Angus Dawson runs through some of the most common questions asked by clients hoping to speed overrunning work on their homes, and warns of some potential implications
Projects to create a dream home are often beset by delays, leaving clients frustrated and looking for practical solutions. Some of clients’ more common questions – and potential pitfalls – can be foreseen.
What can I do to speed up the works?
Even if the contractor is in culpable delay, the client can seldom require it to accelerate the works at its own cost. Check for other ways to try and speed up completion.
For example, if there are non-critical items (such as landscaping), the client might wonder if it has the contractual right to omit these so they can be completed after practical completion by the existing or another contractor? However, choosing another contractor might give the original contractor a claim for loss of profit on the omitted element.
If the client accepts practical completion with an obligation on the contractor to complete outstanding works after, it should ensure it has a specific date, ideally backed by damages if the works are completed late. You will also need to consider insurance arrangements as cover often lapses at practical completion.
Instructing the contractor to accelerate or re-programme works may amount to a variation and entitle it to additional payment.
Can I move in?
Rental costs and practical issues often lead clients to want to move in before the works are complete. The effect of moving in early will depend on the contract terms.
The JCT Standard Building Contract includes provisions which entitle the client to take possession of part of the works before practical completion. The contractor’s consent is required, but this cannot be unreasonably withheld or delayed. If partial possession is taken, practical completion of that part of the works will be deemed to have occurred, the defects liability period for that part will begin straight away and there will be a proportionate reduction in the level of liquidated damages payable for delay in completion of the balance of the job. Clear records should be kept of which elements are taken over.
If the contract excludes partial possession, or the relevant procedure is not followed, early occupation may be deemed to be acceptance that practical completion has occurred. If early occupation is to be taken outside partial possession provisions, you should document with the contractor what works are outstanding and when these are to be completed. Again, insurance needs consideration.
Can I get rid of my contractor?
Most contracts limit the client’s right to terminate a contract to insolvency or failure by the contractor to proceed with the works in a regular and diligent manner.
The client cannot necessarily terminate just because the contractor has not completed the works by the contractual completion date. Wrongly exercising a termination clause is likely to amount to a repudiatory breach (see below).
Even if the client has grounds to terminate, it will need to consider the practical effect of doing so. It will need to be realistic about the programme and cost implications of terminating and appointing a new contractor. Warranty issues will also need to be considered as the more contractors involved in a project, the more scope there is for finger pointing if there are defects in the works.
Plotting a course through a project in delay can be complicated and frustrating for clients. Careful consideration therefore needs to be given both to the terms of the building contract and to the practical implications of taking a particular course of action.
Angus Dawson is senior solicitor at Macfarlanes
In plain English
Repudiation of a contract has to be mutual or the question of damages could arise
A repudiatory breach occurs if a party shows an intention no longer to be bound by the terms of the contract. The occurrence of the breach does not itself terminate the contract – for this the innocent party has to accept the repudiation.
If a repudiatory breach is accepted, both parties are discharged from any further obligations under the contract and the innocent party can claim damages. In the context of wrongful termination of the contractor’s employment, this is likely to be a claim for loss of profit on the balance of the job.
But how do you know if a breach is repudiatory?
The key element here is that the offending party has made its intention clear that it no longer intends to perform its obligations. Informing the contractor that its employment has been terminated where the client has no contractual grounds for termination will amount to a repudiatory breach.
As a result clients need to be aware that even if they think they have strong grounds for terminating the employment of the contractor, it is always open to the contractor to argue that the contract has been repudiated – and to look to recover damages.