The Supply of Goods and Services Act 1982 implies a term into a contract that a supplier of a service will provide the service with reasonable skill and care. The accepted test for whether a professional person has provided the service with reasonable skill and care is the Bolam Test (Bolam v Friern Hospital Management Committee [1957] 2 All ER 118). The Bolam Test sets out that if a professional person carried out their work to a standard that a responsible body of competent members of the same profession would have accepted as proper, then that professional person is not guilty of negligence. As such, in the absence of any express term to the contrary in the contract, a professional designer has a duty to design the works with reasonable skill and care.
However, the Sale of Goods Act 1979 (amended by the Sale and Supply of Goods Act 1994) implies a term into a contract that where goods are supplied, the goods must be of a satisfactory quality and fit for all the purposes for which goods of the kind in question are commonly supplied. This is an absolute obligation to achieve a specified result and does not require any proof of negligence. As such, in the absence of any express term to the contrary in the contract, a contractor supplying goods has a fitness for purpose obligation, thus guaranteeing that the goods and the completed building will be fit for their intended purpose.
The core clauses in the NEC4 engineering and construction contract set out that the Contractor is required to Provide the Works in accordance with the Scope. Furthermore, a reason for the Project Manager not accepting a Contractor’s design is that it does not comply with the Scope. Whilst the contract does not specifically state that the works must be fit for purpose, in the absence of any express term to the contrary, the Sale of Goods Act implies that the completed building should be fit for its intended purpose.
However, if secondary option clause X15 “The Contractor’s Design” is selected in the contract, the standard of care is reduced to that of reasonable skill and care. The express term sets out that the Contractor is not liable for a Defect which arose from its design unless the Contractor failed to design the works using the skill and care normally used by professionals designing works similar to the works.
It should be noted that the NEC4 engineering and construction short contract also requires that the Contractor Provides the Works in accordance with the Scope. As such, the Contractor has a fitness for purpose obligation. However, the short contract does not include secondary option X15. Accordingly, a bespoke additional condition may be added in the Client’s Contract Data to reduce the standard of care to reasonable skill and care.
Relevant clauses: 20.1, 21.2, X15
Produced by Andrea Rae, Head of Legal and Commercial at Stradia, in conjunction with Quantity Surveyors International
Andrea.rae@stradia.com
October 2021
If an event occurs which has not arisen from a fault of the Contractor and the event is one of the compensation events listed in the contract, then the Contractor may be entitled to be compensated for any effect the event may have in the form of a change to the Prices, the Completion Date and/or a Key Date.
If a compensation event occurs as a result of the Project Manager or the Supervisor issuing an instruction, notification or certificate, or changing an earlier decision, the Project Manager should notify the Contractor of the compensation event at the same time as the communication. If the Project Manager fails to notify the Contractor of the compensation event, the Contractor may notify the Project Manager. However, the Project Manager remains responsible for notifying the Contractor of a compensation event in these instances and the Contractor cannot be time barred as a result of failure to notify the Project Manager of the compensation event.
Should an event occur, or the Contractor expects that an event will occur, which the Contractor believes is a compensation event, the Contractor must notify the Project Manager of the event. However, if the Contractor fails to notify the Project Manager of the event within eight weeks of becoming aware that the event has happened, the Contractor is time barred under the contract and is not entitled to a change to the Prices, the Completion Date and/or a Key Date.
The Project Manager or the Contractor may not issue notice of a compensation event after the Defects Certificate has been issued. As such, should an event occur, after Completion but within eight weeks of the Defects Date, which is not as a result of the Project Manager or the Supervisor issuing an instruction, notification or certificate, or changing an earlier decision, the Contractor must notify the Project Manager of the compensation event in less than eight weeks, so as to ensure that the notice is issued prior to the Defects Certificate and hence, prevent the Contractor from being time barred.
