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In the construction industry, uncertain economic climates, such as that caused by the Covid-19 pandemic, can cause constraints on cash flow and potentially negatively affect liquidity across global supply chains. As such, employers have sought to rely on their contractual rights to avoid or delay payment. As a result, contractors and subcontractors are being faced with a lack of cash flow; it has regularly been stated that ‘cash is the lifeblood of the construction industry’1 resulting in problems with non-payment, late payment or underpayment. In order to ensure cashflow, contractors may have a right to interim payments. Whereas employers may have a right to set-off or withhold sums due in the contractor’s interim payment applications to cover services performed by themselves, or costs incurred in relation to the contractor’s work a process is often referred to as back charge. This article briefly introduces interim payments and set-off in the construction context it then details aspects of back charges in the common law jurisdictions of Canada, the UK and the US.

 

Introduction to the right to an interim payment and set-off

Under the general principle of contract law in the UK,a party does not have a right to claim interim or partial payments as part of the agreed sum of the contract, unless there is a contractual agreement or statutory right.²

In the context of construction contracts, the use of interim payments is a standard means of ensuring cash flow for contractors and subcontractors alike. The purpose of interim payments is to relieve the contractor/subcontractor of the burden of financing the whole of the works until completion – works that may take many months or years to complete. It is incorporated into all standard construction contracts (FIDIC, JCT, NEC, ICE and the like) and statutes in the UK (the Housing, Grant Construction and Regeneration Act (HGCRA) 1996 as amended by Part 8 of the Local Democracy, Economic Development and Construction Act (LDEDCA) 2009, section 109 ‘Entitlement to stage payment’).

According to RICS guidance notes,³ several methods and mechanisms are used for contractual agreements for interim payments. These include the use of the bill of quantities, priced activity schedules, milestone payments and contract sum analysis. The periodic intervals applicable to interim payments can also be contractually agreed, such as bi-weekly, monthly (the most common interval), every three months, quarterly and so on.

When an employer or contractor encourages the procurement of materials and equipment at the early construction stage, construction contracts allow the contractor or subcontractor to apply for payments for materials and equipment delivered at the construction site or some other agreed location before installation, which is often referred to as a payment for ‘material on site’. Generally, the employer or contractor is then entitled to inspect the stored materials and equipment to verify the quality and ensure that materials have been suitably stored and insured, before making payment.

The US appellate court held that ‘A set-off (sometimes called contra charging) is a counter demand which a defendant holds against a plaintiff, arising out of a transaction extrinsic of the plaintiff’s cause of action.’⁴

There is often confusion between abatement and set-off. Abatement is used as a means to reduce a contract price in circumstances where full payment may not necessarily be justified. For instance, if a subcontractor failed to carry out works to an acceptable standard and the value of the works was diminished, the contractor would have grounds to reduce the amount owed on the basis of the difference in value.⁵ The measure of abatement is ‘how much less the subject-matter is worth’,so the measure of the abatement cannot exceed the total of the sum to which it is applied.⁶ Since an abatement applies only to matters that go to reduce the value of the work performed, it cannot apply to a counter-claim for a delay in the execution of the works, which would be a matter of set-off.⁷ It is also well established that abatement cannot apply to a claim for professional services.⁸

Set-off has a wider application than abatement given that it could be a remedy for breach of contract, for example, applying to a counter-claim for recovering costs in relation to the costs of the delay that were incurred or rectifying defective works.⁹ From a quantum perspective, while the measure of abatement cannot exceed the contract sums, set-off, as a form of counter-claim for damages, may exceed an agreed sum.

In the UK, the right of set-off exists under common law. In Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd,¹⁰ the House of Lords held:

‘It has been a well-sealed principle of law since the middle of the last [19th] century that when a claim is made for the price of goods sold and delivered or work and labour done, the defendant is entitled to set-off or set up against the amount claimed any damages which he has suffered as a result of the plaintiff’s breach of the contract under which the goods were sold and delivered or the work and labour were done.’

