Construction Law: A Glossary Of Terms

1. Adjudication 

Adjudication is a statutory dispute resolution mechanism under the Construction Industry Payment and Adjudication Act (CIPAA) 2012, to specifically deal with claims for payment relating to construction work or construction consultancy services.

2. Affidavit 

A written statement confirmed by oath or affirmation, for use as evidence in court.

3. Alternative Dispute Resolution (ADR)

Dispute resolution processes which attempt to avoid the perceived disadvantages of the traditional adversarial approach of the courts. Generally, they involve the appointment of a neutral third party to resolve a dispute within a more informal and conciliatory framework. They are often confidential and may have cost and time benefits to participants as the strict procedural requirements are often dispensed with.

4. Arbitration

Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.

5. As Built Drawings

Drawings which depict the details of the completed construction ‘as built’ as opposed to ‘as designed’. The drawings take into account changes to the design that may have occurred during the construction process. Most commonly requested for building services (plumbing, electrical, mechanical) and are generally used as the record of the physical construction works for the purpose of maintenance and future building work.

6.  Bills of Quantities (BQ)

A full description of the amount of work necessary for completion of building works. Usually, a BQ will have columns on the right-hand side of the page to allow the contractor to price the work

7.  Breach of Contract

Where a party to a contract fails to act (by a positive act or by omission) in accordance with its contractual obligations.

8.  Certificate of Completion & Compliance (CCC)

An official recognition that the building is fit for the purpose it was built for, meaning that it has been well-constructed and suitable for occupants to live in.

9.  Certificate of Making Good Defects (CMGD)

A certificate that is in relation to the completion of defects, imperfections, shrinkage and any other fault raised during the Defects Liability Period (DLP).

10. Certificate of Non-Completion (CNC)

A formal written notice to the contractor that they have failed to complete the works described in the contract by the completion date that was last agreed between the parties.

11. Certificate of Practical Completion (CPC)

A CPC marks the point at which the contractor has completed the contractual obligation and is ready to hand over the works to client/employer.

12. Concurrent Delay

A delay to the progress of the works under a construction contract which runs concurrently with another delay to the progress of the works. For example, the works may be simultaneously delayed by rain and an industry strike.

13. Condition Precedent 

A specified condition which must be fulfilled before the terms of an executed contract will become effective.

14. Contract Sum 

The price the client/employer agrees to pay a contractor for the performance of works. A contract sum may be varied during the course of the contract as a result of a variation of the works or other entitlement (eg delay costs). Also known as Contract Price.

15. Counterclaim

A claim by a Defendant/Respondent against a Plaintiff/Claimant, raised in response to, but not in defence of the Plaintiff/Claimant’s primary claim.

16. Critical Path

The longest sequence of tasks that must be completed to execute a project. The tasks on the critical path are called critical activities because if they’re delayed, the whole project completion will be delayed.

17. Damages

Compensation awarded by a court to a party for loss suffered as the result of a breach of contract or negligence. The four main types of damages are general, special, liquidated and exemplary. Other categories of damages include aggravated and nominal damages.

18. Default

A failure to perform a required act or obligation, or the performance of a dishonest or wrongful act or omission. Under a contract, specified defaults may entitle the other party to terminate the contract.

19. Defects Liability Period (DLP)

A specified period after the completion of a construction project during which the contractor is responsible for rectifying any defects or faults that may arise – typically lasts twelve to thirty-six months.

20. Delay & Disruption Costs

Extra costs incurred by the contractor as a result of interruption or reduced efficiency in performing the works, which are recoverable if permitted by the contract or at common law. These costs may include such things as the hire of plant or unproductive labour. Also known as Prolongation Costs.

21. Expert

A person who has the necessary qualification to give expert evidence in litigation or arbitration.

22. Extension of Time (EOT)

The additional time granted to the contractor to provide an extended contractual time period or date by which work is to be, or should be completed and to relieve it from liability for damages for delay.

23. Final account

The calculation of the sum due to the contractor in respect of the contract as a whole.

24. Force Majeure

An event which is beyond the reasonable control of the contracting parties and which prevents the works from being carried out. This may include flooding, earthquakes, cyclones, war, industrial disputes, pandemics, secondary boycotts and temporary failure to obtain export approvals. In construction contracts these events may provide a right to an Extension of Time or to terminate the contract.

