ENGGEN 734 – Engineering

Contracts for Project Managers

Semester One, 2024

Lecture One, Week One

Presented by Janine Stewart; Tim Palin; and Oscar Read

Lecture Outline: Friday
What we will cover…

 Course Introduction

 History of construction law

 Application in modern day

 Legal framework – outline of:

 Key legislation

 Contract

 Common Law / civil law

 Key issues / questions and outline from students

2
Course Outline
• Legal framework – legislation, common law, contract law
& equity
• The contract process
• Contract formation
• Concept stage of project
• The Project: Procurement
• The Project: Scope and standard of works
• Pricing & payment
• The Construction Contracts Act 2002 (CCA)
• Variations & valuation of variations
• Liabilities
• Insurance
• IPENZ, CCCS, NZIA

Assessments:
What does Mid Semester Break: 29 March–14 April 2024 • Individual assignment x 2
the syllabus • Team assignment
• Contributions and
cover? reflections
• Time in construction contracts
• Defects liability periods
• Notice provisions and time bars
• Suspension & termination (CCA)
• Standard forms
• Professional representative (role of the Engineer)
• Disputes under construction contracts
• Limitation (Limitation Act 1950, Limitation Act 2010, &
Building Act 2004)
• Health and Safety at Work Act 2015

End of lectures: 31 May 2024

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Admin
Key Information
 Tutorial Hours:
 Fridays: 12 - 2pm

 Assessment:
 Assignment 1 (Research question): due 11.59pm NZT Sunday 17 March 2024 (20%)
 Assignment 2 (Project Case Analysis): due 11.59pm NZT Sunday 21 April 2024 (30%)
 Assignment 3 (Group assignment): (30%):
 Part A: due 11.59pm NZT Sunday 12 May 2024
 Parts B and C: both due 11.59pm NZT Sunday 2 June 2024
 Assignment 4 (Contributions and reflections): due 11.59pm NZT Sunday 2 June 2024 (20%)

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Key people

Janine Stewart (Key Contact) Geoff White Grant de Lisle Oscar Read (Key Contact)
Janine.Stewart@minterellison.co.nz Geoff.White@minterellison.co.nz Grant.deLisle@minterellison.co.nz Oscar.Read@minterellison.co.nz

Matthew.Ferrier@minterellison.co.nz
Jordan.Oldham@minterellison.co.nz Charlene.Fairnie@minterellison.co.nz
Admin
Key Information

 Recommended Texts
 Nicholas Dennys and Robert Clay (eds) Hudson’s Building and Engineering Contracts (13th
ed, Sweet & Maxwell, London, 2015)
 Stephen Furst and Vivian Ramsay (eds) Keating on Construction Contracts (10th ed, Sweet &
Maxwell, London, 2016)
 Tómas Kennedy-Grant and Michael Weatherall Construction Contracts and Dispute
Resolution (Lexis Nexis, Wellington, 2016)

 Other Helpful Resources

 Building Contract Dictionary (3rd ed, Blackwell Science, 2001)

 MinterEllison’s Constructionary: http://www.constructionlawmadeeasy.com/Constructionary

 Building Law in New Zealand – Westlaw NZ>Commentary

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Admin
Key Information

 Required Resources:
 New Zealand Standard 3910:2013

 New Zealand Standard 3910:2023

 Both available to download and print a single copy for own personal use through the
Canvas reading list.

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Readings
Expectations

 You will be expected to prepare before each lecture using:

 The module content on Canvas

 Relevant cases and resources identified in the module content

 Relevant chapters in recommended texts

 NZS 3910:2013

 Other materials referred to in lectures

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 ‘Days in the life of a ‘typical’ construction project’

Territorial authority
Engineer to contract

Financier

Principal Contractor

Design and
consultant team

Role of: the Engineer

(3910:2013) /
the Contract
Administrator and
3910 and “special conditions” Independent Certifier
FIDIC (3910:2023)
NEC
• Variations
Bespoke
• Instructions
• Claims by contractor
• Extensions of time Extension
claims of time?
• Design development Liquidated Defect Liability period Latent defect period
• RFI damages

