Practical Building Forms and Agreements

Andrew Pike, A. Pike

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781135273927
• Edition: 1
• Topic: Architecture
• Subtopic: Architecture General

The purpose of this book is to help employers and their advisers (especially their Quantity Surveyors) in drawing up all the contracts required on a normal UK building project.

CHAPTER 1

INTRODUCTION AND REVIEW OF THE FORMS

INTRODUCTION

1. This chapter contains a brief introduction and goes on to describe the Forms given in this book in reasonable detail. Chapter 2 explains why certain amendments and additions to the JCT forms of contract are suggested in the Forms. Chapters 3 and 4 are brief notes respectively on collateral warranties and letters of intent. It is thought that most readers of this book will have a basic knowledge of building projects and the various contractual structures in general use. However, these basic concepts are briefly explained in the author’s paper ‘Construction Management and the JCT Contracts’ (see Chapter 5), together with charts illustrating the relationships of the several parties involved. Readers are urged to review Chapter 5, if in any doubt about these matters.

2. In the UK, we are most fortunate to have the benefit of a large range of published institutional standard forms, upon which building contracts and allied documents, such as consultants’ appointments and collateral warranties, may be based. It is, therefore, unnecessary to start from a blank sheet, and the use of generally accepted standard forms serves the very useful purpose of minimizing the time spent in negotiations.

3. For appointments of consultants, such as Architects, Quantity Surveyors and Engineers, there are widely used forms published respectively by the Royal Institute of British Architects (‘RIBA’), the Royal Institution of Chartered Surveyors (‘RICS’) and the Association of Consulting Engineers (‘ACE’). However, a well-advised Employer or funding institution will often require these forms to be added to and amended. For example:

– there is generally no provision in the published forms for collateral warranties in favour of third parties, such as funding institutions, purchasers or tenants;

– there is generally no provision for professional indemnity insurance to be taken out and maintained by the relevant consultant; and

– under the RIBA standard forms of Architect’s appointment (both the 1982 Edition and SFA/92), the Architect may resign at any time upon reasonable notice, which may cause the Client severe difficulties and loss, especially if the Architect has at that point received a large percentage of his fee.

Nevertheless, the great majority of the provisions of the relevant forms are reasonable and acceptable, and the forms of consultants’ appointments given in this book are relatively brief documents incorporating the relevant published form by reference.

4. Building contracts in the UK are usually entered into in one of the forms published by the Joint Contracts Tribunal for the Standard Form of Building Contract (‘JCT’). The constituent bodies of the JCT are listed in the glossary to Chapter 5. Again, a well-advised Employer or funding institution will very often require the JCT forms to be amended and added to in certain important respects. For example:

– there is no provision in any of the JCT forms for collateral warranties in favour of third parties;

– there is no provision for performance bonds or parent company guarantees, which are very frequently required by the Employer in practice;

– there are serious pitfalls from the Employer’s point of view, which are explained in Chapter 2; and

– there is no provision in the JCT Contractor’s Design Form (‘JCT 81’) for professional indemnity insurance to be taken out and maintained by the Contractor in respect of his design responsibilities, which will be at least equivalent to those of an Architect.

5. The preparation of building contract documentation in the UK has traditionally devolved upon Quantity Surveyors. However, the increased complexity of such documents in recent years, and particularly the proliferation of collateral warranties, has caused more and more lawyers to become involved in the construction field.

6. The great majority of the provisions of the JCT forms are reasonable and acceptable, if somewhat incomprehensible, and the forms of building contract given in this book are relatively brief documents incorporating the relevant JCT form by reference, with certain specific amendments of limited scope and length.

7. With regard to collateral warranties, the only published forms known to the author are the British Property Federation Collateral Warranty for Funding Institutions CoWa/F (in its three editions), the BPF Collateral Warranty for Purchasers and Tenants CoWa/P&T, 1992, and the Royal Incorporation of Architects in Scotland Duty of Care Agreement, 1988. The BPF forms CoWa/F, Second Edition 1990 and Third Edition 1992, and CoWa/P&T 1992, are reproduced in Appendices B, C and D. Form CoWa/F, Third Edition 1992, was published while this book was in the course of preparation. As it contains, like SFA/92, a number of points adverse to the warrantee’s interests, the author has continued to use the Second Edition, which is largely acceptable, as a drafting base for all the forms of collateral warranty given in this book. Proposed departures from the Second Edition are explained in the commentary upon Form 6. Form CoWa/F, Third Edition, and Form CoWa/P&T are much less favourable to the warrantee. The published notes to Form CoWa/F, Third Edition, and Form CoWa/P&T, themselves explain the limitations on the warrantor’s liability under those forms. It is understood that a second edition of Form CoWa/P&T is imminent.