The House of Lords¹¹ held that the contractor was entitled to set-off unless there were clear terms excluding it. The House of Lords refused the subcontractor’s argument that set-off cannot be exercised to prevent cashflow from being impeded, which causes significant impacts in the construction industry. Therefore, this judgment allowed contractors to refuse the full payment to subcontractors by insisting set-off, which caused cashflow constraints in the construction industry. Thereafter, the UK construction industry experienced a substantial amount of bankruptcies among subcontractors in the 1980s and 1990s. The unregulated set-off was criticised, among others, by the Latham Report, Constructing the Team (1994), which triggered the legislation of the HGCRA 1996 regulating the right to set-off under sections 110 ‘Dates for payment’ and 111 ‘Requirement to pay notified sum’. Later sections included 110A ‘Payment notices: contractual requirements’ and 110B ‘Payment notices: payee’s notice in default of payer’s notice’ and were inserted by the LDEDCA 2009.

Right to back charge

What is a back charge?

Construction projects are rarely completed without a contractor facing some issues with a subcontractor or vendor, such as poor quality of work, late delivery and abandonment of the project. The contractor may have a contractual or legal mechanism to resolve such issues themselves instead of the subcontractor, who should have fixed the issues first-hand, and charged the subcontractor for any direct and unanticipated costs incurred. In the construction industry this process is often called ‘back charging’.

A back charge, in which there is a deduction from a subcontractor’s payment for a contractor’s unexpected costs in relation to the subcontractor’s works, can be claimed as a form of set-off or counter-claim. A back charge is basically the claim for unexpected costs: ‘it is billings for work performed or costs incurred by one party that, in accordance with the agreement, should have been performed or incurred by the party to whom billed’.¹²

Under the law of contract in the UK, contracts provide the opportunity to recover damages when one party fails to perform. The starting point for the damages is: ‘[T]he rule of the common law is that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.’¹³ This principle also applies to back charges.

Back charges can arise due to a variety of reasons, including:

• defective works or materials;

• delay to the works – a contractor might set-off the appropriate amount of liquidated damages in accordance with the contract;

• damage to a jobsite and cost of repair; and

• clean-up costs incurred to maintain worker safety or compliance with the regulations surrounding health, safety and the environment.

From the authors’ review, it appears that the most frequent reason for a back charge arises from defective works. Hudson defined that

‘defective work is work which fails to comply with the requirements of the contract and so is a breach of contract. For large construction or engineering contracts, this will mean work which does not conform to express descriptions or requirements, including any drawings or specifications, together with any implied terms as to its quality, workmanship, performance or design.’¹⁴ Many standard forms of contract do not provide the definition of defects (ie, FIDIC),¹⁵ so this will mean that whether or not work is defective can be influenced by local law and practice and will therefore vary in different jurisdictions.¹⁶

A back charge, in which there is a deduction from a subcontractor’s payment for a contractor’s unexpected costs in relation to the subcontractor’s works, can be claimed as a form of set-off or counter-claim

Under UK law, there are quite significant legal issues relating to the contractor’s obligations as to the quality of materials, workmanship and design (generally fit for purpose obligations) and the construction professional’s liability (generally reasonable skill and care obligations). Further discussion is outside the scope of this article.

A back charge, in the context of this article, is money withheld by a contractor which relates to the payment to a subcontractor to cover services claimed to have been performed, or costs incurred by the contractor relating to the subcontractor’s work.

From the perspective of the contractor, it is necessary to recover the unexpected costs incurred due to the subcontractor’s defective and/or delayed works. From the perspective of the subcontractor, they may state that the back charges are unfair when there is no:¹⁷

• prior notice of defective work;

• time to investigate whether the work is defective;

• time allowed to fix the work;

• documentation that the cost of the back charge is appropriate and due to the defective work; and/or

• payment of other money until back charges are accepted.

The Canadian judgment, Impact Painting Ltd v Man-Shield (Alta) Construction Inc, 2017 ABQB 743 (CanLII), provides substantial considerations for resolving differences and disputes between contractors and subcontractors related to the above issues.

Impact Painting Ltd v Man-Shield (Alta) Construction Inc

In the recent decision of the Court of Queen’s Bench of Alberta in Canada, Impact Painting Ltd v Man-Shield (Alta) Construction Inc,¹⁸ the Court dealt with disputes arising from back charges, and provided guidance in relation to them.

