What exactly is a construction contract?

Posted: 19th March 2019

BuildersWhere construction contracts make no specific provision as to how disputes are to be resolved, a statutory adjudication regime kicks in – but that begs the question of what exactly is a construction contract.

In this guideline case, the High Court ruled that a contract to provide a feasibility study in respect of a revolutionary public transport proposal did infact fit the bill.

An engineering company had been asked by a client to investigate the viability of using hyperloop technology to link two cities as part of the Northern Powerhouse scheme.

A hyperloop is a mode of passenger or freight transport in which pods are propelled by magnetic levitation at speeds of up to 760mph.

The company’s fee for the work was agreed in the form of an appointment letter at £350,000 plus VAT, but only £75,000 of that sum was paid. The letter did not contain a dispute resolution clause and, in those circumstances, the company invoked the Housing Grants, Construction and Regeneration Act 1996 to appoint an adjudicator.

The adjudicator awarded the company the £275,000 balance of its fee, plus more than £44,000 in interest. That sum remained unpaid and the company launched enforcement proceedings. The client resisted the claim on the basis that the agreement was not a construction contract and the adjudicator therefore lacked jurisdiction to consider the matter.

In dismissing the client’s arguments, the Court noted that the company had been engaged to assist with the definition and detailed design of construction operations that it was intended would subsequently be carried out.

The agreement fell fairly and squarely within the definition of a construction contract. The client’s other grounds of challenge to the adjudicator’s jurisdiction were also rejected and the Court entered summary judgment in favour of the company for the full amount of the award.