Contract administration

Chapter 7

Contract administration







43 Does the contractor have a duty to draw attention to an error on the architect’s drawing?

Generally and in normal circumstances, the contractor has no liability for design and, therefore, no liability for the production of design drawings. The question often arises whether the contractor is entitled simply to build what the drawings and specifications set out, even if there are errors on the architect’s drawing. It is not surprising that most architects would say ‘No’, but the case law on this subject is not so clear.

It has been established by a Canadian case that a contractor will be liable to the employer for building errors in a design if the original architect was not involved in the construction stage.1 The reasoning behind the decision in that case seems to have been that the employer was no longer relying on the architect and, therefore, relied solely on the contractor, which should have taken care to check that everything on the original architect’s drawing worked properly. That, however, is not the situation under consideration here, where the original architect is still engaged and there is an error in the drawings. There were two cases in 19842 which held that a contractor did have a duty to warn the architect if it believed that there was a serious defect in the design. Subsequently, however, another court decided that such duty as the contractor might have was to the employer and probably only in those cases where the contractor was aware of the employer’s reliance on it for at least part of the design.3 This has echoes of the Canadian case mentioned above. To further confuse matters, another case held that a contractor had a duty to at least raise doubts with the architect if there appeared to be something wrong with the drawings.4 One would have to wonder at the motives of a contractor who had full knowledge of a drawing error and yet failed to bring it to the attention of the architect.

That position was taken a stage further by a Court of Appeal case.5 Although this case involved sub-contract work, the principles set out by the court are equally applicable to main contracts. A sub-contractor (JMH) designed the temporary support work to a roof. Unfortunately, its design was overruled by the employer’s engineer, who proposed a different design. There was no question in this instance that JMH warned the engineer of the danger of his design quite clearly, but the engineer took no notice and the substitute design for temporary work went ahead. Needless to say, the roof collapsed. Surprisingly, the court held not just that JMH had a duty to warn, which the court seemed to accept had been done, but that they had failed to warn with sufficient force. One cannot help but think that the only degree of warning that the court would have accepted as sufficient would have been if JMH had given the warning and, at the same time, threatened to stop work if the warning went unheeded. This indeed appeared to be the court’s position.

The contractor’s duty to warn probably arises only if the design is seriously defective. In the case just mentioned, it seems to have been a potential danger to life. A contractor who did not warn an architect who had made a small dimensional error or a small mistake in detailing would be unlikely to have any liability.

The important point to be drawn from these cases is the reliance by the employer on the contractor. If it can be shown that the employer does rely, even partly, on the contractor, it seems that there will be a duty to warn of serious defects. On the other hand, cases where the duty arises to warn the architect will be rare because the architect seldom, if ever, relies or is entitled to rely on the contractor. In the context of JCT traditional contracts, the duty is likely to be limited because the employer will usually be relying on the architect and not the contractor. Contractors can take heart that they are not generally responsible for checking the architect’s drawings. Having said that, a contractor proceeding with construction in the certain knowledge that there were errors on the drawings would find little favour with an adjudicator in any subsequent dispute.

44 Under DB, must the employer’s agent approve the contractor’s drawings?

Clause 2.8 of DB provides that the contractor must without charge give the employer two copies of its design documents as and when from time to time necessary and in accordance with schedule 1 of the contract or as otherwise stated in the contract documents. The contractor is not to commence any work until it has complied with the procedure.

Schedule 1 sets out the procedure, but with reference to the Employer’s Requirements. Paragraph 1 requires submission in the format stated in the Employer’s Requirements. If the Employer’s Requirements do not state the format, it seems the contractor may submit the information in any format it desires. Therefore, it is essential that the format is set out.

The submission must be made in sufficient time to allow any comments made by the employer to be incorporated before use of the relevant document. That requirement must be read in the context of paragraph 2, which gives the employer 14 days from receipt of the submission or, if the contract documents give a later date or period, from the date or the expiry of the period, to return one copy of the document to the contractor.

The contract adopts the well-known system of lettering the returned documents either ‘A’, ‘B’ or ‘C’, depending on whether or not they are in accordance with the contract. ‘A’ means that the contractor must carry out the Works in accordance with that document. ‘B’ or ‘C’ means that the document is not in accordance with the contract and it must be accompanied by a written statement stating why the employer considers that to be the case. Documents marked ‘B’ may be used by the contractor if the employer’s comments are incorporated and the employer is provided with an amended copy. Documents marked ‘C’ cannot be used for construction, but the contractor may re-submit after amendment.