Man-Shield was the contractor on a retirement community construction project in Edmonton. Impact Painting was Man-Shield’s subcontractor for the painting and wallpaper installation.

Impact issued a number of invoices to Man-Shield for ‘extra works’, for which no written variation orders had been issued. Man-Shield rejected the majority of those invoices. Consequently, Impact commenced an action against Man-Shield to seek payment for the extra work and other unpaid amounts.

The general measure of damages for breach of contract when a contractor has provided less than full performance, or has provided defective work, is the cost of curing the defective condition

Man-Shield made a counter-claim against Impact in the sum of approximately CAD 209,000 for 12 heads of back charges for the expenses incurred which they had issued to Impact during the currency of the contract.

The Court held that a party claiming to be entitled to a back charge must meet a ‘four-stage test’:¹⁹

‘In my view, the onus is on the party claiming a back charge to prove that:

1. The back charge is for an expense actually, necessarily and reasonably incurredby the party claiming the back charge.

2. By the terms of the subcontract, or by some other agreement between the parties, the charge is one, or is in relation to some task, for which the subcontractor undertook responsibility.

3. The general contractor incurred the expense because the subcontractor defaulted on the responsibility to which the charge relates.

4. Prior to incurring the charge, the general contractor gave notice to the subcontractor of its default and a reasonable opportunity to cure it.’ (emphasis added)

It is submitted that the four-stage test appears to be very onerous, with hurdles to overcome in order for a contractor to exercise a back charge, details of which are set out below.

Stage 1: ‘The back charge is for an expense actually, necessarily and reasonably incurred by the party claiming the back charge.’

In the US, when the subcontractor performs defective work, the contractor is generally entitled to recover, as the principle of damages, the amount of money that will reasonably compensate the contractor for the harm resulting from the defective works.²⁰

Although loss and expense are deemed to be equivalent to damages for breach of contract,²¹ Stage 1 in the Impact case only “referred to expenses ‘which are actually, necessarily and reasonably incurred’. It is not clear why the judge referred only to an expense for the scope of back charges but it is submitted, given the facts of the case, that only expenses can be claimed by the defendant; the judge in the case does not need to refer to loss.

For the claiming party to seek to recover consequential damages in terms of loss, such as lost profits, lost use or lost rent, and in the US, in order to recover funds for these alleged, the employer must prove the following:²²

• it was foreseeable to the parties when they entered into the contract that these damages would probably result if the contract
was breached;

• these damages were in fact caused by the contractor’s defective/incomplete construction; and

• the amount of damages.

The first two elements are related to stages 2 and 3, so will be discussed later. In relation to the amount of damages, the measure of damages will be either the cost of cure, or diminution in value as well as the availability of consequential damages for defective constructions.²³

Cost of cure

The general measure of damages for breach of contract when a contractor has provided less than full performance or defective work is the cost of rectifying the defective condition.²⁴ This measure is appropriate unless the cost of repair would be grossly disproportionate to the results to be obtained or would involve unreasonable economic waste, in which case the diminution in value rule applies.²⁵

Diminution in value

US law recognises that even though work can deviate from contract requirements, it would require great waste to remove and replace the work that has been performed.²⁶ In such cases, ‘diminution in value’ is the appropriate measure of damages to compensate the client. A ‘diminution in value’ measure of damages is appropriate when the following occurs:²⁷

• the contractor failed to perform its works in strict compliance with the contract;

• the work performed by the contractor resulted in an unusable project; and

• the cost to remove and replace the work to the form required by the contract would result in unnecessary waste or very high cost.

The quantum calculation is the contract price minus the value of the work actually performed,²⁸ which is a form of abatement.

In the UK, Ruxley Electronics and Construction Ltd v Forsyth²⁹ was concerned with the choice between an award of damages being either the ‘cost of cure’ or ‘loss of amenity’.

Ruxley agreed to build a swimming pool in Forsyth’s garden. The contract specified that the pool would have a diving area of seven-foot six-inches deep. When constructed, the diving area was only six-feet deep, which was still a safe depth for diving. However, Forsyth brought an action for a breach of contract claiming the cost of having the pool demolished and rebuilt, being the ‘cost of cure’, at a sum of £21,540.

