Good faith – there is no general concept of good faith under English common law, but it is imposed by most jurisdictions with a Civil code . An express duty to act in accordance with good faith principles appears at clause 10.1 of the NEC 3 Engineering and Construction Contract. Such a duty may be implied by reference to the particular circumstances, the parties’ intentions, and commercial norms ( Yam Seng PTE v International Trade Corporation [2013] ). Governing law – this is the law that the parties choose as being the law of the contract, and which will be applied when interpreting the rights and obligations of the parties under the contract. It does not have to be the law of the country in which the contract is to be performed, but where no express provision has been included, it is likely that this will be the governing law. into two limbs. The first limb provides that a claimant can recover damages for losses which would arise in the ordinary course of things from the breach of contract (direct loss). The second limb provides that it may also recover for other losses likely to arise from a special circumstance, provided it was within the contemplation of the parties at the time of the contract (indirect or Consequential loss ). Housing Grants, Construction and Regeneration Act 1996 – UK legislation enacted with the intention of improving cash flow in the construction industry by providing a transparent payment structure reinforced by the right to suspend works for non-payment and swift resolution of payment disputes. Key provisions are that it requires construction contracts to have defined payment periods, and the paying party is obliged to pay the amount certified unless certain notice requirements Hadley v Baxendale – the case that established the rule applied to recovering Damages based on a foreseeability test which is divided
The final date for payment must be certain, and not conditional on an event. Fitness for purpose – the standard or quality which may be applied to the work and materials supplied under a construction contract. Generally, the standard applied under a construction contract is Reasonable skill and care , but the higher ‘fitness for purpose’ standard is implied where (1) the contractor undertakes design of the relevant works or (2) the employer makes known to the contractor a particular purpose for which the works are to be used. It may also be included by use of express wording. Different rules apply to design teammembers. Fitness for purpose obligations impose Strict liability on the party agreeing to meet the obligation. Force majeure – a term derived from Napoleonic law, which describes a neutral ie no fault event which prevents construction works from being performed and/or completed. The event must be something which neither party could have anticipated would occur at the outset of the project. It will usually give entitlement to an extension of time, and if continuing beyond a period specified in the contract, will excuse the parties from future performance and provide a ground for termination. cost, but does not make a causal link between the two, usually because there are numerous events, with complex interdependencies, which are said collectively to have caused the loss. GMP – an acronym for “Guaranteed Maximum Price”, a form of contract procurement which transfers to the Contractor all the price risk once the contract sum has exceeded the GMP, other than in the case of defined exceptions such as employer changes. Global claim – a claimwhere the contractor identifies a total cost that has been incurred, and the events that have caused him to incur the
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