6 Control of the works
6.1 In DB16 there is no reference to an architect or contract administrator, and both the execution of the works and many aspects of the administration of the contract lie in the hands of the contractor. This reflects the intention in design and build procurement that the employer will have less involvement with day-to-day aspects of the contract than might be the case in traditional procurement, and that the contractor will shoulder a greater responsibility for overall co-ordination of the project. The employer, for example, is not required to produce any further design information after the contract is entered into. The employer is nevertheless required at various stages in the contract to issue instructions, notifications, consents and decisions, and is likely to appoint consultants to give advice on these.
Employer's agent
6.2 Under Article 3, the employer is entitled to appoint a person to act as employer’s agent, and to remove and replace the agent at will, provided it notifies the contractor of the agent’s identity. The agent is not referred to again in the conditions, except for clause 2.7.3 (availability of documents for inspection) and clause 3.1 (access to the site). If an agent is named, however, the contractor would be obliged and entitled to treat the agent as the employer for all purposes of the contract; for example, applications for payment would be submitted to the agent. This would be the case in relation to all references to the ‘Employer’ in the conditions, unless the employer informs the contractor otherwise by written notice under Article 3. Although clauses 2.7.3 and 3.1 make specific reference to the employer’s agent, and not the employer, it is likely that the clauses would be interpreted to include the employer. However, if the employer does not wish to employ an agent, then it should enter ‘the Employer’ in Article 3, rather than leaving the article blank or deleting it as, otherwise, it is not entirely clear what the effect of these clauses would be.
Site manager and contractor's persons
6.3 The contractor is required to keep a competent ‘Site Manager’ on the site ‘at all material times’ (cl 3.2). There is no requirement in the contract conditions for the person to be named, nor for the contractor to seek approval of the employer before appointing or replacing them. Nevertheless, this is an important role, as this person may receive instructions from the employer, and therefore acts as the contractor’s agent. It would therefore be good practice to establish the identity of the site manager in a pre-contract meeting, and to make sure this is recorded in writing. The contractor has full responsibility for the performance of the site manager and all people the site manager engages on the project, and the employer is given no power to remove or replace any of these people (in practice this right is often added through amendments to the contract).
6.4 Under clause 3.1 the contractor is required to allow access to the site and to workshops to the employer’s agent and any person authorised by the employer (which could also include a clerk of works). This requirement is very broadly expressed, and would even appear to cover the permanent on-site presence of a person authorised by the employer. It does not require the details of any authorised person’s access to be set out in the employer’s requirements, although it may be sensible to include this information if it is available. The only restrictions that may be imposed are ‘as necessary to protect proprietary rights’ of the contractor or any sub-contractor.
Principal contractor
6.5 The contract assumes that the contractor will act as principal contractor for the purposes of the CDM Regulations, unless another firm is named in Article 6. It is the employer’s responsibility to appoint a principal contractor, therefore if the contractor is unable to or ceases to take on this role, the employer must appoint a substitute (Article 6). It is the contractor’s responsibility to develop the construction phase plan so that it complies with the Regulations, and to ensure that the works are carried out in accordance with the plan.
Principal designer
6.6 The principal designer (if not the contractor, see paragraph 4.28) has no duty to inspect the works and would be very unlikely to visit the site unless some very unusual circumstance arises, such as the discovery of an unanticipated hazard. The main responsibility for ensuring that correct health and safety measures are employed on site rests with the contractor, both under statute and under the express terms of the contract (cl 3.16.2).
Employer's obligations
6.7 DB16 refers in only one place to the employer’s obligation to provide information, that obligation being to define the site boundaries (cl 2.9). However, it should be noted that failure to provide any necessary instructions, decisions, information or consents may constitute a default by the employer for which an extension of time may be granted (cl 2.26.6) and may give rise to a direct loss and/or expense claim where the failure causes disruption to progress (cl 4.21.2). It is also grounds for termination if the failure causes a suspension in the works for a period greater than the amount stated in the contract particulars. In all these cases the failure constitutes grounds only when it was not caused by the negligence or default of the contractor; an example of such negligence might be failing to notify the employer in reasonable time of the need to take a decision.
6.8 There are many places in the contract where the employer is required (or has the power) to make a decision, issue an instruction, consent to an action or notify the contractor in writing regarding a matter. The obligation or power is expressed in a variety of different ways in different clauses, but the effect of failure to comply is the same, and the employer will need to be prepared to deal with any such issues promptly. Clause 1.10 now requires that all ‘consents or approvals’ shall not be unreasonably delayed or withheld (except in relation to clause 7.1, assignment). The key instances of such decisions, consents, etc. are highlighted in Tables 6.1 and 6.2.
Table 6.2 Key powers of the employer Clause
Information to be provided by the contractor
6.9 The contractor as ‘Principal Contractor’ may be required by the principal designer to provide information in relation to the health and safety file. If the contractor is acting as principal designer then, under clause 3.16.2, it is required to prepare and deliver the health and safety file to the employer.
