192 Construction contracts
approvals and the like. Permits can be of some importance for construction contractors for delivery of materials and plant to site through customs and to permit export of plant on completion.
12.2.7Providing contract documents
Provision of contract drawings, bills and other documents is a matter for the contract administrator under the JCT forms, but this data is required under NEC3 to be provided by the employer at the inception of the works. Errors in documents or in requirements will be a matter for which the employer is responsible in that correction of those errors will amount to a variation. Employers should therefore be aware that errors in documents provided can be costly to resolve.
The FIDIC 1999 Red Book also requires the employer under clause 4.10 to make available to the contractor all relevant data in the employer’s possession on sub-surface and hydrological conditions at the site, including environmental aspects. The obligation continues after the base date, through the course of the works.
12.2.8Co-operation
A general duty on all parties to co-operate features expressly in some standard forms. This goes further than the implied terms of non-hindrance and co-operation mentioned in Section 12.1.1. The first clause of NEC3 requires the parties to act as stated in this contract and in a spirit of mutual trust and co-operation (clause 10.1). More usually, obligations involving co-operation are reserved for contracts with partnering type arrangements or supplements. JCT introduced an optional supplementary clause in JCT SBC 11, schedule 8, clause 1 (JCT DB 11 at Schedule 2, clause 7) requiring the parties to work with each other and other project team members in a co-operative and collaborative manner, in good faith and in a spirit of trust and respect. Further, each is to address behaviour which is not collaborative.
Further obligations involving co-operation might be found in optional clauses. A good example can be found also in JCT DB 11 at Schedule 2, clause 11 in respect of performance measurement where the employer is obliged to monitor and assess the contractor’s performance.
12.3RESPONSIBILITY FOR THE CONTRACT ADMINISTRATOR
It has been emphasized above that many construction contracts allocate to the contract administrator the performance of what are really the employer’s obligations. These will be considered in more detail in Chapter 18; our interest for the moment is in the extent to which the employer can be held responsible to the contractor for the contract administrator’s actions.
It is crucial in this context to distinguish between two separate aspects of the contract administrator’s role. First, there are the numerous things done in the
Employer’s obligations 193
capacity of agent of the employer (such as supplying information, giving instructions as and when necessary, and so on). In Merton LBC v Stanley Hugh Leach Ltd14 it was held that the employer impliedly guarantees to the contractor that these functions will all be performed with reasonable diligence and with reasonable skill and care. This means that any negligence on the part of the contract administrator will render the employer liable for breach of contract to the contractor. The employer will then be able to claim in turn against the contract administrator, for breach of the terms of engagement.
The second aspect of the contract administrator’s role concerns certain ‘independent’ or ‘discretionary’ functions, such as certification. As to this, it was said in
Merton v Leach that the employer does not undertake that the architect will exercise his discretionary powers reasonably; he undertakes that, although the architect may be engaged or employed by him, he will leave him free to exercise his discretion fairly and without improper interference by him. As a result, an employer who obstructs or interferes with the issue of a certificate, or who improperly pressurizes the contract administrator, will be liable to the contractor.15
Notwithstanding this statement, there are circumstances in which the employer’s duties in respect of the contract administrator’s ‘discretionary powers’ go further than mere non-interference. In Perini Corporation v Commonwealth of Australia16 an employer became aware that the architect was acting improperly, by refusing to deal at all with applications for extension of time (as opposed to merely making incorrect decisions on applications). The Australian court held that it was the employer’s obligation in such circumstances to order the architect to carry out his duties under the contract and, if that failed, to dismiss and replace him. In Perini, the architect was an employee of the employer, a government department, but it is thought that the same principle would apply in cases where the architect is ‘independent’.
12.4RESPONSIBILITY FOR SITE CONDITIONS
A question which has arisen many times over the years concerns the extent to which an employer who initiates a project bears legal responsibility in respect of its feasibility. In particular, if site conditions such as the subsoil turn out to be unexpectedly adverse, or the proposed method of working proves impracticable, is there any way in which the contractor can claim redress? The answer to these questions naturally lies within the terms of the contract, but a fairly clear overall picture emerges from the leading cases.
14(1985) 32 BLR 51.
15John Mowlem & Co plc v Eagle Star Insurance Co Ltd (1992) 62 BLR 126.
16(1969) 12 BLR 82.
194 Construction contracts
12.4.1Contractor’s risk
As a basic principle, it is clear that the risk of adverse site conditions rests with the contractor. This was firmly established in Bottoms v York Corporation,17 which concerned the carrying out of sewerage works. Because the soil was softer than anticipated, the contractor had to carry out considerable extra work. When the engineer refused to authorize extra payment for this work as a variation, the contractor left the site and claimed a reasonable sum for the work done. No boreholes had been sunk in advance by either party, but the employer had received reports before signing the contract that the contractor was almost certain to lose money in the type of ground to be expected. It was nevertheless held that the employer owed no duty to disclose these reports to the contractor, whose claim accordingly failed.
