Construction FAQs

1. Must a contract be in writing to be binding?

No – a contract is an offer and acceptance. There requires to be consensus between the parties – on certain essentials. Consensus is tested objectively. The difficulty with a verbal or partially verbal Contract, is proving the terms which have been agreed.

 

2. Is an unsigned contract, or one signed by only one party, binding?

Yes – provided there has been agreement as to its terms. The benefit of a contract signed by both parties is that there can be no disagreement that such terms form part of the contract. It will not be an answer for a person to say that he did not read a document before signing it or that he did not understand it. The meaning of certain terms within the contract may of course be an entirely separate matter upon which various disputes may arise.

 

3. Can a party claim loss and expense if there is no loss and expense clause in the contract?

No – although there may be circumstances in which a claim for damages for breach of contract can be made on grounds such as late or incorrect information, delays caused by the Employer etc, such claims will depend upon whether there are express or implied terms regarding such obligations. Various hurdles require to be overcome to pursue such a claim in damages as opposed to relying on an express contractual “entitlement ” to loss and expense.

 

4. Where an Architect/Engineer under-certifies, is the Contractor entitled to interest?

This entitlement would only arise in certain limited circumstances where for example the under-certification had been done in bad faith, fraud was involved or had been caused by client interference. Under-certification of itself does not set up an entitlement.

 

5. How do you successfully tie up a Guaranteed Maximum Price contract to avoid any further claims?

With the utmost difficulty! A Guaranteed Maximum Price is normally linked to a fixed or identifiable scope of work. Whilst there may be issues regarding design development, any additional changes not foreseen by the Contractor at the time of entering into the contract will not necessarily be accommodated within the GMP. In addition the GMP concept does not generally prevent a claim for losses sustained arising from breaches of contract i.e. late information, lack of or restricted possession.

 

6. Arbitration was commonly used for the final determination of disputes but the Scottish law needed updated - has it been?

Yes. The Arbitration (Scotland) Act 2010 provides a world-leading statutory framework for the conduct of arbitrators in Scotland. It sweeps away a lot of old out-dated rules and focuses on providing a speedy, cost efficient and private dispute resolution mechanism.

 

7. What is the limitation or timebar period for claims?

This is set out in the Prescription and Limitation (Scotland) Act 1973 as amended. Generally speaking, claims under a contract prescribe (are extinguished) five years after they become enforceable. In relation to a claim for damages for breach of contract or breach of duty, the general rule is that such a claim may subsist for 5 years from the date that the damage has been caused by a breach or, the date of reasonable discoverability of such damage, whichever is the later, before it is extinguished by prescription.


The concept of discoverability postpones the start of the five year period, for example, in the case of latent defects, to the date the party discovers or, should with reasonable diligence, have discovered the damage and that it was caused by a wrongful act or omission. This is subject to a “long stop” date of 20 years from the date of damage. Different rules apply in relation to claims for personal injuries. It is important to note that 6 and 12 year periods often inserted in contracts, particularly in consultants’ appointments, are English law periods of limitation.

 

8. Where the contract is said to be subject to English Law, must you sue in England?

No – the choice of law of the contract does not dictate where a party can sue or be sued. This is determined by rules of jurisdiction contained in the Civil Jurisdiction and Judgements Act 1982. These may alternatively be spelt out in the contract. If not, the most common grounds of jurisdiction are the place of domicile of the defender or the place of performance of the obligation in dispute e.g. where the sums outstanding are to be paid – at the pursuer’s place of business.

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