Professional Documents
Culture Documents
ACKNOWLEDGMENT
For the success of this project largely depends on the encouragement and guidelines of many
others. I take this opportunity to express my gratitude to the people who gave full support to
finish the project successfully.
I would like to thank lecture Mr. Sanjaya kodituwakku who guided throughout this project
and my friends and my family members who helped and encouraged me to finish the project
successfully.
Zamri shan
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Law and Contractual Procedure
Contents
ACKNOWLEDGMENT .......................................................................................................... 1
INTRODUCTION ................................................................................................................... 3
Task 02 .................................................................................................................................. 4
Task 03 .................................................................................................................................. 9
Task 04 ................................................................................................................................ 16
Conclusions .......................................................................................................................... 23
References ............................................................................................................................ 24
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Law and Contractual Procedure
INTRODUCTION
Through the LAW we are gaining a vast knowledge on different types of Contractual law use
in construction industry. In addition to our day today lecture series we are assigned to do
certain project works in relation to the module.
This assignment is for LAW subject for the 4th semester in BTEC HND in Quantity
Surveying. This subject is most important for Quantity surveys. Because it there is any
disputes we can handle it through contractual law
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Law and Contractual Procedure
Task 02
Task 2.1
A construction contract provides a legal binding agreement, for both the owner and the builder, that
the executed job will receive the specific amount of compensation or how the compensation will be
distributed. (Juan Rodriguez, 2016)
As the statement mentions above, a construction contract is a legal binding agreement between two
parties, in this instance the contractor and the client, based on conditions and terms recorded in
document form.
Selecting a construction contract mainly depends on the three main factors; cost, quality and quantity.
There are five types of commonly used construction contracts.
They are,
1. Unit price contract
2. Lump sum contract
3. Cost plus contract
4. Target cost with variable fee contract
5. Percentage of construction contracts
Legal effect the contractor is only responsible for different units of work in his section. So he will
not be responsible for any other project sections and its errors. Also the contractor has a duty of care
towards the client. (Juan Rodriguez, 2016)
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Law and Contractual Procedure
In this type, the contractor agrees to complete a certain task of work for a fixed price. This method of
contract is used for works which the cost can be estimated before commencing the project works.
For example To complete the foundation works, the contractor estimated a sum of 10,000 pounds.
The client agrees and pays the sum. Once this agreement has been placed, the contractor is legally
bound to complete the construction of foundations within the given budget. If the amount exceeds
more than 10,000 pounds, the contractor should bear the additional costs through himself. And the
client wil not have to pay any additional money. (Juan Rodriguez, 2016)
Here the client pays for the complete cost of materials and labour. This contract type is mostly used
where there is uncertainty regarding the construction works taking place.
For example, while excavation, the contractor finds out that there is a solid rock in the construction
site. Therefore additional cost should be bared by the client in order to destroy the rock using heavy
machinery. (Juan Rodriguez, 2016)
The contractor and client agree to a target estimation of construction. Bonus or penalty arrangements
are included into this target figure. The work must be of fair nature and sufficient drawings and
specifications must be produced.
This contract is commonly used for engineering projects. Here the compensation involved is based on
a percentage of the cost of construction.
For example To build a roof, the contractor estimates a fee of 4,000 pounds. As compensation a
percentage of the fee say 10%, will be taken as compensation fees.
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Law and Contractual Procedure
Task 2.2
When relating to the construction industry, standard forms of contracts are the documents written by
legal representatives in the construction industry. These documents are used as a legitimate contract
between the stakeholders who are involved in the building process. Basically it is an agreement which
sets out who does what, for how much and in what manner it should be done.
Standard forms can be used as in its original state or can be modified with the opinion of the
stakeholders involved in the project which is known as special conditions of contract.
For a construction project to be successful and have minimum disputes It is important to select a
standard contract which suits the requirements of the construction project. These documents play a
vital role in a construction project.
Since the documents are standard documents and have been used widely in construction
projects, the general terms are well understood by the professionals involved in a construction
project. Which would lead to less disputes
Because standard forms of contract have been used from early days, there are solutions for
each and every scenario that can possibly arise while construction takes place. Also past cases
which caused disputes in contracts can be identified and quarantined.
The standard documents are fair to both sides (contractor and consultant). They spread risk
equally to both parties
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Law and Contractual Procedure
If a dispute occurs, the standard form of contract can be proof as to the contract terms agreed
and a resolution can be obtained in lesser time.