At first instance the judge rejected the claim for ‘cost of cure’ damages on the grounds that it was an unreasonable claim in the circumstances and awarded Forsyth ‘loss of amenity’ of £2,500. This award was reversed by the Court of Appeal, which held that damages should be awarded at the amount required to place Forsyth in the same position as he would have been had the contract been performed, which in the circumstances was the cost of demolition and rebuilding the pool as specified.

Ruxley appealed and the House of Lords allowed the appeal, upholding the judge’s award of £2,500 for ‘loss of amenity’. Lord Lloyd said:

‘Does Mr Forsyth’s undertaking to spend any damages which he may receive on rebuilding the pool make any difference? Clearly not. He cannot be allowed to create a loss which does not exist in order to punish the defendants for their breach of contract. The basic rule of damages, to which exemplary damages are the only exception, is that they are compensatory not punitive.’³⁰

Lord Mustill held that compensation should be reasonable, saying:

‘[t]he test of reasonableness plays a central part in determining the basis of recovery and will indeed be decisive in a case such as the present when the cost of reinstatement would be wholly disproportionate to the non-monetary loss suffered by the employer.’³¹

US law recognises that even though work can deviate from contract requirements, it would require great waste to remove and replace the work that has been performed. In such cases, ‘diminution in value’ is the appropriate measure of damages to compensate the client.

The FIDIC Yellow Book 1999 edition clause 11.4 provides both remedies as employer’s options, as follows:

‘If the Contractor fails to remedy the defect or damage by this notified date and this remedial work was to be executed at the cost of the Contractor under Sub-Clause 11.2 [Cost of Remedying Defects], the Employer may (at his option):

(a) carry out the work himself or by others, in a reasonable manner and at the Contractor’s cost, but the Contractor shall have no responsibility for this work; and the Contractor shall subject to Sub-Clause 2.5 [Employer’s Claims] pay to the Employer the costs reasonably incurred by the Employer in remedying the defect or damage;

(b) require the Engineer to agree or determine a reasonable reduction in the Contract Price in accordance with Sub-Clause 3.5 [Determinations]’. (emphasis added)

Stages 2 and 3

In relation to Stage 2, the charge is one, or is in relation to some task, for which the subcontractor undertook responsibility. Stage 3
is where the general contractor incurred the expense because the subcontractor defaulted on the responsibility to which the charge relates.

In Impact Painting Ltd v Man-Shield (Alta) Construction Inc,³² stages 2 and 3 are related to the issues of causation.

As regards causation, under the principles in relation to causation in the UK, a claimant can recover damages only if a breach of contract has caused damages. It is not enough to argue that there is a breach of contract and the existence of damages: the damages must be a ‘consequence’ of the breach. In other words, in a civil case, the claimant must establish or prove them on the principle of the ‘balance of probabilities’,³³ meaning there is a linkage between cause (breach) and effect (damages), which is referred to as ‘proof of causation’. Causation can be divided into two categories: ‘causation in fact’ and ‘causation in law’ (or remoteness).

Causation in fact

Under the law of contract in the UK, a ‘but for test’ normally has to be implemented to prove causation in fact.³⁴ The question is ‘if there is no defendant fault, will the claimant still suffer the loss?’ When the answer is ‘no’, then the defendant will be liable.

Meticulous documentation appears to be essential for both contractors and subcontractors. Keeping detailed records will help to support or contend any back charges.

However, a ‘but for test’ has its limits. In the UK, if a claimant and defendant are responsible for the competing causes (concurrent causes), the ‘but for’ test will not apply, and the ‘dominant cause test’ is not deemed to be applicable in this case.³⁵

Causation in law: remoteness

Under the rules of remoteness of damage in contract law, set out in Hadley v Baxendale,³⁶ a claimant may only recover losses that may be reasonably considered as arising naturally from the breach (the first limb/leg). The first limb is sometimes referred to as an objective test, or those that may reasonably be in the contemplation of the parties when entering into a contract (the second limb/leg), which depends on additional special knowledge by the defendant; the second limb is sometimes referred to as a subjective test.

