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The International Federation of Consulting Engineers (FIDIC) Contracts Committee recently unveiled the much-anticipated new suite of rainbow contracts, with the publication of amended Red, Yellow and Silver Books. The changes reflect only some of the key amendments introduced by the revised 2017 FIDIC contracts. Nevertheless, the changes are significant and it will undoubtedly take time for contracting parties to become familiar with the revised contracts.
The Supreme Court recently found the well-established regime of registered employment agreements to be unconstitutional. Uncertainty regarding the level of protection for wages and benefits of workers in the construction sector followed this decision, but has now been addressed by the Sectoral Employment Order (Construction Sector) 2017 and the Sectoral Employment Order (Mechanical Engineering Building Services Contracting Sector) 2018.
Construction contracting has seen significant change in both the private and public sectors, including the introduction of the long-awaited reform of the Public Works Contracts and a definitive date for the operation of the Construction Contracts Act 2013. The act applies to a wide range of construction contracts, including main contracts, subcontracts and professional team appointments entered into after July 25 2016.
Limitation of liability is a hotly negotiated issue in most commercial construction contracts. Parties often rely on the standard form clauses as being tried and tested and drafted with the benefit of industry knowledge. Such reliance can prove hazardous, as it may not adequately deal with the commercial risks of a particular project. Exclusion clauses that significantly limit parties' liability by way of financial caps are generally useful.
Support for building information modelling (BIM) is gathering pace. BIM is regarded as a powerful risk and cost management tool, encouraging better collaboration and improved project delivery. Contractors are already utilising BIM to help them to gain competitive advantage in the marketplace. Critics believe that specific BIM clauses and terms should be incorporated into the contract to help avoid potential disputes.
It has been a busy time for the construction industry as the economy picks up and growth in activity levels across a range of sectors brings new opportunities. This new wave of development is taking place alongside regulations and changes to industry practice. New regulation in the sector is welcome, but the breadth of the changes means that all players must keep up to speed with them.
The Office of Government Procurement has published its Report on the Review of the Performance of the Public Works Contract, setting out its conclusions following the long-awaited review. While the report acknowledges what does not work and what must be addressed in the contracts, it will be the action taken to implement the identified measures that will reveal whether it can change the landscape of public sector contracting.
The Construction Contracts Act 2013 introduced a number of key protections aimed at improving cash flow in the construction industry, including an adequate payment mechanism in all construction contracts. The introduction of the right for parties to refer disputes relating to payment to adjudication has the potential to revolutionise dispute resolution under construction contracts.
A new version of the Arbitration Rules for use with the Public Works suite of contracts was recently published on the Construction Procurement Reform website. The new rules must be used with all applicable contracts awarded subsequent to a tender deadline of January 24 2014. The rules are welcomed in their approach to certain issues, but other features are more questionable.
As construction industry members and practitioners were preparing for the Building Control (Amendment) Regulations 2013 to become operative, the Building Control (Amendment) Regulations 2014 were signed into law. The 2014 regulations refine and clarify changes introduced by the 2013 regulations and address some of the more controversial elements.
The main objectives of the Safety, Health and Welfare at Work (Construction) Regulations 2013 are to fully transpose the requirements of the Mobile Sites Directive and reduce the regulatory and administrative burdens while maintaining health and safety standards. In line with the directive, the regulations apply to a person having construction work carried out on his or her own home.
Two recent High Court cases have considered the position of parties with regard to a contractual entitlement to arbitrate a dispute. Both decisions, which involved construction disputes, provide guidance on how the courts apply the Arbitration Act depending on the actions of the parties to the underlying dispute.
Once the Construction Contracts Act becomes enforceable it will make pay-when-paid clauses ineffective except in limited circumstances concerning the insolvency of the ultimate paying party. Consequently, the main contractor will effectively bear the risk of funding the project.
The Construction Contracts Bill was recently passed and will soon become law, providing a much-needed boost for the Irish construction industry. The industry will now have a piece of legislation that, although not perfect, should revolutionise dispute resolution and ensure that payment practices which inhibit cash flow become a thing of the past.
The Building Control (Amendment) Regulations 2013 have been recently signed into law. The regulations introduce a substantial number of changes, including the revision of the commencement notice and the introduction of three new types of mandatory certificate. The most controversial elements have been removed. Notwithstanding the changes, the new regulations still present a challenge to the construction industry.
The Irish High Court has upheld the binding nature of a conciliator's recommendation and acknowledged the mandatory nature of conciliation as a first step in the dispute resolution process under the Royal Institute of the Architects of Ireland (RIAI) contract. The judgment is a seminal decision in Irish construction law since there is little precedent on the RIAI form of contract.
With the downturn in the economy, the construction sector has had to deal with the fall-out of key stakeholders finding themselves in real financial difficulties, which many have been unable to survive. So what are the issues that parties should be aware of when a developer or contractor goes bust? How do the standard form contracts manage such a scenario? What rights or obligations does an employer or contractor have?
The Public Works Contracts in Ireland adopt an approach which seeks to pass as much risk as possible to the contractor for checking the accuracy of all information which may be provided. Changes made in the latest version of the Public Works Contracts have reinforced this philosophy. Contractors will need to be mindful of this additional risk and will now have the additional challenge of factoring this into their pricing.
At times when money and resources are constrained, legal costs are at the forefront of clients' minds. However, there are some ways in which parties to construction and engineering contracts can reduce their potential costs exposure when dispute resolution proceedings are unavoidable. Alternative dispute resolution and early case settlement strategies should be promoted at every possible juncture.
