Last reviewed 25 June 2020
In order for a construction project to be successful, the parties need to understand has been agreed, and also what administrative procedures need to be followed under the building contract. Roland Finch explains some of the different contractual methods of communication that can be used.
When a contract for construction works is arranged between different parties, there is typically an agreement that certain work will be done in exchange for something — usually payment. In order for this all to take place, however, there needs to be some means of “administration”, and that in turn requires some communication.
The communication can take many forms, whether verbal, written and, in some cases, by the transfer of data. Psychologists tell us that there are as many as eight different types of communication; if we include things like smell and touch, or facial expression and eye contact, or body language.
By comparison, where construction contracts are concerned, the form of communication should be relatively simple — most recognise only oral or written communication (although the latter may be extended to include drawn information).
The routes of communication should also be straightforward. Typical construction contracts involve only two parties: client and contractor; contractor and subcontractor; client and consultant, for example. But it is never as simple as that. Multi-party contracts are becoming more common, and many employer/contractor arrangements will involve a consultant in a supervisory role.
In addition, contract drafters and lawyers come up with particular names for certain types of communications, and these are reflected in the wording of the contract itself.
So what types are there — and how can we recognise them?
First of all, it should be recognised and acknowledged that the contract itself is a form of communication. It sets out what the parties have agreed to do for one another, together with the consequences of a variety of outcomes; one example is the payment that will result from successful completion of the work. The contract governs what happens if the work is not completed satisfactorily, or the payment is not made on time, with a whole range of scenarios in between, all of which are necessary to ensure the smooth running of the project.
It is inevitable that the nature of the work will change from job to job, together with its location, and prevailing local conditions. However, for the most part, some things, like commencement, completion (and non-completion), variations, payment, dispute resolution and termination, will remain a feature of all contracts.
Since the processes involved will also be very similar each time, the concept of “standard form” building contracts has evolved. These allow recognisable and repeatable terms and conditions to be adopted, which is obviously easier and faster than having the parties renegotiate the details each time, and much better than having a verbal arrangement, where nobody can remember what was agreed almost immediately after the agreement was reached — nor prove it.
Once a list of rights and obligations have been recorded, it falls to the parties to operate the contract between them.
More often than not, a third-party consultant is appointed to oversee and administer the contract terms. Depending on the standard form chosen, this person may be referred to as the engineer, architect, supervising officer or contract administrator, but their purpose and role will be similar in all cases (although the detail will depend on the precise wording of the contract).
So how does the contract operate in practice? Well, it relies on the parties, and, where there is one, the contract administrator (CA), undertaking a series of tasks. One party will supply information, and access to the working area, and the other will carry out and complete the work described.
The administrative side of the project requires the transfer of information between the parties. Depending on the type of task and the person who does it, the contract will describe what information is needed and any particular criteria for its transmission.
Using the JCT Intermediate Building Contract (IC 16) as an example, the First Recital requires the “employer” to “state” the nature and location of intended works. It also requires the provision of drawings to “show and describe” the work to be done. The Recitals go on to state that the drawings must be “numbered and listed”, and “signed and initialled” by each party for identification.
The employer then has to “supply” documents, including the bills of quantities, specification and/or work schedules, as appropriate, which have been “prepared”.
In turn, the contractor is stated to have “priced” the relevant documents, and “stated the sum... for carrying out the Works”.
It’s easy to see, therefore, that there are a lot of activities included in the contract terms, but also a lot of points where the parties must interact. And it is at these points where communication, and perhaps more importantly, the form of communication can be critical.
JCT IC 16 comprises a number of different procedures that must be completed as part of the day-to-day administration and operation of the contract. Similar procedures will feature under other standard form contracts, but the precise mechanisms may vary. The IC 16 solution to this is to appoint a CA.
Where there is an Information Release Schedule, the CA is responsible for ensuring that information is released at the time stated in that schedule. The CA may well not be responsible for producing that information but they oversee the process.
However, they must “provide further drawings and details which are necessary to amplify or explain the Contract Drawings”. In this case they are responsible for the provision itself, so it is easy to see where the subtle differences lie (and also where confusion might arise).
Other activities included for the various parties include words like “send”, “certify”, “approve”, “instruct”, as well as “give notice”, “obtain consent”, “issue”, “make”, and “undertake”.
In very simple legal terms, a certificate is usually held to be a record of some occurrence; an example will be certification of completion (or non-completion) or an interim or final certificate for payment purposes.
A notice, by contrast, is a warning that something has, or is about to, happen. Examples of notices include notices of delay, notice of termination, and those associated with the Housing Grants, Construction and Regeneration Act: “pay-less” notices.
As we have already noted, the precise mechanism may vary from project to project and contract to contract, so it is important to understand how the terms are defined, and the context for their application.
It is not always easy to tell the difference between types of communication, given all the different terms we have already discussed, combined with their use and misuse in a contractual situation. Is there a difference between a notice and a notification, or a certificate and a statement?
The short answer is there may be, and it is possible that the person making that interpretation will be a court, when a formal dispute arises, so care should always be taken to understand how the communication channels are supposed to operate, and make sure that the language and terminology is consistent and, where possible, defined.
The best way to do this is to read the contract carefully, and make sure that any specification and associated documents follow the same terminology. The CA should help with that process, and a good CA can bring significant benefits to all parties.
Construction, and the contracting world, has its own language (or should that be dialect?) as well as its own idioms, and there are many pitfalls for the unwary.
If in doubt, tread carefully.
Roland Finch BSc. FRICS ACI Arb. is a technical author for the National Building Specification (NBS), specialising in preliminaries. The views expressed here are those of the author and should not be taken as representing either NBS or RIBA Enterprises Ltd.