Building Contract Claims and Disputes

Dennis F. Turner, Alan Turner, Alan Turner

• Editorial: Routledge
• Año: 2014
• ISBN:
  9781317888949
• Edición: 2
• Categoría: Diritto
• Categoría: Diritto contrattuale

The second edition of Building Contract Claims and Disputes (first published as Building Contract Disputes ) provides a study of the causes of contractual disputes, particularly of claims in construction projects and of how they can be resolved successfully. It examines contracts, decisions, documentation and project operation from the points of view of clients, contractors, subcontractors and professional advisers. Readers in practice will find this book an invaluable and comprehensive reference. Those taking professional examinations or degree and postgraduate courses will also benefit greatly from it.The book explains the background, preparation and settlement of claims, with negotiation and dispute resolution from mediation to adjudication, arbitration and legal proceedings. The interrelations of variations, extension of time and loss and expense are considered. Three specially structured case studies of construction projects illustrate and apply the principles to detailed practical situations. This edition deals with a considerably expanded range of contracts, including JCT, GC/Works/1, design and build, minor works, ICE and innovative NEC. It covers recent legal rulings and changes in the law and contract forms, as well as parts of the Housing Grants, Construction and Regeneration Act 1996 and the Arbitration Act 1996.

PART 1

PRECONTRACT ACTIVITES

CHAPTER 11

BACKGROUND TO CONTRACT DISPUTES

■A complex process

■Clients and the industry

■Matters underlying disputes

■Outline practical approaches

This book is about building contract claims and disputes in particular, rather than about building disputes in general. This is a topic which has exercised the minds of many within and beyond the industry for years and it conjures up a number of discrete subtopics, numbers of which are explored in the detailed sections of this book. Because of the proverbial relation between wood and trees, it is useful to survey some principles which underlie much of the detail. To the initiated, they may savour of nothing new, but it is hoped that any reader will find something of value among them.

A COMPLEX PROCESS

It is perhaps surprising that more does not go wrong, even today, with the production of buildings when the intrinsically complicated and hazardous nature of the activity is reviewed. This is most obvious in terms of accidents and so forth during construction, while problems of securing quality and ensuring that designs do not fail come close behind. But the operational process is at least as subject to problems, even if they are not so apparent to the outsider. What happens in this process is the spawning-ground for the disputes that this book considers.

It has been said that factory production is a line of work going through people, whereas site production is a line of people going through work. This difference arises from the need to install the work on an individual and perhaps difficult site, with all the problems of coordination and the added ingredient of the weather. The work is usually also individual in content, even if it repeats the character of other buildings. This is not new, and down the centuries problems of time and money overrun have been found. Several of the old law cases testify to this, as also, for example, do the records of the building of London churches two hundred years ago. Although today’s refined systems for controlling the process undoubtedly have improved so many aspects, they also show up more starkly things that do go wrong. This reflects the premium on the rapid completion of buildings which are often inherently more complex, and can be much larger than in the past. What can be done to improve affairs? This theme has occupied numerous top-level committees, as well as those in humbler positions in the industry. The findings of the Latham Report, Constructing the Team, found largely the same problems existing in the industry in 1994. In particular, Latham concluded that the number of disputes that arose in the industry was a major factor which perpetuated poor relationships and poor performance in the industry. It is not the claim of the present work to provide the answers, rather it seeks to make some sticking-plaster available for application when an injury occurs. Even so, its basic propositions may be oversimplified as follows:

(a)Avoid problems whenever it is possible to do so without excessive expenditure of resources.

(b)Accommodate problems in the most efficient way, when (a) is not possible, accepting some disturbance as inevitable.

(c)Resolve any disputes which arise out of the compromise of (b) as smoothly as possible in the circumstances resulting.

This ‘council of imperfection’ is suggested, not as something new, but as something consciously to adopt. It is an approximation to what usually happens, but perhaps by default rather than intent. It is not a call to be careless, but to weigh the options and select the optimum and not strive for the unattainable.

