Construction Contracts in Context: Legal and Contractual Issues - Essay Example

Legal and Contractual Issues SECTION A contract is a legal binding or agreement between two parties. All the parties in an agreement have a control. The law provides rights for all contracts. A good contract should be legally accepted. A legal contract is easily protected with the government in case of any issues during the creation process or after breakage. All parties entering a contract must be able to access their benefits before signing1. They should ensure that they are satisfied before entering. All the people involved in a contract have a chance to speak out in order to understand the contract before signing. Hoover‘EmUp PLC (‘Hoover’) brought out share of SkyHigh Project Limited (‘SkyHigh’) which was a middle sized contraction company. The initial designs were done by PrimeDesign Partnership (‘PrimeDesign’). Hoover had a lawyer who helped him in his projects. The lawyer usually goes through his paper to be updated with the agreements he is in. During one particular diligence exercise he noticed that Hoover had misstated some of his documents. Being a written contact it might give the opponent a good hand in case of a dispute. The statements brought him into a big problem for design defects were noticed in the building. When Hoover noticed the problem he blamed it to PrimeDesign. The use of different legal issues in construction was the only way they have to meet their claims2. A good construction contract should be able to adhere to the Legal issues related to construction. Different contractual and legal issues were noticed in the case. Legal issue discovered during the investigation of the case3. The first issue was the one that deals with contractors and subcontractors. The issue deals with matters concerning what contractors are held liable during the building process4. It states that contractors and subcontractors are liability in automobile, commercial general and worker compensation/ employers’ liability. Hoover being the employer of PrimeDesign he is protected by this law. He has the right to sue PrimeDesign and claim for compensation. He can use the advantage of this law to ensure that SkyHigh has been compensated completely or partially for the design problem which is expensive. Another issue is in term of risk of the property or the builder. Risk of property of builder section tackled accidents that may lead damage of property or bodily damage. The decisions are made based on different considerations. Location of the project, type of project, cost associated with the project, type of contract, owner’s desires to participate in solving the risk and the parties involved are some of the considerations. It is safe for a developer to have a builder’s risk which will cater for such issues. In such a case like Hoover’s the constructor might be held liable for the damage. It is advisable they take the builder risk protection before the case becomes serious. They can use it to claim for the different cost issues that accompanied the damage at hand. They can make PrimeDesign to take part of the burden reducing the chance to waste much money. They should make them pay for the damages they caused during the initial design. The people entering a contract should be able to ensure consistency before signing. It is advisable for one should read the contract carefully and even involve a qualified lawyer to review it before signing. The document should be created in a way that it does not affect the time of the other party. It should be consistent to avoid many cases arising from one. A good contract should be able to fulfill the desires of all parties that are associated with it. One should be able to look at his ability to fulfill his end of the deal before signing. A careful contract will reduce the chances of entering into an unfair contract causing future regrets. One has to think twice before deciding to enter into the agreement5. According to Hoover’s case, mistakes were found in the document that he signed for the contract. The wrong information may cost him as the developer and SkyHigh a big loss. The PrimeDesign may decide to use it to their advantage. They may be able to stipulate the little error and convince the judges making them win. The issue of the document also arises in the side of PrimeDesign for they did not concentrate on what they were to do to make the contract a success. They made a design that had issues. Weavers of subrogation should always be in place. The weavers of subrogation are used to transfer the risk from contractor side to the insurers. A good building contract should endure that they are ensured to reduce problem of blaming their contractors. The use of weavers may reduce the chances of having to go to court which might take much time.6 According to the case of SkyHigh against the PrimeDesign it is clearly seen that the office developed were not ensured. The fact that the Hoover and SkyHigh are struggling to get much evidence to make PrimeDesign shoulder some or all the loss proves that they are not insured. With the presence of the weaver they could save the issue and just ask for compensation. Design profession is another legal issue that arises from construction contracts. A designer should ensure that his profession is recognized and ensured. The professional issues include the automobile and commercial general liability7. When making a construction agreement one must ensure that the other one is professionally protected. A designer should be able to consider the issue in terms of the type of the project. In case of any destruction the insured organization will take the mess. PrimeDesign is a professional designing center. It has to be under design profession protection to avoid issues. The protection could have taken care of the accusation making it easy to solve the case with Hoover. Risks should be allocated to parties that are in best control of the work. The owners should be access the risk and determine if they are willing to carry the loss or allocate it to another party. Each party should be given a chance to deal with their own mess. No party should try to pass its errors to the others. The owner may decide to allocate the whole mess to the other party or share it out. Decisions regarding risks should be assessed properly before coming up with a solution. The risk should be given to the party that manages and controls it. They should be made to understand the mess they might be in incase they are careless8. The party hold responsible should work hard to ensure that they don’t have to pay for the mess. According to Hoover he was able to give the risk to PrimeDesign which gives him a upper hand9. He transferred all the risk regarding to the design of the office to the PrimeDesign. He can use this as an advantage to ensure that they compensate the money that will be used to correct the mess. Another legal issue is in terms of surety bonds. The risks brought by nonperformance are distributed