Construction update - report and review on new developments

New Royal Institute of British Architects (RIBA) form of appointment

The RIBA has recently issued its Standard Agreement 2007 S-Con-07 for the appointment of an architect. The previous form, SFA/99, was the subject of criticism by the High Court in a 2005 case, Munkenbeck and Marshall v Harold. It described two of the terms as "unfair and onerous". Although those particular terms are now amended, the form contains the following clauses, which employers will be well-advised to amend or delete:

• The architect is obliged to perform his services only "so far as reasonably practicable". This could allow the architect a number of excuses for failure to perform.
• The architect is entitled to additional fees where he incurs extra expense "for reasons beyond [his] control". This is potentially wide enough to cover defaults of sub-consultants or even unforeseeable problems at the architect's own office (such as a sudden illness of a key person).
• There are obligations on the client to supply information that it can reasonably obtain that is necessary for the proper performance of the architect's services. This is wide-ranging, and could be onerous. It is presumably intended to cover such matters as site reports. The clause then allows the architects to rely on such information. This could be problematic unless the client has arranged for the original provider of the report to give the appropriate warranty.
• There is a "net contribution" clause. Clients should usually delete such a clause. It prevents the client claiming for its losses wherever it could also sue someone else for those same losses (regardless of whether it actually does).
• The client's copyright licence to use design material may be ineffective if there is a dispute about payment of fees. This can leave a client in an uncertain position (JCT 05 contains a similar difficulty for employers).
• Common law set-off rights are excluded.
• There is an optional provision for an overall cap on liability.

Now you're stuck: with arbitration!

If the parties to a contract have incorporated an arbitration clause then the starting assumption is that they intend any dispute arising out of their relationship to be decided by arbitration. This is so unless the language makes it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction. You can no longer argue fine verbal distinctions to exclude some disputes from the agreement to arbitrate. You will be taken to have agreed on a single tribunal for the resolution of all disputes unless you expressly provide otherwise in your contract.

Additionally, even if one party says that the main contract is invalid, and the other party disputes it, that dispute must still be decided under the arbitration clause. The invalidity or rescission of the main contract will not usually result in the agreement to arbitrate being invalid. The agreement to arbitrate must be treated as a distinct agreement. It is only voidable on grounds which relate directly to the agreement to arbitrate itself, for example in cases of alleged forgery of a signature of one party, or an agent acting without authority. Only in rare cases will the dispute negate the agreement to arbitrate.

[Fiona Trust & Holding Corporation & Ors v Yuri Provalov & Ors, reported in the House of Lords under the name of Premium Nafta Products Ltd & Ors v Fili Shipping Co Ltd & Ors (17.07.07)].

Now you're stuck: with an adjudicator's decision!

If you raise jurisdictional objections to an adjudication, for example that the contract is not in writing, you must make it clear at the time, preferably in writing, that you reserve your position to raise objections at any subsequent enforcement hearing. You must state that not only do you raise an objection on grounds of lack of jurisdiction but that you are not agreeing to be bound by the decision the adjudicator reaches on the issue and that you reserve your right to raise objections in the future. If you don't, like the defendant in this case, you will be taken as having agreed to be bound by the adjudicator's conclusions on jurisdiction and you will be stuck with his decision.

[Harris Calnan Construction Co Ltd v Ridgewood (Kensington) Ltd (15.11.07)]

New provisions on corporate manslaughter

The Corporate Manslaughter and Corporate Homicide Act 2007 comes into force in April 2008. It creates a new offence of corporate manslaughter and the intention is that it will be easier to prosecute companies and other larger organisations where a corporate management failing has led to death.

As the law currently stands, before a company can be convicted of manslaughter, a "directing mind" of the organisation (that is, a senior individual who could be said to embody the company in his actions and decisions) also has to be guilty of an offence. Only smaller companies with hands-on directors have been convicted as in larger organisations safety decisions are not taken at board level and rarely by one individual.

Under the new legislation an organisation will be guilty of an offence if the way in which its activities are managed or organised it causes a persons death and it amounts to a gross breach of a relevant duty of care owed by the organisation to the deceased. For an organisation to be guilty the way in which its activities are managed or organised by its senior management must be a "substantial element" in the gross breach.

For further information of the new provisions, including information on when a duty of care arises, what amounts to gross breach of duty and what is meant by senior management, access our more detailed analysis. Click to take note of the action you should be taking now to ensure your organisation will be compliant.