CLIENTS AND THE INDUSTRY

Construction clients all want the right building, at the right time and for the right price. They vary in how far they are equipped to achieve these objectives, even if the structure of the industry and prevailing conditions give them the chance. The reasons for building and the priorities and differing objectives that different types of clients and contractors may have is explored in Building Procurement. (Books referred to are listed at the front of this book.)

The seeds of possible future conflict are often sown in the early days of a project and it is essential for a client and his advisers to establish their objectives from the outset. If the appropriate procurement path is chosen it is more likely that future conflict can be managed within the risks that the procurement method will contain. No method is risk-free for client and contractor and some place most of the risks on only one of the parties. If this is appreciated from the outset it may make dispute and possible conflict more understandable, so that contingency in time and/or money has been allowed for by the parties.

The entirely ‘lay’ client, that is one unversed in the procurement process, faces a number of special obstacles. He may not know very clearly what it is that he wants to have produced. Even if he does, he may not know how to present a brief over design or programme. He may well be puzzled by the split between design and construction organisations, how they relate to him and to each other. He may be tempted to opt for the ‘cheap’ or the ‘quick’ way to meet his need, without seeing the pitfalls that there may be. In particular, he may be too optimistic about what can be done within the money and time available. When things are rolling forward, he may not realise the effects that his changes of mind will have, even those that embody flashes of near-genius.

All clients face numbers of internal problems. Their budgets are restricted by total limits, by when the money is available and by the return (in any way) that the project must achieve. Time may be pressing to meet markets, to provide social satisfaction or whatever is the target. Technological changes in requirements may affect the solutions that are embodied in a building. These effects may be in conflict, but they may not be foreseen until work is under way. They may be compounded by the activity of building being on already occupied sites or, worse, in occupied buildings. The individual nature of many buildings has already been touched upon.

The response of the industry to clients as a whole shows first of all in a structure that has evolved over the decades. In the order in which clients may become aware of their existence, there are design consultants, cost consultants, contractors, subcontractors and suppliers, leaving aside all the more peripheral personnel such as inspectors. It is a tenet of systems theory that organisations tend to become rigid according to the functions that they have been performing and not always to be responsive to change. In addition the structure may make the flow of activities and information more tortuous than a single operation might necessitate.

In the case of construction, the process of providing a building filters through this structure, which largely facilitates it. But because typically there are several organisations involved, the possibility of gaps in communication or coordination is present. Indeed it may be said that most disputes, which are not essentially technical or due to changes of mind, occur because of disjunction at interfaces. Some of these are due to misinformation etc and some to misunderstanding of what is required. Even when there is some form of integration of activities, as in design and build arrangements, the same gaps are possible, although liability for them is shifted.

In more traditional patterns, the major contractual arrangements are set up on the basis that the client and contractor hardly speak to each other, as the nexus is to be found in the consultants for the project. It may then be argued that the objectives of the latter are not entirely identical with those of the two parties to the building contract, that is the client and the contractor. This is not to suggest lack of professional concern, but simply that they are constrained by their own upbringing. Thus an architect may not be primarily concerned with information flow, as against aesthetics and function of the finished project, whereas a quantity surveyor may not see clearly the importance of cash flow to a contractor, as against ultimate settlement at an uncertain date. Some, but not all, of the newer patterns and contracts address the communications issue (as it may partially be termed) and this is brought out on occasions in this volume.

MATTERS UNDERLYING DISPUTES

At risk of some repetition of points just made, some of the more common, if not always more obvious, causes leading to disputes of the types considered most often in this volume may be set out. Many of them are avoidable at some cost, which may or may not be justified. Sometimes a matter may best be left as a risk, and not everything can be foreseen every time. The causes are present, whether they should be pre-empted is a matter of policy, but the decision should be made consciously when the cause and risk are known to exist.

