Ireland: GAR Know How Construction Arbitration

Last Updated: 29 July 2019
Article by Karen Killoran, Niav O'Higgins and Kate Monaghan

LEGAL SYSTEM

1 Is your jurisdiction primarily a common law, civil law, customary law or theocratic law jurisdiction? Are the laws substantially derived from the laws of another jurisdiction and, if so, which? What instruments have legal force and effect? Who are the lawmaking bodies? How and where are new laws published? Can laws be passed with retrospective effect?

Ireland is a common law jurisdiction deriving its laws substantially from laws of other common law jurisdictions, principally England and Wales. The Constitution, Acts of Parliament, Statutory Instruments, regulations, European Union legislation all have legal force and effect. The Oireachtas (the Irish parliament comprising two houses – the Dail and the Seanad) is the lawmaking body. New laws are published by the Oireachtas on the Irish Statute Book (irishstatutebook.ie) and are signed into law by the President. Laws can be passed with retrospective effect, provided they do not seek to render as an infringement, an act that was innocent at the time of its commission (article 15.5.1 of the Constitution) as upheld by the Irish Supreme Court in McKee v Culligan.

Typically, construction contracts in Ireland provide for alternative forms of dispute resolution procedures such as mediation/conciliation/arbitration, etc, rather than referral of disputes under a construction contract to the courts. As such, there is a limited pool of decisions relating to constructions disputes emanating from the Irish courts. Practitioners therefore tend to look to court decisions coming from the United Kingdom for guidance.

CONTRACT FORMATION

2 What are the requirements for a construction contract to be formed? When is a "letter of intent" from an employer to a contractor given contractual effect?

The essential requirements of a construction contract are: agreement, consideration, certainty, intention to create legal relations and capacity.

If a letter of intent is to be given contractual effect, this should be clear from its terms. The letter of intent should: record the agreement of both the parties, provide for consideration and be clear on its face that the parties intend to enter into a contractually binding arrangement (an intention to create legal relations) and that the terms of that arrangement are clear.

CHOICE OF LAWS, SEAT, ARBITRATOR AND LANGUAGE

3 Are parties free to choose: (a) the governing law of their contract; (b) the law of the arbitration agreement; (c) the seat of the arbitration; (d) any arbitral rules; (e) anyone to act as arbitrator; and (f) the language of the contract and the arbitration? If not, what are the limitations on choice and what happens if the parties act contrary to them?

Under the Arbitration Act 2010 (the 2010 Act), parties are free to choose the governing law of their contract, the law of the arbitration agreement, the seat of the arbitration, the arbitral rules, the choice of arbitrator(s) and the language of the contract and arbitration.

If the parties do not agree the number of arbitrators or the appointing body in their arbitration clause, the 2010 Act, provides that the arbitral tribunal will consist of one arbitrator and the Irish High Court has the power to appoint the arbitrator in the absence of an alternative agreement between the parties. In an arbitration with three arbitrators, each party appoints one arbitrator, and the two appointed arbitrators will appoint the third arbitrator. If a party fails to appoint the arbitrator within thirty days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within thirty days of their appointment, the appointment will be made by the High Court. The 2010 Act incorporates the UNCITRAL Model law wholesale and so its provisions will apply to an arbitration under the 2010 Act unless the parties agree to use another set of ad hoc rules or institutional rules.

In January 2018, the Irish High Court in Achill Sheltered Housing Association CLG v Dooniver Plant Hire Ltd [2018] IEHC 6 granted an order determining that the appointment of an arbitrator had been invalid, as the matters referred to arbitration had not previously been referred to conciliation as required under the contract.

IMPLIED TERMS

4 How might terms be implied into construction contracts? What terms might be implied?

The common law of Ireland has developed to include various specific implied terms in construction contracts, many of which relate to design and quality. Terms may be implied into a construction contract by statute, by custom or practice or in order to satisfy the 'business efficacy' test so as to make a contract workable. Generally, an employer under a construction contract will be under an implied term of cooperation, which includes doing all that is necessary on its part for the execution of the Works. Contractor implied terms include a duty to complete works within a reasonable period of time (where none is specified or an act of prevention make the date for completion inapplicable), a duty to execute work with proper skill and care in a good and workmanlike manner and a duty to use materials that are reasonably fit for purpose and of good quality.

The Sale of Goods and Supply of Services Act, 1980 (the Sale of Goods Act) applies to construction contracts in Ireland and implies terms that include that the contractor has the necessary skill to render the service, that the service will be supplied with due skill, care and diligence and that where materials are used, they will be sound and reasonably fit for purpose. The Sale of Goods Act also creates a statutory right of action for misrepresentation.

CERTIFIERS

5 When must a certifier under a construction contract act impartially, fairly and honestly? To what extent are the parties bound by certificates (where the contract does not expressly empower a court or arbitral tribunal to open up, review and revise certificates)? Can the contractor bring proceedings directly against the certifier?

There is an implied contractual obligation for the certifier to act independently, fairly and impartially as between the contractor and the employer. It is not unusual in Ireland for the employer to appoint an employee within its organisation as employer's representative and certifier under the construction contract, but the same duties of impartiality will apply.

