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K&L Construction Law Blog

Legal issues, news, and regulations concerning the construction industry

General Contract Law Update

Posted in Articles and Publications, Europe

As part of K&L Gates’ commitment to continuing professional development, the lawyers in our London office’s Energy, Infrastructure and Resources group regularly provide presentations and seminars on a wide range of legal issues.

The attached slides are taken from a presentation by Matthew Smith, Inga Hall and Daniel Lopez de Arroyabe on the subject of recent developments in contract law.  The presentation looked at cases on general commercial and contractual issues, as well as focussing more particularly on those relating specifically to construction law matters.

To view the presentation, click here.

Federal Government Issues Advanced Release of Revised Building and Construction Code

Posted in Articles and Publications, Asia Pacific, Uncategorized

By Duncan Fletcher, K&L Gates, Perth and  Matthew Parker, K&L Gates, Sydney

The Federal Government has issued an advance release of its revised Building and Construction Industry (Fair and Lawful Building Sites) Code 2014 (Revised Code), which will come into effect when the Building and Construction Industry (Improving Productivity) Bill 2014 (Bill) commences as an Act. Once enacted, the Bill will also reestablish the Australian Building and Construction Commission.

To read the full alert, click here.

Here’s a Tip: There are several ways contracts can help you avoid delays in design approval.

Posted in Articles and Publications, The Americas, Uncategorized

By Ryan D. DeMotte and Richard F. Paciaroni, K&L Gates, Pittsburgh

The design/build delivery model o­ffers owners and contractors the potential for greater efficiencies in the construction process, but if the parties do not carefully manage the design review process, the project can experience unnecessary delays to procurement and construction that can cascade throughout the project.

To read more in an article published in the November/December 2014 issue of Construction Today, please click here.

Reposted with permission.

Adjudicator Has No Jurisdiction Because Of “A Very Strong Prima Facie” Case Of Fraudulent Misrepresentation At Appointment Stage

Posted in Case Summaries, Europe

By Mike R. Stewart and Mary E. Lindsay, K&L Gates, London

Eurocom Limited v Siemens PLC

[2014] EWHC 3710 (TCC)

http://www.bailii.org/ew/cases/EWHC/TCC/2014/3710.html

It is never easy to resist an action for enforcement of an adjudicator’s decision.  Speed and certainty are central tenets to the adjudication mechanism provided by the Housing Grants Construction and Regeneration Act 1996.  However, the judgment in the recent case of Eurocom Limited v Siemens PLC shows that the courts will not put enforcement of the adjudicator’s decision above basic legal principles.

The dispute arose in relation to a sub-contract allowing for the installation of communication systems in the London Underground.  Siemens terminated the sub-contract in August 2012.  A first adjudication took place and the decision made on 27 September 2012.  That decision provided that a net sum was due from Eurocom to Siemens.  Eurocom served a second notice of adjudication on 21 November 2013 and it was that adjudication that gave rise to these enforcement proceedings.

In the enforcement proceedings the judge considered, amongst other things, whether appointment of the second adjudicator was valid.

The adjudicator was appointed under the RICS’s nomination procedure.  This required Knowles, acting for Eurocom, to complete a form in which it was asked to identify “any Adjudicators who would have a conflict of interest” in the case (who would not thereby be appointed).  A number of adjudicators, the adjudicator in the first adjudication (who might very well and sensibly have been appointed as adjudicator in the second adjudication) and a firm of solicitors were listed in this section of the form.  The form was not initially shared with Siemens. 

However, it subsequently came to light and it transpired that the adjudicators identified did not in fact have a conflict of interest in the case.  Knowles accepted they did not “properly” answer the question asked by the RICS about conflicts of interest, but merely referred to people without any conflicts who they did not want to be appointed. 

Siemens’ primary case was as follows:

  • The application form sent to the RICS by Knowles seeking the appointment of an adjudicator misrepresented to the RICS that a number of individuals had a conflict of interest;
  • This was a false statement, made deliberately and/or recklessly by Knowles; and
  • A nomination based upon such a fraudulent misrepresentation is invalid and a nullity, such that the adjudicator has no jurisdiction.

The Court decided the point as follows (at para 65 of the judgment):

“… there is a very strong prima facie case that [Knowles] deliberately or recklessly answered the question “Are there any Adjudicators who would have a conflict in this case?” falsely and that therefore he made a fraudulent representation to the RICS as the adjudicator nominating body.”

