Net contribution clauses on construction projects - Revision history

Designing Buildings at 08:47, 22 September 2020

2020-09-22T08:47:21Z

← Older revision		Revision as of 08:47, 22 September 2020
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	* Langstane Housing Association v Riverside Construction (Aberdeen) Ltd.		* Langstane Housing Association v Riverside Construction (Aberdeen) Ltd.

−	[[Category:~~Other_legislation~~]] [[Category:DCN_Legislation]] [[Category:Appointments]] [[Category:Contracts_/_payment]] [[Category:Procurement]]	+	[[Category:DCN_Case_Law]] [[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:DCN_Legislation]] [[Category:Other_legislation]] [[Category:Appointments]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

Designing Buildings at 17:14, 26 February 2020

2020-02-26T17:14:27Z

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	In construction it is not unusual for more than one party to be responsible for a breach of contract. For example, there may be a design fault, a failure to inspect, and poor workmanship, all contributing to a defect in the works. Under common law (the [http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act] 1978) all parties can be jointly and severally liable for the loss or damage that flows from the breach.		In construction it is not unusual for more than one party to be responsible for a breach of contract. For example, there may be a design fault, a failure to inspect, and poor workmanship, all contributing to a defect in the works. Under common law (the [http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act] 1978) all parties can be jointly and severally liable for the loss or damage that flows from the breach.
−
−	A "Net Contribution" clause is a common feature in many standard form professional services contracts used in the construction industry. they are often used when seeking the appointment of an architect, a consultant or designer. They are often also referred to as 'proportional liability' clauses.

	This means that the client can pursue the parties either jointly, or individually (severally) for the full amount of the loss. If the client decides to pursue one of the parties for the full amount, then that party may in turn pursue the other parties that contributed to the breach to recover their share of the amount claimed.		This means that the client can pursue the parties either jointly, or individually (severally) for the full amount of the loss. If the client decides to pursue one of the parties for the full amount, then that party may in turn pursue the other parties that contributed to the breach to recover their share of the amount claimed.
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	* Langstane Housing Association v Riverside Construction (Aberdeen) Ltd.		* Langstane Housing Association v Riverside Construction (Aberdeen) Ltd.

−	[[Category:Other_legislation]] [[Category:Appointments]] [[Category:Contracts_/_payment]] [[Category:Procurement]]	+	[[Category:Other_legislation]] [[Category:DCN_Legislation]] [[Category:Appointments]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

Designing Buildings at 17:14, 26 February 2020

2020-02-26T17:14:11Z

← Older revision		Revision as of 17:14, 26 February 2020
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	In construction it is not unusual for more than one party to be responsible for a breach of contract. For example, there may be a design fault, a failure to inspect, and poor workmanship, all contributing to a defect in the works. Under common law (the [http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act] 1978) all parties can be jointly and severally liable for the loss or damage that flows from the breach.		In construction it is not unusual for more than one party to be responsible for a breach of contract. For example, there may be a design fault, a failure to inspect, and poor workmanship, all contributing to a defect in the works. Under common law (the [http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act] 1978) all parties can be jointly and severally liable for the loss or damage that flows from the breach.
		+
		+	A "Net Contribution" clause is a common feature in many standard form professional services contracts used in the construction industry. they are often used when seeking the appointment of an architect, a consultant or designer. They are often also referred to as 'proportional liability' clauses.

	This means that the client can pursue the parties either jointly, or individually (severally) for the full amount of the loss. If the client decides to pursue one of the parties for the full amount, then that party may in turn pursue the other parties that contributed to the breach to recover their share of the amount claimed.		This means that the client can pursue the parties either jointly, or individually (severally) for the full amount of the loss. If the client decides to pursue one of the parties for the full amount, then that party may in turn pursue the other parties that contributed to the breach to recover their share of the amount claimed.
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	The amount that can be recovered from one party can be limited by a net contribution clause. This restricts liability to the amount for which the party being pursued is responsible. Other amounts must be recovered from the other parties. Net contribution clauses assume that parties responsible for the same loss or damage are all contractually liable to the other party to the contract, and that they have paid the share that they would have been apportioned under common law.		The amount that can be recovered from one party can be limited by a net contribution clause. This restricts liability to the amount for which the party being pursued is responsible. Other amounts must be recovered from the other parties. Net contribution clauses assume that parties responsible for the same loss or damage are all contractually liable to the other party to the contract, and that they have paid the share that they would have been apportioned under common law.
		+
		+	Without a net contribution clause, a designer and a builder are each liable to the client for the defective works. In this case, the client can recover all of its loss from the designer despite the joint liability of the builder. The designer must then seek to recover a portion of those damages from the builder under the Civil Liability (Contribution) Act 1978.
		+
		+	The effect of a Net Contribution clause is that if the court found the designer 70% liable and the builder 30% liable, the client can recover only 70% of its damages from the designer. The client must also then seek recourse by a further claim against the builder to recover the remaining 30% of its loss.
		+
		+	With a Net Contribution clause, if the builder becomes insolvent when the client brings its claim against the designer who is 70% liable, the client may in practice recover only 70% of its total loss. if there were no Net Contribution clause, the architect could be liable for 100% of the damages under the Civil Liability (Contribution) Act 1978.
		+
		+	Insurers often stipulate that professional consultants include a Net Contribution clause where Collateral Warranties are used.

