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Berwin Leighton Paisner Christmas quiz 2010
Practical Law UK Articles 2-504-3036 (Approx. 9 pages)
Questions and answers for the Berwin Leighton Paisner construction law Christmas quiz 2010.
This article sets out the questions and answers for the Berwin Leighton Paisner construction Christmas quiz 2010.
The answers are revealed by clicking on the note below each question.
1. Claims in tort
A contractor enters into a contract with Own Co (the owner) to build and sell a new building to Own Co. The building contains a latent defect that renders it dangerous to persons or other property. Any action under the contract is time barred. Assume that an action in tort is not time barred. Which of the following statements is true?
- (a) The contractor owes a duty of care in tort in relation to defects that cause either personal injury or physical damage to property other than the property itself.
- (b) The contractor does not owe a duty of care in tort not to cause economic loss to Own Co.
- (c) The contractor does owe a duty of care in tort not to cause economic loss to Own Co.
- (d) A contractor cannot owe concurrent duties of care in contract and tort.
- (e) In the recent case of Linklaters Business Services v McAlpine Ltd and others [2010] EWHC 2931 (TCC), Akenhead J confirmed that there is no place for the complex structure theory in cases such as the one outlined above.
Close Drafting Note
Answers to question 1
Statement (a) is correct, as it reflects the principles of Donoghue v Stevenson [1932] AC 562.
Statements (b) and (c) cover a grey area, but (c) is currently correct on the basis of authorities. In Mr J A Robinson v PE Jones (Contractors) Ltd [2010] EWHC 102 at paragraphs 10-13, the Technology and Construction Court (TCC) addressed the question of whether a contractor can owe its client a concurrent duty of care in tort in relation to economic loss (see Legal update, Home owner's claim statute barred as no duty of care owed by the builder).
Statement (d) is incorrect. It is well established that contractors can owe concurrent duties of care in contract and tort (see paragraphs 36-52 of the judgment in Robinson v PE Jones for a review of these authorities).
In relation to statement (e), Akenhead J found that the complex structure theory did not apply in the Linklaters case because in the case of insulated chilled water pipe work, the piping and the insulation were two components which went to make up one installation, so that damage to the pipework (caused by the defective insulation) is damage to the "thing itself" and not damage to "other property". The complex structure theory therefore cannot apply. (For more information on the Linklaters case, see Legal update, Claim against sub-sub-contractor in Linklaters' litigation fails (full update).)
For more information on concurrent liability in contract and tort, and pure economic loss, see Practice note, Professional negligence.
2. FIDIC
2.1 Which of the following statements are true?
- (a) The FIDIC Silver Book imposes a fitness for purpose obligation on the contractor whereas the FIDIC Red Book does not.
- (b) Under the FIDIC Silver Book the contractor is entitled to an extension of time where the works are or will be delayed by any of the following:
- (i) variation;
- (ii) any other provision; or
- (iii) any delay, impediment or prevention caused by the employer.
- (c) Under the FIDIC Red Book the contractor takes responsibility for both verifying and interpreting the site data made available by the employer.
- (d) Under the FIDIC Silver Book, the engineer plays a crucial role by acting as the employer's agent. For example, for ordering variations, making decisions as regards payment certificates and resolving disputes between the employer and contractor.
Close Drafting Note
Answer to question 2.1
Statement (a) is false. Both the Red and Silver Books impose a fitness for purpose obligation on the Contractor (clause 4.1).
Statement (b) is true.
Statement (c) is false. The contractor is only responsible for interpreting site data under the FIDIC Red Book.
Statement (d) is false. The engineer does not feature in the FIDIC Silver Book.
For more information on the FIDIC suite of contracts, see Practice note, FIDIC Forms of Contract.
2.2 Under which of the following forms of contract does the contractor take full responsibility for the design of the works:
- (a) FIDIC Silver Book (FIDIC).
- (b) IChemE Conditions of Contract for Process Plant (IChemE).
- (c) IMechE General Conditions of Contract MF/1 (Rev 4) (IMechE).
Close Drafting Note
Answer to question 2.2
Statement (a) is acceptable (in the Christmas spirit) but, strictly speaking, the answer is none.
The FIDIC form comes closest to this object, but does not fulfil the objective of being a true "turnkey" contract as suggested by its full title. Under clause 5.1 the employer retains responsibility for:
- Elements of the employer's requirements expressed to be immutable or the responsibility of the employer.
- Definitions of intended purposes of the works.
- Criteria for the testing and performance of the completed works.