Standard documents save valuable negotiation time because they are already computed and
doesnt have to be done from scratch. (Wikipedia, 2015)
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Law and Contractual Procedure
Task 2.2 B
The BOQ gives away the estimated cost for the project and a list of materials, parts and labor
(and their costs) that are included in the contract. The bill of quantities is helpful in valuing
variations and assists in the preparation of progress claims
Specifications Set out technical requirements of the work, they add the additional bit of
information needed to complete drawings in a project
Drawings the architectural drawings of the project which will be helpful in the design stage
Special conditions of contract The conditions named in this are the ones which are created
by the contractor or the client for their particular project.
Schedule of works How work should be carried out and in which manner
The above mentioned documents have a legal significance regarding the project because they
influence how the contract terms and conditions should be implied.
For example, The Bills of quantities are studied and the size of the project is analyzed. The selection
of contract conditions differs from the scale of each project. So judging from the BOQ, the conditions
which are suitable for this scale of project can be concluded.
Therefore it is clear that these documents which are major part of a construction contract have a legal
significance towards them. (Wikipedia, 2016)
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Law and Contractual Procedure
Task 03
A dispute is an argument or a disagreement between two or more parties for a certain work or
agreement
The construction project has a certain dispute in them. Therefore construction disputes are fairly
common but they vary in their nature, size, scale, and complexity. (Kat Kadian-Baumeyer, 2015)
Every construction dispute starts with a minor error, either from the contractors part of the clients. If
these disputes are not dealt with in the beginning they become very expensive in terms of financial,
personal and time. The main expenses such as Lawyers, dispute resolution process alone costs highly.
Other than that company resources, loss in company projects etc are results of disputes. Therefore it is
wise to minimize disputes in the construction industry and if one occurs, it should be settled with
minimal costs. Such is the nature of the disputes in construction industry.
Disputes can occur from different parties who are involved in the construction project. Given below
are some of them,
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Law and Contractual Procedure
Contract Related Uncertainties in contract documents
- Risk allocation
- Improper interpretation of data
Given above are some of the main causes of disputes occurring in the construction field. Disputes can
be minimized by paying more attention to the factors that contribute to it and by controlling the
outcome of it. (Kat Kadian-Baumeyer, 2015)
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Law and Contractual Procedure
1. Litigation
2. Alternative Dispute Resolution
Litigation
Litigation is common dispute resolution mechanism where a dispute is referred to the courts for a
decision. The courts have powers to inspect documents, witnesses to provide evidence that supports
the cases, and to enforce decisions that both parties must adhere to. The scale of the dispute will
decide which court deals with it. (Lecture note)
Advantages of Litigation
Disadvantages of Litigation
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Law and Contractual Procedure
Alternative dispute resolution method is highly regarded and often has a combination of three
systems; mediation, adjudication and arbitration. Basically ADR refers to a variety of processes that
help parties resolve disputes without a trial. Since litigation takes more time and money, new
alternative dispute resolution mechanisms have proven to be beneficial. (Lecture note)
Benefits of ADR
Settlements (Non-binding)
1. Negotiations
2. Mediation
3. Conciliation
Decisions (Binding)
1. Litigation
2. Adjudication
3. Arbitration
4. Expert determination
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Law and Contractual Procedure
Negotiations
Generally individuals directly involve in the dispute to seek resolution through direct negotiation
with both parties. If a solution is not met within a period of time, the dispute is elevated into the next
level in the organizations. (Wikipedia, 2016)
Advantages Quick process, cheap, both parties have control of the outcome
Disadvantages If parties dont have equal power, this method will be ineffective
Mediation
Mediation is a way of settling disputes in which a third party (a mediator) helps to decide the case. An
important aspect of this system is that the even though there is a mediator, he does not decide the
outcome. It is decided by the two parties involved.
A typical mediation takes place in a meeting of all related individuals in the same room. Each party
gives a short presentation of facts. The mediator then gives his opinion on the case. Both parties then
discuss further and come to a suitable conclusion fair to both sides.
Conciliation
This is similar to mediation. A third party known as the conciliator takes a more interventionist role
and suggests remedies and ideas as for a fair outcome and to achieve an agreed settlement.