The Court said that the consequence of this was as follows (at para 75 of the judgment):

“… I conclude that the fraudulent misrepresentation would invalidate the process of appointment and make the appointment a nullity so that the adjudicator would not have jurisdiction.”

The Court also agreed with Siemens’ alternative case that the completion of the form gave rise to a breach of an implied term to act honestly.  Here the Court referred to the judgment in Makers v Camden (at [29(7)]) that there might be an implied term “by which the party seeking a nomination should not suborn the system of nomination”.  Eurocom, through its advisors, had sought through fraudulent misrepresentation to influence the discretion to be applied by the appointing body, the RICS.  Eurocom should not benefit from this benefit and the appointment of the adjudicator was invalid.

The ramifications of this decision will be keenly monitored by the industry. 

High Court Finds No Duty of Care From Builder to Owners Corporation

Posted in Asia Pacific, Case Summaries

by Sandra Steele, Belinda Montgomery, Marcel Marquardt, Matthew G. Sier, K&L Gates, Sydney

The High Court has held that a builder of a serviced apartment complex does not owe a duty of care in negligence for financial loss arising from defects in common property to an owner’s corporation (Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36).

The serviced apartments were built by the builder under a design and construction contract with a developer. The owner’s corporation was a subsequent owner of the land.

This is an important decision for the building and construction industry as it has defined the circumstances in which a commercial builder will be found liable for defective works in negligence. 

To read the full alert, click here

Enforcing Notice Provisions in Construction Contracts in the United States

Posted in Articles and Publications, The Americas

By Kimberly L. Karr, K&L Gates, Pittsburgh 

Notice provisions are a key part of construction contracts.  These provisions typically require a contractor to notify the owner of the project (or an owner-designated representative) when the contractor believes that it is entitled to extra costs or additional time for the project.  Notice provisions generally require that notice be given within a certain time period and that the contractor back its claim with supporting information. 

Notice provisions are often the source of disputes between owners and contractors.  This post provides an overview of common issues that owners and contractors in the United States should consider when negotiating notice provisions and addressing notice of potential claims during a project. 

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Overhaul of the Building and Construction Industry Payments Act 2004 (Qld): How the Changes Will Impact Queensland, Australia

Posted in Articles and Publications, Asia Pacific

Sandra Steele and Marcel Marquardt, K&L Gates, Sydney

The amendments to the Building and Construction Industry Payments Act 2004 (Qld) (BCIP Act) were passed on 11 September 2014 and received assent on 26 September 2014. The changes contained in the Building and Construction Industry Payments Amendment Act 2014 (Qld) (BCIPA Act) are extensive and will impact most participants in the building and construction industry in Queensland, Australia.

The commencement date is expected in the coming weeks. 
 
To read the full alert, click here.
 

Preliminary court injunction or adjudication−new legal tools to avoid excessive duration of con-struction court proceedings in Germany?

Posted in Articles and Publications, Europe

By Kristina Fischer, Eva Hugo and Christoph Mank, K&L Gates, Berlin

In general, German court proceedings relating to construction and engineering matters can take between three to six years and sometimes up to ten years, until a final, binding judgment is obtained. The reasons for such excessive duration in construction court proceedings are manifold: Courts may be overloaded by the number of disputes brought before them, judges may not have the necessary technical or judicial experience or expertise and the clarification of the facts of the case may be time-consuming and not be possible without one or more experts´ opinions. In addition, the losing party generally exhausts all court instances before a case is finally settled. The excessive duration of construction court proceedings is expensive; and often, it even poses a threat to one or both parties´ economic existence.

The call for a reform of the current procedural law for construction disputes is getting louder: Working groups, organizations and experts demand that a new−accelerated−procedure for the resolution of construction disputes must urgently be introduced into the German legal system.

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Expansion of Statute of Limitations in Illinois under 15th Place Condominium Association v. South Campus Development Team, LLC

Posted in Case Summaries, Illinois

By Daniel E. Raymond and Jesse G. Shallcross, K&L Gates, Chicago

General contractors and developers beware—suits for breach of express indemnity now have a longer shelf life in Illinois.

