Building & Construction Law all notes

Transcription

1 Building & Construction Law all notes

2 Week 2 THE NATURE OF THE BUILDING AND CONSTRUCTION INDUSTRY Project participants Project stages Procurement methods Typical players and processes Typical project participants The proprietor/principal for whose benefit is the project being done? Owner of the project. Eg UTS for UTS building works. Proprietor can be a company, government agency, partnership. The financiers who is putting up the money? Professional Team all of the professional consultants you need to design and build the project eg architects, engineers, quantity surveyors (cost controllers) Construction participants eg directly employed labour, subcontractors The five typical project stages 1. Inception 2. Detailed design 3. Documentation & tender 4. Construction a. Approvals b. Retention fund v unconditional c. Program of works i. Against which extension of time claims are measured ii. Critical path activities those which delay the project completion date d. Proof of insurance e. Role of superintendent f. Practical completion 5. Post construction period, after practical completion defects liability Typical procurement methods & contracts - Lump sum / hard dollar o Defined scope of work, fixed price o As described in drawings and specifications o If there is no issue with time, this is the best type of contract for the proprietor Design is finalised and documented o Bill of quantities o Contractor assumes most risk - Guaranteed maximum price o Advanced but incomplete design o Conditional fixed price o Contractor allowances

3 o Specification finalised post contract o Enables fast tracking o Owner bears risk of end price - Design and construct o Design is evolved only to basic design o Contract to both complete design and construct o Contractor engages consultants depending on how early contractor gets in on the act o Novation or own consultants o Loss of access to the design team - Cost plus o Design incomplete o Cost is not ascertainable o Time a significant factor o Design finalised after commencement o Payment on invoice plus agreed mark up o Proprietor assumes financial risk - Schedule of rates o Design incomplete o Cost not ascertainable o Time a significant factor o Suited to urgent works o Tendered schedule of rates o Capped maximum and minimums o Measurement basis of payment - Construction management o Contractor acts as agent o Infrastructure provided by contractor o Permits early works o Identifiable and agreed packages o Tender of packages by contractor o All sub-contracts direct with Proprietor o Payment as work progresses plus agreed mark up o Proprietor takes financial risk Important concepts Contract documents Superintendent Scope of work PC items (Prime Cost items) Provisional sums

4 Variation Delay Retention Liquidated damages Presentation on liquidated damages: - Possible losses that Investa might suffer if LL does not reach PC? o Tenants unable to move into building loss of rent o Additional equipment hire o Additional overheads - How could LL be protected in the contract? o Capped at a percentage of contract sum o Capped at days loss You don t have to prove your loss! Superintendent can certify X days late, and deduct liquidated damages from next progress claim. No requirement to show loss, only have to show did not achieve practical completion by X date. If I were advising, would always advise to put something in the contract for liquidated damages, because it caps the loss! You can price the risk in your price! Negotiate the liquidated damages. If nothing is in there, damages are at large! Can sue for ANYTHING that is in reasonable contemplation of the parties as long as not a penalty, they are not bad because they make things predictable. Contracts liquidated damages refers to schedule at the back amt per day/week, is BLANK! Supposed to fill in the schedule! If it is BLANK then not the sole remedy for late completion, and you are back to actual damages Risk management - Who bears the risk? - Party best placed to control should bear - Price is risk dependant - Management requires identification - Risk allocation by the contract - Risk occurrence and predictability - Failure to identify and allocate results in avoidable claims/disputes Summary - Construction is complex and involves risk - Potential for disputes is high

5 - Projects are established in defined stages - Procurement methods differ and each has a unique contract form - Each form allocates risk differently - All foreseeable risks should be identified and allocated - Foreseeable risks can be efficiently managed via the contract

6 Assignment - Implied terms in construction contracts o Implied term of good faith Termination for convenience clauses allow a contracting party to terminate at will and without cause. They are quite common in constructioncontracts. Clauses that empower the principal (or its representative) to remove part of the work from the contractor's scope of works are also quite common. Is the principal at large in exercising such rights, alternatively is the exercise of such rights tempered by either an impliedobligation to act in good faith, the equitable doctrine of penalties; or the equitable doctrine of relief against forfeiture? Can contract drafting assist and, if so, how? As some segments of the building and mining industries in Australia face straightened economic times, it is likely that the courts will be called on to resolve such issues. UK: In February the High Court said (in Yam Seng vs International Trade Corporation) this hostility was misplaced and suggested that duties of good faith should be implied more often. One of the bases for this was that a general norm which underlies almost all contractual relationships is an expectation of honesty. Some may query how normal that is in the construction industry. - Can hand it in either in class on Monday 14 September or by Friday 18 th September at Rob s chambers 9 th floor 67 Castlereagh St & King St - The marks are in the critical analysis. Eg this is the way the law works now, and this is why I think it could be improved by doing X Y and Z - Liquidated damages or penalties? Government use of LDs in contracts