In the subsequent case of Victoria Laundry (Windsor) Ltd v Newman Industries Ltd,³⁷ a normally expected loss of profit was deemed recoverable. However, exceptionally lucrative loss of profit recovery was not allowed since it was not in the reasonable contemplation of the parties.

If the type of loss caused by the breach of contract is within the reasonable contemplation of the parties, the magnitude/extent of the loss does not matter subject to a duty to mitigate.³⁸ Hudson stated: ‘foreseeability is generally considered to be concerned with the type of loss, not its amount.’³⁹

Degree of certainty

It is a general principle that the claimant should prove the claim with sufficient certainty. In Lisbon v US,⁴⁰ the US Federal Court of Claims stated the principle:

‘[C] bears the burden of proving the fact of loss with certainty, as well as the burden of proving the amount of loss with sufficient certainty so that the determination of the amount of damages will be more than speculation.’

In both the US and the UK, the courts have recognised the dangers of encouraging too detailed proof of causation with absolute certainty.⁴¹ On the other hand, the courts have also been careful to adopt a deliberately pragmatic and common-sense approach.⁴² The claimant must prove the extent of losses with reasonable certainty using civil law standards, examining a ‘preponderance of the evidence’ in the US and a ‘balance of probabilities’ in the UK, respectively.⁴³ Whether or not the evidence advanced by the claimant meets the reasonable certainty rule is a matter of fact.⁴⁴

Bailey⁴⁵ commented on the uncertainty issue, analysing a series of English and Australian case law stating that:

‘[i]t is difficult to calculate with any precision the extent of the innocent party’s loss or damage, the court will do its best to arrive at an appropriate award of damages, even if this involves elements of speculation or guesswork.’

By applying the general principles of UK law in conjunction with the stage 2 and 3 tests of the Impact case, it is submitted that it is crucial to prove with sufficient evidence that remedial works by the contractor were caused by the subcontractor in question, and back charge amounts were incurred directly by that specific subcontractor. The type of back charge should be foreseeable, and the claimant must prove the extent of back charge with reasonable certainty.

In the US case of Great Western v Role Construction,⁴⁶ the Court ruled that it was the contractor’s responsibility to establish the fact that the subcontractor’s defective work was indeed tied to the back charge.

Meticulous documentation appears to be essential for both contractors and subcontractors. Keeping detailed records will help to support or contend any back charges. For the contractor, it will be imperative to include as much detail as possible when sending a notice of defective work, such as a Non-Conformation Report, an Inspection Report, quality test results and the like. If the subcontractor decides to take remedial action, it will be important to take progress photos for the records. If the subcontractor does not cure the defects, it’s essential to keep the invoices and timesheets regarding the back charges separately to provide to the subcontractor/vendor on completion. It is also good practice to make a separate defect-related account for booking the costs incurred in the cost ledger. From the perspective of a subcontractor, the subcontractor should also document all phases of the work performed by themselves.

In the absence of evidence, the contractor may argue that it is impossible or impractical to trace back which subcontractor made a fault when many subcontractors are involved, which is highly likely in the construction industry. The contractor may attempt to allocate the overall incurred costs pro rata to each subcontractor. In the US case of Great Western Drywalls v Roel Construction,⁴⁷ when the clean-up costs were the issue, the Court upheld the contractor’s right to assess clean-up costs against a particular subcontractor. However, the Court ruled the costs could not be calculated pro-rata back to each subcontractor but had to be specific to each contractor’s responsibility for clean-up costs.

Stage 4: Prior to incurring the charge, the general contractor gave notice to the subcontractor of its default and a reasonable opportunity to cure it

Stage 4 appears to be principally concerned with notice requirements to implement a right to back charge.

In relation to notice requirements between the employer and the contractor, the FIDIC Yellow Book 1999, clause 11.4 states:

‘If the Contractor fails to remedy any defect or damage within a reasonable time, a date may be fixed by (or on behalf of) the Employer, on or by which the defect or damage is to be remedied. The Contractor shall be given reasonable notice of this date.’