25. Injunction

A court order that either prohibits a party from doing, or continuing to do a certain act (prohibitory injunction) or orders a party to carry out a certain act (mandatory injunction). The remedy is discretionary and will not be granted if an award of monetary damages would be a sufficient remedy. Injunctions are either interlocutory or permanent. In urgent situations, a party may be granted an interlocutory (interim) injunction at a separate court hearing to preserve the status quo until the dispute has been disposed of at a full court hearing.

26. Latent Defects

Defects caused by failures in design, workmanship or materials which may not become apparent or readily detectable (even with the exercise of reasonable care) until many years after completion of the project or long after the end of the defects liability period. c/f Patent Defects.

27. Limitation Period

A set period of time prescribed in contract or statute during which an action may be commenced in court beginning on the date when the cause of action arose.

28. Liquidated Damages (LD)

A contractually ascertained or pre-determined amount of damages that are claimable by either party in the event of a breach of contract.

29. Lump-Sum Contract

A fixed price contract and is not subject to re- measurement or recalculation except for Provisional Quantities and Variations.

30. Mediation

A non-formal and wholly voluntary process involving an impartial third party as the Mediator. A Mediator’s role is to facilitate parties in reaching a mutually satisfactory resolution without going through or completing a trial or appeal.

31. Nominated Sub-Contractor (NSC)

A sub-contractor selected by the client/employer to carry out an element of the works

32. Omissions

Removal of part (or, on rare occasions, all) of the scope of work from original scope of work of a contractor or sub-contractor.

33. Partial Possession 

A circumstance whereby a party retains or assumes rights to possess or occupy a portion of land or premises the subject of an agreement.

34. Patent Defects

A defect that exists in project works that are able to be ascertained or identified by making reasonable enquiries or investigations at the time of practical completion.

35. Pay-When-Paid Clause

The obligation of one party to make payment is conditional upon that party having received payment from a third party.

36. Performance Bond

A performance bond is issued to one party of a contract as a guarantee against the failure of the other party to meet the obligations of the contract. A performance bond is usually issued by a bank or an insurance company.

37. Preliminaries

Work and materials necessary for the execution of building works, but not actually forming part of the completed works themselves. Examples are site huts, scaffolding, site clearance, plant and temporary lighting.

38. Privity of Contract 

The general legal principle that only those persons who are parties to a contract may enforce it.

39. Progress Certificate

A certificate generally issued to the contractor which certifies the amount of work completed and the amount for which the contractor is entitled to payment from the client/employer.

40. Progress Claim

A claim made by the contractor seeking payment of money from the client/employer proportionate to the amount of work completed to date. Progress claims are frequently made on a monthly basis.

41. Provisional Sum

A provisional sum is an allowance or estimate, made for a specific part of the project that is yet to be described in enough detail for contractors to appropriately price.

42. Relevant Event

An event that causes a delay to the completion date, which is caused by the client/employer, or a neutral event not caused by either party. Relevant events entitle the contractor to claim an EOT; that is for the completion date to be extended.

43. Remeasurement Contract

A remeasurement contract is where the work is measured and valued against agreed rates. There is therefore no agreement as to a lump sum, but there is agreement as to the basis upon which the work will be valued.

44. Retention

Retention is a percentage (usually 10% of total work done certified, subjected to a limit of 5% of contract sum) of the amount certified, that is deducted from the amount paid and retained by the client/employer. The purpose of retention is to ensure that the contractor properly completes the activities required of them under the contract. Retention can also be applied to sub-contractors.

45. Set Off

A cross debt or cross demand, which entitles a party to offset the debt against the other party’s claim. For example, a client/employer may set off monies in its progress payment if it has rights of set-off against the contractor.

46. Step-in Rights

Rights to replace or be a substitute for another or to interpose or become involved (usually so as to halt or hinder an action).

47. Suspension of Works 

When a contractor decides to temporarily hold off his construction work.

A contractor who has obtained an adjudication decision in its favour may suspend the performance of its work, without being in breach of contract and is entitled to an extension of time as well as loss and expense incurred if the adjudicated amount is not paid for.

48. Termination of Contract

Termination of contract means that to treat the contract as an end. When a contract is terminated, the parties to the contract are no longer obliged to perform their obligations under the contract.

49. Time at Large

If the contractor fails to achieve practical completion by a specified date as a result of a delay by the client/employer and an Extension of Time is not assessed and granted in respect of that delay, the contractor will only be obliged to achieve practical completion within a reasonable time. An express obligation to complete by the stipulated date is replaced by an implied obligation to complete within a reasonable time.

50. Variation

Any change to the original contract which can be in a way of addition or omission to the original scope of work.