Shark-infested contracts

Public artwork plays an increasingly important part in modern development. Many planning authorities insist on it as an intrinsic part of schemes and use section 106 agreements to achieve the desired result.

The artwork can take many forms but is easy to visualise in the familiar guise of the metalwork sculptures seen in many city centres.

The importance of the artwork is underscored by the fact that it often has to be in place before a scheme can be occupied. In effect, the artwork can dictate when practical completion has taken place. However, although the artwork can be pivotal, it is likely to cost a fraction of 1% of the overall construction cost and, further, the contract sum for the supply and installation of the artwork is likely to be swallowed up in the liquidated damages for only a few days’ delay.

Even though contract sums for artwork are comparatively small, there is the separate issue of what the artwork is subsequently worth. Damien Hirst’s shark was commissioned for £50,000 but eventually sold for £7m. The Physical Impossibility of Death in the Mind of Someone Living (as it is named) deteriorated to the extent that the shark was replaced under his direction.

This leads to a debate about whether the value in the artwork is in its concept or its physical construction. What happens if someone is paid £50,000 to construct something that becomes a piece of art worth £5m If they are negligent in the construction do they have liability of £5m if a piece becomes worthless?

This is a specialised area but it shows the importance of making sure that contract documents are in all circumstances fit for purpose

 

This differs markedly from a £50,000 contract for an air handling unit where that unit is only ever likely to be worth in the vicinity of £50,000.

Contracts for public artwork are not, properly, construction contracts and do not, for example, fall within the scope of the Construction Act. This raises the question of why they are being discussed in the legal pages of Building. The reason is simple: because of their proximity to construction works proper they tend to be caught up in the same procurement strategy. Before you know it, the installer of the artwork is being asked to sign up to the same trade contract that is being used for £10m of M&E services.

This raises a number of issues with the terms of the contract:

• Does it contain the usual terms? Although they seem harmless on the face of it, the contract will most likely have a number of terms that simply do not fit with a contract for artwork. For example, the artwork installer may be asked to provide collateral warranties to all of the tenants that occupy the completed scheme, even though they will not have an interest in the artwork outside the building in the same way that they would for M&E services within their part.
• Have any bespoke terms been added? One client was asked to install a prize-winning design prepared by others and to warrant that the completed work would not be an inducement for children to play on it. It was not clear how or, indeed, what the penalties would be for breach of the warranty. Needless to say, the clause was deleted.
• Does it reflect an appropriate allocation of risk between the parties? Almost certainly not, as any artwork installer accepting a contract prepared by a developer will be exposing itself to a high degree of risk in relation to its reward for the contract. A simple solution is for the artwork installer to have a cap on liability, although developers do not like caps on liability.
• Do the parties intend construction-specific legislation to apply to the contract? For example, although there would be no statutory right to adjudication for a contract for artwork, the parties would be signing up to a contractual right to adjudication in circumstances where they might not intend to.

Although this is an admittedly specialised area, it demonstrates the importance of making sure that the contract documents are themselves, in all circumstances, fit for purpose.