6.10 Under clause 2.37, the contractor is obliged to provide the employer before practical completion with ‘such Contractor’s Design Documents and related information as specified in the Contract Documents and as the Employer may reasonably require’. These documents and information are those which ‘show or describe the Works as built or relate to the maintenance and operation of them’. Note that if nothing is set out in the contract documents the contractor is still under an obligation to provide such information as may reasonably be required, which in the case of most buildings could amount to a substantial operation and maintenance manual. Given that this is a design and build contract, it would be expected that the contractor will provide full details of maintenance of mechanical services, the building envelope, etc. Nevertheless, to avoid arguments about what might be reasonable, it would be sensible to give details of what will be required in the contract. The employer would be able to withhold the statement of practical completion until this information has been provided (cl 2.27).
6.11 Under clause 2.2.3 the contractor must provide such samples of the standard or quality of materials, goods and workmanship as are set out in either the employer’s requirements or the contractor’s proposals. The contract does not state what should happen if the employer is not satisfied with the samples provided. If the samples are not in accordance with any specification included in the requirements, then this could be pointed out to the contractor, with the disclaimer that the rejection (or acceptance) of the sample does not relieve the contractor of its obligations. If the sample does not in fact contravene anything in the requirements, then the only course will be to instruct a change in the requirements in order to stipulate an acceptable standard. This instruction may entitle the contractor to claim an extension of time and loss and/or expense, as might any delay by the employer in making a decision or giving any instruction. It should be noted that there is no right to comment on the samples, or any procedure or time interval specified during which the employer may make comments or reach any decision regarding samples. It would be possible to amend the clause to refer to specific provisions set out in the requirements (along the lines of Schedule 1). However, provided the samples meet the standards set out in the requirements, there should be no need to comment – any attempts to raise or alter the standard is likely to constitute a change.
Design submission procedure
6.12 DB16 contains detailed provisions regarding the submission of the developing design by the contractor. This information is essential in order for the employer to monitor the development of the design and to integrate it with the rest of the works.
6.13 The contractor must provide to the employer copies of the ‘Contractor’s Design Documents’ (cl 2.8). ‘Contractor’s Design Documents’ are defined as ‘the drawings, details and specifications of materials, goods and workmanship and other related documents and information prepared by or for the Contractor in relation to the design of the Works (including such as are contained in the Contractor’s Proposals), together, where applicable, with any other design documents or information to be provided by him under the BIM Protocol’ (cl 1.1). It should be noted that the definition refers to ‘information prepared by the Contractor’ and clause 2.8 (unlike clause 2.37) does not refer to ‘information reasonably required by the Employer’. The information the contractor may prepare to construct the work may be different from the information that the employer would like to receive. If specific information is needed, and the BIM protocol is not used, then it may be sensible to set out a schedule in the employer’s requirements.
6.14 As regards timing, the information is to be provided ‘as and when necessary from time to time in accordance with the Design Submission Procedure’, and ‘the Contractor shall not commence any work to which such a document relates before that procedure has been complied with’ (cl 2.8). The ‘Design Submission Procedure’ is defined in clause 1.1 as ‘such procedure as is specified in the BIM Protocol or, where that is not applicable, the procedure set out in Schedule 1, subject to any modifications of that procedure set out in the Contract Documents’.
Schedule 1 procedure
6.15 The design submission procedure (Schedule 1) states that the documents should be submitted ‘by the means and in the format stated in the Employer’s Requirements’ and also states ‘and in sufficient time to allow any comments of the Employer to be incorporated’ (Schedule 1:1). It would therefore be open to the employer, and on most projects would be wise, to include detailed requirements regarding format and timing of submissions in the contract documents.
6.16 Following submission of a design document, the employer must respond within 14 days of the date of receipt, ‘or (if later) 14 days from either the date or expiry of the period for submission of the same stated in the Contract Documents’ (Schedule 1:2). In other words, if the contractor supplies information earlier than any agreed date, the employer is not required to respond any earlier than the date stated in the contract documents.
6.17 The employer is entitled to take three alternative courses of action: it can accept the design document, in which case it should return it marked ‘A’; it may accept it, subject to certain comments being incorporated, in which case it should be marked ‘B’; or it can make comments and require the contractor to resubmit the document with the comments incorporated for further approval, in which case it should be marked ‘C’ (Schedule 1:5). In the cases of ‘B’ or ‘C’, the employer must state why the document does not comply with the contract. (Comments are only valid if the document does not comply (Schedule 1:4); if it does comply, any required alteration would constitute a change.) If the employer does not respond within the specified period, it is deemed to have accepted the document (Schedule 1:3).
6.18 Schedule 1 paragraph 8.3 states that neither any comments nor any action by the employer will relieve the contractor of its liability to ensure that the document complies with the contract, or that the project complies with the contract. This has the effect that, if the contractor incorporates a comment made by the employer, then it accepts that the comment has been properly made (i.e. it identifies a way in which the design document is not in accordance with the contract).