In 15th Place Condominium Association v. South Campus Development Team, LLC, the Appellate Court for First District of Illinois held that a claim for breach of an express indemnity clause contained in a construction contract is subject to a ten-year statute of limitations instead of four.[1]  The subject of the dispute was a contract between 15th Place Condominium Association (the “Association”) and South Campus Development Team (the “Developer”) to develop two condominium towers (the “Project”).  The Developer contracted with Linn-Mathes, Inc. (the “General Contractor”), who would act as general contractor.[2]  The contract between the Developer and the General Contractor included an express indemnity clause and a cause of action accrual provision.[3]  By 2003 and 2004, the Project was substantially completed, and, in 2005, the Developer turned over the property to the Association.[4] 

Unhappy with the Project, the Association sued the Developer for breach of the implied warranty of fitness and habitability, breach of fiduciary duty, and negligence in 2008.[5]  In turn, in 2011, the Developer filed a third-party complaint against the General Contractor for breach of express indemnity, among other claims.[6]  At the trial level, the General Contractor successfully argued that the Developer’s claim for breach of express indemnity was untimely and barred by the four-year statute of limitations for construction-related claims.[7] 

The appellate court, however, disagreed.  Relying on the Illinois Supreme Court’s ruling in Travelers Casualty & Surety Co. v. Bowman, the court overturned the trial court and applied the ten-year statute of limitations for contract claims.[8]  In Travelers, the Illinois Supreme Court instructed that when determining whether to apply the ten-year statute of limitations for contract claims or the four-year statute of limitations for construction-related claims, courts must look to the nature of the claim—meaning whether the claims emanates from construction-related activity or a contractual obligation.[9]  Applying this test to the express indemnity clause at issue, the court determined that the nature of the claim was for failure to indemnify, a contractual obligation, not from any “act or omission relating to construction activity.”[10]  Thus, the ten-year statute of limitations applied and the Developer’s claim for breach of express indemnity was not barred by the passage of time.


[1] 2014 IL App (1st) 122292.

[2] Id. ¶¶ 5-7.

[3] Id. ¶ 43.

[4] Id. ¶ 39.

[5] Id. ¶ 7.

[6] Id. ¶ 10.

[7] Id. ¶¶ 17-20.

[8] Id. ¶ 45.

[9] Id. ¶ 46.

[10] Id. ¶ 52.

Pennsylvania Supreme Court Rules that Subsequent Homeowners Are Not Entitled to Implied Warranty of Habitability

Posted in Case Summaries, Pennsylvania, The Americas

By Christopher A. Barbarisi and Loly G. Tor, K&L Gates, Newark

In Conway v. Cutler Group Inc.,[1]  the Pennsylvania Supreme Court reversed a decision by the Superior Court and held that the builders’ implied warranty of habitability does not run to subsequent purchasers of homes, significantly limiting homebuilders’ potential liability to subsequent owners.

In Conway, the homeowners, Michael and Deborah Conway, purchased a three-year-old home from the original owners, who had purchased the home new from the builder.  After allegedly discovering water infiltration and construction defects in the home, the Conways filed suit against the builder for breach of the homebuilders’ implied warranty of habitability.  The trial court dismissed the Conways’ complaint, finding that the Conways’ claim for breach of the implied warranty was barred due to lack of privity. On appeal, the Superior Court reversed, finding that the implied warranty of habitability should exist independently of a contract between the builder and homeowner because the warranty is based on public policy considerations, is designed to “equalize the disparate positions” of the builder and homeowner, and exists independently of any builder representations.

In reversing the Superior Court, the Pennsylvania Supreme Court considered the history of the implied warranty of habitability and its adoption by the Court in Elderkin v. Gaster.[2]  In Elderkin, the Court rejected the doctrine of caveat emptor and instead placed the burden of risk on a builder “‘that a home which he has built will be functional and inhabitable in accordance with contemporary community standards.’”[3]  The Court also recognized that the implied warranty in Elderkin was based on the existence of a contract between the builder and the homeowner (which, of course, does not exist with a subsequent purchaser) and was limited to situations where the parties are not in privity.  After discussing the varying decisions reached by courts in other jurisdictions on this issue, the Court declined to depart from its position that the implied warranty of habitability is grounded in contract and requires privity between the parties to be enforced.  It concluded that whether to extend the warranty of habitability to subsequent homeowners is a question of public policy properly left to the legislature.  Thus, unless and until Pennsylvania’s General Assembly decides otherwise, an action for breach of implied warranty of habitability requires contractual privity between the parties, eliminating a potential source of liability to homebuilders.
 
[1] J-41-2014 (Pa. Aug. 18, 2014).
[2] 288 A.2d 771 (Pa. 1972).
[3] J-41-2014 at *4 (quoting Elderkin, 288 A.2d at 777).