	Clients tend to resist net contribution clauses as they transfer the risk of not being able to recover losses onto the client. Whilst this is fair in that the client did appoint all the parties, the client themselves are completely innocent of the breach.		Clients tend to resist net contribution clauses as they transfer the risk of not being able to recover losses onto the client. Whilst this is fair in that the client did appoint all the parties, the client themselves are completely innocent of the breach.
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	In the case of West & Anor v Ian Finlay & Associates, the judge considered the Unfair Terms in Consumer Contracts Regulations 1999 (which protects consumers against unfair standard terms in contracts with businesses and states that any ambiguity should be interpreted in favour of the consumer), deciding that the net contribution clause was ambiguous and interpreting it in context concluded that it did not encompass the main contractor, only the other contractors and specialists appointed directly by the claimants. However, this decision was overturned on appeal in 2014 as the Court of Appeal found that the clause was clear and that the Claimant could have negotiated its terms or made other provisions if they had wished. See West & Anor v Ian Finlay & Associates appeal for more information.		In the case of West & Anor v Ian Finlay & Associates, the judge considered the Unfair Terms in Consumer Contracts Regulations 1999 (which protects consumers against unfair standard terms in contracts with businesses and states that any ambiguity should be interpreted in favour of the consumer), deciding that the net contribution clause was ambiguous and interpreting it in context concluded that it did not encompass the main contractor, only the other contractors and specialists appointed directly by the claimants. However, this decision was overturned on appeal in 2014 as the Court of Appeal found that the clause was clear and that the Claimant could have negotiated its terms or made other provisions if they had wished. See West & Anor v Ian Finlay & Associates appeal for more information.

−	~~= Find out more =~~	+	= Related articles on Designing Buildings Wiki =
−		+
−	=== Related articles on Designing Buildings Wiki ===	+

	* Breach of contract.		* Breach of contract.

86.152.150.72 at 15:15, 17 December 2015

2015-12-17T15:15:25Z

← Older revision		Revision as of 15:15, 17 December 2015
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−
	In construction it is not unusual for more than one party to be responsible for a breach of contract. For example, there may be a design fault, a failure to inspect, and poor workmanship, all contributing to a defect in the works. Under common law (the [http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act] 1978) all parties can be jointly and severally liable for the loss or damage that flows from the breach.		In construction it is not unusual for more than one party to be responsible for a breach of contract. For example, there may be a design fault, a failure to inspect, and poor workmanship, all contributing to a defect in the works. Under common law (the [http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act] 1978) all parties can be jointly and severally liable for the loss or damage that flows from the breach.

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	Clients tend to resist net contribution clauses as they transfer the risk of not being able to recover losses onto the client. Whilst this is fair in that the client did appoint all the parties, the client themselves are completely innocent of the breach.		Clients tend to resist net contribution clauses as they transfer the risk of not being able to recover losses onto the client. Whilst this is fair in that the client did appoint all the parties, the client themselves are completely innocent of the breach.

−	Net contribution clauses have become increasing popular in appointment agreements and collateral warranties. Questions remain however about whether they are always enforceable, for example where one of the parties to whom liability is apportioned is not present in court. However, in 2009, in the Scottish case of ~~[http://www.scotcourts.gov.uk/opinions/2009CSOH52.html~~ Langstane Housing Association v Riverside Construction (Aberdeen) Ltd], the court seemed to accept that this sort of clause was not unusual and that the client could, if they wanted, insure themselves against unrecoverable losses.	+	Net contribution clauses have become increasing popular in appointment agreements and collateral warranties. Questions remain however about whether they are always enforceable, for example where one of the parties to whom liability is apportioned is not present in court. However, in 2009, in the Scottish case of Langstane Housing Association v Riverside Construction (Aberdeen) Ltd, the court seemed to accept that this sort of clause was not unusual and that the client could, if they wanted, insure themselves against unrecoverable losses.

