Damages for Breach of Contract

This chapter analyses the basic rule governing the assessment of damages for breach of contract, which emphasizes that no special or different rules apply to construction contracts. It explains that the basic rules have no limits to its application to the amount of loss that can be recovered. It also discusses how limits involve a set of rules which go back to the famous and ancient case of Hadley v Baxendale. This chapter describes the categories of recoverable loss, such as the damages which the other party ought to receive in respect of a breach of contract. It analyses the second limb of the rule in Hadley v Baxendale that relates to special circumstances known to the parties at the time the contract was made.

Contracts: Formation and Interpretation

This chapter discusses the law relating to construction, engineering, and infrastructure contracts. It explains a series of rules developed by the law that guide the courts into making decisions about whether obligations will be enforced and analyses how courts enforce most contracts in circumstances where the parties had an intention to create legal relations. It also identifies parties that have the capacity to contract, such as adults and corporations. This chapter explains how undischarged bankrupt may enter into a contract without committing a criminal offence. It mentions government departments that can contract and sue or be sued pursuant to their contracts.

Limitation of Actions

This chapter reviews the operation of the statutory restrictions on the prosecution of stale claims that caused Parliament to pass acts of limitation designed to prevent the bringing of claims after a certain period to eliminate the injustice of unduly delayed claims. It analyses the operation of key domestic statutory limitation periods applicable to common construction law disputes and the policy justifications behind them. It also reviews the application of foreign limitation periods. It emphasizes the essential procedural nature of a limitation defence under English law, which requires that any applicable time bar must be pleaded by a defendant if it is to be effective.

Mistake, Misrepresentation, and Frustration

This chapter focuses on mistake, which can be described as an erroneous belief of parties that wish to enter into a contract. It explains that mistakes determine whether a contract comes into existence at all or whether a written contract is to be interpreted in a manner that appears to run contrary to its text. It also discusses the distinction of mistakes between mistakes as to the terms of the contract or the identity of the contracting parties and mistakes as to the factual and legal assumptions that underlie the contract. This chapter elaborates that mistakes as to terms or identity may give rise to a wide range of legal consequences, depending on the nature of the mistake. It clarifies that a mistake as to the facts or law that underlie an agreement can only affect an apparent contract in a very narrow set of circumstances.

Assignment, Sub-Letting, the Contracts (Rights of Third Parties) Act 1999 and Collateral Warranties

This chapter explores assignment, which denotes the transfer of contractual rights from one party to another. It explains how there can be no assignment of the burden of a contract without the consent of the other contracting party. This chapter also looks at sub-letting, the Contracts (Rights of Third Parties) Act 1999 and collateral warranties.

The Roles of Professionals

This chapter discusses professions that are traditionally concerned with building and engineering works, such as architects, engineers, and quantity surveyors. It analyses how project managers are being added to the group of construction professionals engaged by employers. It also probes the work of construction professionals in England, Wales, and Scotland that is subject to the Housing Grants, Construction and Regeneration Act 1996 (HGCRA). This chapter cites a construction contract in the HGCRA as an agreement to do architectural, design, or surveying work or provide advice on building, engineering, interior decoration, or exterior decoration to construction operations. It looks at traditional forms of contract that is responsible for the design of the works and the contractor for the construction.

Guarantee and Indemnity

This chapter tackles guarantee or bond, which has no definitive judicial definition but is widely held to be a contract in which the guarantor agrees to be answerable for the debt or default of another to a third party. It cites the primary obligation of a third party that is underwritten by the guarantor as an essential characteristic of a guarantee. It also explains how the guarantor becomes answerable for the faults of the third party. This chapter talks about the indemnitor that undertakes a primary liability to another party in order to indemnify the other party against a specific event, which may or may not involve the act or default of a third party. It points out that the indemnity contained in construction sub-contracts is the most frequently used form of indemnity in the construction industry.

International Construction Arbitration

This chapter explains that an arbitration agreement is an agreement to submit to arbitration present or future disputes. It analyses the Arbitration Act 1996, which governs all arbitrations in England and Wales and provides that an arbitration agreement is made in writing. It also discusses the special nature of an arbitration agreement as it is not discharged by death and survives the repudiation, frustration, or discharge of the agreement with which it is concerned. This chapter elaborates that the first step for any employer, contractor, or sub-contractor involved in a dispute is to check and see whether the dispute is governed by an arbitration agreement. It reviews the most common incorporation by reference, which is when parties agree that a particular set of standard conditions shall govern their agreement.

Certificates and the Right to Payment

This chapter looks at the payment provisions introduced by the Housing Grants, Construction and Regeneration Act 1996 (HGCRA) that apply to most substantial onshore construction operations in the UK. It analyses construction contracts defined under sections 104–105 of the HGCRA, which must contain a minimum, mandatory payment, and payment notice regime. It also explains how the HGCRA regulates and prohibits payment provisions, such as ‘pay when paid’ clauses. This chapter probes section 109 of the HGCRA, stipulating that any party to a construction contract in the UK is entitled to payment by instalments, stage payments, or other periodic payments for any work under the contract. It reviews the relevant statutory provisions in the HGCRA and the Scheme for Construction Contracts (England and Wales) Regulations 1998, which provide a payment code that must be followed in every UK construction contract from October 2011.

Mediation and Alternative Dispute Resolution

This chapter focuses on alternative dispute resolution (ADR), which is used as a collective description of various methods of resolving disputes other than through the formal adversarial processes of litigation or arbitration. It emphasizes how ADR is now recognized in construction industry standard form contracts that provide for dispute resolution processes. It also mentions courts in the UK and throughout the world that support and actively encourage ADR, specifically in England and Wales that includes ADR as part of the Civil Procedure Rules (CPR). This chapter considers the use of ADR to assist in resolving disputes in the construction industry. It concentrates on mediation but also looks at negotiation and early neutral evaluation.