The three dispute resolution mechanisms explained above will result in a settlement being
made between the two parties. But it is a Non-binding agreement. Next we shall refer to
Binding agreements
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Law and Contractual Procedure
Adjudication
Adjudication can be implemented by either party at any time they wish (beginning. During the project
or after) this is a quick method of resolving disputes which leads to a binding and immediately
enforced decision. Usually the adjudicator has to make a decision before 28 days. The adjudicator
doesnt go in too deep into the details and facts but rather makes a quick decision in order to proceed
with the construction project. (Wikipedia, 2016)
Disadvantages rough and ready decision, not a final decision can be returned
Arbitration
This method of dispute resolution is used for when a genuine dispute between two parties is found. It
is more like the court proceedings than adjudication. The arbitrator is chosen by the parties involved
in the construction project. An arbitrator can be a lawyer, or an expert in the construction field. The
arbitrators decision is legally binding and can be run through the courts. (Wikipedia, 2016)
The most suitable dispute resolution methods for disputes in construction industry are
given below
Client related Direct negotiations with the client would be a sound dispute resolution method
because the client is inexperienced in the construction field and can be guided using direct speech.
Contractor related Mediation. Since the contractor does have an experienced background and the
client is not sure about the procedure, the client needs a third party as a mediator as a dispute
resolution method. This will guide the client in the right path.
Design Related Adjudication. Adjudication can be implemented any time of the project. And the
design stage is the beginning of the project. Therefore using the help of an adjudicator in order to get
a solution for this is vital.
Contract related Arbitration. Since this is related to the construction contract it has many legal
entities to consider. Therefore a thorough inspection from experts in dispute fields is important. Even
though this is a costly method it should be given preference because it is contract related.
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Law and Contractual Procedure
External Factors Direct negotiations will be suitable because the contractor cannot predict such
incidents, for example the weather changes. Due to heavy rain the construction works cannot take
place. The client would understand the situation. (Lecture note)
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Law and Contractual Procedure
Task 04
Quantity Surveyor
Quantity Surveyors have usually completed an appropriate tertiary degree course and
undertaken work experience (Law, 2012)
Quantity Surveyors work on projects ranging from office blocks, schools, hospitals, factories
to bridges, railways, oil and mining development, shipbuilding and large process engineering
works such as oil refineries, and anywhere that major construction work is carried out
As advisers they estimate and monitor construction costs, from the feasibility stage of a
project through to the completion of the construction period. After construction they may be
involved with tax depreciation schedules, replacement cost estimation for insurance purposes
and, if necessary, mediation and arbitration. (Law, 2012)
Quantity surveyors are employed predominantly on major building and construction projects
as consultants to the owner, in both the public and private sectors
They may also work as academics in the building and construction disciplines and in
financial institutions, with developers and as project managers
Quantity Surveyors work closely with architects, financiers, engineers, contractors, suppliers,
project owners, accountants, insurance underwriters, solicitors and Courts and with all levels
of government authorities (Law, 2012).
They are:
1) Client Quantity Surveyor / Consultants Quantity Surveyor
2) Contractor Quantity Surveyor
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Law and Contractual Procedure
Quantity surveyors control construction costs by accurate measurement of the work required,
the application of expert knowledge of costs and prices of work, labour, materials and plant
required, an understanding of the implications of design decisions at an early stage to ensure
that good value is obtained for the money to be expended. (Law, 2012)
The technique of measuring quantities from drawings, sketches and specifications prepared
by designers, principally architects and engineers, in order to prepare tender/contract
documents, is known in the industry as taking off. The quantities of work taken off typically
are used to prepare bills of quantities, which usually are prepared in accordance with a
published standard method of measurement (SMM) as agreed to by the QS profession and
representatives of the construction industry. Many larger QS firms have their own in-house
methods of measurement and most bills of quantities prepared today are in an abbreviated
format from the one required by the SMM. (Law, 2012)
Responsibility of client QS
At pre-contract stage
Preparation of approximate estimates of costs at the design stage and giving advice to
the design team on alternative materials and types of construction and also the
financial aspects of contracts.
Cost planning at the design stage to ensure that the client gets the best value for his
money.
Taking out quantities from drawings and preparation of bills of quantities.
Preparation of tender documents and calling for tenders.
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Law and Contractual Procedure
After construction, Preparation of final accounts and agreeing the total with the contractors
quantity surveyor. If any mistake of QS there are professional negligence. That time senior
QS are vicarious liable, because the senior QS should be check all details.
