Ambiguities can be expensive
Failure to appreciate the significance of some of the basic issues associated with the definition of sites can have serious consequences for a party’s rights – including those to liquidated damages – under the contract, warns Joanne Emerson.*
01 April 2007
In the most basic of definitions, the site could just be a place where the work under a construction contract is performed.
However, ‘the site’ can be a difficult and amorphous concept and interpretations can differ widely depending on the type and location of construction work to be performed. For example, a project that involves a large amount of underground tunnelling has an entirely different conception of what is ‘the site’ than the conventional construction of an office building on a greenfield site.
In some cases, a site will involve working in a marine environment or could even involve building on top of a podium constructed by another contractor for a separate part of a larger project.
All variations in projects will require different considerations of the definition of 'the site' and the way in which this is addressed in contractual documents. Moreover, the site is inextricably related to ground conditions and therefore is closely linked with the concept of ground conditions claims.
So what is 'the site'?
The definition of ‘the site’ generally means the surface of the land area in question. This does not generally include the area below the surface. It is usual practice to include a more detailed description of the site in the construction contract either by way of a site plan or the lot/title descriptor.
Access & possession to contractors
Availability and access to the site is a key concept in any construction contract. There are essentially two types of site availability: access and possession. Exclusive possession is the highest form of site availability and may, in certain circumstances, entitle the contractor to claim legal rights over the land on which the site is located. Non-exclusive access is the least onerous form of site availability and is suitable to certain types of procurement, for example construction management where there are several contractors involved in the project.
The employer has a fundamental obligation under any construction contract to make the site available to the contractor (either by granting a right of access or possession). There is also generally an obligation implied into every construction contract to the effect that the employer will provide the contractor with a full and unrestricted licence over an appropriate access route from entrance point to the work area – this obligation must not be inconsistent with an express term of the contract.
Failure to make the site available in both a time and manner sufficient for the contractor to be able to fulfil its contractual obligations to execute the work will usually lead to a claim by the contractor that it has been prevented from executing the works by the completion date. In these circumstances if there is no mechanism in the contract to extend the time to complete the works, the employer runs the risk that this act of prevention will set “time at large” and preclude the employer from claiming liquidated damages.
Access to the site by others
The contractor’s right of access to or possession of the site, is subject to a general right of access for the employer and authorised persons such as the project manager, consultants and other contractors. The contract should address who bears the risk of those persons delaying or disrupting the execution of the work on site.
The contract may also provide that the contractor must allow the execution of the work by contractors engaged directly and/or indirectly by the employer (often referred to as “separate contractors”). This obligation can range from a mere acknowledgement to agreeing to actively facilitate and co-ordinate the contractors; work with the separate contractor’s work. If the contractor agrees to this more onerous obligation, then the contractor will also typically seek to exercise some control over the separate contractors by separate deed.
Ground conditions
Any consideration of the concept of ‘the site’ must also include a discussion about ground conditions.
Ground conditions often cause disputes, particularly in relation to the construction of certain types of projects such as dams, tunnels and marine structures. Historically, the employer has shouldered the risk of ground conditions due to the fact that it had a better knowledge of the site. In more recent years however, the normal practice has been to impose the risk on the contractor at a cost.
The usual position is that unless the contract provides otherwise or there is a contrary representation, the contractor must inform itself of all aspects of the work including the practicality of carrying out all parts of the work on the site in question. The contractor should ensure that it undertakes sufficient investigation about the conditions on the site prior to execution of the construction contract. This will typically require “all areas access” to the proposed site in order to establish what risks or potential risks the site may impose. If the employer wishes to allocate the risk of ground conditions to the contractor, the prudent course is to make this clear in the contract documents. Often the employer provides the contractor with as much information as possible concerning the nature of the site but without providing a warranty as to the accuracy of the disclosed information. Moreover, any information provided about the site should include appropriate qualifications. For example, where investigations express opinions for design purposes, a qualifying statement should be made to ensure the tenderers are aware that the opinions expressed may be those of persons who are less experienced or specialised than the contractor itself.
Every report included in the tender information should include a clear statement as to the purposes for which the report was prepared and the scope of the brief which formed the basis of the investigations. Where there may be areas of significant uncertainty or doubt with respect to the assessment of the ground conditions, these areas of doubt should be disclosed to tender. It is also recommended that the employer and all the tenderers attend a mandatory site meeting to discuss information available on the site conditions. Minutes of any site meeting should be kept and circulated to all tender.
On a practical level, the site represents the essence of any construction project. However, the nature of site and related issues such as availability, access and ground conditions are often overlooked. Failure to appreciate the significance of these issues, however, can have serious consequences for a party’s rights under the contract, including rights to liquidated damages. Accordingly, parties to a construction contract should carefully consider these issues during negotiations when they can be addressed.
* Joanne Emerson is a Bahrain-based legal consultant at the legal firm Norton Rose. Legal queries related to the construction sector can be addressed to Norton Rose through Gulf Construction Magazine at
editor@gulfconstructionworldwide.com
Norton Rose has had a presence in the Middle East for over 25 years and has advised developers, lenders and contractors in relation to the legal aspects of a wide variety of construction and infrastructure projects in the region.
With a combined team located in both the Bahrain and Dubai offices, Norton Rose is able to provide both contentious and non-contentious support to financiers, developers, contractors and specialist contractors in the region.
