Overview of Construction Law

Construction Law has evolved as an area of law dealing with disputes that arises in relation to the construction of buildings and other similar fields. It has been developed by bundling the laws relating to commercial law, contract law, planning law, tort law and employment law. This branch of law includes issues like negligence, contract, guarantees, claims and other similar areas of laws relating to construction (Manderson, Jefferies and Brewer 2015).

An employer, who has undertaken a project relating to construction of building, requires several individuals to be involved for the purpose of providing him with services, advice and supply of raw materials. This would require the employer to employ several individuals to carry out these functions. The employer needs to effect such employment by way of contractual agreements. 

In a contract, which is legally binding, there must be a consideration for the parties to the contract that needs to be passed between each of them. According to the law of contracts, in case a contract has been effected by way of an offer being accepted, the terms that have been agreed upon by the parties to the contract cannot be altered. The alteration of the same may be effected if the parties to that contract expressly extend their consent to such an alteration. However, effect of such an alteration will be the formation of a new contract and the dissolution of the old one.

In the field of Construction, the developer employs contractors to carry out a construction project. However, there are certain instances where the contractors delivers a project, which lacks the standard of quality that has been expected in that given situation. In this context, the question that arises is that whether the developer has the right to withhold money for such a substandard quality of work. However, there are certain specified circumstances where the developer is justified in withholding money form such a contractor. On the delivery of a substandard form of work, the developer may withhold the payment that needs to be made to the contractor but a under the limited situations that has been sanctioned by law. The employer must make sure that such a withholding of payment is legal and legitimate. In case such a withholding of payment is not legitimate, the developer has a liability to make the payment. The same can be explained with the case of Matthew Harding v Paice & Anr [2015] EWHC 661 (TCC).

Contractual Agreements in Construction

The contracts that are entered into, for the purpose of construction, are required to be made in a written form. The written contracts must include the terms of the contract that binds the parties to the contract. In case a dispute arises between the employer and the contractor regarding such withholding of money, the employer must establish the legitimacy of withholding before the court. In most of the states in the United Kingdom, the commercial contracts needs to be written, the verbal agreements are not binding upon the parties. The verbal agreements in commercial contracts is not considered to be valid. In case, the employer has resolved to withhold payment from a contractor, for an inefficient service that has been provided by the contractor, the employer needs to effect such a withholding by providing a written contract to the contractor. In case the employer fails to furnish a written instrument effecting such withholding of payment, the employer might be imposed with an additional penalty that needs to be paid to the contractor whose payments have been stopped. The same has been contended in the case of Galliford Try Building Ltd v Estura Ltd 2015] EWHC 412 (TCC). 

In case the contractor has carried out a work in an inefficient manner, which was not expected in the situation, the employer has the right to withhold payment relating to that part of the work that has been carried out inefficiently. The payment for the part that has been carried out in an efficient manner cannot be withheld by the employer. The rule for withholding payment is applicable to the situation where the inefficiency has been committed by the fault of the contractor. In case, the substandard work of the contractor is the result of the fault of a third party or the employer himself then the employer does not have the right to withhold the payment. In such a situation, the contractor may bring a suit against the employer claiming full amount that employer owe him owing to this contract. The contractor may also claim for a penalty for such a withholding of payment without the fault of the contractor. The same has evolved with the case of Henia Investments Inc v Beck Interiors Ltd [2015] EWHC 2433 (TCC).

The employer is also justified in withholding payment where the performance of the contract has been delayed by the contractor. The contract must contain the time-frame and the penalty for the delay in such time frame. However, all these penalties and withholding of payment are to be effected in case the reason for such a delay or substandard work is the fault of the contractor himself. The same has been made evident in the case of Caledonian Modular Ltd v Mar City Developments Ltd [2015] EWHC 1855 (TCC).

Withholding Payment in Construction

In the present situation, Florence is the developer who has employed the Sun and Moon Construction as a contractor for working on a large business park. The contractor so employed has carried on their work and forwarded an application to Florence requesting for the payment of the same. However, the payment application was denied and the reason that has been provided by the employer for the same was the substandard quality of work that has been provided by the contractor. The issue that arises from this situation is the fact that whether there exists any rights and obligations for both Florence and Sun and Moon under the contract regarding the Employer withholding monies due and an analysis of those rights and obligations.

The contract between Florence and the Sun and Moon Construction is a construction contract and the same will lead to the assumption that the contract is a written one as verbal agreements are not binding in case of commercial contracts. Therefore, the contract in this case is a valid one and the same binds both the parties to the contract to perform their contractual obligations.