Decision making and results

A number of early decision areas always exist. It is a fact of most adventures in life that the early decisions are usually the most critical, because they condition those that follow and because they are often irreversible without an unacceptable cost. Fundamental is the care taken with the initial concept of the scheme (at whatever quality level is sought) and the design brief into which it is transformed. Hard behind comes the time allowed for both design (with accompanying planning permission etc) and construction. Inseparable from quality and programme is the product of the two, namely cost. A balance will need to be struck between the competing trio of quality, programme and cost, and the constituents of each should be examined critically at the earliest stages of a project. An optimum will arise and it will seldom be possible to obtain a client’s desired quality to the programme and cost that he wants. The client’s critical requirements must be matched with his resource provisions.

There are also several basic conditions which may be unavoidable and so should be evaluated closely. The site and existing buildings may constrain what can be achieved, both as an end-product and also on the way in terms of phasing and so on. The nature of the scheme may bring in particularly complex constructional or organisational methods, because it is unusually integrated or innovative. External constraints may be present, or archaeological interest may be anticipated.

Implementation of the concept divides into two areas: decisions and achievement. Decisions are tied in with development of the brief, perhaps happening in part post-contractually, and also with setting up the contract. It lays itself open to the possibility of seeking to pinch pennies while introducing undue risk for the client, for instance by making inadequate provision for elements in the programme needing time or expenditure. An obvious area of doubt is in the legal provisions, where ambiguities or gaps may be left over points of procedure. But conversely, the attempt to be oversmart and cover every option may create fresh loopholes that never existed before. Post-contractually, this type of approach may turn into lack of tolerance that stirs up its own protective reaction. Special care is needed when overlapping contractual arrangements are used, individually near-impeccable, but together causing discrepancies.

Implementation, by activities to produce the work, follows on what has been sketched in the last paragraph. Inadequate consideration of the management system for the whole operation is a likely cause of weakness. Overcoming this does not necessarily mean introducing something complicated, but rather ensuring there is a logical, unambiguous allocation of responsibilities, with a clear decision path through the whole programme and watertight procedures for communicating decisions to those who need to know. It is often argued that people produce information to suit their own perceptions of what is needed, not to give what others need to use. Rationalisation of information to suit others might actually mean less unneeded work carried out by the producers for themselves! Common problems over information are that it is incomplete, unclear, error-ridden or just plain late in arriving. The rise of some forms of contracting over recent years may be as much due to the attempt to dispose of these failures as to secure any radical difference in the way in which work is organised on the site and paid for by the client.

Even with the appropriate systems, there are still weaknesses that may creep into their use. Changes of mind are not necessarily a sign of indecision: they may show a willingness to reflect and not be blinkered, but they can spread havoc if they are not controlled. They are another example of optimisation: at a certain level of cost, a good idea ceases to be worth implementing. Furthermore, although the end results may be similar, there are no proper excuses for putting off decisions until too late or for indulging in panic action when a difficult situation does come to light. These instances may look as though they are mainly to be laid at the doors of clients and consultants, but may be the responsibility of contractors also, who can fail to foresee problems or to organise their own activities. This may aggravate a loss situation, or even lead to one which cannot be charged to the client.

Team interactions

The correct system may have the wrong team members. Consultants, it has been suggested, may be bad organisers, even worse a minority are bad at designing. It is not unknown for them to be unreasonable to a greater or lesser degree. Contractors and subcontractors too may not be well organised, and they may be of the wrong size (either way) for the work they undertake. They may lack expertise in particular types of project — sometimes in any type, it appears! It may be their fault that they accept the work, but it may be the precedent fault of others that they were ever selected to tender. They may be commercially inept on particular contracts, something that it may be difficult to foresee will happen. Tenders may be too low for profitability, work may be performed uneconomically, or (with or without these features) firms may be ‘claims conscious’. Sometimes they just do not know how to secure their normal entitlements in the final account.

This survey is cast in a deliberately gloomy vein, to make its point. But when all this is said, many of those operating in the construction field are doing their level best to perform the miraculous today and the impossible not long after. It is also pertinent that authors who live in ivory towers should not drop bricks. There are also a number of factors which arise from quarters other than clients and those with whom they contract. There are the actions or inactions of local authorities and others with powers of approval or who perform work ...