between owners, subcontractors and contractors. Any construction contract should be created in a way that all the parties fulfill their part of the deal. There should be a way to fine the party which does not perform what is expected well. Once a problem is found in the part of the contract the owners will blame it to the contractors in charge. It will be the work of the contractor to determine the exact cause of the problem and blame it on the subcontractors in charge. The process will go on till the person who did the mess is found and has to pay for the time and cost that was wasted. In the case of SkyHigh when the problem with the design was noticed, they first think of PrimeDesign who were the one in charge of the initial design. It is the work of the PrimeDesign to look into the matter and realize the core reason. The information will be used to come up with a decision on who will be made to pay for the whole mess. A good construction should not only rely on the certificates that they are issued with as their only defense. It has been noticed that the certificates do not hold much information. The certificates of insurance fail to give specific information about the contract during constructions and after the construction is complete. It is advisable for the parties involved to have other supporting documents that will mention the specific task of each one of them. The certificates are known for possessing incomplete and wrong information. The wrong information make it risky for may cause confusion in terms of job completion in time and what the parties are expected to do. In the case of Hoover, he had other documents to support his claim. It is said that the PrimeDesign had agreed to be viable when it comes to the design issues. In the other hand the lawyer of Hoover notice mistake on the documents which can be used against Hoover. Hoover has to use the information he has well to make him win the case10. With the help of his lawyer he can be able to analyze the contract further to make them win the case. In conclusion, we are able to see that the whole construction process is a complicated process. The people entering such a risky contract should be able to consider all the legal issues associated with it. They should understand all the terms before entering the agreement. Hoover as the developer has to use all the power he has to save the office. He has to gather evidence from the legal issues adhere and use them to their advantage when accusing PrimeDesign. The agreement between PrimeDesign, SkyHigh and Hoover had specific terms that govern it. 1The Liability in respect of application of professional skill, care and diligence in executing the design under appointment should be followed. It was the work of all parties in the contract to do their part of the deal with much care11. They had the responsibility to ensure that they have done everything they agreed on in the right way. The PrimeDesign were to give the good initial design and they failed which made Hoover who is the developer noticed in the wrong time. PrimeDesign are held viable of all the mess that the design caused to the operation. Despite the fact that the mess had not affected the people yet, they have to correct the error in the office before it is late. The agreement mentioned 2the consultant. The contract created gave the included the PrimeDesign as the initial designers consulted. The document mentioned the advice that the engineering organization gave them during the consultation. The PrimeDesign being the key consultant they were clearly named and made to sign that they will not mislead the work. Another term was 3the people under appointment which was the Appointment between PrimeDesign and the original developer, the Employer under the construction contract. It mentioned the task that each one of them was to do and how they will be expected to pay in case of failure. The other term was 4weather the accusation of before and after construction will be for the contractor who is SkyHigh. The term was able to include the person who will be blamed in case of issues arising before and after the construction process. It is clear that SkyHigh carried the whole blame for they are the one who take the responsibility of finding the error and try to find solution. Another term of agreement was12. The consultant of the contractors who was PrimeDesign. The PrimeDesign was responsible of the errors regarding the design which they created. It is revealed when SkyHigh and Hoover try to get information to blame the problem to them. The other term that could be used in the case was the agreement of the parties to perform the appointment and to bind by the rules in respect of the contractor13. The SkyHigh were willing to take the responsibility of solving the problem at hand even after the work was completed. Lastly, 7the original developer was always mentioned in place of the employers. Hoover being the main developer he carried the entire burden to the end. Being the one who signed in place of the employers he had to handle the mess. SECTION 2 JCT Standard Building Contract JCT Standard Building Contract is used to represent the rights of the contractor and employers in the contract. The design and building contract mainly deals with protection of the contractors who do both the design and contraction work. In 2011, JCT contract standards were updated. It was made by part 8 of the Local Democracy, Economic Democracy and Construction Act 2009 (LDEDCA)14. It mainly affected the Housing Grand, Construction and Registration Act 1996 (HGCRA). It only changed some of the things but others remained15. It tackles issues concerning new building construction. It mainly tackled the issues concerning due dates and payments. There are different changes that were stipulated in the act. The 2011 act had many payment agreement of the contractor. Some of the clauses were completely the same. It stated in clause 4.8 that the contractor states the amount he considers due and the calculation related to the amount. The act will protect the contractor in terms of payment. It will give them the right to speak out in terms of pay they need. The provision was not different to the one stated in 2005. They were found to be completely similar to the past clause16. Clause 4.8.2 stated that in periodic payment the due date is the later of the receiving date of the application by the employers or the date specified for the interim application17. The clause specifies in the exact dates that the payment agreement. It reduces the chances of the payment delays. It makes the employer to honor his words in the payment agreement in terms of dates18. It gives both the contractor and the employer a chance to negotiate. All the requirements at this point in clause 4.8.2 of 2005 were the same to those of 2011. Nothing was changed at this point. The other act states that the final dates of payment remains days from the due date. It was found to be totally the same to the 2005 clause. The clause restricted