The principle that adverse site conditions are the contractor’s risk is not altered merely because the employer provides plans or specifications at the time of tender. The mere fact that these are provided does not imply any warranty by the employer as to their accuracy. In Sharpe v San Paulo Brazilian Railway Co,18 for example, a contractor undertook to build a railway in Brazil for a lump sum. The engineer’s plans proved to be hopelessly inadequate and, as a result, the contractor was forced to excavate about twice as much as had been anticipated. It was held that, since the accuracy of the plans was in no way warranted, the contractor was not entitled to any extra payment in respect of this work.
Similar principles apply to working methods. In Thorn v London Corporation,19 a contract was let for the demolition and replacement of Blackfriars Bridge. The plans and specifications prepared by the engineer (whose directions the contractor was required to obey) featured the use of caissons to enable work to be done whatever the state of the tide. Unfortunately, these caissons proved to be useless, with the result that the contractor suffered considerable delay and extra expense. Once again, however, it was held that there was no implied guarantee by the client that the bridge could be built in the manner specified, and so the risk lay on the contractor.
12.4.2Employer’s responsibility
Notwithstanding the general principle outlined above, there may be situations in which an employer incurs liability when the project proves to be unexpectedly difficult or expensive to carry out. The major ways in which this occurs are as follows:
Implied warranty. Although the mere fact that an employer provides tendering information does not automatically mean that its accuracy is guaranteed, it may occasionally be possible for a warranty of accuracy to be implied. In Bacal Construction (Midlands) Ltd v Northampton Development
17(1892) HBC 4th ed, ii, 208.
18(1873) LR 8 Ch App 597.
19(1876) 1 App Cas 120.
Employer’s obligations 195
Corporation,20 for example, a contractor tendered to design and build six blocks of dwelling houses, under instructions to design the foundations on certain hypotheses as to ground conditions. These hypotheses, which were based on borehole data, subsequently proved inaccurate. It was held that, in these circumstances, the employer must be taken to have warranted that the ground conditions would be as they were hypothesized to be.
Misrepresentation. Even where there is no warranty as to site conditions, a contractor may be able to show some misrepresentation by or on behalf of
the employer. This will certainly be the case if there is any deliberate fraud in covering up the true conditions.21 In the absence of fraud, it is no doubt possible to base a claim on a negligent misrepresentation.22 However, this
will not be easy to establish, especially where (as is common) the contract provides that it is the contractor’s responsibility to check such matters.23
Standard method of measurement. Building contracts frequently state that the bills of quantities on which they are based have been prepared in
accordance with a specified Standard Method of Measurement. For example, JCT SBC 1124 clause 2.13.1 refers to RICS New Rules of Measurement – Detailed Measurement for Building Works (NRM2), and ICC 1 clause 57 refers to CESMM3 or such later amended edition as may be stated in the Appendix. Where this is so, a contractor who unexpectedly encounters rock may claim that this should have been a separate item in the bills and that the employer must therefore pay the extra cost. Such claims
have been described as without foundation and without merit (Wallace 1986: 448), but there is some legal authority to suggest that they are valid.25
12.4.3Shared responsibility under standard forms
Claims by contractors for additional cost or time due to encountering adverse ground conditions are more likely to occur on civil engineering projects, and less likely on building projects. An exception on building projects arises on a refurbishment project where the state of the existing structure may be important. For this reason, rather than referring specifically to ground conditions, some forms now refer more widely to ‘adverse physical conditions’.
JCT SBC 11 does not expressly refer to ground conditions, so the common law position will apply. The employer’s requirements provided with JCT DB 11 may refer to ground conditions and might, therefore, be treated as representations unless expressly stated otherwise. Clause 12 of the ICC 11 form uses a form of words that has remained largely unchanged from old ICE civil engineering forms: a contractor who encounters physical conditions (other than weather conditions), which could not have been reasonably foreseen by an experienced contractor, is to notify the
20(1975) 8 BLR 88.
21S Pearson & Son Ltd v Dublin Corporation [1907] AC 351.
22Morrison-Knudsen International Co Inc v Commonwealth of Australia (1972) 13 BLR 114.
23Dillingham Ltd v Downs [1972] 2 NSWLR 49.
24JCT SBC 11 as amended by NRM Update issued August 2012.
25Bryant & Sons Ltd v Birmingham Hospital Saturday Fund [1938] 1 All ER 503.