The commonly held position in Ireland prior to 2007 was that a contractor was entitled to enforce an interim payment certificate by way of summary judgment as a debt due. Following the decision of the Irish High Court in Moohan & Bradley Construction Limited v S&R Motors Limited (2007), contractors operating under the standard RIAI contract terms can no longer rely on being awarded summary judgement in court on interim certificates where a valid defence is raised. In such cases, even where judgment is granted, the execution of that judgment may be stayed pending the outcome of an arbitration hearing on all the issues between the parties. Moohan & Bradley has continued to be applied in a number of recent Irish cases.

COMPETING CAUSES OF DELAY

6 If an employer would cause (eg, by variation) a two-week critical delay to the completion of the works (which by itself would justify an extension of time under the construction contract) but, independently, culpable delay by the contractor (eg, defective work) would cause the same delay, is the contractor entitled to an extension?

Irish law (like the law of England and Wales) is constantly evolving on this topic and there has been no Irish decision since the case of Walter Lily v Mackay (2012) in England. Irish law tends to follow the precedent set down in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) regarding concurrency of delay, namely:

If there are two concurrent causes of delay, one of which is a relevant event, and the other is not, then the contractor is entitled to an extension of time for the period of delay caused by the relevant event notwithstanding the concurrent effect of the other event.

Standard forms of construction contracts used in the private sector in Ireland (RIAI and Engineers Ireland forms) generally do not include a clause dealing with concurrent delay. However, in recognition of the ever evolving law in this area and the risk of remaining silent leading to disputes, parties will generally include a concurrent delay clause in their construction contracts dealing with, in particular, whether the contractor can recover delay costs where there is an entitlement to an extension of time for concurrent delays.

The public works contracts in Ireland for use on all public sector construction projects, expressly provide that a contractor is not entitled to recover delay costs for the period of concurrent delay where the works are concurrently delayed by more than one cause and one or more of the causes is not a compensation event under the contract.

DISRUPTION

7 How does the law view "disruption" to the contractor (as distinct from delay or prolongation to the completion of the works) caused by the employer's breaches of contract and acts of prevention? What must the contractor show for a disruption claim to succeed? If an entitlement in principle can be shown (eg, that a loss has been caused by a breach of contract) must the court or arbitral tribunal do its best to quantify that loss (even if proof of the quantum is lacking or uncertain)?

The standard form contracts in Ireland tend to be silent on the issue of disruption, namely, there is generally no express provision to the effect that the employer will not disrupt the contractor's work save that the contractor's right to claim disruption is expressly excluded under the Irish public works forms of contract and only delay costs notified in accordance with the strict provisions of the public works contracts and included in the contractor's tender are recoverable.

The courts recognise an implied term of construction contracts that neither party will hinder the other in completion of its contractual obligations and so a contractor may rely on this implied term to ground a claim for disruption that is essentially a breach of contract claim and the remedy will be compensation for the loss and expense incurred.

The contractor must show that the disruptive event was at the risk of the employer and that this event caused the contractor's claimed losses. Establishing a claim for loss of productivity or disruption is dependent on very precise records being kept and produced by the contractor. The contractor must be able to prove the effect of each individual disruptive event on its work and this test is applied quite strictly by the courts.

ACCELERATION

8 How does the law view "constructive acceleration" (where the contractor incurs costs accelerating its works because an extension of time has not been granted that should have been)? What must the contractor show for such a claim to succeed? Does your answer differ if the employer acted unreasonably or in bad faith?

The Irish courts have not yet had cause to determine whether a doctrine of "constructive acceleration" exists in Ireland, nor do standard form contracts in Ireland expressly recognise the concept. However, were an Irish court to be called upon to consider the issue, it more than likely would follow the position in England and Wales, in which no definitive authority exists for constructive acceleration.

However, under Irish law, in practical terms should a contractor be forced to accelerate its works in order to avoid the application of liquidated damages where delays are subsequently found to be due to the fault of the employer, a contractor may be able to recover the costs of acceleration by:

  1. a claim for loss and expense due to disruption (as distinct from delay costs), where the construction contract allows for recoverability of disruption costs (see question 7); and/or
  2. a claim for damages for breach of contract by the employer in failing to grant an extension of time to which the contractor was otherwise entitled to, including the contractor's costs of mitigation (the contractor must make reasonable attempts to mitigate its loss; where it does so, the costs of such mitigation are recoverable).

A contractor may also be entitled to relief in Ireland, (as distinct from damages), under the prevention principle, in cases where some act of prevention by the employer puts time at large and the contractor's liability to complete by a specified date falls away (as does the liability to pay liquidated damages from that date).

In the UK, the Technology and Construction Court in September 2017 held in North Midland Building Limited v Cyden Homes Limited (2017) that in circumstances of concurrent delay, the prevention principle will only be applicable if the contractor can show that the employer's acts or omissions have prevented the achievement of an earlier completion date. If the earlier completion date would not have been achieved in any event due to the concurrent delays resulting from the contractor's own default, the prevention principle will not apply. This decision was upheld by the UK Court of Appeal. The Irish courts have not yet had cause to determine this specific issue; however, if an Irish court were to be called upon to consider the same, it more than likely would follow the position reached by the TCC.

To view the full article click here

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions