The Foundations of a Claim – Do I have a Construction Contract?

15 October 2019

The Housing Grants, Construction and Regeneration Act 1996 (Construction Act) applies to an agreement with anyone for the carrying out of construction operations, arranging for the carrying out of construction operations by others, and providing labour for the carrying out of construction operations, as these will mean there is a ‘construction contract’. The Construction Act will also apply to an agreement for design work or providing advice on building, engineering, decorating in relation to construction operations.

The Construction Act defines the meaning of ‘construction operations’ and specifies exclusions to what would be considered ‘construction operations’, such as drilling for oil, the making of artistic works (sculptures, murals, and other works) that are wholly artistic in nature, and delivery to site of materials except under a contract that also provides for their installation.

A recent case in the Technology and Construction Court (Universal Sealants (UK) Ltd (t/a USL Bridgecare) v Sanders Plant and Waste Management Ltd[1]) looked at the consequences of such exclusions. Here, a contract between the parties for the supply of materials did not contain an installation element and so was not caught by the Construction Act, which provides a framework for payment and adjudication provisions and implies into a construction contract those provisions if they are absent in a construction contract (through the Scheme for Construction Contracts (England and Wales) Regulations 1998).

The case involved a subcontract order for concrete, which was delivered to site by wagon and then discharged directly into a channel. The concrete was not fit for purpose and ended by being broken out and replaced. The claimant referred the dispute to adjudication and the adjudicator found that the concrete company was in breach and ordered it pay damages of just over £50,000.

The court however found that there was no contract for installation of the concrete and so the exclusion from the definition of ‘construction operations’ under the Construction Act applied and the adjudicator had no jurisdiction to decide the dispute. The claimant was not, therefore, entitled to summary judgment to enforce the adjudicator’s decision.

Whilst this case deals with an exclusion to the application of the Construction Act, it is important to remember that the definition of ‘construction operations’ is wide – going beyond the obvious construction, alteration, extension, or demolition of structures –  and parties could have a construction contract subject to Construction Act provisions in situations where they may not consider they would do.

The following are some examples of works that would be considered ‘construction operations’:

  1. installation of security or communications systems;
  2. painting or decorating the internal or external surfaces of a building;
  3. cleaning of structures (if carried out in the course of construction, alteration, repair, extension, or restoration); and
  4. installation of air-conditioning systems.

Agreements for the carrying out of the above works would result in the Construction Act applying, which will expose the parties to specific payment provisions and the right to refer disputes to adjudication. If a client is not aware that the Construction Act applies, then consultants and contractors carrying out construction operations are entitled to make applications for payment. If the client does not follow the mechanics to, for instance, pay less than what is applied for, the contractor/consultant would be entitled to the full amount applied for and if payment is not made could refer the dispute to adjudication (which would likely be successful). The consequences are serious and therefore it is important to think about works and services being carried out and if the Construction Act will apply.

[1] [2019] EWHC 2360 (TCC)

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Ian Smith
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