6.19 If the contractor disagrees with a comment and considers that the document complies with the contract, it is required to inform the employer, within seven days of receipt of the comment, that compliance with the comment would give rise to a change (Schedule 1:7). The contractor must explain the reasoning behind its conclusions. The employer must either confirm or withdraw the comment within seven days. The confirmation or withdrawal does not signify that the employer accepts that the design document complies, or that the comment represents a change (Schedule 1:8.1); this would be a question of fact, to be resolved by adjudication if necessary. The contractor would have to implement the comment and argue its case later.
6.20 If the contractor does not notify the employer of its disagreement with a comment, then that comment will not be treated as a change, even if it could, in fact, later be shown to be a change (Schedule 1:8.2).
Employer's instructions
Table 6.3 Matters over which the employer may or shall issue instructions Clause
6.21 The employer has the power to issue instructions regarding the matters shown in Table 6.3. Only the employer (or the employer’s agent) has the power to issue instructions. Sometimes the contract states that the employer ‘may’ issue instructions (e.g. instructions requiring a change under clause 3.9) but, at other times, the employer ‘shall’ issue instructions (e.g. instructions regarding provisional sums under clause 3.11), which has the force of an obligation.
6.22 If the employer has appointed an agent, then the agent would have authority to give an instruction. If anyone other than the employer or an agent were to give an instruction, this would not be effective under the contract and the contractor would be under no obligation (and would be unwise) to comply with any such instruction.
6.23 Clause 1.7.1 states that all instructions must be in writing. An oral instruction from the employer is of no immediate effect (cl 3.7.1). However, the contractor is obliged to confirm its terms in writing within seven days. The instruction takes effect seven days from the receipt of the confirmation by the employer, provided that the employer does not dissent by notice within seven days (cl 3.7.1). If the employer confirms the instruction prior to the seven-day period elapsing, the instruction takes effect from the date of the employer’s confirmation (cl 3.7.2). If neither party confirms the oral instruction, but the contractor acts upon it anyway, the employer is given the option of later confirming the instruction at any point up until the due date for the final payment under clause 4.24.5 (cl 3.7.3). However, the contractor would have taken a risk (MOD v Scott Wilson Kirkpatrick).
Ministry of Defence v Scott Wilson Kirkpatrick & Partners [2000] BLR 20 (CA)
Scott Wilson Kirkpatrick (SWK) was engaged as structural engineer and supervising officer by the MOD in relation to refurbishment of the roof at Plymouth Dockyard under GC/Works/1. Several years after the works were complete, wind lifted a large section of roof and deposited it in a nearby playing field. The contract had required 9–12 in. nails, but the contractor had used 4 in. nails. The supervising officer had been party to discussions regarding the use of the 4 in. nails, but neither he nor the contractor could remember very clearly when these discussions had taken place, or exactly what had been said. The Court of Appeal decided that the evidence was sparse and vague, and declined to find that there was any instruction under 7(1)(a) or 7(1)(m) (instructions that may be given orally), or that there had been any agreement as to the replacement. Even if the supervising officer’s conduct amounted to confirmation or encouragement, this could not absolve the contractor from its duty to fix the purlins in a workmanlike manner. The MOD was therefore entitled to insist on its strict contractual rights. The Court of Appeal noted, however, that an instruction in writing was not a condition precedent to a claim by the contractor, so long as it was able to prove that the change had been agreed.
6.24 All instructions must be in writing and sent in the format and by the means agreed between the parties, which could include electronic communications (cl 1.7.2). If no means has been agreed, instructions may be sent by ‘any effective means’ (cl 1.7.3). It should be remembered that it may be necessary to prove that an instruction has been received and when it arrived. Clause 1.7.3 does not contain a ‘deemed to have been received’ provision, unlike clause 1.7.4, and therefore it is advisable to send a hard copy by recorded delivery or to record receipt of instructions at a subsequent progress meeting. Unless otherwise agreed, no special format is required for instructions, but it is often convenient to use the forms published by RIBA Publishing. An instruction in a letter would be effective, as long as the letter is quite clear. A drawing sent with a letter requiring it to be executed would constitute an instruction, but a drawing with no covering instruction may be judged to be ineffective.
6.25 Unless a special format and means have been agreed, instructions in site meeting minutes may constitute a written instruction if issued by the employer, but not if issued by the contractor, and only if the minutes are recorded as agreed at a subsequent meeting. It is possible that the instruction might not take effect until after the minutes are agreed, and it would depend on the circumstances whether the minutes were judged to be sufficiently clear to fall within the terms of the contract. It is therefore not good practice to rely on this method. The use of site instruction books should also be avoided. Although signing an instruction in a book would constitute a written instruction under the terms of the contract, there is no obligation to sign such books, and it may also be prudent not to make quick decisions on site but to wait until all the implications of the instruction can be considered.
