Construction Law: The Types of Construction Contract - Assignment Example

CONSTRUCTION LAW By + Introduction Construction contract is contract of two persons the client and contractor to construct a building. There are two types of contract the fixed price and the cost plus contract. Fixed price contract is whereby both the client and contract or fix price of the contract as per the terms of construction law. The cost plus contract, the price is paid in terms of percentage of the total cost in the construction .The contractor will in cur the total construction cost, and after wards receives reimbursement from the client. The contractor is entitled to the total cost plus percentage fee as per the contract with the client. Construction contract comprises of both revenue and cost. The revenues are the total amount received by the contractor and incentive payment. The revenue can increase or decrease depending on the nature of the contract. Cost escalation clause increase the total contract revenue while penalties imposed on the contractor by the client reduces the total revenue. The contract costs are divided into two: direct cost to the contract and general cost. The client takes care of the total cost. Contractors should use the Contract JCT SBC (Q) 2011 so as comply with the conditions of employees and the housing regulation in United Kingdom. Before beginning any job on the site, the contractor must be aware with the safety and healthy procedures of workers. It is the responsibility of the contractor to provide safe and healthy working to workers at thesite. All the individuals visiting the site should be protected from injuries at thesite. It is advisable that the contractor take an insurance policy for all workers to compensate for damages suffered. Healthy and safety officer is allowed to visit the site to monitor safety and health standards of the workers (Allensworth, 2009). The JCT SBC (Q) 2011 requires that contractors use materials which are less harmful to the health of the individuals. The materials should be free from asbestos, Urea formaldehyde, lead substance, Calcium silicate and mineral fibres substances. A substance like asbestos emits fibres substance that causes cancer and other diseases to human beings. All substances should be prevented from the premise by using recommended materials in construction. Preston Developments Limited (PDL) and Contractor Build care Construction Limited (Build care) enter into a construction contract on 12th September 2014. The completion period was set to be on 10th June 2015. In accordance to the construction clauses, the contractor should accomplish the construction of the building before the completion period set out in the agreement. If the completion period elapses before the completion of construction, the contractor should inform the architect by a letter in forming about reasons the delay. The architects will extend the completions date if the reasons for the delay are reasonable. The architect will give the contractors reasonable time to complete the work. The extension time should be shorter to reduce the total contract cost. However, if the architects do not find valid reasons for the extension of the contract; he or she will inform the contractors and sub-contractors before 12 weeks elapse from the day of receiving the letter from the contractor. Contractors should use the necessary resources and skills to complete the work on time to avoidliability due to delay in job completion (Cameron, 2000). The Housing, Construction and Regeneration Act, requires all the contractors who have worked for 45 days and above to receive an interim payment. Interim payment is the amount of money given to the contractors by the client on the work completed up to the date. Before the payment, the client quantity survey undertakes valuation of the work completed. Valuation of work completed depends on the nature contract; most contracts calculate the work done basing on percentage of completion. If the Quantity Surveys are certified of, the work done the contractor is given the payment less any amount that was given prior to interim time. The client issues interim certificate to the contractor, the certificate contains the total amount of interim payment. The certificate serves as a shred of evidence for payment of the stated amount as per the terms of contract. Contract or Build care Construction Limited is should receivethe interim payment from Preston Development Limited because they have worked for more than 45 workingdays. Failure of PDL to pay them, theyhave a right to terminate the construct and sue the company for payment of work done (Samuels, 1996). The contractor has a responsibility for all materials on the site. The client assign all the requisite material to the contractor who will be answer able for any damages that might occur to the materials on side. When the client notices any defects on the materials on the site, contractor will have to compensate the full amount to the client. The client will subtract the cost from the retention money of the contractor. Before subtraction of the money from the retention, client should inform the contractor for approval of the money. Construction law gives the client right to deduct any loss that occurs due to the contractor and workers negligence. Build care Construction Limited had piled up materials on side under leaking tarpaulins, consequently leading to damages on the materials. The deduction of cost of materials by PDL entitled to deduct the cost of material on interim payment. However, the defect on the brickwork was subject to further investigation since the quantity survey did not mention it during the interim valuation. it is the work of a contractor to prevent defects in buildings as per the construction policies. The Contractor is required to review the contract agreement with the client to ensure that the construction is per the agreement. The contractor should always monitor the construction of building by the sub –contractors to ensure that the construction work is per the industry standards. Contractor is the overall supervisor of the construction and is in charge of the entire construction process. Contractor has a right to inspect all materials to the site and formulation of the technique of construction. It is the duty of the owner of premises to make sure the construction is as per the statutory requirement and not the duty of the contractor. However, if the contractor is aware that the construction does not conform to the statute, he or she will notify the client architect. It was the duty of Build care Construction Limited to ensure that the buildings contain defects. The defects can cause the clients damages in the future. Therefore, defects should be corrected before the completion of the contract. Adefect in buildings has increased recently with the introduction of Computer Aided Design. CAD has replaced the traditional approach method, which utilize creativity and architecture technical skills to design a building. Computer Aided Design relies on the use of new materials of construction. The architect without further study to the material, they assemble and use the materials. The architects have abandoned their role to the contractors. The contractors have little knowledge on the design and