsinto construction practice, in particular in regulating payment processes andensuring health and safety on site. Identify, consider and critically evaluate the different approachestaken by these two interventions (in payment and health and safety) and thesuccess of each of them in meeting their goals. Answer: Introduction to ConstructionContracts Aconstruction contract7essentially involves an agreement8 between an Employer and theContractor, who agrees to supply work and materials for the construction of adefined building, or other structure or works. In return for this, the Employeragrees to pay the Contractor a specified, or ascertainable price. The right to payment is important to Contractors, notjust for themselves but also to allow them to pay their own sub-Contractors.Failures or delays in making expected payments from Employer to Contractor (orfurther down the chain) can have significant effects for a project. It isnecessary for Contractor to follow the health and safety standards with therequired quality or workmanship and completed on time.
LegalInterventions to Payment provisions Preface The importance of issues related to late payment isnow recognized by the fact that legislation enshrines the payment process in manyforms of UK construction contract with a view to ensuring that contracts haveworkable and effective payment mechanisms. This legislation is the ‘Housing Grants, Construction andRegeneration Act 1996’ (HGCRA) which applies to relevant construction contracts9. The construction contracts must make provisions fora payment mechanism which comply with the Act and if they don’t then theprovisions of the Act apply. Responsibilities of Employer and Contractor The payment provisions in the 1996 Act deal withpayers and payees, they relate to un-amended provisions applicable to contractsbetween 1 May 1998 and 1 November 2011 and amended provisions for contractsbeyond the later date. Under the Act, the parties to a construction contractare free to agree on definite payment mechanism to ensure cash-flow. Theframework for the implication of terms relating to payment is allowed in theAct, wherein if the agreed contractual provisions are not up to the requiredstandards, there is a provision to setup a form of dispute resolution known asconstruction adjudication.
1 In Brunswick Construction LtdVs Nowlan and Others, a Contractor is engaged to execute al the works,where supervision of the works by architect the Engineers drawing were found tobe defective the courts implied a term in to the contract requiring theContractor to warn of any known or suspected defects in design.2 The cost of rectifyingwiring and lighting works maybe categorized under pure economic loss.3 RamseyJ’s verdict in Liberty Merican Ltd VCuddy Civil Engineering Ltd. 4 A professional indemnity insurance againstnegligent acts, errors and omissions of the insurer will extend professionalindemnity cover to collateral warranties entered into by the insured, providedthe warranties are on terms considered reasonable and acceptable by theinsurer.5 Scottish case of KierConstruction Limited v WM Saunders Partnership LLP 2016 CSOH 17.
6 It is an Act of theParliament of the United Kingdom that covers landlords’ and builders’ liabilityfor poorly constructed and poorly maintained buildings, along with any injuriesthat may result. 7 A contract is part of law of ‘obligations’, which may be defined asthe agreements between the two parties, which creates, for those two parties,legally binding rights and obligations.8 The basic formula in contract is that there must be an offerfollowed by acceptance, which is how the agreement is reached. The standardforms of building contracts are issued by Joint Contracts Tribunal (JCT),Institution of Civil Engineers (ICE) and Scottish Building Contract Committee(SBCC).9 A party to a contract which is for more than (or agreed to beestimated at more than) 45 days (referred to in the Act as a ‘relevantconstruction contract’) is entitled to instalment payments, stage payments orother periodic payments for work carried out under a contract