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.
A new draft international standard providing information management guidance when using building information modelling has been issued for public comment. The standard is split into two parts. The first part deals with concepts and principles and applies to the whole lifecycle of a built asset, while the second deals with the delivery phase of assets and enables the client or appointing organisation to establish its requirements for information during the delivery phase of assets.
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.
Malaysia witnessed considerable developments in statutory adjudication case law in 2017, probably due to the increasing use of this form of dispute resolution mechanism by stakeholders in the construction industry. This update examines some of the significant decisions that were handed down by the Malaysian courts in 2017 and their impact on statutory adjudication under the Construction Industry Payment and Adjudication Act.
The Court of Appeal recently considered whether a pay-when-paid clause in a construction contract is void under the Construction Industry Payment and Adjudication Act. It found that pay-when-paid clauses under a construction contract drawn up before the enactment of the Construction Industry Payment and Adjudication Act will remain valid and not be affected by the introduction of Section 35, which prohibits any conditional payment clauses in construction contracts.
The Federal Court recently dealt with three broad issues under the Construction Industry Payment and Adjudication Act – namely, jurisdictional challenge, the exclusion of defences and the setting aside and staying of decisions. The decision has broad repercussions for the way that adjudications are conducted in Malaysia.
The Construction Industry Payment and Adjudication Act 2012 came into effect on April 15 2014. Since then, the Malaysian courts have had the opportunity to consider various aspects of the act on numerous occasions. Some significant decisions have been handed down by the courts in the past two-and-a-half years and although statutory adjudication in Malaysia is still in its infancy, it is evident that a body of local decisions is steadily being built up to assist in the interpretation of the act.
The Supreme Court has for the first time interpreted the provisions on the pricing of change orders in the most widely used Swiss standard form contract, the SIA Norm 118. But the decision also has wider ramifications for Swiss law construction contracts. It makes clear that it should be assumed that parties to a lump-sum contract intended to contractually regulate the effect on the contract price of a unilateral change order, even if the terms of the contract are ambiguous.
Construction lawyers are frequently called on to draft or interpret extension of time clauses. But the questions of what should be in these clauses, and why they are typically included in construction contracts in the first place, receive little attention. When drafting an extension of time clause, parties will want to carefully consider whether and how to address a number of specific issues.
Swiss courts and arbitrators have addressed the interface between force majeure clauses and regulatory changes, and how they impact on the contractor's entitlements. Clauses addressing unforeseen circumstances will be construed in line with the parties' actual intentions. If they cannot be established from the text and surrounding circumstances and evidence, the tribunal will construe the clause objectively, regarding how it can be understood in good faith.
Employers should keep a watchful eye on contractor variations and ensure that they do not modify any important quality or original requirements specified in the contract. Whatever the length of the contract, the employer is duty bound to notify any deviation from the contract on final inspection. However, the courts will not protect a contractor which has fraudulently concealed a defect or prevented the employer from discovering a defect.
Employers typically have the power to vary works, including by making changes to the sequence or timing of their execution. Sometimes, these variations do not entitle the contractor to additional remuneration. However, as confirmed by a recent Federal Supreme Court decision, even a change order that is permitted under a contract could result in a breach of the employer's ancillary obligations and therefore give rise to a right to compensation.
Construction delay claims are regarded as being among the most difficult types of claim in the industry, due in large part to the difficulty in analysing the home office overhead costs associated with a specific project in conjunction with the percentage of the total amount of these costs for the company. It is important for a contractor to select a recognised methodology for calculating allocable home office overhead costs and ensure that all elements tied to such damages methodology are satisfied.