‘Completion’ date

Project concept Procurement Contract Project delivery Practical Defect Expiry of

• Define purpose • Contract framework commencement completion Liability limitation
of project • Design procurement “commencement (often not the Certificate periods
• Confirm output • Project delivery team date” “completion
• Concept design • Contractor • Signed date” set by
• Project structure • Design team contract (ideal) the contract)
• Acquire land if • Engineering team
have not done etc
so already
History of construction law

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History of construction law and
jurisprudence

The roots of construction law

 Area of law with longstanding case

law reaching back to 1800s

 Concepts and tools go back

hundreds of years (i.e. retentions)

 Many contract law precedents come

from construction cases e.g. Williams
v Roffey

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Construction industry in modern day
What’s happening today
 Period of uncertainty

 Change in Governments

 Pause on major Government workstreams

 Focus on procurement models

 Slow in private sector

 Material price inflation

 Labour constraints

 Credit constraints

 Building Code changes

 ‘Boom bust’ cycles

 Recession environment distressed projects

 Change in New Zealand standard form

 Strong use of arbitration and adjudication for disputes

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What does “construction” cover?
 Horizontal infrastructure
 Roads

 Rail

 Water

 Vertical infrastructure and buildings

 Public infrastructure

 schools, courts, hospitals,

sports facilities, etc
 Commercial

 Residential

 Industrial

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Legal Framework: Outline

• Common law vs civil law jurisdiction

• In a common law jurisdiction law is set by statute and common law
• In a civil law jurisdiction law is set by codes and statutes

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Common Law Jurisdiction
Key aspects…

• New Zealand is a common law jurisdiction

• Statute / common law / contract

• Common law is derived from custom and judicial precedent

• Courts apply common law principles to statutes

• A common law system gives precedential weight to common law, so that

consistent principles applied to similar facts produce similar outcomes

• Past common law binds judges that make decisions to ensure consistent
treatment

• Equity

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Civil Law Jurisdiction
Key aspects…

• In a civil law system core principles are codified into codes and statutes,
which serve as the primary source of law
• The purpose of codification is to provide all citizens with a written collection of
the laws which apply to them
• Judges apply and interpret the law contained in a code or statute to the facts
of a case
• Most EU states operate under civil law system

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Common Law vs. Civil Law

Common Law Civil Law

Written Not always Always

Constitution
Judicial Binding on lower courts Generally not binding, more
decisions guidelines
Writings of Little influence Significant influence in
legal some civil law jurisdictions
scholars
Freedom of Extensive – only a few More limited – a number of
contract provisions implied by law provisions implied by law
into contractual relationship into contractual relationship
e.g. good faith

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 What is the legal framework for a
construction project

 Statute and regulations

 Common Law

 Contract

 Equity

 Application of so many areas of law

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Key Legislation

 Construction Contracts Act 2002

 Building Act 2004

 Resource Management Act 1991

 Health and Safety at Work Act 2015 (came into force in April 2016)

 Fair Trading Act 1986

 Consumer Guarantees Act 1993

 Limitation Act 1950

 Limitation Act 2010

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Construction Contracts Act 2002
 Introduced in 2002 – significant amendments in 2015 and October 2023

 Purpose is to facilitate regular and timely payments between parties to a

construction contract

 Applies to all contracts where “construction work” is carried out (broad definition of
“construction work” – section 6)

 Construction Contracts Amendment Act 2015:

 Increased the scope of “construction works” to include design, engineering, quantity

surveying work and related services;

 Introduced retention regime from 31 March 2017;

 Broadened number of adjudications that can be enforced.

 Construction Contracts (Retention Money) Amendment Act 2023:

 Strengthened retentions – see later slides

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Construction Contracts Act 2002
 Payments under a construction contract (Part 2 CCA)

o Payment claim / payment schedule procedure (ss 19 – 24)

o Two principal remedies to recover monies due:

 Recover the unpaid portion of the amount claimed as a debt due in Court (ss
23(2)(a) and 24(2)(a))

 Contractor may serve notice of intention to suspend works for non-payment (ss
23(2)(b) and 24(2)(b))

 See e.g. CJ Parker Construction Limited (In Liquidation) v Ketan [2017] NZCA

 Suspension of Works (s 24A CCA)

 Adjudication process provides for speedy resolution of disputes (Part 3

CCA)

 Retentions scheme applies from 31 March 2017 22

Retentions under CCA

 What are they?

 What is their purpose?

 What other performance security options are there?