8. Therefore, most of the Forms given in this book are based upon, or incorporate by reference, a widely used and accepted published standard form, with limited amendments and additions. Incorporation by reference is, of course, a common legal technique, which has the effect of bringing into the relevant Form the entire text of the incorporated document, subject to the amendments and additions stated in the Form. There is no need at all in such a case actually to sign or amend the published standard form itself. This method of proceeding should save a considerable amount of bulk and expense. In view of the need to add clauses and forms of collateral warranty to the JCT forms, it is no longer very practical to follow the time-honoured method of going through the JCT printed forms, amending in manuscript and gluing in extra pages. Modern word-processing makes this practice unnecessary.

9. The Forms (which are set in a different font from these chapters) are designed for use by well-informed lawyers and non-lawyers on UK building projects. If there is a non-UK element (for example, if a party to the arrangements is incorporated or resident outside the UK) or some other peculiarity (such as an element of ‘design and management’), specific legal advice on that aspect is required. However, even in such cases it is hoped that the cost and extent of that advice will be limited by the use of the Forms as a drafting base.

10. As a word of warning about using forms and agreements from a book, the author notes that, in over 22 years practising as a solicitor, he has hardly ever been able to use such a form unamended in practice. There always seems to be some unusual feature which requires special amendments. However, the author has done his best to provide all the forms and agreements required in a normal case and to make them ‘user friendly’.

11. Before going on to a review of the Forms, it is necessary to mention the vital subject of design responsibility. Employers should be aware that, in a conventional arrangement where the Employer’s Architect or other consultant designs and the Contractor builds to that design, the consultant is under a professional duty of reasonable skill and care to the Employer in relation to the design, but neither the consultant nor the Contractor guarantees or warrants a favourable result, so that the building will indeed be fit for its intended purpose. For example, if the consultant specifies a building material only subsequently found to be deleterious, he will not be liable to the Employer, because he has not been negligent. The Contractor’s responsibility is to follow the consultant’s design and he is therefore not normally responsible for design defects. Where the Contractor assumes design responsibility under the JCT 81 ‘design and build’ form, his design responsibility is no more than that of a consultant under a conventional arrangement, and he does not warrant that the Works will be fit for their intended purposes, as made known to the Contractor by the Employer’s Requirements. See clause 2.5.1 of JCT 81. In view of this, some Employers may wish to request express warranties of fitness for purpose from consultants and Contractors, but strong resistance may be expected. A warranty of fitness for purpose of the relevant building will normally go beyond professional indemnity insurance coverage and is therefore extremely dangerous for the warrantor.

REVIEW OF THE FORMS

12. Form 1 is an Architect’s Appointment, incorporating by reference the RIBA Architect’s Appointment, 1982 Edition. Special Conditions have been added to the RIBA Architect’s Appointment relating to the following principal subjects:

– Professional indemnity insurance: the Architect is required to maintain professional indemnity insurance at a stated level for a stated time. See the commentary upon clause 9 of Form 6 for further explanation. All the professional indemnity insurance clauses given in this book are based upon clause 9 of BPF Form CoWa/F, Second Edition (Appendix B).

– Collateral warranties: the Architect is required to give collateral warranties to funding institutions, purchasers, tenants and others acquiring interests in the Works. Collateral warranties are further explained in Chapter 3 and in the commentary upon Form 6.

– Personal and/or Parent Company Guarantees: if the Architect is an individual or a partnership, the individual or all of the partners will be personally liable for the due performance and observance of the Appointment and of the relevant collateral warranties. However, if the Architect is incorporated, i.e. a company, the Client may well require due performance and observance of the Appointment and of the collateral warranties to be personally guaranteed. The guarantors would normally be shareholders in, and/or directors of, the incorporated Architect. If the Architect is incorporated and is a subsidiary of a parent company, the Client may well require the parent company to give guarantees. Of course, at least in theory, one could have both personal and parent company guarantees in respect of the same matter.

– Duty of care to the Client: the Architect’s duty to the Client is that the Architect ‘has exercised and will exercise reasonable skill, care and diligence in conformity with the normal standards of the Architect’s profession’. It is important that the duty should be retrospective, because the Architect will often have started work before the formal Appointment is entered into.

