Contracts for Infrastructure Projects

An International Guide to Application

Philip Loots, Donald Charrett

• Verlag: Informa Law from Routledge
• Jahr: 2022
• ISBN:
  9781000566567
• Auflage: 1
• Thema: Law
• Thema: Contract Law

Contracts for Infrastructure Projects: An International Guide provides a guide to the law relating to construction contracts for infrastructure projects; it is intended for the use of engineers and other professionals who are involved in the negotiation and administration of construction contracts, to enable them to understand the risks involved, and how to minimise them. The principles of construction law outlined in this book apply to small construction contracts as well as very large contracts for which the contract sum may be in the billions of dollars.

The focus of the book is on construction contracts entered into by commercial organisations operating in a business environment. Contract law generally assumes that such parties are of equal bargaining power and puts relatively few fetters on their ability to agree on the terms of their bargain. However, where legislation impacts on the execution of construction projects or the operation of construction contracts it may be of major importance in protecting the rights of weaker parties or third parties.

It is assumed that the users of this book will be familiar with the general concepts of tendering and contracting for engineering and construction projects but may not have any formal knowledge of the law. To the extent possible, the emphasis is on general principles of contract law that are widely accepted in many jurisdictions. Examples are drawn from case law in a number of common law jurisdictions, as well as from civil codes.

CHAPTER 1Introduction

DOI: 10.4324/9781003206873-1

CONTENTS

1.1 Objectives of this book

1.2 Lex constructionis

1.3 Contract law and construction contract law

1.4 Common law and civil law

1.4.1 Convergence of common law and civil law

1.5 Differences between legal concepts in the common law and civil law systems

1.6 Common law

1.7 Case law

1.8 Mandatory and non-mandatory laws

1.9 Topics covered by this book

1.1 Objectives of this book

This book is intended to be a practical guide to the law relating to construction contracts as applied to infrastructure projects. It is intended for engineers, lawyers, contract administrators, owners, contractors, and other professionals who are involved in the negotiation and administration of construction contracts, to enable them to understand the risks involved, and how to minimise them. The principles of construction law outlined in this book apply to small construction contracts as well as very large contracts for which the contract sum may be in the billions of dollars.

The focus of this book is on construction contracts entered into by commercial organisations operating in a business environment. The law generally assumes that such parties are of equal bargaining power, and, depending on the jurisdiction, puts relatively few fetters on their ability to agree on the terms of their bargain. Construction contracts are typically very detailed in defining the allocation of risks and the scope of each party’s obligations and rights. In a real sense the terms of the contract constitute the private law governing the parties’ conduct. The widespread international use of standard form contracts and international arbitration to resolve construction disputes, and a lex mercatoria, establish widely followed norms of international construction law that are articulated in this book.

The book does not attempt to address the particular features of construction contracts related to building works on domestic housing for individual consumers. It should be noted that many jurisdictions have specific legislation that regulates domestic building contracts intended to provide consumer protection for individuals who may not be familiar with construction, and who may have limited bargaining power to negotiate appropriate contract terms with the building and professional contractors who execute the building work. Consequently, there is considerably more statutory intervention into freedom of contract in domestic building contracts than in other types of construction contracts.

It is assumed that the users of this book will be familiar with the general concepts of tendering and contracting, but not necessarily have a formal knowledge of the law relevant to infrastructure projects.

Construction law encompasses a number of legal doctrines in addition to the law of contract, such as equity, tort law, and the requirements of statutes. As the emphasis in this book is on construction contracts, these other legal doctrines are not covered in any detail, except to the extent that they affect contractual relationships. To the extent possible, the emphasis is on general principles of contract law that are widely accepted in many jurisdictions.

1.2 Lex constructionis

The book has the ambitious aim of endeavouring to cover, in a general way, the practice of construction law as it is applied internationally. Such a construction contract may be ‘domestic’ where the contracting parties and the construction are carried out in one country. Alternatively, it may be ‘international’ where the contracting parties are from different countries, or the subject matter of the contract is executed in more than one country. Both domestic and international construction contracts are subject to the relevant laws relating to the entry into, execution, and termination of construction contracts, and to the laws relevant to the execution of the construction works in the country where they are executed.