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Construction Contracts (Retention
Money) Amendment Act 2023
Key Provisions Summary

 Amends the Construction Contracts Act 2002.

 Commencement: Took effect on 5 October 2023 and applies to commercial

construction contracts made on or after that date, or renewed on or after that date.

 Purpose: To strengthen CCA’s retentions regime and allows MBIE to investigate

and prosecute retention money offences.

 Retention money is automatically trust property: Retention money must be

held in a compliant bank trust-account.

 Robust accounting and reporting requirements: Must keep proper and

available records, as well as provide information to beneficiary party at least every
3 months.

 Failure to comply can result in criminal prosecution under the Act and fines.
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Building Act 2004

 Wide meaning of “building work” covered under Building Act (s 7)

 Applies to the construction of new buildings as well as the alteration and

demolition of existing buildings (ss 8 and 9)

 Aims to improve control of, and encourage better practices in, building
design and construction

 This means:

o Clarity and guidance on the standards buildings are expected to meet

o More certainty that capable people are undertaking building design, construction and
inspection

o More scrutiny in the building consent and inspection process

o Better protection for homeowners through the introduction of mandatory warranties

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Building Act 2004

 Key sections:

o When and how to apply for a building consent (ss 40 – 52)

o National multiple-use approvals (ss 30A – 30H)

o Inspections by building consent authorities (s 90)

o Code compliance certificates (ss 91 – 95A)

o Certificates of acceptance (ss 96 – 99A)

o Implied warranties in relation to residential building work (ss 362H – 362P)

o Special provisions for certain categories of buildings – dangerous, affected, earthquake

prone, or unsanitary buildings (ss124 – 132A)

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Building Act 2004
 Building Act subject to reviews and amendments since its introduction

 Example: Building Amendment Act 2013

 Part of a package of changes which introduced new measures to improve the building and
construction sector and ensure sector delivers good quality building works
 Provided new consumer protection measures
 Created new remedies for breaches of implied warranties

 Example: Building Amendment Act 2016

 Changed the method methodologies by which local councils, engineers and building owners will carry
out assessments and deal with earthquake-prone buildings.

 Example: Building (Building Products and Methods, Modular Components, and Other
Matters) Amendment Act 2021

 Introduced greater regulation of building products and methods, including the extension of
obligations / liability to product manufacturer and suppliers. E.g.,
 redefining what a building product is;
 giving MBIE the power to issue regulations specifying produce information;
 new information requirements and penalties around product information; and
 others
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Building Code – performance based

 All building work must comply with the Building Code (first schedule to
the Building Regulations 1992)

 The Building Code prescribes functional requirements for buildings and

performance criteria with which buildings must comply in their intended
use (see section 16 BA04)

 Acceptable Solutions and Verification Methods are produced by the

MBIE as a means of establishing compliance

o e.g. Clause E2 adequate resistance to external moisture, Clause B2 durability,

Clause E3 Internal moisture

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Building Code updates
2021 Building Code update; new acceptable solution and
verification methods
• Energy efficiency for housing and small buildings, & large buildings
• Energy efficiency for HVAC in commercial buildings
• Natural light for higher-density housing
• Weathertightness testing for higher-density housing
• New Verification Methods

2022 Building Code update; new acceptable solution and

verification methods
• Protection from fire
• Plumbing and drainage
• Structural stability of hollow-core floors
• Energy efficiency

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Resource Management Act 1991

 Replaced more than 50 other environmental statutes. Before its implementation,

environmental issues were controlled by a variety of laws and administrative
agencies

 Aims to achieve a more coordinated, streamlined, and comprehensive approach

to environmental management

 Promotes the sustainable management of New Zealand's natural and physical

resources

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Resource Management Act 1991

 Regional councils prepare regional plans that focus on the management of air,
water, land and soil

 District councils prepare district plans that manage activities on the land e.g.
Building and earthworks

 If you want to do something that is not allowed under the RMA you have to apply
for resource consent (Part 6 RMA)

 When applying for a consent you must provide an assessment of the potential
environmental effects (AEE) of your project (s 88(2) RMA)

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Health and Safety at Work Act 2015

 Came into force on 4 April 2016

 Significantly broadens the range of parties responsible for health and

safety, heightens obligations and imposes harsher fines and penalties

 Introduction of ‘PCBU’ as the primary duty holder, required to ensure:

 The health and safety of workers employed/engaged/influenced/directed by the

PCBU

 That the health and safety of other people is not put at risk

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Health and Safety at Work Act 2015

 Due diligence duty for directors and officers

Primary liability

Exercise due diligence

to ensure compliance

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Health and Safety at Work Act 2015

 Increased penalties

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Fair Trading Act 1986

 Purpose is to encourage competition and to protect consumers from misleading

and deceptive conduct and unfair trade practices

 The FTA prohibits:

o Misleading or deceptive conduct (or likely to mislead or deceive)(s 9)

o False or misleading representations (s 13)

o Unfair trading practices (s 17)

 It applies to anyone in trade and to the goods or services they sell, or offer for
sale

 As of 17 March 2015, parties cannot, in trade, include an unfair contract term in

a standard form consumer contract or apply, enforce, or rely on an unfair
contract term

 Generally cannot contract out of FTA

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Fair Trading Act 1986
Fair Trading Amendment Act 2021: Unconscionable conduct and small
trade contracts

 The Fair Trading Amendment Act 2021 amended the Fair Trading Act 1986 (the
Act) to introduce the following 2 new protections against unfair practices:

 It prohibits unconscionable conduct in trade.

 Unconscionable conduct is serious misconduct that goes far beyond being commercially
necessary or appropriate (s 7 and 8 of the Act)

 It extends the Act’s existing protections against unfair contract terms in standard form consumer
contracts to also apply to small trade contracts.

 These are contracts between businesses that form part of trading relationships with an actual or
expected total value of less than $250,000 in any 12-month period (26B to 26E of the Act)
Fair Trading Act 1986

 E.g. A supplier of building materials who gives you a false impression as to the
quality of materials purchased

 E.g. A real estate agent who has misled the purchaser about the condition of the
property or some aspect of the agreement for sale and purchase

 E.g. A tradesperson that claims he or she is a member of a trade association

when he or she is not

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Consumer Guarantees Act 1993

 Provides that goods and services must meet certain guarantees

 The Act covers goods you buy, like materials and appliances for the house, as
well as the services provided by your architect, designer, builder or other
contractors

 Does not apply to goods usually used for commercial purposes, but may be
covered by the Sale of Goods Act

 Cannot contract out unless “fair and reasonable” to do so

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Consumer Guarantees Act 1993

 Materials you buy must be of acceptable quality, fit for purpose and complying
with description or sample (ss 6, 8, 10)

 Remedies for goods include a replacement, a refund, or keeping the goods and
paying a reduced price (s 19)

 The guarantee for the supply of services is that such services will be performed
with reasonable care and skill (s 28)

 Where the failure is in the service you can ask for the problem to be fixed or get
someone else to fix it and claim the cost of repair (s 32)

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Limitation Acts

Limitation Act 1950 Limitation Act 2010

Applies to acts or omissions before Applies to acts or omissions from 1

1 January 2011. January 2011.

Proceedings must be brought 6 Proceedings must be brought 6

years from the date that the cause of years from the date that the act or
action "accrued”. omission “occurred”.

Claims cannot be brought 15 years

after the date of the act or omission
on which the claim is based (15-year 15-year longstop.
longstop).

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Limitation Acts: When does time begin to
run?

Limitation Act 1950 Limitation Act 2010

Contractual claims
6 years from the date of breach.

Contractual claims An additional 3 years are available to

6 years from the date of breach. bring a claim if the claimant can satisfy
the Court that there is a “late knowledge
date”.

Tort claims
6 years from the date of the act or
omission.
Tort claims
6 years from reasonable discoverability. An additional 3 years are available to
bring a claim if the claimant can satisfy
the Court that there is a “late knowledge
date”.

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Common Law
Most relevant…

 Negligence

 Common law contractual remedies if not captured in statute

42
Contract Law

• A legally binding agreement between two or more parties

• Whatever is agreed takes precedence but there is an overlay of statutes e.g.

Contract and Commercial Law Act 2017, Fair Trading Act 1986
• Courts apply principles of contractual interpretation e.g. objective intention of
the parties
• Can set a different disputes forum

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Equity

44
Equity
Concepts and principles relevant to construction law

•Equity
• Distinct set of principles although
applied through common law
• ‘Clean hands’ doctrine

• Estoppel

• Waiver

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