From the subcontractor’s perspective, like the FIDIC conditions, the subcontract shall provide reasonable notice provisions, meaning if and when the contractor finds the defective works, the subcontractor shall be notified and provided with a reasonable amount of time to correct, repair or clean up any issues caused by the subcontractor’s work. The reasonable amount of time will be a matter of fact. A best-recommended practice is to have any back charge-related notice requirements explicitly stated in the subcontract.⁴⁸

This research has found that in the US, an approach/guidance/standard subcontract form to construction back charges is provided by the Associated Schools of Construction, the Associated General Contractors, and the American Subcontractors Association (ASA).

The standard forms generally state that a contractor must first provide notice before any back charges are incurred. Secondly the subcontract requires another written notice to be sent seven days after the services or materials were provided. Finally, the contractor must provide a written compilation of the charges by the 15th day of the following calendar month.

The ASA recommendations are the most favourable to subcontractors:

‘No back charge or claim of customer for services shall be valid except by an agreement in writing by subcontractor before the work is executed, except in the case of subcontractor’s failure to meet any requirement of the subcontract. In such event, customer shall notify subcontractor of such default, in writing, and allow subcontractor reasonable time to correct any deficiency before incurring any costs chargeable to subcontractor. No back charge shall be valid unless billing is rendered no later than the 15th day of the month following the charge being incurred. Furthermore, any payments withheld under a claim of subcontractor default shall be reasonably calculated to recover the anticipated liability and all remaining payment amounts not in dispute shall be promptly paid.’

The effect of failure or noncompliance of the notice and providing the opportunity to cure is not clear in the judgment of Impact Painting Ltd v Man-Shield (Alta) Construction Inc.⁴⁹ The effect can be either to disregard the whole entitlement of the back charge or deduct the quantum of back charges.

In the US, the Tennessee Court of Appeals⁵⁰ has held that

‘the common-law is that one should give notice designed to allow the defaulting party to repair the defective work, to reduce the damages, to avoid additional defective performance and to promote settlements of disputes.’

The Court of Appeals held that the defendant’s counter-claim was properly dismissed where a defendant ‘failed to give Plaintiff notice and an opportunity to cure the alleged construction defects pursuant to the common-law’. Many states in the US have enacted ‘right to cure’ statutes that require notice and an opportunity to cure prior to commencing litigation.⁵¹

Conclusion

In the construction industry, contractors may have a right for interim payments, which is against the common law principle in the UK prohibiting interim or partial payments.

Under the common law, employers have a right to set-off or withhold sums due in the contractor’s claim for interim payments or final payment in the UK. However, the HGCRA has regulated the employer’s action for set-off or withholding payments to secure cashflow in the industry.

Contractors may claim back charges to cover services performed by themselves or costs incurred in relation to the subcontractor’s work in the form of set-off or counter-claim against the subcontractor’s claim for interim payments or final payment.

The Canadian Court provides some considerations and guidance for back charges. A notice may be the first step and crucial requirement for a back charge; this is to ensure the subcontractor’s right to cure the defect. When the subcontractor resists the contractor’s request to cure the defect, then the contractor may cure the defect by themselves at the expense of the subcontractor. The remedy is generally based on ‘cost of cure’. The courts, however, may test the reasonableness of the cost and then apply ‘diminution in value’ principle. The contractor should prove that the type of back charge is tied to the subcontractor’s works and is foreseeable. The contractor should prove the causation with reasonable certainty.

 

Notes

1 As Denning LJ noted in Modern Engineering (Bristol) Ltd v Gilbert-Ash (Northern) Ltd (1973) 71 LGR 162.

2 See Cutter v Powell (1795) 101 ER 573.

3 RICS (2015), Interim valuations and payment, 1st edn London, see www.rics.org/uk/upholding-professional-standards/sector-standards/construction/black-book/interim-valuations-and-payment, accessed 27 January 2021.

4 M D Masonry v Universal Surety Co, 6 Neb App 215 (Neb Ct App 1997).

5 ‘Set off & Abatement – which is which?’ (Blake Newport, 22 June 2012), see https://blakenewport.wordpress.com/2012/06/22/set-off-abatement-which-is-which-2 accessed 27 January 2021.

6 S Furst, V Ramsey, and D Keating, Keating on construction contracts (10th edn, Sweet & Maxwell 2017) paras 19-111.

7 Ibid.

8 Ibid. paras 19–112.

9 Ibid. paras 19–113; see Set off & Abatement, n5, above.

10 Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd(1976) 1 BLR 73.