the employer on dates expected to fulfill his part of the deal. It protects the contractor from the issue of late payments. On the other hand, it disadvantages the employer for he does not have the right to negotiate more on extra payment time of payment. The other clause on the act which was also the same to the 2005 was clause 4.9.2 which stated that there should be no later than 5 days. Payment notice that sets out of the considered due at the due date is issued by the employer19. The employer has to give the contractors the days that he feels she will be ready to pay. It also includes the date of contract completion. The first significant change in the act was in clause 4.9.3 which stated that in term of the payment notice. In case of deficiency or delays in payment the due amount will be the one the contractor stated in the interim application. It mainly deals with situation where the employers give inadequate information or no information on the dates. In the 2005 act, the contractor had to wait for the employer to give the dates. The clause made reduced the chances of payment delays. The other clause combined clause 4.9.3 and clause 4.9.3, it stated that the sum in interim application should be the one that the employers should pay unless notice is issued five days before the day of payment20. It will be able to ensure that the employer does not change anything without consulting the contractor. The other clause is stated in clause 4.10.2 which stated when the employer considers sum of other notified sum he might have to send a pay less notice. All payments must state the sum due as the service date and the basis for the same. It is applied in the absence of interim application. It stipulates clearly on how the employer can change due date according to the services offered and the time taken for the offer. It also gives an explanation to the sum reducing misunderstanding with the contractor. It will show the different reasons for the actions of the employer. The 2005 clause was different to this. It did not have a clear explanation on the employer’s actions. It did not include the time of the service. The other change is clause 4.10.4 pay less notice. It replaced the withholding notice. The pay less notice is kind of wider than the withholding notice. It a better one for it deals with big values. It also deals with counterclaims and deductions. It is a solution to the problem of absence of payments by stating what is due21. The pay less contract is a good one for it gives mathematical explanations which are easy to analyze than the withholding method. The method will ensure that everything about money issues. The values are arranged in a way that it shows how it was earned. It will ensure that the employers pay the contractor money the money they expected. The payment notice must be issued even in the state that the total is zero. The other change is in clause 4.12 it deals with the final payment. It states that, the due date of the final payment is one month after the last period of rectification. It deals with the final date of completion of the good defect. It also deals with the date of submission of the final statement. It states that the final payment is 28 days after the statement is submitted. The clause is better than the 2005 one for it gave the employer enough time to deal with the payments. It ensures that the employer gathers enough money to clear with the contractor. It reduces the chances of court issues for the employer will be able to look for the money in the right time and pay the contractor22. The JCT act of 2011 made changes in clause 8.7.3 it deals with the contractors insolvent. It states that if the notice of less pay expires and the contractor is insolvent then the employer should not do any payments. The application of the provision is in the new clause 111(10). The clause also states that the employer should not pay for the sum that is declared due. It is the contractors work to ensure that he is not solvent at any time of the contract. It helps to make the contractor well without supervision. The clause increases trust between the contractor and the employer. Employer feels safe for he has the right of not paying for what is not due. It also makes the results of the contract be at their best. It reduces the task of the employer visiting the site all the time23. Clause 4.11.1 was also changed. It deals with termination of contract if the contractor is noticed to be as a result of bribery. It introduced the aspect of seven days suspension. Whenever the contactor is found with the bribery case the contract is terminated with pay on services already done. In the 2005 all the bribery cases lead to contract termination. It helped to reduce the chances of bribery during contract allocation. The contractor had to go through all forms of applying for the contract, his qualification checked before he gets the job. The clause increased fairness which made the end results a good one for the contractors are always qualified. The other change was in clause 4.11.2 which gave the contractor rights to ask for some amount after termination. The contractor were given chance to claim reasonable money according to the work they did. The change from JCT standards of 2005 to 2011 was very important. It was able to mention so many important factors that were left out. It was more flexible. The change allowed the contractor and the employee to make necessary changes as the contract is in process. It gave them a chance to speak out when they feel pressed24. Another reason is that it increased understanding between the contractor and the employer. It gave them a chance to explain themselves in case of any changes. It gave both of them a chance to participate in making decisions. It increased fairness which increased peace among the contractor and the employer. The changes have also improved the performance of the contractor. Contractors enter a contract with the purpose of gaining from it. The new rules encourage them to work well for they are paid according to what they do25. In conclusion, the JCT standards play a big role in protecting the rights of constructors and designers. It gives them a right to speak out in time of conflict. It ensures that no constructor or employee is mistreated during the construction process. It is so important for it leads to creation of good buildings26. The JCT standard reduces the bribery issues making the qualifications the key thing employers look at. It promotes the factor of good will for everyone works in the way expected. Constructors should read the standards well to reduce chances of being used during the contract. Bibliography Bondzi-Simpson, Ebow P. Law of Contract. London: Triton Publisher, 2002. Chemerinsky, Edwin. Constitutional Law, Fourth Edition (Aspen Casebook). California: Aspen Publisherd, 2013. Chemerinsky, Erwin. Constitutional Law: Principles and Policies, 4th Edition. Chicago: Aspen Publisher, 2011. 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