In this case, the consideration for Florence was the carrying out of the construction work and the consideration for Sun and Moon Construction is the payment of money that will be payable by Florence. The construction work has been carried out by Sun and Moon Construction but Florence has failed to make payment for the same. On application forwarded by the contractor the employer has denied the payment. The reason that the employer has provided for such a withholding of payment was the work performed by the contractor to be substandard. 

In such a case, the contractor has the right to bring a proceeding against the employer claiming the payment. Florence has a right to deny the payment contending the work carried out by the contractor to be substandard and not up to the expectations. This ground for withholding the payment will be available to Florence but for availing the same, Florence needs to prove the work to be substandard or inefficiently done before the court. The proving of the same is mandatory for withholding payment. However, the Florence has the right to withhold the payment to the extent to which the work has not been done or the work has been done in an efficient manner. Florence is under an obligation to make the payment of that part of the contract that has been efficiently done by the Sun and Moon Construction. In case of effecting such a withholding of payment, Florence is under an obligation to provide a written instrument containing the notice of the reason for which the withholding has been effected. The same can be illustrated with the case of ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC).

The contractor in this case, namely the Sun and Moon Construction may bring a suit against Florence for his denial to make payment for the work that has been done by him. The contractor may claim for the payment that he is entitled to under the quantum of work that has been performed by him or the part of the work that has been performed efficiently. In case the withholding of payment is not justified, the contractor also has the right to claim penalties from the employer.

Disputes that are unsolvable by negotiations needs to be solved by resorting to the techniques involving the dispute resolution. There are mainly three kinds of dispute resolution methods that are available to the disputing parties. These dispute resolution techniques are namely, mediation, arbitration and litigation (Gul, S., 2016).

The mediation is a form of dispute resolution that involves the intervention of a third party who is neutral about the dispute to intervene in the matter and resolve the dispute by the process of mediating. The third party strives to arrive at an agreement for both the parties after examining the situation thoroughly (Roberts 2016). The main objective of the mediator is not to force a solution but to arrive at a recommendation that has consideration for both the sides of the dispute. This form of dispute resolution aids the disputing parties to channelize their grievances and exploring all the sides to the dispute in order to arrive at a decision that will best satisfy both the parties to the dispute (Ali 2018). The process of mediation is somewhat a non-binding kind of a technique of dispute resolution. However, as the parties to the dispute arrive at a decision in this case with the help of a bargaining of the terms among themselves and a mediating process by the neutral third party, the chances of the compliance of the decision arrived at will remain higher. The process of mediation provides the parties to the same with an opportunity to fabricate a solution that is unique to the situation and has been arrived at by the joint consent of both the parties (Blake, Browne and Sime 2016).

The neutral third party who is involved in the process of mediation is a professional. The third party to the mediation is a professional who has the proper training and skills relating to the legal, economic and technical area involved in the process. The role of a third party in a mediation process is to evaluate both the sides of the dispute, explore all the solutions that are relevant to the situation and then arrive at a decision that will best serve the situation. This process of dispute resolution provides a chance to both the parties to the dispute to indulge in the process of the resolution. This process ensures the confidentiality of the situation being an informal process (Cortés, P. ed., 2016). 

Dispute Resolution in Construction Law

Another form of alternative dispute resolution that is available to an individual in case a decision cannot be arrived upon by the individual by negotiation, is the process of Arbitration. In the process of arbitration, a third party who is neutral to the situation, acts as the judge and upon him is vested the responsibility of resolving the dispute that has been proposed to be resolved. This technique of dispute resolution involves a structure similar to the structure of the litigation. In the process of arbitration, the parties to the arbitration may apply to the arbitrator to resolve the dispute that has been incurred in a particular situation. The arbitrator is a third party who are independent, private and qualified to address such situations. The disputing parties to the arbitration applies to such an arbitrator who will provide both the parties to the dispute to present their contention about the dispute. The arbitrator so appointed requires to address the arguments presented by both the sides of the dispute and arrive at a decision that will satisfy the situation. While arriving at the solution to the dispute the arbitrator needs to ask for the evidences that both the parties are based their case upon. The examination of the same needs to be carried out by the arbitrator and then arrive at a decision that will bind the disputing parties to the arbitration. The parties involved in an arbitration does not have the opportunity to indulge in a negotiation. Once the arbitrator has been appointed the parties loses their right to negotiate. They are required to submit their contentions and the evidences upon which their decision has been based upon to the arbitrator. However, there is a scope of virtual negotiation that can be effected by the parties among themselves but the presence of the arbitrator in such a negotiation along with the lawyers of both the parties is necessary (Creutzfeldt and Bradford 2016).