The Contractor’s entitlement to a change to the Prices, Completion Date and/or a Key Date in respect of a compensation event is limited to the Contractor’s rights under the contract. Accordingly, the Contractor may not make a claim for damages resulting from a compensation event, thus preventing the Contractor from trying to bypass the time limits and processes in the contract.
| Relevant clauses: | 61.1, 61.3, 61.7, 63.6 |
Produced by Andrea Rae, Head of Legal and Commercial at Stradia, in conjunction with Quantity Surveyors International
Andrea.rae@stradia.com
September 2021
The Project Manager decides the first assessment date, following discussion with the Client and the Contractor in respect of the internal processes and procedures of both Parties. The first assessment date is not later than the assessment interval after the starting date set out in the Contract Data. Assessment dates occur at the end of each assessment interval, typically one calendar month, until either the Supervisor issues the Defects Certificate or the Project Manager issues a termination certificate.
The Contractor should submit an application for payment to the Project Manager before each assessment date. The application for payment should set out the amount the Contractor considers to be due, details of how the amount has been assessed and be in the form stated in the Scope. The Project Manager takes into account the application for payment the Contractor has submitted when making an assessment.
The amount due at the assessment date is the Price for Work Done to Date, plus other amounts to be paid to the Contractor such as incentive payments for achieving Key Performance Indicator’s under Option X12 or X20 or advance payment to the Contractor under Option X14, less amounts to be paid by the Contractor such as the cost of the correction of Defects by the Client in accordance with clause 46.
If the Contractor fails to submit an application for payment prior to the assessment date, the amount due is the lesser of: the amount the Project Manager assesses as due at the assessment date; and the amount due at the previous assessment date. As such, if there is no change in the period which reduces the amount due in the previous assessment, no further payment is made which will affect the Contractor’s cash flow.
However, if the Project Manager decides that say the amount due at the previous assessment date has been incorrectly over-assessed, or a reduction is required as a result of a compensation event, or if Option X7 is selected and the amount of delay damages levied for the period is greater than the Price for Work Done to Date, the Contractor is required to pay the Client the difference between the amount paid at the previous assessment date and the amount due at the assessment date.
This provision in the contract is likely to discourage the Contractor from deliberately not submitting an application for payment in circumstances where there is a reduction in the amount due since the previous assessment and as a result, the Contractor has been overpaid.
Relevant Clauses: 50, 51.1
Produced by Andrea Rae, Head of Commercial & Legal Services, Stradia in conjunction with Quantity Surveyors International
August 2021
Ty is very proud to be wearing his new suit for his next race, and at Stradia we’re very proud to be sponsoring Ty.
Defined Cost is used for the assessment of compensation events under all the main Options: Option A – Priced contract with activity schedule; Option B – Priced contract with bill of quantities; Option C – Target contract with activity schedule; Option D – Target contract with bill of quantities; Option E – Cost reimbursable contract; and Option F – Management contract. Defined Cost is also used to calculate the Price for Work Done to Date under Option C, D, E and F.
Defined Cost is calculated using the rates and percentages stated in the Contract Data which are fixed for the duration of the contract but may be adjusted for inflation if Option X1 is selected. Rates included in the Contract Data depend on the main Option selected and include people rates, Equipment and design, manufacture and fabrication outside the Working Areas. Other amounts are calculated at open market or competitively tendered prices with deductions for discounts, rebates and taxes which can be recovered.
The Schedule of Cost Components sets out the components which are included in the assessment of Defined Cost for Option C, D and E. The Short Schedule of Cost Components applies to Option A and B. Neither of the schedules apply to Option F where Defined Cost is restricted to payments due to Subcontractors and the prices for work done by the Contractor.
The components in each schedule include elements of people, Equipment, Plant and Materials, Subcontractors, charges, manufacture and fabrication, design and insurance. The schedules relate to the rates contained in the Contract Data. The rates for Option A and B are more comprehensive and include people rates, which results in the schedule being shorter than the schedule for Options C, D and E.
Disallowed Cost applies to the open book Options only (C, D, E and F) and is deducted from Defined Cost. Disallowed Cost includes costs; which are not justified by the Contractor’s accounts and records; should not have been paid to a Subcontractor or supplier; or was incurred because the Contractor did not follow an acceptance or procurement procedure, give an early warning, or give notice of the preparation for and conduct or an adjudication or tribunal with a Subcontractor; together with the cost of correcting Defects after Completion; resources, Plant and Materials not used to Provide the Works; and dispute resolution between the Parties.
