This case has raised the question of when a contract is over and done with, which can affect practically every construction job that’s carried out
I t is relatively rare these days to find cases that cover a multitude of issues, with guidance being given on a range of problems. One such case is Treasure vs Dawes. Tony Bingham writes above about what might be considered to be the headline issue in that case – when do you have a contract in writing? However, there are interesting points in at least two other significant areas.
In Treasure Mr Justice Akenhead gently sidestepped the issue of what may or may not be a contract in writing and when an oral variation may be referable to adjudication by saying, in effect: “Well, you have adjudication in your contract, the variations arise out of the contract, so put one and one together and, bingo, you’ve got an adjudication decision that the court can enforce.” Full marks to the judge on that one; the Court of Appeal decision in RJT
(as discussed by Tony) was creating difficulty and this gives us a neat solution to it. Unfortunately it seems to have created an even bigger problem to replace it.
The problem is the support of the court for the right of an architect to issue variations after certifying practical completion. Tony is quite right in his discussion of this case to say that practical completion does not equate to bidding the site a fond farewell never to return. There are likely to be defects, or little bits of finishing work to complete. That is, however, different to newly instructed work.
So how big a deal is this? Well, pretty big. It’s easy to say “yes, but the cost will be captured in the rate for the variation”, but will it?
Let’s go back a stage: what is the purpose of a construction contract? It is there to give certainty so that if and when a question arises, you can go to the rule book and find the answer. If the answer isn’t in the book, or the book is not clear, you can ask your friendly adjudicator to explain what the book says, or fill in the blanks.
One thing that is almost certain to be in the book will be a requirement that the works be completed by a certain date, subject of course to that being extended for various reasons such as, yes, you guessed it, a requirement to carry out extra, or varied work. When you have finished doing your work that is it, it is complete. You get a nice certificate saying so.
Are terms relating to million-pound liability insurances
appropriate to installing an extra cupboard? And what happens to the liquidated damages?
The certificate allows everyone to know that the work is complete so when the contractor gives up control of the site, the employer will need to insure his shiny new building. All well and good, but then, as the contractor finishes loading up his van the architect says: “Oh, just one thing, I know its not in the spec but could you just...”
This is where we have the problem. If the contractor goes back to site after getting his practical completion certificate, on what basis is he carrying out that work? Is it still under the old contract? Is there a new contract on the same terms as the old one? Or is there a wholly new contract on who knows what terms?
You can’t go back to the original contract, that one is finished and you have a certificate that says so. What about a contract on the same terms? Well, maybe, but are terms relating to parent company guarantees and million-pound liability insurances really relevant or appropriate to installing an extra cupboard?
And what happens to the liquidated damages? That leads to scary option three, a contract on who knows what terms.
Given the purpose of a contract, this is really the place you want to avoid.
In Treasure, the court indicated that an architect can give instructions under a contract after practical completion has been achieved and certified. If that is right, then where is the certainty? How do contractors know they have finished and when do employers know they need to start keeping the premises insured?
A more pragmatic approach is for everyone involved to accept that practical completion means the end.
Rob Horne is a partner in Trowers & Hamlins’ construction group