construction of building. Some architects have little experience on construction thus, designing defective buildings. The constructions have sub- contracted the construction to others contractors, who are after moneyand not quality. The goal of most contractors is to maximize the profit using the shortest time with minimal cost. Architect and contractors are responsible for defects in a building. The brickwork defect in PDL construction was due to the fault on the contractor to notice and report to the architect. The deduction of the amount from the interim is a requirement to cover the loss suffered by the client. Construction contract termination is the process of ending contract. The two parties due to contractual and non-contractual can terminate the contract. However, before a party terminates a contract, the company solicitor should be consulted for legal advice concerning termination. The client and contractor should find out the outcome of the issue before termination of the contract. Contract termination can be because of frustration outside the ability of the client and contractor. Frustration of the parties automatically ends the construction contract. A party should terminate the contract after the actual frustration occurs. If a party terminates the contract due financial difficulty, it will not amount to frustration, and the party is liable under the law of contract to compensate for damages to the other party. If the contract was terminated because of frustration, all theparties would not be liable. The client and contractor should be aware of frustrating events that terminate the contract automatically, to avoid payment of damages after the collapse of the contract. Repudiation brings the contract into an end. Repudiation occurs when one party is in breach of contract. The party should be in a serious breach that will automatically terminate the contract without further action. If the client employs other contractors to perform, the same job will automatically terminate the contract of the former contractor. When the client block all accessible routes to the construction site will mean that no one is permitted to step there thus, the contractor will automatically terminate the contract. Failure of the contractor to perform the task will make the client terminate the contract and look for another contractor. There should be a clearevidence of repudiation by the one party. If there was no repudiation, the innocent party can himself be breach of contract for contract termination. The innocent party will be entitling to lower damages than in a case that involve the real repudiation. In the case of repudiation, the innocent party will be compensated to recover all the loss. The law governing contract allows the innocent person to recover all contract returns from the other party. The contract can also be terminated for convenience of the other party. The client or contract or terminates the contract for the sake of other important issues surrounding the party. The client can choose to terminate the contract if he or she found out that the eligible tenants to his or her premise would be less than the size of the premise. When the cost of the contract is higher than the profit, he will receive from the use of the building; the client will automatically terminate the contract. Termination by convenience should be effective for it not to attract a legalliability. If the termination is not clear, enough it will call for compensation of the other party. In the case of Abbey Development versus PP Brickwork Ltd, the company terminate the contract by convenience due to poor work man ship and lack of supervision of the contract. It was held by the court that the company did not provide efficient reason for terminating the contract. The court gave an order to the company, to reduce the contract and accomplish the project as per the terms of the contract. For a party to succeed in termination of the contract, it should provide valid and honest reason for termination. In the case of Westminster Council versus Hadley Design Associate, the client terminated the contract for building repair. The client terminated the contract due to the contractor within the month provide unsatisfactory services, and the client required one contractor and market requirement. The court held that the council wash one stand reasonable for termination of the contract. The plaintiff is right for compensation by the party who terminate the contract. The plaintiff should be compensated to the original position by paying all the cost and work done to date. Another similar termination to convenience is the termination by suspension. The party uses the termination to undertake other allegation. Termination by suspension and termination by convenience can sometimes yield the same results at the end of the suspension period. The client is required by the law to add in their contract suspension clauses to avoid inconvenience to the contractors and the employees of the company. The Construction and Regeneration Act of 1996 contain provisions that make sure the contractors receive their payment throughout the contract period. The Act provides that the contractors must be given the interim payment after the valuation of their work within the contract period. Failure of the client, to pay the agreed, amount can lead to the contractor suspending the job until the all amount is paid. The client should pay retention money after deducting all the expenses and damages of the contractor. The Construction Act provides a procedure followed by the client in paying the contractors. The client writes a payment notice to the contractor five days to the payment date. It is a statutory requirement to give payment notice even if the client does not have money now. The payment is paid by the end of the contract in full amount. Iftheclientwishes to payfeweramounts, heorshe should give a payless notice and the reasons for paying less money. If the client fails to give a notice within the five working days, the contractors will write to the client demanding for payment in the default notice. Construction law has a fixed duration of time for completion. The time is set out in the contract between the client and the contractor. The contractor must accomplish the task within the time allocated by the client. I f the contractors go beyond the contract period, it means allocation of more resources and incurring extra cost that was not in the plan of the client. Many issues, that can cause delay on the contract, are beyond the contractor’s ability. Delays caused by the client due to alteration of the contract, suspension of one party and strike of workers causes the contract to be extended. In the case of Preston Developments Limited (PDL) and Build care Construction Limited, the contractor is entitled to more allocation of time because the client had altered with the original contract. Reference ALLENSWORTH, W. (2009). Construction law. Chicago, Forum on the Construction Industry, American Bar Association. CAMERON, J. G. (2000). A practitioners guide to construction law. Philadelphia, PA, American Law Institute-American Bar Association Committee on Continuing Professional Education. SAMUELS, B. M. (1996). Construction law. Englewood Cliffs, NJ [u.a.], Prentice-Hall. Read More