Construction Law & Contract

BNV7127

Birmingham City University

November 2019

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Table of Contents
Claiming for fees without a signed contract..............................................................................................5
The legal Implications of commencing with site set up, without a signed contract....................................6
Factors to consider in selecting an appropriate form of subcontract and their influence on
project performance.................................................................................................................................7
The importance of having a written contract & the impact on time, quality and cost................................9
Health & Safety – CDM2015....................................................................................................................10
Legal Cases.............................................................................................................................................11
References..............................................................................................................................................13

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Claiming for fees without a signed contract
This situation would be considered as SD (the offeror) making and communicating an offer to
AC (offeree) to provide services, thus it is seen as an ‘offer’ and not an ‘invitation to treat’.

As stated by Wood (2011, P55):

“It is accepted that before a formal agreement can be reached there must be a valid
offer made by the offeror and a valid acceptance of that offer by the offeree”.

From this point, only the offeree (AC) can accept or reject the offer as supported by Boulton v
Jones (1857) 6 WR 107.  As offeree (AC) did not reject this offer, and the acceptance of this
offer (by conduct) was communicated and demonstrated by AC sending a quantity surveyor
to complete work for early cost advice to SD, strengthening AC’s position as per Reveille
Independent LLC v Anotech International (UK) Ltd [2015] EWHC 726 (Comm). 
Furthermore, under the principle ‘acceptance by conduct’, even if the terms of the contract
cannot be identified (including the rate of payment) the court would imply a reasonable
amount should be paid as defined by the Sale of Goods Act 1982 s.15(1).  

AC’s position is strengthened by the ‘objective test’, because SD’s offer could be interpreted
as per Storer v Manchester City Council [1974] 1 W.L.R. 1403a ‘willingness to contract’ on
agreed terms, with the intention that it is to become binding once accepted.  Additionally,
within business agreements the presumption is parties intend to create a legally binding
agreement (Wood, 2011, Hough & Kirk, 2018). It would be presumed by the court as per
Edwards v Skyways [1964] 1 WLR 349 that AC was intending to enter a legal agreement and
it would be SD’s responsibility to provide evidence to the contrary.

To be valid, a contract must be supported by ‘consideration’,unless it is made by deed

(Wood, 2011). The definition of consideration comes from the case of Currie V Misa (1875)
LR 10 Ex 153: 

“some right, interest, profit or benefit accruing to one party, some

forbearance, detriment, loss or responsibility given, suffered or undertaken by
the other” (cited in Wood, 2011, P63).

It could be argued, that SD demonstrated ‘consideration’ as they would accrue a benefit from
the early cost advice provided and equally, that AC was given ‘responsibility’ for undertaking
early cost advice.

SD could contest the above stating  ‘past consideration’ because AC completed the act of
early cost advice before the ‘promise of reward’ was made.   However, AC could argue the
exemption, that there was an implied promise to pay for our services and utilise the basis of a
‘quantum meruit’ application.

In summary, as we (AC) can demonstrate the three essential elements of a contract;

Agreement, consideration, and the intention to create legal relations we are legally entitled to
claim the fees.

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The legal Implications of commencing with site set up, without a
signed contract.

AC are motivated to commence site setup because of the positive impact on the company
image and revenue stream.

Despite, being a positive situation, AC must be mindful that problems might develop later if
the quality of our work / site set up is disputed and AC does not have a signed contract to
clearly define our obligations and any exemptions.

The possible implications for continuing without a signed contract are as follows:Without a
signed contract both parties remain unclear about the terms. The scope of the works is not
defined (even for the site set up), and no price (tenders),time or payment schedule has been
agreed. If a dispute arises then the lack of these details may lead a court to find that
important terms were still under negotiation as per case Baird Textile Holdings Ltd v Marks
& Spencer Plc [2001] EWCA Civ 274 lead and the courts finding would be ‘there was no
contract’. Thus, AC is exposed to greater risk through liability without limitations.

Placing AC at further risk are unforeseen changes that occur once site setup has commenced.
Significant variations, that occur without a contract may lead to increased project scope and
additional costs being borne by AC as they cannot be claimed for, as demonstrated by the
case Barter v Mayor of Melbourne (1870) 1 A.J.R 160.

Commencing with site set up (our conduct), AC could be found to have demonstrated that we
agreed the contract with SD regardless of signing. Leading to AC being potentially bound to
the contract terms.