6.26 The contractor must comply with every instruction (cl 2.1.4), provided that it is valid (i.e. provided that it is in respect of a matter regarding which the employer is empowered to issue instructions). The contractor must comply ‘forthwith’, which for practical purposes means as soon as is reasonably possible (cl 3.5). The requirement to comply is subject to certain exceptions:
- the contractor’s consent is required to any instruction requiring a change which affects the design (cl 3.9.1), although that consent is not to be unreasonably delayed or withheld (cl 1.10);
- the contractor need not comply with a clause 5.1.2 instruction (access and use of the site, etc.) to the extent that it makes a reasonable objection (cl 3.5.1 and 3.9.2);
- if acting as principal contractor or principal designer, the contractor may have an objection under the CDM Regulations (cl 3.9.4).
6.27 Where the employer acts outside its power to give instructions as set out under the contract, the contractor is under no obligation to comply with any instruction given. If the contractor feels that an employer’s instruction might not be empowered by the contract, or requires clarification, then the contractor may ask the employer to specify in writing the provisions of the contract under which the instruction is given, and the employer must do this ‘forthwith’ (cl 3.8). The contractor must then either comply, in which case the instruction is deemed to have been valid, or issue a notice referring the disputed instruction to the decision of an adjudicator.
6.28 Even if the contractor decides to query the instruction under clause 3.8, this does not relieve the contractor of the obligation to comply. Should the instruction be found to be valid and the contractor did not comply, it would be liable for any delay caused. If the contractor does comply, but the instruction turns out to have been invalid, the contractor may be entitled to any losses incurred through compliance.
6.29 If the contractor does not comply with a written instruction, the employer may employ and pay others to carry out the work to the extent necessary to give effect to the instruction (cl 3.6). The employer must have given written notice to the contractor requiring compliance with the instruction, and seven days must have elapsed after the contractor’s receipt of the notice before the employer may bring in others. This indicates that a recorded form of delivery is desirable. Although there is no obligation to issue such notices, it would be prudent for the employer to take swift action in order to protect its interests. The employer is entitled to recover any additional costs from the contractor, i.e. the difference between what would have been paid to the contractor for the instructed work, and the costs actually incurred by the employer. These costs could include not only the carrying out of the instructed work, but also any special site provisions that need to be made, including health and safety provisions, and any additional professional fees incurred. Although it would be wise to obtain alternative estimates for all these costs wherever possible, if the work is urgent there would be no need to do so.
Changes
6.30 Employers may decide that they wish to vary the requirements at some point after the contract is signed. Under common law, neither party to a contract has the power unilaterally to alter any of its terms. Therefore, in a construction contract the employer would not have the power to make any changes unless the contract confers such a power. As some aspects of construction may be difficult to define precisely in advance, most construction contracts contain provisions allowing the employer to vary the works to some degree.
6.31 Under DB16 the employer is empowered to order specific ‘Changes’ to the requirements (cl 3.9.1). The term ‘Change’ is defined under clause 5.1 and includes alterations to the design, quality and quantity of the works, and to operational restrictions such as access to the site. The contract expressly states that no such change will vitiate the contract (cl 3.9.3), but the power does not extend to altering the nature of the contract, nor can the employer make changes after practical completion. All changes under clause 3.9 may result in an adjustment of the contract sum (cl 5.4.1) and give rise to a claim for an extension of time (cl 2.26.1) or direct loss and/or expense (cl 4.21.1).
6.32 The employer may vary the design, quality or quantity of the works; for example by requiring air conditioning in an area that had previously been naturally ventilated. The employer may add to or omit work, substitute one type of work for another or remove work already carried out (cl 5.1.1). If the change results in an alteration to the design of the works the contractor’s consent must be sought (cl 3.9.1), which must not be unreasonably delayed or withheld (cl 1.10). As the contract provides for the contractor to be compensated for any increases in cost or programme, it would normally be unreasonable for the contractor to refuse consent, but it may be reasonable where the change is so extensive that it seriously disrupts the project.
6.33 The employer may vary the access to or use of the site, limitations on working space or working hours, the order in which the work is to be carried out or any restrictions already imposed (cl 5.1.2). However, the contractor need not comply with the type of change defined in clause 5.1.2 to the extent that it makes reasonable objection (cl 3.9.2). Given that the contractor will be paid for such changes it is difficult to see what might constitute a ‘reasonable’ objection but, for example, the instruction might make site operations almost impossible to manage. This contract provision is necessary not only to allow the employer some flexibility, but also to accommodate difficulties that may arise, for example through local authority restrictions on working hours.
6.34 Any instruction under clause 5.1 may, if it results in a suspension of work for a period longer than that stated in the contract particulars, give the contractor grounds for termination (cl 8.9.2). The consequences of such an instruction are therefore serious.
6.35 If the contractor is the principal contractor or principal designer it must, within a reasonable time of receiving an instruction effecting a change, or in respect of a provisional sum, inform the employer in writing if it has any objection to the instruction in relation to its obligations under the CDM Regulations (cl 3.9.4). If the contractor makes an objection, the employer may vary the terms of the instruction to remove the objection to the reasonable satisfaction of the contractor. The contractor is not obliged to comply with the instruction until the matter is resolved.