If the contractor thinks that the employer is wrong and that the document is in accordance with the contract, there is the option under paragraph 7 of notifying the employer within seven days of receipt of the comment that compliance with the comment will result in a change (i.e. a variation). The contractor must give a reason, of course. The employer has a further seven days to either confirm or withdraw the comment. If the employer simply confirms the comment, the contractor must then amend and re-submit the document. Paragraph 8 then sets out some provisos:

Whether the employer confirms or withdraws comments does not mean that the employer accepts that the documents or amended documents are in accordance with the contract or that compliance with the comments will result in a change.

If the contractor does not take the option of notifying the employer that compliance with the comment will result in a change, the comment is not to be treated as giving rise to a change.

The contractor’s duty to ensure that the design documents are in accordance with the contract is not reduced by the contractor’s compliance with the submission procedure or with the employer’s comments.

In brief, the position is that it is the contractor’s obligation to comply with the contract. No submission of documents or comments by the employer will remove that obligation. If the employer makes comments that amount to a change, the contractor must promptly notify the employer of its view on the matter. Failure to notify the employer within the seven days allotted will preclude the contractor from recovering any payment for such alleged change. However, notification in itself will not guarantee payment; it will be a matter of fact whether or not there has been a change.

It should be noted that the contract stays well clear of any suggestion that the employer approves any documents. But use of the word ‘approval’ appears not to make any difference to the principle in any event. In Hampshire County Council v Stanley Hugh Leach Ltd,6 the court said:

The fact that Leach’s alternative proposals were approved by the architects is irrelevant. No employer is going to be advised to enter into a contract giving the contractor an entirely free hand. The JCT Design and Build Contracts require the contractor’s design be approved and this of course does not relieve the contractor of obligations in respect of his design.

45 What happens if the contractor cannot obtain materials?

The authority on this topic is scarce to the point of non-existence.

Under SBC clause 2.3.1, materials and goods have to be provided only ‘so far as procurable’. It will be noticed, however, that the contractor’s obligation under clause 2.1 is to provide what is specified in the contract documents. The whole of the contract must be read together, of course, and the introduction of the word ‘procurable’ gives the contractor a useful protection if materials or goods are truly unobtainable. Clearly, it does not protect a contractor who discovers that it has miscalculated its tender and that it is more difficult or more expensive than expected to provide what is specified. ‘Procurable’ is not qualified, and, on a strict reading of the clause, it can be argued that a contractor is protected even if the materials or goods were not procurable before the contract was entered into. It might be thought that a sensible and businesslike approach would restrict the meaning of ‘procurable’ to those items that had become unobtainable after the contract was executed. Whether that is the correct way to interpret the clause is not certain.

It is difficult to forecast what conclusion might be reached by the courts, still less an adjudicator, but a strict reading of the clause results in the conclusion (deeply unattractive so far as the employer is concerned) that if the items are not procurable for any reason, the contractor’s obligation to provide them is at an end. It then becomes necessary for the architect to issue an architect’s instruction requiring as a variation the provision of a substitute material. The variation is to be valued in the usual way.

The effect is to remove from the contractor any obligation to check that specified goods and materials are procurable before tendering. In order to change this situation, it is probably necessary to amend the contract clauses to specify a date after which the contractor is not responsible if materials or goods are no longer procurable.

It is arguable that if the contract does not refer to materials being procurable, for example in IC or ICD contracts, the contractor’s inability, through no fault of its own, to obtain important specified materials may render the contract frustrated. In practice, a frustrated contract could be avoided if the architect gave instructions for a variation of the material.

46 What powers does a project manager have in relation to a project?

Over the years the concept of project management has steadily gained ground, together with a good many misconceptions. A project manager is unlikely to be the same person as the contract administrator, and it is the contract administrator who has the main powers under the building contract. The RIBA approved a definition of a project manager as follows:

The Project Manager is a construction professional who can be given executive authority and responsibility to assist the client to identify the project objectives and subsequently supply the technical expertise to assess, procure, monitor and control the external resources required to achieve those objectives, defined in terms of time, cost, quality and function.7

It may be argued that such a definition does nothing to set out what ought to be the function of a project manager in regard to a building project. Project management is often considered as though it is a self-contained system and as though the words ‘project manager’ instantly conjure up a recognisable and easily identifiable discipline. However, the courts have agreed that this is not the case and that the duties of a project manager may vary dependent on the base discipline of the person carrying out the role.8 The concept of project management is not particularly linked to construction; a project manager is rather a creature of the manufacturing industries. It is certain that all project managers have skills in common, but a project manager on a building contract cannot approach the task with the same freedom as if he or she were project managing a new product through a factory. There are roughly two kinds of project managers:

Project managers who represent the employer and act as its technical arm, and

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