The decision that is delivered by the arbitrator has an element of confidentiality. The decision thus delivered cannot be appealed and is binding upon the parties to the arbitration. The process of arbitration is a less expensive one and unlike litigation it provides for speedy remedy to the aggrieved persons. However, the parties involved in the process the of arbitration may pursue the court in case the decision arrived upon by the arbitrator fails to cater their grievances (Menkel-Meadow 2017).

Mediation

Another kind of process that involves dispute resolution is the process of litigation. Litigation is somewhat a formal process of dispute resolution that involves the parties to the dispute to appear before the court in order to address their grievances (Jamal 2015). The court allows parties to the dispute to indulge into a process of contest. In this process of dispute resolution, the parties are provided with the opportunity of contesting their sides to the dispute. The judge striving to resolve the case has the power of calling upon the witnesses and collecting evidences relating to the dispute. The judge who is deciding upon the case is conferred with an ample amount of power to decide upon the same. The decision arrived at by the court will be binding upon the parties to the dispute and the parties does not have the opportunity to ignore the same. They are bound by the decision that has been delivered by the court and does not has the option of repudiating the same (Lee, Yiu and Cheung 2016).

However, the process of litigation is more expensive than the other two of the process of dispute resolution. It is a slower process of dispute resolution as the courts trying the cases are, generally, overburdened with such cases. The dispute when contested in a court loses its confidentiality (Cortés, 2015).

In the present situation, the withholding of payment by Florence form the Sun and Moon Construction owing to the reason of their performing of a substandard kind of work. In this case this is a business dealing and the both the contractor and the employer have an urgency regarding the dissolution of the dispute as the contractor has already spend a considerable amount of money on the project. The employer also has a urgency in getting the project properly done. In such circumstances, the best process of dispute resolution that will properly cater to the needs of the situation is the mediation. This is because of the speedy remedy that the parties may avail in pursuance of this method of dispute resolution. The reputation of a business will be at stake if the dispute has been made public which will cause a considerable amount of damage for both the parties to the dispute. Hence, mediation will be the best process of dispute resolution to cater this situation. 

References

ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC)

Matthew Harding v Paice & Anr [2015] EWHC 661 (TCC)

Galliford Try Building Ltd v Estura Ltd 2015] EWHC 412 (TCC)

Caledonian Modular Ltd v Mar City Developments Ltd [2015] EWHC 1855 (TCC)

Henia Investments Inc v Beck Interiors Ltd [2015] EWHC 2433 (TCC)

Manderson, A., Jefferies, M. and Brewer, G., 2015. Building information modelling and standardised construction contracts: a content analysis of the GC21 contract. Construction Economics and Building, 15(3), p.72.

Gul, S., 2016. Alternative Dispute Resolution: A Legal Perspective. In Handbook of Research on Effective Communication, Leadership, and Conflict Resolution (pp. 126-143). IGI Global.

Blake, S.H., Browne, J. and Sime, S., 2016. A practical approach to alternative dispute resolution. Oxford University Press.

Cortés, P. ed., 2016. The new regulatory framework for consumer dispute resolution. Oxford University Press.

Creutzfeldt, N. and Bradford, B., 2016. Dispute resolution outside of courts: procedural justice and decision acceptance among users of ombuds services in the UK. Law & Society Review, 50(4), pp.985-1016.

Menkel-Meadow, C., 2017. Dispute processing and conflict resolution: theory, practice and policy. Routledge.

Lee, C.K., Yiu, T.W. and Cheung, S.O., 2016. Selection and use of alternative dispute resolution (ADR) in construction projects—Past and future research. International Journal of Project Management, 34(3), pp.494-507.

Cortés, P., 2015. The Brave New World of Consumer Redress in the European Union and the United Kingdom. Disp. Resol. Mag., 22, p.41.

Ali, S.F., 2018. Mediation in the UK courts: Efficiency, Confidence and Perceptions of Justice. In Court Mediation Reform. Edward Elgar Publishing.

Roberts, M., 2016. Mediation in family disputes: principles of practice. Routledge.

Jamal, A.A., 2015. ADR and Islamic law: the cases of the UK and Singapore.