When considering a contractor's primary obligations, attention often turns to those requirements relating to the required standard of the works and to the time within which they must be completed.
Often overlooked, however, is a contractor's obligation to carry out and complete the works. This obligation is often express (for example see clause 2.1 of JCT 2005 Standard Building Contract or clause 20.1 of NEC3) but will generally be implied if not and can give rise to a number of disputes.
What is the scope and extent of a contractor's completion obligation? How can contractors - in discharging this obligation - mitigate exposure to additional and unforeseen costs?
The starting point
Whether expressly or impliedly, a contractor is generally required to carry out and complete the scope of works that is contractually required of it. In return, it will be paid the agreed price. The amount and the character of the work that must be carried out by the contractor depends entirely on the description of the work contained in the contract. Sometimes the work will be described in very general terms (e.g. a habitable four bedroom house). In other cases, the work required will be described in great detail, by reference to drawings and specifications. Generally speaking, however, the contractual description of the work will be a hybrid: containing both general descriptions and a certain level of detail.
When considering a contractor's completion obligation, one may be confronted with two types of problem:
- What is the contractor required to 'complete'? What if the description of the work fails specifically to mention particular elements of work?
- Who bears the risk of any unexpected difficulties that may arise?
The first type of problem
For reasons of practicality and documentary limitations, no description of work - however meticulously prepared - can be expected to set out every element of work that is to be undertaken by a contractor. While omissions may more frequently arise with smaller work operations (for example the failure of a carpentry specification to specify the supply of nails), this is not always the case. Indeed, the case law demonstrates that more important elements of work are sometimes omitted from the detail.
When seeking to establish the contractual scope of work the courts will consider all of the descriptions of the work contained in the contract. The courts will pay equal regard to the general descriptions and to the detail, to which the established rules of contract interpretation will then be applied. Where detailed specifications and drawings do exist, it does not follow that they will prevail over the more general descriptions contained elsewhere. Indeed, to the contrary, the courts are quite prepared to give precedence to the general descriptions of the work and to recognise that - for a number of reasons - important elements of work are sometimes omitted from the detail.
Once the overall description of the work to be undertaken is established in this way, the courts will then hold the contractor to an obligation to perform whatever work is necessary to achieve it. The contractor's obligations will therefore include for any work that is not specifically described, if that work is essential to ensure the required end result.
This essential (but not specified) work is sometimes referred to as 'indispensably necessary' work. In the absence of specific provisions in the contract, this work will form part of the contractor's original price.
The second type of problem
Events sometimes arise which were unexpected by both parties, but which must be overcome to achieve completion. In these situations, the contract may be silent. Examples include:
- An imposed design being impracticable or even impossible to construct
- Environmental conditions being unexpectedly severe
- Site or subsoil conditions arising which nobody expected
- The need to repair works damaged by external causes (e.g. vandals).
When confronted with these types of circumstances, the courts have consistently held that - unless the contract provides for a specific entitlement - these are all issues that the contractor must overcome at its own cost.
The explanation given for this view is that, by agreeing to carry out and complete a project, a contractor effectively promises that it can and will do so - whatever difficulties it might encounter along the way. The additional work that is necessary to overcome such problems is sometimes referred to as 'contingently necessary' work. In the absence of a contrary contractual indication, such issues must be overcome by the contractor for no increase in the price.
The inclusive price principle
The requirement that both indispensably and contingently necessary work will - in the absence of express provisions in the contract - be regarded as included in the contractor's price is sometimes referred to as the 'inclusive price principle'. While the inclusive price principle can have profound effects, these effects can of course be mitigated by the contract.
For example, to address any uncertainties concerning indispensably necessary work, the parties can spell out in their contract the work that is included in the price. While there are a number of ways in which this can be done, a bill of quantities contract is perhaps the most obvious example.
Under a bill of quantities arrangement, the parties set out in detail what the contractor has agreed to do for the price. If certain items of necessary work were not set out in the bills, contrary to the applicable method of measurement, then an additional entitlement will accrue. A re-measurement contract is another option, which operates slightly differently but has similar results.
Provisions seeking to mitigate the effect of contingently necessary work are also common. One often sees provisions requiring an instruction in the event of impossibility, or affording the contractor an entitlement in the event that unforeseen ground or exceptionally inclement weather is encountered. Such provisions are necessary if the default position - i.e. full contractor responsibility - is to be avoided or mitigated.
- In the absence of any specific contractual provisions, a contractor's scope of works will be ascertained by construing the descriptions of the work contained in the contract as a whole. This could well involve the general descriptions of the works taking precedence over the detail comprised in drawings, specifications and other technical data.
- A contractor must carry out and complete all work that is necessary to deliver the scope of work as ascertained, even if it is not specifically mentioned in the contract.
- The contractor may encounter certain difficulties in carrying out its works. The contractor must generally overcome these difficulties without an increase in the price.
- The effects of the inclusive price principle can be reversed or mitigated, but clear contractual wording is required if the general rules are to be displaced.