The Legal Framework of the Construction Industry - Essay Example

Construction Law Introduction 1The legal framework of the construction industry One of fundamental objectives of business, including construction business, is profit maximization. Another is value creation. In the construction industry, both are inextricably bound to each other. Unless profits are sustainable, value creation is not possible over a construction company’s useful years, especially if it were to be in the private sector, not having access to public funds. Again value creation creates high expected satisfaction levels for customers, who later translate into high levels of profits and growth for construction business. However, the maxim that the total aggregate is greater than the sum of its individual parts holds well in the UK construction industry too. Construction projects could clearly be said to be the result of co-ordinated efforts between promoters, project managers, consultants, architects, planners and workforce (own and/or contracted) who actually carry out the construction work at the site. Thus, when considering the construction industry in its entirety, the need for demand creation is vested with groups of individuals who could create more value for organisations than individuals working in isolation. “But by freely indulging in exchange, that is with no coercion, each member would be better off or at least no worse off than by being in isolation. The group as a whole would be better off; value is created.” (Sen n.d). However, construction activities also envisage time and cost factors. Unjustified delays may cause budgetary constraints which could be avoided if planning and organization of joint projects were carried out meticulously and diligently. “It was concluded that this approach offers a number of benefits for the client, the main contractor, partnering subcontractors and professional consultants, such as, lower costs, improved team approach and less confrontation.”(Humphreys, Matthews & Kumaraswamy 2003, pp.166-178). 1.2. Legal issues arising from sub-contracting: Under normal circumstances, it is the principal contractor who is responsible for the work entrusted to sub-contractors, and shall be held responsible for their actions and non-actions. However, much would depend upon the ensuing covenant and the terms and conditions of employment. Just as there are legal differentiations between contractors and employees, so also there are surrounding differences between the rights, liabilities and privileges of contractors, sub contractors and others along the line. Though much about contracting is gained from the UK Contract Act and ancillary laws, local laws and practices are also of major import, especially in the event of disputes. Often the demarcation of where the responsibilities of the main contractor ends and that of the sub contractors begin could be blurred and would depend upon facts and circumstances of each case. Often the fault may lie not with the main contractors but with the issues arising from the engineering, or architectural department. In the event these departments form part and parcel of company, and the people employed here are employees, the contractor could be “vicariously liable.” (Marsh 2000, p.29). However, if the employer were working as independent contractor, he could not be held liable under tort laws, since he had acted as a man of ordinary prudence and common sense would have done under normal circumstances. Coming to the aspects of materials supplied by employer, it is incumbent on the part of sub contractors to take good care of the same, failing which he would be held liable for its losses, or damages. However, losses to goods arising out of his control and jurisdiction cannot be attributed to him alone. Thus, one of the major aspects that have been identified in construction activities has been that of partnering; which, in essence is the cornerstone and bulwark of construction business. It has given its propensity for contractual un-fulfilment and projects getting aborted at different stages due to supervening reasons, internal or external. Thus, one of the major reasons for failures in the construction business is the loss of partnering or the failure among the covenant holders to sustain and maintain the demands of construction of the project according to pre-determined needs and objectives. But, the main question that still remains would be-”where is the value addition take place? It is mainly where the economic activity takes place. Who appropriates it? Mainly by those who contribute critically to the activity. It can be the owners of capital but it can also be the suppliers of skills.” (Association for heterodox economics conference, 2007). Onerous legal formalities in UK construction context: It is seen that in the case of UK construction industries; the legal formalities are onerous and at this stage it is necessary that the responsible officials like site engineers or supervisors co-ordinate for the smooth operations and functioning. “The Virtual Team has vast experience in construction and engineering related contracts and other documentation, and are available to help you avoid the commercial and contractual risks of accepting onerous contract conditions.” (UK construction industry on the brink of meltdown, 2010). Impacts of JCT laws on UK construction industry: JCT 63 considers the fact that main contractors could not be held responsible in the event the sub contractors renege on contracts in the event of presence of a separate contract by the employers with sub contractors. However, in the event, the contract was routed through them; they would also need to share the responsibility, since the sub contractors were authorised to act under their control and jurisdiction. Conclusion: Joint Code Tribunals (JCT) along with the provisions of many legal provisions that could be connected with construction industry could be seen as major benchmarks for the UK Construction industry. Since the legal implications of construction are far reaching and extensive, it is necessary that the construction industry adopts ways and means by which these could be handled in right earnest. Besides, teamwork within the industry could also help to achieve synergistic goals. The use of practical sense could also help the industry to achieve a high degree of success through teamwork.” First, monitor the performance of the contractor through the use of Key Performance Indicators, which must of course be agreed in advance. Second, make sure that the achievement of practical completion is linked to the achievement of the sustainable goals you want incorporated into your project.” (Glover 2008, p.11). Reference List Association for heterodox economics conference, 2007. [Online] Bristol Business School. Available at: http://www.uwe.ac.uk/bbs/aheconference/prog.shtml [Accessed 15 May 2010]. Glover, J., 2008. Sustainable development in the construction industry. [Online] FenwickElliot, p.11. Available at: http://www.fenwickelliott.co.uk/files/Sustainable%20Development%20in%20the%20Construction%20Industry.pdf [Accessed 15 May 2010]. Humphreys, P., Matthews, J. & Kumaraswamy, M., 2003. Pre-construction project partnering: From adversarial to collaborative relationships. [Online] Supply Chain Management: An International Journal, 8(2), pp.166-178. Available at: http://195.92.228.61/Insight/viewContentItem.do;jsessionid=A283AC77FC3C98D55420EB91313FFF4C?contentType=Article&hdAction=lnkhtml&contentId=858285&history=false [Accessed 15 May 2010]. Jones, M. & Saad, M., 2003. Managing innovation in construction. [Online] Thomas Telford, p.194. Available at: http://books.google.com/books?id=FhdJGaonGNQC&pg=PA30&dq=Role+of+contractual+arrangements+in+UK+construction+business&ei=CnHuS6XBN5iIkATWz_2cCg&cd=3#v=onepage&q=Role%20of%20contractual%20arrangements%20in%20UK%20construction%20business&f=false [Accessed 15 May 2010]. Marsh, PDV., 2000. Contracting for engineering and construction projects. [Online] Gower Publishing Ltd, p.29. Available at: http://books.google.com/books?id=KvrnwM7GxpoC&pg=PA110&dq=UK+contractors+laws&ei=R1n-S7Y6m9KSBOSt1dcN&cd=3#v=onepage&q=UK%20contractors%20laws&f=false [Accessed 15 May 2010]. Sen, AJ., n.d. Leibenstein and the new firm. [Online] Indian Institute of Management Calcutta. Available at: www.uwe.ac.uk/bbs/aheconference/Papers/Sen2.doc [Accessed 15 May 2010]. UK construction industry on the brink of meltdown, 2010. [Online] PRLog. Available at: http://www.prlog.org/10544492-uk-construction-industry-on-the-brink-of-meltdown.html [Accessed 15 May 2010]. Read More