Table 6.4 Matters which are to be 'treated as a Change' Clause Notes
6.36 It should be noted that DB16 refers in many places to events which are to be ‘treated as a Change’, often without requiring the employer to issue an instruction. These are summarised in Table 6.4. The wording in each instance is not always consistent, but it appears that the contractual consequences of these deemed changes are the same. Clause 2.26.1 cites ‘Changes and any other matters or instructions which under these Conditions are to be treated as, or as requiring, a Change’ as a relevant event, which would cover all the matters listed below, and similar wording is included under clause 4.21.1 in relation to loss and/or expense.
Goods, materials and workmanship
6.37 Clause 2.2.2 makes it clear that all work must be carried out in accordance with the standard specified in the contract documents, or in any subsequently released contractor’s design documents (which in turn must comply with the employer’s requirements). The employer may appoint an architect or other professional to inspect at regular intervals to monitor the standard that is being achieved. If any changes were made in order to raise or lower the standard, then this would constitute a change. When the standard achieved appears to be unsatisfactory it can be tempting for the employer’s agent (or authorised inspector) to become involved in directing the day-to-day activities of the contractor on site. Apart from being an enormous burden on the agent, such a situation could confuse the issue of who is ultimately responsible for quality and is to be avoided. The agent could, of course, draw the contractor’s attention to typical areas of defective or poor quality work. Some measures for dealing with defective work are set out in the contract, as detailed below.
Defective work
6.38 The employer may instruct the contractor to open up completed work for inspection, or arrange for testing of any of the work or materials, fixed or unfixed (cl 3.12). Obviously, the employer would take this action if there were reasonable grounds for suspecting defective work or materials. No time limit is specified, but the employer should issue an instruction as soon as the need for such action becomes apparent (delay could result in escalating or unnecessary costs), although failure to ask for tests in no way relieves the contractor of the obligation to provide work according to the contract. The cost of carrying out the tests is added to the contract sum, unless it was already provided for in the employer’s requirements or the contractor’s proposals, or in the event that the work proves to be defective. Unless the work is defective, the contractor may also be entitled to an extension of time under clause 2.26.2 and loss and/or expense under clause 4.21.2.2.
6.39 If work is found to be defective, the employer has the power to issue an instruction ‘in regard to’ the removal of work, materials or goods from the site (cl 3.13.1). The employer is not required to consult with the contractor, who has no right of objection. Curiously, the employer is not given an express power to require rectification of the defective work (although such a power was given in the 1981 edition of the form). Of course, removal of the defective work would necessitate reconstruction, achieving the same result albeit in a more dramatic way, when, in fact, a small modification may be all that is needed. This would, strictly speaking, have to form the subject of a separate agreement but, in practice, the contractor is unlikely to object to an instruction that requires rectification rather than removal.
6.40 Even though instructing removal might appear excessive, considering that the contractor is already under an obligation to build the work correctly, it can be important to issue instructions that enable the clause 3.6 sanctions to be brought into operation (Bath and North East Somerset DC v Mowlem). To fall within clause 3.13.1 the instruction must specifically require removal of the work from site, however impractical. Simply drawing attention to the defective work would not be sufficient (Holland Hannen v Welsh Health Technical Services).
Bath and North East Somerset District Council v Mowlem plc [2004] BLR 153 (CA)
Mowlem plc was engaged on JCT98 (Local Authorities With Quantities) to undertake the Bath Spa project. Completion was expected to be in 2002 but work was still under way in 2003. Paint applied by Mowlem to the four pools began to peel, and the contract administrator issued Architect’s Instruction no. 103 which required Mowlem to strip and repaint the affected areas. Mowlem refused to comply and the Council issued a notice under clause 4.1.2. Mowlem still did not comply, and the employer engaged Warings to carry out this work. Mowlem refused Warings access to the site, and the Council applied to the court for an injunction, which was granted. Mowlem appealed against the injunction, but the appeal was dismissed.
Mowlem had argued that it was able to rectify all the defects and that the liquidated damages provided under the contract were the agreed remedy for delays caused. The Council was able to show that the liquidated damages were not adequate compensation for the losses suffered. Lord Justice Mance held that, in such cases, the court should examine whether the liquidated damages would provide adequate compensation and, if they would not, as in this case, it is appropriate to grant an injunction. In reaching this decision he took into account irrecoverable losses, such as the ‘unquantifiable and uncompensatable damage to the Council’s general public aims’.