– Proscribed materials: in addition to his warranty of professional skill, care and diligence, the Architect gives a warranty about certain proscribed materials not being specified for use, or used, in the Works. The list of proscribed materials given in this and the other Forms are all as in the BPF Forms (Appendix B, C and D). Further materials may be added, if the relevant party is so advised by an expert on building materials. A lawyer should not, of course, assume responsibility for deciding which materials should be listed, as that decision will be outside his professional expertise. See also the commentary upon clause 2 of Form 6.

– Other consultants: it frequently happens that the Architect is the lead consultant and recommends other consultants to his Client. Sometimes, the Architect may actually employ other consultants as sub-consultants. However, that course of action will increase the Architect’s legal responsibility to the Client, because the Architect will then be held responsible for the subconsultants’ work, just as any ‘main contractor’ will be held responsible for his ‘sub-contractors’. The Architect’s Appointment deals with the Architect’s involvement in the appointment of other consultants by making it clear that the Architect is not responsible for other consultants employed directly by the Client, even if recommended by the Architect, but that the Architect is responsible for his sub-consultants. It is provided that the Client shall have the right of approval of sub-consultants’ terms of engagement, and that sub-consultants shall give collateral warranties to the Client, so that the Client will have direct recourse to the sub-consultants, as well as the Architect, in the event of sub-consultants’ negligence. However, for the reasons stated above, the Architect will usually be ill advised to employ sub-consultants.

– Copyright: the Client’s rights regarding copyright are strengthened, by giving a wider copyright licence to the Client than that given by the RIBA Architect’s Appointment, including a licence to use the relevant design documents for the extension of the Works. The Client is also entitled to receive copies of the relevant design documents.

– Termination: the Architect’s right under the RIBA Architect’s Appointment to resign at his discretion is removed. As mentioned above, this could be very adverse to the Client, especially if the Client had already paid a large percentage of the Architect’s fee. The Architect will nevertheless be entitled, under the general law of contract, to terminate in the event of the Client’s repudiatory breach of the Appointment.

13. Form 1A is an alternative form of Architect’s Appointment, incorporating by reference the RIBA Standard Form of Agreement for the Appointment of an Architect (SFA/92), which was published during the preparation of this book. This form is much more adverse to the Client’s interests than the RIBA Architect’s Appointment, 1982 Edition, and the suggested amendments to SFA/92 are therefore more extensive. While the RIBA Architect’s Appointment, 1982 Edition, is still accessible and has not become out-of-date because of legal or other developments, Clients have little reason to use SFA/92 in preference to the 1982 Edition.

14. Form 2 is a Quantity Surveyor’s Appointment, incorporating by reference the RICS Quantity Surveyor’s Appointment.

15. Form 3 is a Structural Engineer’s Appointment, incorporating by reference ACE Agreement 3 (1984). That ACE form is intended for structural engineering work where an Architect is appointed by the Client and the form is harmonized with the RIBA Architect’s Appointment incorporated by reference in Form 1.

16. Form 4 is a Building Services Engineer’s Appointment, incorporating by reference ACE Agreement 4A. That ACE form is intended for engineering services in relation to sub-contract Works, such as heating, ventilating and air conditioning services.

17. There are, of course, other published ACE forms, but ACE Agreements 3 (1984) and 4A are perhaps the two most commonly used. If it is necessary in a particular project to use one of the other ACE forms, Forms 3 and 4 would be readily adaptable for that purpose.

18. Form 5 is a Project Manager’s Appointment, incorporating by reference the RICS Project Management Agreement and Conditions of Engagement. This form is intended for use where a Project Manager (who may, of course, also be an Architect, Quantity Surveyor or Engineer) is appointed to lead the Employer’s professional team. Form 5 would also be suitable for the employment of a Construction Manager in a construction management project.

19. In Forms 1A, 2, 3, 4 and 5, the suggested amendments to the published Standard forms are very much to the same substantive effect as those made in Form 1.

20. Professional appointments, such as Forms 1–5, are contracts for personal services and are therefore not assignable by either party without the other’s consent. It might be considered in some cases that the Client should have the right to assign, for example, to a purchaser or mortgagee of the site, but what sensible purchaser or mortgagee would wish to employ a consultant who was not willing to be employed by him? The same point might be made in relation to ‘step-in’ rights under collateral warran...

Table of contents

• Cover Page
• Half Title page
• Title Page
• Copyright Page
• Dedication
• Contents
• Preface
• Acknowledgements
• Notice
• Forms
• Appendix A Documentary Formalities and Attestation of Deeds
• Appendix B British Property Federation Collateral Warranty for Funding Instritutions CoWa/F, Second Edition 1990
• Index