−	In the case of West & Anor v Ian Finlay & Associates, the judge considered the Unfair Terms in Consumer Contracts Regulations 1999 (which protects consumers against unfair standard terms in contracts with businesses and states that any ambiguity should be interpreted in favour of the consumer), deciding that the net contribution clause was ambiguous and interpreting it in context concluded that it did not encompass the main contractor, only the other contractors and specialists appointed directly by the claimants. However, this decision was overturned on appeal in 2014 as the Court of Appeal found that the clause was clear and that the Claimant could have negotiated its terms or made other provisions if they had wished. See West & Anor v Ian Finlay & Associates appeal for more information.	+	In the case of West & Anor v Ian Finlay & Associates, the judge considered the Unfair Terms in Consumer Contracts Regulations 1999 (which protects consumers against unfair standard terms in contracts with businesses and states that any ambiguity should be interpreted in favour of the consumer), deciding that the net contribution clause was ambiguous and interpreting it in context concluded that it did not encompass the main contractor, only the other contractors and specialists appointed directly by the claimants. However, this decision was overturned on appeal in 2014 as the Court of Appeal found that the clause was clear and that the Claimant could have negotiated its terms or made other provisions if they had wished. See West & Anor v Ian Finlay & Associates appeal for more information.

	= Find out more =		= Find out more =

	=== Related articles on Designing Buildings Wiki ===		=== Related articles on Designing Buildings Wiki ===
−	*Breach of contract.	+
−	*Causes of construction disputes.	+	* Breach of contract.
−	*Contract claims.	+	* Causes of construction disputes.
−	*Contribution and apportionment.	+	* Contract claims.
−	*Defects.	+	* Contribution and apportionment.
−	*Joint and several liability.	+	* Defects.
−	*Latham report.	+	* Joint and several liability.
−	*Loss and expense.	+	* Latham report.
−	*Professional indemnity insurance.	+	* Loss and expense.
−	*West & Anor v Ian Finlay & Associates.	+	* Professional indemnity insurance.
−	*West & Anor v Ian Finlay & Associates appeal.	+	* West & Anor v Ian Finlay & Associates.
		+	* West & Anor v Ian Finlay & Associates appeal.

	=== External references ===		=== External references ===
−	*Building: [http://www.building.co.uk/professional/legal/lathams-legacy/1014461.article Latham's legacy].
−	*[http://www.scl.org.uk/node/779 Joint and Several Liability in the Construction Industry: Is it time for law reform in the UK? (2004).]
−	*[http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act].
−	*Langstane Housing Association v Riverside Construction (Aberdeen) Ltd.

−	[[Category:Other_legislation]]	+	* Building: [http://www.building.co.uk/professional/legal/lathams-legacy/1014461.article Latham's legacy].
−	[[Category:Appointments]]	+	* [http://www.scl.org.uk/node/779 Joint and Several Liability in the Construction Industry: Is it time for law reform in the UK? (2004).]
−	[[Category:Contracts_/_payment]]	+	* [http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act].
−	[[Category:Procurement]]	+	* Langstane Housing Association v Riverside Construction (Aberdeen) Ltd.
		+
		+	[[Category:Other_legislation]] [[Category:Appointments]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

Designing Buildings at 14:32, 15 October 2015

2015-10-15T14:32:33Z

← Older revision		Revision as of 14:32, 15 October 2015
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	*[http://www.scl.org.uk/node/779 Joint and Several Liability in the Construction Industry: Is it time for law reform in the UK? (2004).]		*[http://www.scl.org.uk/node/779 Joint and Several Liability in the Construction Industry: Is it time for law reform in the UK? (2004).]
	*[http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act].		*[http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act].
−	*~~[http://www.scotcourts.gov.uk/opinions/2009CSOH52.html~~ Langstane Housing Association v Riverside Construction (Aberdeen) Ltd].	+	*Langstane Housing Association v Riverside Construction (Aberdeen) Ltd.

	[[Category:Other_legislation]]		[[Category:Other_legislation]]

Designing Buildings at 15:20, 4 December 2014

2014-12-04T15:20:17Z

← Older revision		Revision as of 15:20, 4 December 2014
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	=== External references ===		=== External references ===
	*Building: [http://www.building.co.uk/professional/legal/lathams-legacy/1014461.article Latham's legacy].		*Building: [http://www.building.co.uk/professional/legal/lathams-legacy/1014461.article Latham's legacy].
−	*CIC: [http://www.cic.org.uk/activities/9%20LBriefing-%20Net%20contribution.pdf Net contribution clauses].
	*[http://www.scl.org.uk/node/779 Joint and Several Liability in the Construction Industry: Is it time for law reform in the UK? (2004).]		*[http://www.scl.org.uk/node/779 Joint and Several Liability in the Construction Industry: Is it time for law reform in the UK? (2004).]
	*[http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act].		*[http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act].

