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Articles from the Silver Shemmings Ash Team on contractual matters, recent case law changes and items of interest in the construction and property world

Common Intention At Time Of Contract

May 31, 2019 | Silver Shemmings

Having spent just over 12 years in the construction industry, initially qualifying as a civil engineer, my time has since been spent as a solicitor resolving disputes on the part of my clients. One of the key insights in separately representing the full spectrum of stakeholders in the construction industry is that I gain the differing perspectives of each of the entities in the full delivery of a construction project

As a solicitor specialising in the construction and property field, I retain a particular interest in small- to medium sized construction and property companies, most likely on account of my time spent with such companies while I was an engineer. I do not think I would be exaggerating if I were to say that the situation is more treacherous and risky today. What is very apparent are the trends and the patterns that arise when a construction contract is successfully discharged or in the alternative ends up in a dispute. Statistics aside, it, in fact, does not require a great deal of science to be applied to understand when and how a dispute will occur

COMMON INTENTION

I have previously written and presented seminars on the point that a vast majority of disputes commence and are created at the time of formation of the agreement. Certainly, it will be that the seed is sown for a potential dispute later on. I rely upon this on the basis that the courts will generally seek to understand what the common intention was at the time of contract. Any ambiguities or intentions that can be construed from the agreement will be held. This is generally a strict view taken, as it is not for the courts or any adjudicator to make a bad bargain a good one, their purpose is merely to give effect to the terms of the agreement. The most transparent pattern that appears to emerge is the vast gulf that is apparent between employers and contractors/subcontractors and how the relationships are viewed internally

Repeatedly, employers or contractors who employ subcontractors will say that they struggle to find those parties who will deliver a product in time/budget to the right quality without a threat of insolvency. Conversely, small companies still face the threat of delayed and disrupted cashflow and non-payment despite what the law provides for under the Construction Act 2013

LIQUIDITY

It becomes somewhat irrelevant as to the quality of work a small company can deliver if they simply cannot meet their own payment obligations, especially when significant sums of labour are considered. Liquidity becomes an issue, and the ultimate success of the project will have boundaries and parameters imposed that introduce a further threat of failure to the overall project. Having acted in a number of corporate insolvency matters, this is a repeated process and is sadly quite common.

Inherently, this is an internal conflict that exists within the construction industry and, when viewed from the outside in, on the face of it appears to be counterproductive and resists growth

HIGH RISK

What is clear from the banking sector is that there is an appetite to support small companies who wish to grow, however in the current model and circumstances, such small companies are seen as high risk to traditional banking, with little collateral or leverage to provide. Engaging the banking sector to view such companies as being less of a risk to provide working capital to has in the past been based upon time spent with the company to address its own issues

Chiefly, there are a real number of issues that contribute to the reasons why payment in the construction industry in Ireland is chronically poor and what the potential solutions are, including adjudication. Many are fascinating and academically interesting to all but those who are faced with the issue of not being paid. However, the immediate resolution requires the payee to take the steps that are needed, engage with the legislation and to act on the issue. Education through seminars and lectures will assist in the long term to avoid the chronic problems that remain

This article was first published in CIF Construction Magazine in May 2019, which can be found here

Author Henry Hathaway is a Partner with Silver Shemmings Ash and is a graduate of Trinity College Dublin (Civil Engineering). He is a qualified Civil & Structural Engineer and has previously spent twelve years in the Construction Industry representing both Contractors and Clients in Engineering and Project Management, he specialises in Pre-Contract Negotiation, Contract Formation, Project Lifecycle, Tender Development, Identification of Delay & Disruption, Establishment of Claims, Ascertainment of Costs

At Silver Shemmings Ash, we provide seminars and training alongside our core activities in contentious and non-contentious matters. The purpose of these is to facilitate a greater knowledge and understanding of construction and property law. There remains a considerable lack of training in such areas for companies and this is an issue which we are looking to address


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