11 Ibid.

12 Facilities and Campus Services, ‘Glossary of Construction Terms’ (2005, Cornell University) see https://operations.fs.cornell.edu/info/ir_glossary.cfm, accessed 10 November 2020.

13 Robinson v Harman(1848) 1 Ex Rep 850 at 855; Ruxley Electronics and Construction Ltd v Forsyth [1995] UKHL 8; n 6 above paras 19–003.

14 Nicholas Dennys and Robert Clay (eds), Hudson’s Building and Engineering Contracts (13th edn, Sweet & Maxwell 2015) para 4–71.

15 In accordance with NEC 3rd edn Contract, a ‘defect’ is part of the works which is not in accordance with the Works Information or a part of the works designed by the Contractor which is not in accordance with the applicable law or the Contractor’s design which the project Manager has accepted.

16 See n 14 above, para 4–072.

17 Bruce Suprenant, ‘Watch Your Back Charges’ (The Voice Newsletter, 2018) see https://ascconline.org/Portals/0/Technical-Article-Mar-2018_WebSC.pdf?ver=2018-03-19-093300-573 accessed 27 January 2021.

18 Impact Painting Ltd v Man-Shield (Alta) Construction Inc2017 ABQB 743 (CanLII).

19 Ibid, para 28.

20 See M Beutler, E Gentilcore, Model Jury Instructions: Construction Litigation, (2nd edn, ABA 2015) s 10.03.

21 Wraight Ltd v PH&T (Holdings) Ltd(1968) 13 BLR 29.

22 See n 20 above 10.06.

23 See n 20 above 10.03.

24 See n 20 above 10.04.

25 See n 20 above 10.03–10.05.

26 See n 20 above 10.05.

27 Ibid.

28 Ibid.

29 Ruxley Electronics and Construction Ltd v Forsyth[1995] UKHL 8.

30 Ibid.

31 Ibid.

32 See n 18 above.

33 The balance of probability standard means that a court is satisfied an event occurred if the court considers that, on the evidence, the occurrence of the event was more likely than not, which is often said to be more than 50 per cent.

34 Orient-Express Hotels Ltd v Assicurazioni Generali SA[2010] EWHC 1186.

35 V Moran, QC, ‘Causation in construction law: The demise of the “dominant cause” test?’ (2014) SCL Paper 190.

36 Hadley v Baxendale(1854) 9 Ex Ch 341.

37 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd[1949] 2 KB 528.

38 Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48; Parsons v Uttley Ingham [1978] QB 791.

39 See n 14 above, para 7–003.

40 Lisbon v US(1987) 828 F 2d 759, 767.

41 See n 14 above, para 7–002.

42 Ibid.

43 J Bailey, Construction Law (2nd edn, Informa Law 2016), 13.99; J Sweet and Marc M Schneier, (7th edn, Thomson 2004), 5.11.B; T J Kelleher and G Walters, Common Sense Construction Law Smith (4th edn, John Wiley & Sons2009), 465; see n 14 above para 7–002.

44 Walter Lilly v Mackay[2012] EWHC 1773 (TCC) at 486.

45 See Bailey, n 43 above, para 13.100.

46 Great Western Drywalls v Roel Construction166 Cal App 4th 761 (2008).

47 Ibid.

48 FIDIC Yellow Book (1999 edition), clause 11.4 states: ‘If the Contractor fails to remedy any defect or damage within a reasonable time, a date may be fixed by (or on behalf of) the Employer, on or by which the defect or damage is to be remedied. The Contractor shall be given reasonable notice of this date.’

49 See n 18 above.

50 Bates v Benedetti, E2010-01379-COA-R3-CV, 2011 WL 978195, at 7 (Tenn Ct App 21 Mar 2011).

51 See n 20 above, 10.02.

 

JB Kim is a managing consultant at Blackrock Expert Services, London, and can be contacted at jbkim@blackrockx.com. Dukgeun Yun is a senior associate at Al Tamimi & Co, London and can be Dg.Yun@tamimi.com.

 

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