In relation to Defined Cost, the open book Options (C, D, E and F) require the Contractor to keep records of accounts, payments made, compensation event assessments and communications and any other records stated in the Scope. The Project Manager may inspect the accounts and records at any time.
All costs which are not included in Defined Cost are included in the Fee. These costs include head office overheads and profit. The fee percentage is applied to the amount of Defined Cost.
Produced by Andrea Rae, Head of Legal & Commercial Services, Stradia in conjunction with Quantity Surveyors International E: andrea.rae@stradia.com W: stradia.com
Stradia is proud to sponsor young racing driver, Ty Cuthbert, a 12-year-old from Doncaster with big dreams, who has been invited to represent the SODI Vitesse brand in the UK.
Ty has been racing since his 8th birthday, is a Championship winner and is attracting a global following across various social media networks including the Aston Martin F1 Team, earning respect from F1 drivers including Redbull driver Sergio Perez.
Ty says “My ultimate goal would be to drive an F1 car one day. I love the competition, the new friends and people I meet at the racetrack. All is possible”
Recently Ty was invited to take centre stage at a black-tie construction award ceremony to support two charities which support people who have been bullied. Ty told his own story of being bullied to over 450 business leaders and help raise £45k on the night for the charities.
Stradia Director, Sharron Taylor commented “It’s inspiring to see a young man working so hard towards his dream and being recognised for his achievements at such a young age. We’re thrilled to support him on his journey.”
We wish Ty all the best for the future and look forward to following his progress.
We are delighted to announce that Aspire Associates is merging with Stradia in a move to build the business and further strengthen the existing teams as part of our long-term strategy. The merger will increase our capacity to assist clients including advising on construction contract matters, resolving disputes and undertaking adjudication work.
Nigel Barr, Stradia Managing Director, said “The merger with Aspire is a very positive step forward for both businesses and I am excited to bring together our significant construction contract expertise in this next chapter in our story.”
The two businesses have worked together closely for some time and putting this onto a more permanent basis is a positive move, building a powerful platform for our teams to continue to deliver contractual excellence and exceptional customer service to all of our clients.
Chris Metcalfe, Managing Director of Aspire Associates, commented “We are delighted to be merging with Stradia. We have watched the business grow since its inception and are looking forward to being a part of it, working with the Stradia team whilst continuing to serve our existing clients.”
We are delighted to announce that Stradia has been awarded the Best Management Consulting Firm – South Yorkshire in the Corporate Vision Business Awards 2020.
The title has been awarded based on our expertise within the field, dedication to client service and client satisfaction and our ongoing commitment to excellence and innovation.
During these unprecedented times, Nigel has been delivering very successful online training courses on a range of topics including NEC3 & 4, JCT and 50 Contractual Nightmares.
The training is delivered through an online platform such as Microsoft Teams with high levels of interaction, including questions and group discussion, and receives excellent feedback from delegates.
“We felt it important to encourage the team to work in the normal way despite current difficult circumstances and vital to continue with our team training. Nigel skillfully walked team members with differing levels of knowledge and experience through the training session and created an enjoyable atmosphere with productive outputs. Thank you.” Adrian Hill, Director of Operations at Scape Procure
What our delegates say:
“A well-presented course. Presenter was very knowledgeable and kept us engaged which can be difficult when presenting via webinar.”
” It’s the first online course I have taken part in and feel it worked really well with the questions and answers.”
“Another cracking course hosted by Nigel ”
If you think one of our online training sessions could benefit your team at this time please get in touch.
Liz: 0114 243 0900; Liz.duncan@stradia.com
Nigel: 07966 123 781; Nigel.barr@stradia.com
Stradia is delighted that following a lot of hard work by all partners the innovative Hallam Alliance arrangement is now ready to deliver the campus redevelopment plan. We are proud to have worked closely with Dan Ladbury and the Sheffield Hallam University team advising on alliance strategy, the NEC4 Alliance Contract, the commercial arrangement and procurement. It is a bold and exciting initiative and we are keen to see its huge potential delivered over the coming years.