- Portions, data or information which cannot be verified by the contractor (except as otherwise stated in the contract).
The IChemE contract makes provision for contractor design, but each party remains responsible for its own design element. The balance of responsibility under a particular contract needs to be ascertained by review of the specifications. The picture can become cloudy where both parties have worked on a particular design element. For more information on the IChemE suite of contracts, see Practice note, IChemE contracts.
Under the IMechE contract, the contractor is responsible for the detailed design of the plant in accordance with the specification but, to the extent that detailed designs are provided by the employer (or the "engineer" on behalf of the employer), the contractor will not be responsible for such design if, "within a reasonable time after receipt", he gives notice to the engineer disclaiming responsibility. The drafting is not entirely clear, but is based on the presumption that the specification is prepared by the engineer on behalf of the employer. The detailed design undertaken by the contractor post tender and detailed design by or on behalf of the employer will only occur where there is a variation proposed by the employer. For more information on the IMechE suite of contracts, see Practice note, IMechE/IET Model Forms of Contract.
3. Delay and concurrent delay
3.1 Following the decision of the Inner House in City Inn Ltd v Shepherd Construction Ltd [2010] ScotCS CSIH 68, where there is concurrent delay caused by both the contractor and employer, which of the following reflects English law (one point):
- (a) The contractor does not get an extension of time.
- (b) The contractor gets an extension of time.
- (c) The court will apportion the delay between the parties.
- (d) The court will apply the "but for" test to determine whether or not the contractor is entitled to an extension of time.
- (e) The court will apply the prevention principle.
Close Drafting Note
Answer to question 3.1
Statement (b) reflects English law. For more information on the Scottish Inner House's judgment in City Inn v Shepherd, see Legal update, Employer's appeal in City Inn v Shepherd rejected.
For more information on delay, time for completion and extensions of time, see Practice note, Time for completion and extension of time.
3.2 Where a contractor has submitted a programme indicating completion one week before the contractual completion date, and the contractor is then delayed by the employer by one week, and in fact completes on the contractual completion date:
- (a) The contractor is entitled to one week's prolongation costs.
- (b) The contractor is entitled to its prolongation costs during the week to the extent it can show they were caused by the employer.
- (c) The contractor is not entitled to its prolongation costs during the week.
Close Drafting Note
Answer to question 3.2
Statement (c) is correct. There is no right to complete prior to contractual completion date (Glenlion Construction v The Guinness Trust [1988] 39 BLR 89).
For more information on prolongation and loss and expense, see Practice note, Loss and expense claims in a construction contract.
4. LDEDC Act 2009
4.1 Which of the following statements is true about the Local Democracy, Economic Development and Construction Act 2009 (LDEDC Act 2009) (there may be more than one):
- (a) Third parties may give section 110A payment notices.
- (b) If the payer fails to give a timely section 110A payment notice the payee may give a payment notice at any time before the final date for payment.
- (c) The payer is not obliged to give a "withholding notice" if the payee goes insolvent before the date upon which the payer is required to give such withholding notice.
- (d) The adjudication provisions of a construction contract are required to be in writing.
Close Drafting Note
Answer to question 4.1
Statements (a) and (d) are true.
In statement (b), the payee can give a payment notice at any time.
In statement (c), the payer is only let off giving a withholding notice, or pay less notice (in the new terminology), where the payee becomes insolvent after the date upon which the payer is required to give the notice.
For a list of PLC Construction's comprehensive suite of materials on the forthcoming changes to Part II of the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996), see Getting ready for the Construction Act 1996 changes. For specific information on the effect that the LDEDC Act 2009 will have on payment under construction contracts, when it comes into force, see Practice notes, LDEDC Act 2009: payment and Payment in construction contracts: Construction Act 1996.
4.2 What is the current anticipated "in force" date?
Close Drafting Note
Answer to question 4.2
The Department for Business, Innovation and Skills (BIS) originally indicated that the amended Construction Act 1996 may apply to construction contracts entered into on or after 1 April 2011, but October 2011 now seems more likely. However, no final date has been announced.
5. Bribery Act 2010
5.1 When does the Bribery Act 2010 come into force?
- (a) It is already in force in its entirety.
- (b) April 2011.
- (c) October 2011.
- (d) It is already in force in its entirety apart from section 7(2) (adequate procedures defence), which comes into force in April 2011.
Close Drafting Note
Answer to question 5.1
Statement (b) is true. The Bribery Act 2010 comes into force in April 2011.
For more information on the Bribery Act 2010, see Practice note, Bribery Act 2010.