My advice to this situation would be;Firstly, the securest scenario for AC is to agree and sign
a contract with SD prior to site set up. With a signed contract both parties are clear about the
terms. AC’s obligation with regard to the works is to comply with the terms (including both
express and implied terms) of the contract. A clear contract provides a detailed definition of
the works and this ensures AC’s obligation is limited to what is described in the bills as per
Patman & Fotheringham Ltd v Pilditch (1904) HBC 4th ed, 368. If this is not possible, AC
should complete a further assessment of all possible risks before commencing work.

Secondly, AC must be aware that once work has commenced, AC may struggle to get SD to
sign an agreed contract leaving AC exposed to variations. A signed contract places a limit on
the scope of variations and if it were significant as Blue Circle Industries plc v Holland
Dredging Company (UK) Ltd (1987) 37 BLR 40it would be found to be outside the original
contract, entitling AC to reimbursement for additional works.

Finally, SD wish us to commence site set up immediately, AC could consider the use of a
letter of intent (LOI). This is a possible approach to take whilst finalising the final contract
terms. It is advisable AC takes legal advice on the LOI so wecan implement the necessary
protections quickly to allow commencement of early site works. Provided the LOI is
carefully drafted it can act as the final link in a series of correspondence and tendering as
Twintec Ltd v. GSE Building and Civil Engineering Ltd [2003] EWHC 605 (TCC)which
confirms the agreement between the parties.

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Factors to consider in selecting an appropriate form of subcontract
and their influence on project performance

The aim of contract choice should be to distribute risk clearly and fairly. SCALA (2003)
identifies the key areas to risk for consideration in contract selection as; quality, delay,
default. It is vital AC selects a suitable form of subcontract to protect our ‘contractual duty’
as per Ratatac Ltd v Eade [1999] BLR 261AC is generally liable for subcontractor defaults.

When considering which subcontract to appoint the M & E contractor under, AC should
consider the key criteria and risks of the contract options available.

AC should consider the following questions and the factors in Table 1 before selecting an
appropriate contract;

 Time: Which contract will assist project completion to meet the schedule?

 Cost: Which contract may offer greater value and more accurate cost forecasts?
 Quality: Which contract may provide better value?
 Risk: Which contract offers best risk distribution between the parties for the project?

Table 1: Appropriate factors to consider for the selection of the form of contract

Speed – design and construction

Cost certainty
Dealing with complexity
Client’s involvement
Capacity for variations
Clarity of remedies
Separation of design and management

(Source: SCALA, 2003)

Considering the factors in Table 1 and the project scope to date ‘SolDeb have taken a
‘traditional approach’ and the designs are incomplete, not designed by AC and there is no
maintenance work’, the most suitable main contract is advised to be a JCT2016 Standard
Building Contract with Approximate Quantities (SBC/AQ)(See Fig 1). As this is a private
sector project, it less suited to a NEC contract as these are used more commonly in the public
sector. JCT2016 has been developed makes provisions for subcontractors (appointed by AC,
not the client) through the use of subcontracts SBCSub and SBCSub/D.

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 Figure 1: Guide to selecting the appropriate JCT main contract

(Source: The Joint Contracts Tribunal Limited 2017)

Using SBC/AQ with standard subcontracts, itis likely to influence the project by allowing
works to commence quickly because it requires a bill of approximate quantities from the
client, allowing quicker tenders, which are then subject to remeasurement, and
reimbursement of costs.

SUBcclause 2.3 requires the subcontractor completes work inline the project schedule,
helping the project remain on schedule.

SUBc allows a high capacity for managing variations through use of its ‘variations and
valuation clauses’ (section 5), thus ensuring they are negotiated correctly and if accepted,
time or work schedules are altered accordingly.

Risk allocation in SUBc is generally fixed, so offers best distribution between parties.

SUBc has ‘interim valuation dates’ to ensure fair payment to parties in the contract, which
aims to help reduce financial risk and will promote cooperation, fundamentally helping the
project stay on track to meet its goals.

Adopting the ‘Accelerated or Fast Track’ approach, a scheduling technique that reduces the
duration of projects through overlapping tasks, will assist AC and subcontractors to complete
the project on time.

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The importance of having a written contract & the impact on time,
quality and cost.
Contracts stipulate responsibilities and obligations that parties have agreed,and thisprotects
eachparty if onedoes not fulfil their obligations. Byidentifying the project scope and the
work that will be completed if a contract is broken by one of the parties,the non-breaching
party may be able to pursue compensation.

By entering into a standard building contract, the details of essential duties and obligations
are clearly defined between AC and SD. Thus, time, cost and quality can be managed
effectively.