Holland Hannen & Cubitts (Northern) Ltd v Welsh Health Technical Services Organisation (1985) 35 BLR 1 (CA)
Cubitts Ltd was employed by the Welsh Health Technical Services Organisation (WHTSO) to construct two hospitals at Rhyl and Gurnos. Percy Thomas (PTP) was the architect. Redpath Dorman Long Ltd (RDL) was the nominated sub-contractor for the design and supply of pre-cast concrete floor slabs. RDL assured WHTSO that the floors would be designed to CP 116 (concerning deflection), but the design team later required RDL to work to CP 204. Following installation, the contractor complained about extra work and costs due to adjustments to the partitions necessitated by excessive deflection of the floors, and it was established that they had been designed to CP 116 not CP 204. PTP sent three letters ‘condemning’ the floors, but the first did not mention clause 6(4), and none of them required removal of the work. Cubitts stopped work for 20 weeks until PTP issued instructions specifying how the defect should be resolved. Cubitts commenced proceedings, claiming compensation for delay. The claim was settled, but the relevant parties maintained their proceedings against each other for contribution. The official referee decided that RDL was liable for two-thirds of the amount paid to Cubitts and the design team for one-third. The Court of Appeal decided that this was incorrect and the correct apportionment should have been that RDL was liable for one-third and the design team for two-thirds. In reaching this conclusion it stated: ‘PTP contributed very substantially to the delay which occurred, in failing to recognise the defect in the design at an earlier stage; by issuing an invalid notice in 1976, and by moving very slowly thereafter to take the necessary steps to have the defects in the flooring put right’ (Robert Goff LJ).
6.41 The employer also has the power to issue such instructions requiring a change as are reasonably necessary as a consequence of an instruction in regard to defective work (cl 3.13.2). This would normally arise where part or all of the defective work is accepted, with the result that the work would fail to comply with the requirements, with possible consequential effects on other parts of the design. In such cases, as long as the instruction is ‘reasonably necessary’, no addition is made to the contract sum and no extension of time is given. However, the employer is required to consult with the contractor (presumably to establish the optimum solution whereby disruption and costs to the contractor are kept to a minimum), but there is no need to obtain the contractor’s consent. Note, however, that there is no express provision for any deduction for accepting defective work; this would have to be negotiated between the parties. The employer should specify in writing exactly which defective work is to be retained and record the agreed deduction. Any rates and prices for that work as set out in the contract sum analysis can be used as a starting point for negotiation, but they are not the only matters to be taken into consideration (see Oksana Mul v Hutton Construction Limited).
Oksana Mul v Hutton Construction Limited [2014] EWHC 1797 (TCC)
This case concerned what constitutes an ‘appropriate deduction’ when an employer decided to accept non-conforming work. The project concerned an extension and refurbishment work to a country house using the JCT IC05 form. A practical completion certificate was issued with a long list of defects attached, and during the rectification period the employer decided to have this work corrected by other contractors. The employer then started court proceedings against the contractor, to claim back the costs of this work.
A key issue was the interpretation of clause 2.30, which provides that the contract administrator can instruct the contractor not to rectify defects and ‘If he does so otherwise instruct, an appropriate deduction shall be made from the Contract Sum in respect of the defects, shrinkages or other faults not made good’. In this case the contractor argued that an ‘appropriate deduction’ was limited to the relevant amount in the contract rates or priced schedule of works. The court disagreed. It decided that ‘appropriate deduction’ under clause 2.30 meant ‘a deduction which is reasonable in all the circumstances’, and could be calculated by any of the following: the contract rates or priced schedule of works; the cost to the contractor of remedying the defect (including the sums to be paid to third party subcontractors engaged by the contractor); the reasonable cost to the employer of engaging another contractor to remedy the defect; or the particular factual circumstances and/or expert evidence relating to each defect and/or the proposed remedial works.
However, the judge also pointed out that the employer will still have to satisfy the usual principles that apply to a claim for damages, which include showing that it mitigated its loss. If the employer unreasonably refused to let the contractor rectify defects, then it is likely to find its damages limited to what it would have cost the contractor to put them right.
6.42 The employer can instruct that further tests or opening up are carried out to establish whether there are any similar problems in work already carried out (cl 3.13.3). The cost of further tests would be borne by the contractor, whether or not the additional tests proved work to be defective, provided that the instruction was reasonable. However, the contractor would have the right to an extension if the tests showed that the work was satisfactory and they caused delay. The contractor has no right of objection, and must comply with the instruction immediately.
6.43 In issuing instructions under clause 3.13.3 the employer must have due regard to the Code of Practice included in Schedule 4 of the form. There is no requirement to adhere to the code exactly but, as its observance may be considered evidence that the instructions were reasonable, the employer would be wise to pay it close attention.
6.44 Clause 2.1.1 requires the contractor to carry out the work ‘in a proper and workmanlike manner’ and in accordance with the construction phase plan. Where there is any failure to do so, clause 3.14 entitles the employer to ‘issue such instructions (whether requiring a Change or otherwise) as are in consequence reasonably necessary’. To the extent that such an instruction is necessary, nothing is added to the contract sum and no extension of time given. This is similar to the employer’s power under clause 3.13.2, discussed at paragraph 6.41.
Sub-contracted work
6.45 Under clause 3.3.1 the contractor may only sub-contract work with the written consent of the employer. Failure to comply with this restriction would be a default, providing grounds for termination under clause 8.4.1.4. Under clause 1.10, however, the employer’s permission cannot be unreasonably delayed or withheld. It is suggested that permission is required for each instance of sub-contracting, rather than agreeing to sub-contracting in principle. Any permission is stated not to affect the contractor’s obligations under the contract (cl 3.3.1), for example to carry out the work to the required standard or to meet the completion date.