Designing Buildings at 15:18, 4 December 2014

2014-12-04T15:18:33Z

← Older revision		Revision as of 15:18, 4 December 2014
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	*CIC: [http://www.cic.org.uk/activities/9%20LBriefing-%20Net%20contribution.pdf Net contribution clauses].		*CIC: [http://www.cic.org.uk/activities/9%20LBriefing-%20Net%20contribution.pdf Net contribution clauses].
	*[http://www.scl.org.uk/node/779 Joint and Several Liability in the Construction Industry: Is it time for law reform in the UK? (2004).]		*[http://www.scl.org.uk/node/779 Joint and Several Liability in the Construction Industry: Is it time for law reform in the UK? (2004).]
−	*Hugh James: [http://www.hughjames.com/pdf/Net%20Contribution%20Clauses_.pdf Net Contribution Clauses in Construction Contracts - Are they fair and reasonable]?
	*[http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act].		*[http://www.legislation.gov.uk/ukpga/1978/47/contents Civil Liability (Contribution) Act].
	*[http://www.scotcourts.gov.uk/opinions/2009CSOH52.html Langstane Housing Association v Riverside Construction (Aberdeen) Ltd].		*[http://www.scotcourts.gov.uk/opinions/2009CSOH52.html Langstane Housing Association v Riverside Construction (Aberdeen) Ltd].

−	~~[[Category:Contracts_/_payment]]~~
	[[Category:Other_legislation]]		[[Category:Other_legislation]]
	[[Category:Appointments]]		[[Category:Appointments]]
		+	[[Category:Contracts_/_payment]]
	[[Category:Procurement]]		[[Category:Procurement]]

Designing Buildings: moved Net contribution clauses to Net contribution clauses on construction projects

2014-08-05T14:34:34Z

moved Net contribution clauses to Net contribution clauses on construction projects

← Older revision

Revision as of 14:34, 5 August 2014

Designing Buildings at 09:36, 24 April 2014

2014-04-24T09:36:54Z

← Older revision		Revision as of 09:36, 24 April 2014
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	Net contribution clauses have become increasing popular in appointment agreements and collateral warranties. Questions remain however about whether they are always enforceable, for example where one of the parties to whom liability is apportioned is not present in court. However, in 2009, in the Scottish case of [http://www.scotcourts.gov.uk/opinions/2009CSOH52.html Langstane Housing Association v Riverside Construction (Aberdeen) Ltd], the court seemed to accept that this sort of clause was not unusual and that the client could, if they wanted, insure themselves against unrecoverable losses.		Net contribution clauses have become increasing popular in appointment agreements and collateral warranties. Questions remain however about whether they are always enforceable, for example where one of the parties to whom liability is apportioned is not present in court. However, in 2009, in the Scottish case of [http://www.scotcourts.gov.uk/opinions/2009CSOH52.html Langstane Housing Association v Riverside Construction (Aberdeen) Ltd], the court seemed to accept that this sort of clause was not unusual and that the client could, if they wanted, insure themselves against unrecoverable losses.

−	~~See also:~~ West & Anor v Ian Finlay & Associates~~. In this case~~, the judge considered the Unfair Terms in Consumer Contracts Regulations 1999 (which protects consumers against unfair standard terms in contracts with businesses and states that any ambiguity should be interpreted in favour of the consumer), deciding that the net contribution clause was ambiguous and interpreting it in context concluded that it did not encompass the main contractor, only the other contractors and specialists appointed directly by the claimants.	+	In the case of West & Anor v Ian Finlay & Associates, the judge considered the Unfair Terms in Consumer Contracts Regulations 1999 (which protects consumers against unfair standard terms in contracts with businesses and states that any ambiguity should be interpreted in favour of the consumer), deciding that the net contribution clause was ambiguous and interpreting it in context concluded that it did not encompass the main contractor, only the other contractors and specialists appointed directly by the claimants. However, this decision was overturned on appeal in 2014 as the Court of Appeal found that the clause was clear and that the Claimant could have negotiated its terms or made other provisions if they had wished. See West & Anor v Ian Finlay & Associates appeal for more information.

	= Find out more =		= Find out more =
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	*Professional indemnity insurance.		*Professional indemnity insurance.
	*West & Anor v Ian Finlay & Associates.		*West & Anor v Ian Finlay & Associates.
		+	*West & Anor v Ian Finlay & Associates appeal.

	=== External references ===		=== External references ===

Designing Buildings at 06:45, 15 August 2013

2013-08-15T06:45:37Z

← Older revision		Revision as of 06:45, 15 August 2013
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	*Contribution and apportionment.		*Contribution and apportionment.
	*Defects.		*Defects.
		+	*Joint and several liability.
	*Latham report.		*Latham report.
	*Loss and expense.		*Loss and expense.