Our legal experts consider what the options are when a contractor fails to complete work on time but no programme of works exists. They also uncover the legislation that defines what ‘quality’ means for new-build homes
Who covers extra costs?
This entails a dispute between a housing developer and a groundwork subcontractor that is claiming for extra money for an extended build time. The subcontractor agreed a fixed price for the “duration of the contract”. There was a programme for the initial part of the works but no overall programme was published until six months after works commenced. The works were not able to be completed in the time allowed. Money was offered to accelerate the works, but as this was not achieved, nothing was paid. There is no claim against the subcontractor for delay.
The subcontract states the subcontractor will comply with reasonable requests of developer to accelerate, slow down, suspend or revise the sequence of the subcontract works at no additional cost. It also says the subcontractor should make due allowance in its price to cover any items in respect of contract works. Variation works instructed were agreed on a submitted lump-sum price, or day work at original tendered rates. For works outside the main contract, the developer agreed to raise the day work rates and pay aggregate tax.
At a precontract meeting, nothing was recorded about an overall programme or fixed time period, only that the subcontractor would comply with programmes when published. There were, during the early stages of the works, discussions about fast-tracking.
Can you confirm that programmes published do not form part of this contract? Is the subcontractor entitled to any increased costs in addition to what has been paid on variations?
As the first full construction programme was not produced until six months after the works commenced and, presumably, after the works were priced and the subcontract entered into, it would appear that the parties did not agree to be bound by a specific construction programme. It is also unlikely that the parties expressly agreed that any prospective construction programmes be turned into contract documents.
You refer to a statement made in a precontract meeting that, “the subcontractor would comply with programmes as and when published”. Regardless of whether these minutes are a contract document, it seems unlikely that such a statement would be sufficient by itself to make any period binding upon the parties. However, please note that in the absence of an express completion date, the courts will imply a term that construction works should be completed within a reasonable period. This period will be calculated taking into account factors known before and during the carrying out of works, which could include any contract programmes.
As to the second part of your question, in order for this “agreement” to be binding, the subcontractor would have to have complied with any terms of the contract relating to the agreement of variations. If the subcontract is silent on this point, the subcontractor needs to be able to show that the developer has received a practical benefit in return. If the developer has not received any additional practical benefit for the promised uplift, this “agreement” is likely to be unenforceable – the subcontractor will have to rely on the developer’s good will to get the extra money.
How do you define quality?
The law is as follows. In addition to the duties implied by the Sale of Goods Act 1979, the Supply of Goods and Services Act 1982 provides that in a contract for the supply of a service, there is an implied term that the supplier will carry out the service with reasonable skill and care. This will apply to a new-build contract made on or after 4 July 1983. The implied term may, however, be varied by express agreement.
There is also case law that establishes that where a purchaser buys a house from a builder, there is a threefold implication that: the builder will do its work in a good and workmanlike manner; the builder will supply good and proper materials; and the house will be fit for human habitation. Again, these implied terms may be excluded if both parties consciously agree to it.
Under the Defective Premises Act 1972, a person who takes on work for the provision of a dwelling, whether the dwelling is provided by the erection, conversion or enlargement of a building, owes a duty to ensure that the work is done in a workmanlike manner, with proper materials so that, when completed, the dwelling will be fit for human habitation. These duties are additional to any otherwise owed and cannot be excluded or restricted.
The act does not define "dwelling" but there is academic opinion that it applies to any building used or capable of being used as a residence. The act does not cover any dwelling provided, sold or let for habitation under an approved scheme.