6.46 The form states ‘where considered appropriate’ the contractor shall engage the subcontractor on the JCT Design and Build Sub-Contract (cl 3.4). Although not an absolute requirement, the contractor ought to consider using this form for all sub-contracting, unless there are sensible reasons why this is not appropriate. Whatever form of subcontract is used, however, it must include certain conditions, and clause 3.4 states that the sub-contract must provide that:
- the sub-contract is terminated immediately on termination of the main contract (cl 3.4.1);
- unfixed materials and goods placed on the site by the sub-contractor (the ‘Site Materials’) shall not be removed without the written consent of the contractor (cl 3.4.2.1);
- it shall be accepted that materials or goods included in an interim payment by the employer become the property of the employer (cl 3.4.2.1.1);
- it shall be accepted that any materials or goods paid for by the main contractor prior to being included in a payment by the employer become the property of the main contractor (cl 3.4.2.1.2);
- that each party undertakes to comply with the CDM Regulations (cl 3.4.2. 3);
- the sub-contractor has a right to interest on late payments by the contractor at the same rate as that due on main contract payments (cl 3.4.2.4).
6.47 In addition, clause 3.4 sets out requirements where third party rights and/or warranties are to be granted by the sub-contractor (cl 3.4.2.5). For example, that warranties will be executed within 14 days of receipt of a notice from the contractor (and as a deed, if applicable) and that third party rights will be vested by the sub-contractor upon notice by the contractor. Finally (and very important in the context of design and build), if documents, information or licences may be required from the sub-contractor in relation to as-built drawings, the CDM Regulations and/or the BIM protocol, the sub-contract must make provision for this (cl 3.4.3).
6.48 Most of these terms protect the position of the employer and the provisions regarding unfixed goods and materials are of particular importance in this respect. If a main contractor sub-contracts on other terms, with resultant losses to the employer, then the contractor may be liable for breach of contract.
Named sub-contractors
6.49 DB16 includes provisions for naming sub-contractors, which can be very useful if the employer wishes to involve particular firms in certain aspects of design and construction (the resulting risk distribution is summarised in Table 6.5). The provisions for naming of sub-contractors are set out in Schedule 2, Supplemental Provision 1 and will only apply if incorporated under the contract particulars. Supplemental Provision 1.1 states that its provisions apply ‘Where the Employer’s Requirements state that work (‘Named Sub-Contract Work’) is to be executed by a named person as the Contractor’s sub-contractor (a ‘Named Sub-Contractor’)’. It appears from the following clauses that the requirements must give the actual name of the person appointed to carry out the work, not simply state that this work is to be carried out by a person to be named by the employer.
Table 6.5 Dis tribution of risk between parties when named sub-contractors are used
6.50 There is no indication as to what additional information should be included in the requirements at tender stage. This is due to the wide range of information that might be available, which is dependent on how fully developed the design is at that stage. It would be sensible to give as much information as possible including, if available:
- full details of the company;
- the work to be carried out;
- price, terms and conditions, including any warranty required;
- design drawings, etc. already prepared;
- the price of the work and tender details if obtained.
6.51 In order to collate this information, the employer must first have invited sub-contract tenders. If this has not happened, the employer will provide only limited information to identify the named sub-contractor and the related work, and the contractor will then proceed to obtain a tender.
6.52 The contractor must enter into an agreement with the named person ‘as soon as reasonably practicable’ after entering into the main contract with the employer (Schedule 2:1.1.1). The sub-contractor should be given Supplemental Provision 1 and, in particular, notification of paragraph 1.5 (which protects the employer in the event of termination) must be incorporated. The contractor should engage the sub-contractor on the JCT Design and Build Sub-Contract, or comply with clause 3.4 (see paragraph 6.46). Other than this, no particular terms are required for the sub-contract, unless the employer has stipulated conditions in the requirements.
6.53 If the contractor is unable to enter into a sub-contract in accordance with the particulars in the main contract documents, the contractor must immediately inform the employer of the reasons that have prevented this from happening (Schedule 2:1.1.2). Provided the contractor has acted reasonably, the employer must then by a change instruction either remove the reason, or direct the contractor to undertake the work itself (or have it carried out by a sub-contractor selected by the contractor and approved by the employer), or omit by a change the named sub-contract work. Whatever option is selected, the change must be valued under clause 5.2, may give rise to a claim for an extension of time and will also be a matter with respect to a claim for direct loss and/or expense (Schedule 2:1.2). If the instruction removes the named sub-contractor, it may not name another (Schedule 2:1.1.2). However, if the work is omitted, the employer could arrange for it to be carried out by a person employed directly by the employer under clause 2.6.
6.54 If the named sub-contractor’s employment is terminated by the contractor, the contractor is required to carry out any outstanding work (Schedule 2:1.4). This could be subcontracted with the consent of the employer. The completion of the work is treated as a change, except if the termination resulted from the contractor’s default (paragraph 10.34 discusses termination in more detail).