Countries generally have statute laws that may govern aspects of contracts in general, or construction contracts in particular. An example of the former is a law which provides relief to a party which has entered into an unfair contract, for example Unfair Contract Terms Act 1977 (UK) and Consumer Rights Act (2015) (UK). An example of the latter is the statutory entitlement to progress payments and the process of adjudication for their rapid recovery during the execution of a construction contract in Security of Payment legislation, for example Building and Construction Industry Security of Payment Act 2004 (Singapore).

One fundamental aspect of a construction contract is that it involves construction of a physical facility that is attached to or forms part of the land that is located at a specific place on the earth’s surface, in a particular country. Construction projects typically require considerable human resources and have the potential to significantly impact the environment. Because of their responsibility for their citizen’s well-being, countries generally have statute laws that constrain the ways in which construction projects may be executed. An example of laws regulating the employment of labour are Labour Law (2018 Amendment) (China) and Labour Contract Law (2012 Amendment) (China). An example of laws to protect the environment are General Law of the Environment (Law No 28611) (Peru) and Law of the National System of Environmental Assessment (Law No 29325) (Peru).

Not only do statute laws regulating contracts and/or construction contracts and the execution of construction projects vary from country to country, but there may well be a number of different jurisdictions within one country, each with their own statutes to regulate particular aspects. For example, Australia has six States and two Territories, each of which has its own jurisdiction over construction work carried out within its own geographical area. Thus, there are eight different Security of Payment Acts, with significant differences in detail.

The plethora of different legislation relevant to construction contracts and construction projects across the many jurisdictions around the world makes it impractical to try and cover the details of statute law in a book such as this. This has been briefly covered for a number of jurisdictions around the world in books recently published on the international application of FIDIC contracts.¹ For each of the jurisdictions considered, these books tabulate relevant legislation if the governing law of the contract is in the jurisdiction and if the construction work is carried out in the jurisdiction. The length of each of those tables emphasises the extent to which construction law is subject to statutory constraints, both in the execution of the construction work, and in the operation of a construction contract.

1Donald Charrett (ed), The International Application of FIDIC Contracts A Practical Guide (Informa Law from Routledge, 2020); Donald Charrett (ed), FIDIC Contracts in Asia Pacific A Practical Guide to Application (Informa Law from Routledge, 2022).

Accordingly, the main focus of this book is on lex constructionis – the law relating to construction projects which is widely accepted internationally in legal jurisdictions subject to the rule of law and which recognise the parties’ freedom of contract, irrespective of the specific impact of statute law. The principles of freedom of contract and pacta sunt servanda² form the basis of construction law around the world and ensure that there is a thriving international construction industry. Construction contracts can be executed in the knowledge that, notwithstanding local law differences, there are appropriate methods of dispute resolution, broad agreement on what constitutes a just outcome in most situations, and international norms that ensure remedies can be realised. Knowledge and analysis of the differences may well stimulate desirable improvements in local law and further convergence in approaches between jurisdictions.

2A Latin phrase that means that agreements are to be kept.

There are a number of difficulties with writing a text on construction contract law as it applies internationally, including the following:

• The differences between ‘families’ of law such as civil law and common law.
• The differences in legal terminology between different jurisdictions.
• In a particular common law jurisdiction, the common law in relation to a specific issue may be overruled by statute law.
• The relevant law in one country (or jurisdiction) may differ from that in another country/jurisdiction, whether a common law or civil law jurisdiction.

The authors have endeavoured to give some examples of relevant statute law applicable to contracts in general and construction contracts in particular to illustrate the similarities and differences in the practice of construction law in different countries. However, it should be noted that in view of the wide ambit of construction contract law, the large number of jurisdictions and the speed with which legislation can be promulgated or amended, it is not possible for any assessment of statute law to be correct and comprehensive, even at a single point in time. Readers should therefore consult construction law texts specific to their relevant country/jurisdiction to determine details of the statute and other law that applies to their situation. A (non-exhaustive) bibliography of texts for construction law, FIDIC contracts, and for certain countries is provided in the References section.

1.3 Contract law and construction contract law

Construction contract law is a subset of general contract law, and it is generally consistent with the principles that apply to contract law in general. As noted earlier, jurisdictions may have specific statute laws that define specific requirements for construction contracts, for example the entry into a construction contract or constraints on the method of resolution of construction disputes. However, many aspects of construction contract law are not dependent on the subject matter of the contract (ie construction) and are accordingly not distinguished from general contract law. For example, the principles which underlie the formation of a construction contract are generally not dependent on the nature or special features of a construction contract, and accordingly there is typically no specific contract constructi...