6. Termination
6.1 Your client, Mr Beasley, wishes to terminate a building contract he has entered into with YHC. It is an unamended JCT Design and Build Contract, 2005 edition, Revision 2 2009. He asks you which of the following statements apply to section 8 (Termination) of his JCT contract:
- (a) It contains provisions allowing Mr Beasley to terminate at any time for his convenience.
- (b) It provides that Mr Beasley can terminate once appropriate default notices have been given and the contractor has been given time to remedy a default (other than insolvency and corruption where termination is immediate).
- (c) It contains the parties' sole and exclusive rights in the event of termination under the contract.
- (d) It is without prejudice to any other rights and remedies of Mr Beasley or the contractor (as appropriate).
Close Drafting Note
Answer to question 6.1
Statements (b) and (d) apply.
For more information on the JCT suite of contracts, see Practice note, JCT forms of building contract.
For a precedent schedule of amendments to the JCT Design and Build Contract, 2005 edition, Revision 2 2009, see Standard document, Schedule of amendments to JCT Design and Build Contract, 2005 edition, Revision 2 2009.
For a reminder of how to terminate a JCT contract in practice, see Ask the team: how do I terminate a JCT contract?.
6.2 Mr Beasley also asks you which of the following apply to his JCT contract:
- (a) YHC is entitled to recover its lost profit on the contract if terminated due to Mr Beasley's default.
- (b) The contract terminates automatically in the event of insolvency of YHC.
- (c) Provisions of the contract which relate to payment or release of retention cease to apply upon the insolvency of YHC, whether the contract is terminated or not.
- (d) Mr Beasley can sell all plant and equipment belonging to YHC to pay for completing the remainder of the works.
7. Limitation
7.1 In an action for negligence by a building owner against a professional consultant for negligent design, the cause of action accrues:
- (a) When the building owner relies on the negligent advice.
- (b) When the building owner suffers economic loss (that is, on completion of the building).
- (c) On the date when the relevant damage occurred.
- (d) On the date when the damage was or ought reasonably to have been discovered.
Close Drafting Note
Answer to question 7.1
Statement (c) is correct. For more information, see Practice note, Limitation periods: an overview.
7.2 In an adjudication, the losing responding party has complied with the adjudicator's decision and paid sums to the winning party. It now wants to challenge the adjudicator's decision by legal proceedings and recover sums paid in compliance with it, but the underlying cause of action is statute barred. Which of the following statements is a correct summary of the legal position:
- (a) The responding party cannot now recover these sums in legal proceedings: the claim is statute barred.
- (b) The responding party can bring legal proceedings seeking a negative declaration only (that is, a declaration that it has no liability to the referring party).
- (c) The responding party can bring legal proceedings to recover these sums and, if successful, to be repaid all sums paid. A term can be implied into the contract to this effect and this implied term creates a new cause of action at the time of payment in compliance with the adjudicator's decision.
Close Drafting Note
Answer to question 7.2
Statement (c) is correct. This is a claim to which section 5 of the Limitation Act 1980 applies, because it is a claim founded on a simple contract, so that the losing party has 6 years from the date of payment in which to bring legal proceedings to recover that payment. This issue was recently considered by the TCC in Jim Ennis Construction Ltd v Premier Asphalt Ltd [2009] EWHC 1906 (TCC) (see Legal update, Accrual of cause of action and limitation periods in adjudication).
8. Contribution
8.1 Which of these statements is false?
- (a) Generally, a claimant bringing a claim for breach of contract against parties who are jointly liable under the same contract must join both parties into the proceedings to enforce the promise.
- (b) Generally, a claimant bringing a claim against parties who are jointly liable in tort must join both parties into the same proceedings.
- (c) Parties who are jointly liable to a claimant in tort are also always severally liable.
Close Drafting Note
Answer to question 8.1
Statement (b) is false. For more information, see Practice note, Joint, several and joint and several liability.
8.2 Which of the following statements about "net contribution" clauses (NCC) is true?
- (a) The purpose of an NCC is to prevent a professional consultant or contractor from being held liable for breaches of duty by others.
- (b) An NCC limits a professional consultant's or contractor's liability for breach of contract to its liability under the common law.
- (c) An NCC gives a professional consultant or contractor some protection against the consequences of their own breaches of duty.
- (d) An NCC limits a professional consultant's or contractor's liability for breach of contract to 50% of its liability.
Close Drafting Note
Answer to question 8.2
Statement (c) is true. For more information, see Practice note, Net contribution: what is a net contribution clause?.
End of Document
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