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Construction Update: Momentum Maintained in 2017

12 January 2018

The most notable developments in the Irish construction industry in the last 12 months range from an important construction case law development, the new standard forms of construction contract and the use of letters of intent.

Construction defects: time limits for actions in negligence

In the recent case of Brandley & Ors v Deane & Ors, the Supreme Court provided some much-needed clarity on when the statutory time limit starts to run for property damage claims in negligence.

The Court unanimously confirmed that time runs from the date that physical damage manifests, i.e. the date on which ‘damage’ is capable of being discovered by a plaintiff.

The Court also provided clarification on what constitutes ‘damage’. The Court considered whether a defect constitutes damage and concluded that there may, in certain cases, be a distinction between a ‘defect’ and the subsequent damage caused by that defect. The test in these cases is not whether the defect is capable of discovery; it is whether the subsequent physical damage caused by that defect can be discovered. 

New RIAI contract   

The RIAI forms of building contract, namely the yellow form (remeasurable) and blue form (fixed price) have been updated, incorporating edits into the RIAI 2012 editions. Both forms of building contract are widely used in Ireland on a wide range of building projects.

The RIAI contracts are updated in a number of respects, including changes to reflect the Construction Contracts Act 2013 (CCA), which applies to construction contracts entered into after 25 July 2016. The RIAI contracts incorporate amendments relating to payments, so that applications for payment are issued and payments themselves are discharged subject to timeframes which are consistent with the CCA. The drafters also introduced provisions to address notices under the CCA, so that CCA notices are treated differently to other contractual notices.

The RIAI amended contracts are not fully in line with the CCA. Although the CCA provides that parties can refer disputes relating to payments to adjudication at any time, the RIAI amended contracts provide that all disputes must go to conciliation before the parties can avail of statutory adjudication or arbitration.

Letters of intent

Letters of intent are regularly used as a means of mobilising contractors before parties enter into a full binding contract. Letters of intent can, however, lead to unintended consequences for both employers and contractors.

Letters of intent can be broadly categorised as:

  • Non-binding letters, called ‘comfort letters'
  • “If” contracts, where the letter of intent is an offer capable of being accepted
  • Binding agreements

In the case of the second two categories, letters of intent may give rise to a binding contract.

In larger construction projects, letters of intent typically constitute binding contracts, which are issued subject to an expiry date and/or a capped liability on the employer’s part.

Where letters of intent fall within the definition of a construction contract under the CCA, the provisions of the Act will apply.

In all cases, it is important that appropriate advice is obtained so that the letter reflects the commercial intent of the parties.

Conclusion

While some obvious challenges remain within the industry, for example, the uncertainty arising from Brexit and the increasing cost of construction, the sentiment and outlook within the construction industry for 2018 is positive. All indicators suggest growth across all construction sectors.

The issues covered are generally noteworthy for all construction industry participants in particular for employers, contractors and construction professionals.

The complexity of the issues that arise under each topic will vary on a case-by-case basis and where appropriate, it is important that specific legal advice is obtained.

For more information, please contact a member of our Construction team.


The content of this article is provided for information purposes only and does not constitute legal or other advice.

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