The other two issues relate to inconsistent lighting and
electrical wiring malfunctioning, both of which are attributed to the poor
workmanship of M&E, however, M&E blame it on the AT’s design. In
construction, defects can arise because the work was not carried out in
accordance with good practice or a particular design, or because the wrong
materials have been used, matters under the responsibility of the Contractor
(M). Alternatively, the Designer (AT) could be at fault, because a
particular design is not working in the manner that it should and the defect
will not be attributable to M. If an absolute sense of obligation is
desired under the contract, the Contractor would be obliged to provide and do
everything necessary for the proper completion of the work, this might not be
fair on M and therefore must be interpreted based on facts. However, it
may be argued that M had an express duty under the contract to give
notice to RP and BDB, if it was aware of inadequacy or discrepancy on the
design portion (by AT) and hence would be liable1
to some extent.
If M is found liable for
defective works, it is necessary to determine the option available for the
tenants to recover the costs towards painting works and remedial wiring /
under the provision of collateral warranty. Here, the warranty from M was
issued to BDB who will therefore be the provider / granter for collateral
warranties to the tenant. However, BDB enter into insolvency proceedings at
this point and may not be in a financial position to provide them, the
collateral warranties would not have any value (the granter having no resources
which could be called upon to make up for the losses). However, the obligation
under 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 use
best endeavours3 to
realize the warranty obligation from M. In addition, it is noted that if
BDB has professional indemnity insurance4
coverage, the tenant could expect BDB to make good these losses under the
umbrella of M’s collateral warranty5.
Alternatively, if AT was liable for
defective design, it would be possible for tenants (assuming no FIR clause in
tenancy agreement) to claim under the Act 1999 or legal principle of
transferred loss. Another option would be for RP (as owner of the property) to
claim for damages on all the remedial and rectification works against AT under
the Defective Premises Act 19726.
In summary, collateral warranties
provide tenants (and Employers) the option to sue for defective building works
and get relief from loss arising out of rectifying this work. If CC and M&E
are held accountable for poor standard of works, they will be liable for the
incurred losses and rectifying defective works.
For the loss of electrical equipment at construction
site, tenant will need to raise a claim against CC with whom he has a direct
contractual relation. In the case of M&E, the obligations under the
collateral warranty will have to be routed through BDB in the first instance or
seek (if AT is liable for faulty design) recourse with the RP to claim damages
for the loss incurred.
Word count for Part A of Coursework: 2121
PART B – ESSAY
things, this module discusses a number of legislative or regulatory interventions
into construction practice, in particular in regulating payment processes and
ensuring health and safety on site.
Identify, consider and critically evaluate the different approaches
taken by these two interventions (in payment and health and safety) and the
success of each of them in meeting their goals.
Introduction to Construction
essentially involves an agreement8 between an Employer and the
Contractor, who agrees to supply work and materials for the construction of a
defined building, or other structure or works. In return for this, the Employer
agrees to pay the Contractor a specified, or ascertainable price. The right to payment is important to Contractors, not
just for themselves but also to allow them to pay their own sub-Contractors.
Failures or delays in making expected payments from Employer to Contractor (or
further down the chain) can have significant effects for a project. It is
necessary for Contractor to follow the health and safety standards with the
required quality or workmanship and completed on time.
Interventions to Payment provisions
The importance of issues related to late payment is
now recognized by the fact that legislation enshrines the payment process in many
forms of UK construction contract with a view to ensuring that contracts have
workable and effective payment mechanisms. This legislation is the ‘Housing Grants, Construction and
Regeneration Act 1996′ (HGCRA) which applies to relevant construction contracts9. The construction contracts must make provisions for
a payment mechanism which comply with the Act and if they don’t then the
provisions of the Act apply.
Responsibilities of Employer and Contractor
The payment provisions in the 1996 Act deal with
payers and payees, they relate to un-amended provisions applicable to contracts
between 1 May 1998 and 1 November 2011 and amended provisions for contracts
beyond the later date. Under the Act, the parties to a construction contract
are free to agree on definite payment mechanism to ensure cash-flow. The
framework for the implication of terms relating to payment is allowed in the
Act, wherein if the agreed contractual provisions are not up to the required
standards, there is a provision to setup a form of dispute resolution known as
1 In Brunswick Construction Ltd
Vs Nowlan and Others, a Contractor is engaged to execute al the works,
where supervision of the works by architect the Engineers drawing were found to
be defective the courts implied a term in to the contract requiring the
Contractor to warn of any known or suspected defects in design.
2 The cost of rectifying
wiring and lighting works maybe categorized under pure economic loss.
J’s verdict in Liberty Merican Ltd V
Cuddy Civil Engineering Ltd.
4 A professional indemnity insurance against
negligent acts, errors and omissions of the insurer will extend professional
indemnity cover to collateral warranties entered into by the insured, provided
the warranties are on terms considered reasonable and acceptable by the
5 Scottish case of Kier
Construction Limited v WM Saunders Partnership LLP 2016 CSOH 17.
6 It is an Act of the
Parliament of the United Kingdom that covers landlords’ and builders’ liability
for poorly constructed and poorly maintained buildings, along with any injuries
that may result.
7 A contract is part of law of ‘obligations’, which may be defined as
the 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 offer
followed by acceptance, which is how the agreement is reached. The standard
forms of building contracts are issued by Joint Contracts Tribunal (JCT),
Institution of Civil Engineers (ICE) and Scottish Building Contract Committee
9 A party to a contract which is for more than (or agreed to be
estimated at more than) 45 days (referred to in the Act as a ‘relevant
construction contract’) is entitled to instalment payments, stage payments or
other periodic payments for work carried out under a contract