Time is an extremely important issue in construction. There are three time related issues
known as commencement, progress and completion. Commencement is at the beginning of
the contract and involves AC taking possession of the site. If SD fails to allow AC site
possession in a timely manner, then SD maybe liable for damages for ‘breach of contract’ as
per Rapid Building Group Ltd v Ealing Family Housing Association Ltd (1984) 29 BLR , CA.
The rate of progress is at the AC’s discretion (GLC v Cleveland Bridge and Engineering Co
Ltd (1984) 34 BLR 50), alongside how the work is to be planned and performed, however the
contractor must proceed ‘regularly and diligently’ with the works (JCT clause 2.4).
Completion is described in JCT contracts as practical completion (PC), “allowing employers
to take possession of the works and use them as intended” (Murdoch and Hughes, 2005,
p182) and allows a ‘PC’ certificate to be issued with defects to be rectified in a reasonable
time. In the event of delay in completion the contract will define what the damages (LADs)
shall be and enable AC to know the risks they bear from the start.

The impact of the contract on AC’s obligations regarding quality is basically to comply with
the terms (express and implied) of the contract as JCT2016 clause 2.1. AC must note that the
main obligation for quality of materials and workmanship falls on the contractor, who by the
contract is expected to execute the project to the level of quality required and if standards are
specified, then AC must go by the specification. However, AC must be mindful if the
standards are not specified and it is left to AC’s discretion, then AC may have an ‘element of
design’. If this occurs, then common law applies and imposes a requirement that all design
should be “fit for the purpose”.

The impact of an approximate quantities contract on cost is that AC will be paid on the basis
of actual work done after remeasurement, therefore AC and subcontractors cost risk is
comparatively low. The key advantages of remeasurement contracts are that they allow works
to commence quickly after the initial design is finalised. However, AC must accept there
maybe delays to payments as remeasurement takes time.

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Health & Safety – CDM2015 – Key Requirements
AC must be aware of key responsibilities for SolDeb and Apex and in addition comply with
the following information as a minimum to meet H&S regulations.
Figure 2 identifies the clear roles for each specific party, Client, Principal Designer, Principal
Contractor

Table 2: Managing Health & Safety in Construction - CDM Regulations/Guidance

CDM Summary of role/main duties

dutyholders:
Client - SolDeb Responsible formanagingproject preparations. Including:
■ Appointing key duty holders; principal contractor and designer
■ Adequate time and resources areprovided for the project.
Key jobs:
■ Prepare relevantinformationfor otherdutyholders;
■ Ensure Apex and ACcomplete theirduties;
■ Oversee that welfare facilities areprovided.
■ Notify project to HSE
■ Create Health and safety file

Main designer - Responsible for health and safety in the pre-construction phase of the
Apex project. Including:
■ Ensure designers complete theirobligations.
■ Complete Risk assessment and implement measures to control.
Provide key information to AC to assist them in meeting their
obligations for health and safety in the construction phase.

Main contractor Responsible for healthand

- Anyway safetyintheconstructionphaseoftheproject.Including:
Construction ■ Regular communication with SolDeb and Apex;
■ Produceand organise the written construction phaseplan;
■ Ensurecooperationbetweencontractors and coordinate theirwork
packages.
To ensure health & safety AC must:
■ Deliver site inductions covering rules and safety briefings;
■ Complete risk assessment of main dangers on site
• Including asbestos and dust exposure reduction
■ Secure the site to stop unauthorisedaccess;
■ Provide facilities for welfare; toilets, safe rest/break area.
■ Contract workers with the right skills and training
■ Maintain Health and Safety file

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Figure 2: Structure of CDM2015 – Client, Principal Designer and Principal Contractor
Roles

(Source: PPP Construction Safety)

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Legal Cases
Baird Textile Holdings Ltd v Marks & Spencer Plc [2001] EWCA Civ 274 lead
Barter v Mayor of Melbourne (1870) 1 A.J.R 160.
Boulton v Jones (1857) 6 WR 107
Currie V Misa (1875) LR 10 Ex 153
Edwards v Skyways [1964] 1 WLR 349
Neodox Limited v. Borough of Swinton and Pendlebury (1958) 5 Build.L.R 38.
Patman & Fotheringham Ltd v Pilditch (1904) HBC 4th ed, 368
Rapid Building Group Ltd v Ealing Family Housing Association Ltd (1984) 29 BLR , CA
Ratatac Ltd v Eade [1999] BLR 261.
Reveille Independent LLC v Anotech International (UK) Ltd [2015] EWHC 726 (Comm)
Storer v Manchester City Council [1974] 1 W.L.R. 1403)
Twintec Ltd v. GSE Building and Civil Engineering Ltd [2003] EWHC 605 (TCC)

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 References
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