Work not forming part of the contract/persons engaged by the employer
6.55 Under clause 2.6, the employer may engage persons directly to carry out work that does not form part of the contract while the main contractor is still in possession. This may include statutory undertakers when employed by the employer, but not where they are carrying out the work in pursuance of their statutory duties. If the contract documents have included ‘the information necessary to allow the Contractor to carry out and complete the Works or each relevant Section in accordance with this Contract’, then the contractor must permit the employer to execute such work. Otherwise, the employer can only do this with the contractor’s consent. The consent may not be unreasonably delayed or withheld.
6.56 Clauses 6.1 and 6.2 make it clear that the contractor is not liable for, nor is it required to indemnify the employer against, claims due to injury or damage to property caused by the directly engaged person. The employer should therefore ensure that insurance cover is arranged in respect of any act or neglect on the part of the persons to be employed. The employer should also take note that any disruption to the contractor’s working could lead to an extension of time (cl 2.26.6), to a claim for loss and expense (cl 4.21.5), or even to the contractor terminating the contract (cl 8.9.2). The employer is therefore at considerable risk, and should avoid this route if at all possible.
Making good defects
6.57 The contractor is required to make good any ‘defects, shrinkages or other faults’ which appear and are notified by the employer to the contractor (cl 2.35). The defects are limited to those that result from ‘failure of the Contractor to comply with his obligations’. This would not, for example, include shrinkages or general wear and tear due to occupation, which would be expected even if the work had been carried out as specified.
6.58 The notification should take the form of a schedule, which must be issued to the contractor not later than 14 days after the end of the rectification period (cl 2.35.1). The obligation appears to be limited to those defects that appear after practical completion (latent defects) and does not cover defects that can be identified at practical completion (patent defects). Nevertheless, it is common practice to include any minor items that were outstanding at that stage, as this is a practicable way of dealing with such matters.
6.59 However, it is important to note that the obligation to make good appears to be limited to those defects notified by the employer. Although the contractor may be liable for defects which are not notified, the employer would be unlikely to be able to claim the full cost of repair of any defect made good at a later date. It is therefore important that the employer prepares a comprehensive schedule (Pearce and High v Baxter, see also Oksana Mul v Hutton at paragraph 6.41). The employer is required to issue the notification not later than 14 days after the end of the rectification period, the only point at which the contract requires the employer to issue such a schedule. The employer may instruct the contractor to make good a defect at an earlier stage, but this would normally only be used for serious and urgent problems (cl 2.35.2).
Pearce and High v John P Baxter and Mrs A S Baxter [1999] BLR 101 (CA)
The Baxters employed Pearce and High on MW80 to carry out certain works at their home in Farringdon. Following practical completion, the architect issued interim certificate no. 5, which the employer did not pay. The contractor commenced proceedings in Oxford County Court, claiming payment of that certificate and additional sums. The employer, in its defence and counterclaim, relied on various defects in the work that had been carried out. Although the defects liability period had by that time expired, neither the architect nor the employer had notified the contractor of the defects. The Recorder held that clause 2.5 was a condition precedent to the recovery of damages by the employer, and further stated that it was a condition precedent that the building owner should have notified the contractor of patent defects within the defects liability period. The employer appealed and the appeal was allowed. Lord Justice Evans stated that there were no clear express provisions within the contract which prevented the employer from bringing a claim for defective work, regardless of whether notification had been given. He went on to state, however, that the contractor would not be liable for the full cost to the employer of remedying the defects if the contractor had been effectively denied the right to return and remedy the defects itself.
6.60 If the employer decides to accept any defective work, then this should be clearly confirmed in writing. The full extent of the problem should be carefully established before such a course of action is taken, and an appropriate deduction from the contract sum agreed, as it is unlikely that the employer would thereafter be able to claim for consequential problems or further remedial work.
6.61 Once satisfied that all the notified defects have been made good, the employer must issue a notice to that effect (the ‘Notice of Completion of Making Good’, cl 2.36). The notice must not be unreasonably delayed or withheld. The notice is one of the preconditions for the final payment.
6.62 The contract does not state what should happen in respect of defects which appear after the issue of the schedule of defects, or after the end of the rectification period but before the final payment. It is, however, clear from clause 2.35 that the employer no longer has the power to instruct that these are made good. It is suggested that in such circumstances there would be two possible courses of action. The first would be to make an agreement with the contractor to rectify the defects before the final payment is made. If the contractor refused to do this, an amount could be deducted from the contract sum to cover the cost of making good the work, but this would involve some risk to the employer. The second and less risky course would be to have the defective work made good by another contractor, and deduct the cost from the contract sum. This would involve a delay to the final payment and would probably be disputed by the contractor.
6.63 The contractor’s liability for defective work is not limited to defects notified by the employer, and does not end with the final payment. The contractor is still liable for losses suffered, but no longer has the right to return to site to correct defective work. The employer’s remedy is to bring an action at common law. The rectification period is therefore a sensible procedure which benefits the parties in affording an opportunity to remedy problems at a reasonable cost, without the problems associated with bringing a legal action.