Contractor QS
The Contractor's QS is responsible for the performance of operations that mirror those of the
Owner's QS; the measurement and pricing of construction work, but specifically that actually
performed by the Contractor (and the Contractor's Subcontractors) as opposed to the
construction work described and measured in the Construction Contract between the Owner
and the Contractor. Such a difference in quantity of work may arise from Changes required
by an Owner, or by an Architect or Engineer on an Owner's behalf. Typically, the settlement
of a change (often referred to in a contract as a 'Variation'). (Law, 2012)
The role of a contractors QS will extend further than the day to day running of building
projects and will cover such other areas as sub-contract formation, forecasting of costs and
values of the project, cash flow forecasts and the collation of the Operation and maintenance
manuals of the project. Some contractors and others may attempt to rely on A general
Accountant to deal with construction costs, but usually this is not effective, primarily because
an Accountant does not have the technical knowledge to accurately allocate costs to specific
items of work performed, especially at times prior to the particular work's completion as
required to make accurate assessment of the amounts to be paid to the Contractor during the
course of the work.
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Law and Contractual Procedure
As well as senior QS want to check at all details. If any mistakes by QS, there professional is
negligence. But if that same mistake of senior QS, here vicarious liability senior QS for all
work. (Law, 2012)
Responsibility of Contractor QS
Visit building sites to monitor progress and check the work is to budget
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Law and Contractual Procedure
Prepare a statement of final account recording the actual costs of the project
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Law and Contractual Procedure
Professional negligence occurs when an expert in a certain field fails to meet the requirements of an
average person in his respective field and causes errors in his works which contributes to a loss for the
claimant. (Law, 2012)
The starting point of any professional negligence claim is to see whether the loss is recoverable.
In the given scenario Saman, an experienced quantity surveyor delegated his work to a junior quantity
surveyor (inexperienced).Who had made certain mistakes which led the claimant (Ahamed) to bear
unnecessary losses. Let us see whether Saman is professionally negligent.
In order to establish claim in negligence, it is necessary for the claimant to satisfy the following needs,
Duty of care
Breach of duty of care (behavior below par)
Causation (connection between defendant and damage caused)
Remoteness of damage (Damage falling within the scope of duty) (Law, 2012)
Duty of Care
Duty of care is a legal obligation which is imposed on an individual requiring adherence to a standard
of reasonable care while performing any acts that could foreseeably harm others.
Neighborhood principle
I. Reasonable foreseeability
II. Proximity
Breach of duty of care comes into consideration when a certain professional fails to meet the standard
of care required by an expert in their respective fields by law
Causation
To demonstrate causation, the claimant must be able to prove that the loss they suffered is due to the
defendants negligence. (Law, 2012)
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Law and Contractual Procedure
Remoteness of Damage
If the negligence of the professional did contribute to the loss, for what extent of the loss for which
the defendant out to be held is decided by remoteness of damage. (Law, 2012)
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Law and Contractual Procedure
Conclusions
In this scenario, Saman is an experienced QS with 15 years of experience (an expert). Therefore he
should be able to predict that Kasun who is a trainee in the same field doesnt have enough experience
to prepare a BOQ and will make errors. Therefore it is foreseeable. Also Saman should recheck
Kasuns work before submitting it to a client (Ahamed) so that the errors can be rectified. Saman was
negligent and it is his mistake that he did not check kasuns work.
Therefore, by considering the above factors. The defendant owed the client a duty of care, and he
breached that duty by not doing it up to standard, and it resulted in causing damage which was
foreseeable, and the damage was within the scope and not too remote. Therefore Saman is liable for
all of the damage caused.
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References
Wikipedia. 2015. Standard forms of Contract. [ONLINE] Available at:
https://en.wikipedia.org/wiki/Standard_form_contract. [Accessed 10 February 17].
Juan Rodriguez. 2016. Common Types of Construction Contracts. [ONLINE]
Available at: http://construction.about.com/od/Construction-Management/a/Types-Of-
Construction-Contracts.htm. [Accessed 09 February 17].
Kat Kadian-Baumeyer. 2015. Contract law terms. [ONLINE] Available at:
http://study.com/academy/lesson/contract-law-terms-definitions-contract-types.html.
[Accessed 11 February 17].
Wikipedia. 2016. Breach of Contract. [ONLINE] Available at:
https://en.wikipedia.org/wiki/Breach_of_contract. [Accessed 11 February 17].
Law. 2012. Professional negligence facts. [ONLINE] Available at:
http://negligence.laws.com/professional-negligence. [Accessed 12 February 17].
Lecture Notes
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