Do you have a construction contract or is your contract expressly excluded by section 105(2) of the Construction Act 1996?
The recent decision in Universal Sealants (UK) Ltd (t/a USL Bridgecare) v Sanders Plant and Waste Management Ltd [2019] EWHC 2360 (TCC) looks at this important question in relation to the pouring of concrete.
In order to have a construction contract under s.104 of the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996) you must have an agreement with a person for any of the following:
- The carrying out of "construction operations” (which include the repair, maintenance, extension, demolition or dismantling of buildings or structures ‘forming or to form part of the land’ or any works ‘forming or to form part of the land’ including roadworks, power-lines, etc.);
- Arranging for construction operations to be carried out; or
- Providing labour for the carrying out of construction operations.
Whether or not a contract is a construction contract within the meaning of the Construction Act 1996 is a critical question because if it is, the payment and adjudication provisions contained in the Construction Act 1996 will be implied into your contract if it does not contain such provisions already.
What types of work are excluded from “construction operations”?
Section 105(2)(d) lists types of work that are excluded from “construction operations”, which include:
the “manufacture or delivery to site of building or engineering components or equipment; materials, plant or machinery or components for systems of heating, lighting, air conditioning, ventilation, power supply … except under a contract that also provides for their installation’” (s.105(2)(d)(ii)).
Section 105(2) was considered in the case of Universal Sealants (UK) Ltd (t/a USL Bridgecare) v Sanders Plant and Waste Management Ltd [2019] EWHC 2360 (TCC) which highlighted that a contract for the supply and delivery of concrete was not a construction contract or a construction operation and was expressly excluded by section 105(2)(d)(ii) of the Construction Act 1996.
The case: Universal Sealants (UK) Ltd (t/a USL Bridgecare) v Sanders Plant and Waste Management Ltd [2019] EWHC 2360 (TCC)
Facts
The claimant, Universal Sealants (UK) Ltd (Universal) sent the defendant, Sanders Plant and Waste Management Ltd (Sanders) a subcontract order for the supply of a particular grade of concrete. The parties had a previous history of dealings and the claimant had an account with the defendant.
The concrete was required to fill an expansion joint in a road. The concrete was delivered and placed by a gang of concrete layers. Universal subsequently complained that the concrete delivered was not what had been ordered and the engineer required it to be dug out and replaced. The parties disagreed on whether Sanders was in breach of contract. The dispute was referred to an adjudicator under the subcontract order.
Sanders maintained that the subcontract had not been made on the terms of Universal’s order, but instead had been made on the terms of its delivery note which had been signed by Universal on delivery of the concrete. In addition, Sanders argued that the subcontract did not involve the carrying out of construction operations because it was the delivery to site of materials and thereby one of the exclusions within s.105(2)(d)(ii) of the Construction Act 1996.
Decision
The Technology & Construction Court (QBD) Judge considered the claim and found that:
- The subcontract was on the terms of the subcontract order, incorporating Universal's terms and conditions. This was an offer to purchase concrete which had been accepted by Sanders’ conduct in delivering the concrete to the site. The delivery note was too late to be a counter-offer. The evidence was that it had been signed only after discharge of the concrete.
- The supply of concrete was within the exception contained in s.105(2)(d)(ii) as:
- it was unnecessary for the contract to refer to or use the word “installation”, but its absence was indicative of the nature of the subcontract; and
- the delivery of materials to site was excluded from construction operations “except under a contract which also provides for their installation”. The contract made no reference to installation and there was no price or rate for installation in the contract. The court rejected Universal’s argument that pouring the concrete amounted to installation. Concrete starts to set once it is mixed and because of this, it is almost always poured where it is required. The act of delivery and pouring amounted to the same thing: delivery. There was evidence that Universal instructed Sanders where to pour the concrete and Universal’s layers were standing by to position the concrete. Installation was something additional to delivery as stated by the words "also provides" within s.105(2)(d)(ii). Sanders did nothing further to the material and therefore there was no installation. For example, if the contract had been for the delivery of bricks this would fall within the exclusion unless the supplier "also" did something else, like laying the bricks. This was an unsurprising result and the judgment notes that the provision of concrete is unusual as it normally sets upon its delivery.