Construction contracts commonly used in Ireland do not normally include any express reference to latent defects or state the period for which a contractor shall be liable for them. When a party suffers loss or damage arising from a latent defect to a building or structure, it may pursue damages by either suing in contract or tort, or pursuing claims under both the law of contract and negligence.
More than four years after the introduction of the Public Works Contracts, parties are now familiar with their provisions. But are they aware of the various amendments that are made to these contracts on a regular basis? Several versions of the contracts have been issued since their first publication, incorporating a range of amendments to their provisions. However, many of these changes are not fully advertised.
Since its introduction in May 2010, the Construction Contracts Bill has received widespread support, from both the previous and current governing administrations. Some recent amendments to the bill are significant in terms of its scope and effect, and it is to be hoped that some of the anomalies which exist in the current drafting will be dealt with during the bill's passage through the Dáil.
The insolvency of any party to a construction contract can be disastrous for the project. It can cause significant additional costs and delays to completion, and deprive parties of remedies in respect of defects in the works. This update focuses on the effect of a contractor's insolvency and the rights available to the employer and other parties when such an event occurs.
Virtually all standard form construction contracts contain express rights of termination for one or both parties. In the absence of their express exclusion, all common law rights of termination also continue to apply. Express termination rights are provided for under Clause 12 of the Irish public works contracts. However, the public works contracts contain no general exclusion of common law termination rights.
Independent Senator Feargal Quinn recently introduced the Construction Contracts Bill to the Seanad. The bill was the result of discussions relating to problems with payment for subcontractors in the construction industry. The bill has received government support and is also backed by the Construction Industry Federation. It is now in consultation with construction industry stakeholders and has prompted wide comment.
In the construction sector collateral warranties are typically provided by designers, contractors and specialist subcontractors to, for example, a tenant or purchaser acquiring an interest in the property, or a funder financing the development. The collateral warranty provides the beneficiary with a direct contractual remedy against the warrantor where none would otherwise be available.
The National Asset Management Agency Act has afforded the agency broad powers to enable it to remove non-performing development loans from the Irish banking sector and release finance back into the economy. Many of the powers conferred upon the agency impact directly upon the operation of various construction contracts that have been entered into or will be entered into in the future in relation to development land.
Parties in construction regulate their relationships through the contractual arrangements into which they have entered. At times, the parties come into conflict or disagreement. Having a means by which those differences can be effectively resolved is as important as having a relationship that can work successfully to the mutual benefit of all parties.
A large body of legislation now exists regulating health and safety in the construction industry, entailing greater potential for personal liability and a clearly articulated focus of the Health and Safety Authority to hold managers and directors to account for the acts and omissions of their companies. This update outlines the duties which affected parties must be mindful of in light of these increased liability risks.
All parties to a construction project should understand at the outset who is responsible for the design element of that project. Parties should also be aware of the situations in which design responsibility or a standard of fitness for purpose in respect of design responsibility can be implied into a contract.
The global and domestic economic downturn and the resultant increase in instances of insolvency in construction companies have reinforced the importance for employers to take security over materials that have been paid for but not received, and the need for contractors and suppliers to assert retention of title over goods and materials that have been delivered but not paid for in full.
Problems during construction projects can result in delays or cost overruns. Construction contracts tend to focus on determining which party will be responsible for specific risks and often omit effective mechanisms that might minimize the impact of those risks on the successful completion of the project.
Under the Royal Institute of the Architects of Ireland Building Contract, an employer will face the prospect of having to make payments in full to contractors on the foot of issued interim certificates in circumstances where the contractor has caused as yet unproved losses to the employer due to its breaches of contract.
The Public Works and Construction Services Contracts grant the arbitrator extended powers to enforce compliance with directions and timelines. Although these may result in enhanced efficiency, the powers to prevent a party from relying on matters in respect of which it is in default and to draw adverse inferences from failure to comply with a direction could cause a dilatory combatant severe prejudice.
In order for a contractor to begin works on site before formal contract documentation has been finalized, the employer may decide to send the contractor a letter expressing its intention to enter into a formal contract in due course. However, such letters of intent should not be seen as a substitute for a properly drafted building contract.
Notification requirements have been introduced in new public works contracts as a condition precedent to the contractor's entitlement to make a claim for additional monies and/or an extension of time. There is as yet no Irish case law dealing with non-compliance. However, UK authorities will be persuasive before Irish courts and arbitrators and it is likely that they will insist upon strict compliance.
New public works contracts and conditions of engagement will have a major impact on how public construction works are procured and tendered for, by both contractors and construction consultants. They aim to achieve value for money on construction and civil engineering projects, and to avoid time and budget overspend on publicly funded projects.
After nearly three years of consultation and discussion, the Government Construction Contract Committee has published a suite of five new forms of construction contracts for public works, comprising traditional (employer-designed) and design-and-build contracts for civil engineering and building works, together with a minor works contract, to be used for all public works.
A collateral warranty provides a tenant with a direct contractual remedy against the contractor where none would otherwise be available. In the absence of any legislation akin to the Contracts (Rights of Third Parties) Act 1999 (UK), which would allow a person that is not a party to a contract to enforce a term of the principal contract, collateral warranties are of particular importance in Ireland.
The Safety, Health and Welfare at Work Act 2005 came into effect last September, replacing the 1989 legislation in its entirety. Later this year, new regulations will be enacted to replace and expand the General Application Regulations and the Construction Regulations, together with further regulations on specific issues, all of which will affect those working in construction.