Construction law Scenario
Construction law mainly involves contract law and other legal process aspects, including; project initial bidding, negotiation, and the formulation of contracts and agreements. This field also regulates disputes between individuals who actively participate in the construction procedure (homeowners, construction managers, contractors and subcontractors). Construction law establishes different ethical and legal concerns and obligations on the parties involved in the construction procedure. First, the contractor and the owner must act in good faith while undertaking their contractual duties. The construction manager or contractor has a legal duty to the homeowner to conduct their services or duties effectively and in a workmanlike manner as per the contractual agreement (Hamzah et.al 2011). As such, the contractor must issue a warning to the owner where the construction specifications or design are likely to have damaging or adverse impacts. Contractors are held liable if a building collapses due to identifiable issues in the construction and they had not warned their owners or project managers. Similarly, homeowners have a legal obligation to appropriately cooperate or relate with the contractors and subcontractors to guarantee successful completion of the contractual work. For instance, the owner must not purposefully delay or interfere with the contractor during the execution of their duties. Also, they must ensure that all construction materials are timely supplied. Further, contractors and subcontractors experience some unethical conducts, including; bureaucratic government policies, competitors’ qualifications and experience falsification, inadequate safety ethics by subcontractors, inappropriate contractors’ treatment in final account or tender negotiations, short and late payments, poor documentation, bid-cutting and cover pricing (Hamzah et al. 2011). Other unethical practices include; bribery, fraud, collusive tendering, conflict of interest and unfair conduct. In this case, the ethical and legal concerns that the subcontractors and contractors should be worried about include the following;
- Their compensation; prompt payment, and retainage regulations
- How a potential workmanship dispute would be resolved
- Whether the construction manager is legally allowed to work in the Southern Beach Hotel as they are unlicensed in Florida State?
- Whether the design professionals breached their legal obligation of disclosure by failing to give their designs to Miami Beach building officials?
- Whether the subcontractors and contractors breached their legal and professional obligations by starting their construction work without permits?
- Whether there are appropriate and feasible contractors and subcontractors’ safety ethics governing the construction contract?
- The dispute resolution technique that will be utilized to resolve any disputes arising among them
- Whether there exists any conflict of interests between the contractual parties before starting the construction project?
The legal obligation of disclosure
The duty of disclosure is extensively paramount in construction agreements. All parties are obligated to divulge any critical information regarding the construction project to their workmates. The principle of disclosure prohibits contractors or subcontractors from withholding any information that may detrimentally impact the construction project. Such information may include; structure or design details which are very essential during construction work. For instance, if an owner acknowledges that their building has faulty electrical wiring concerns, they should disclose such information to the subcontractors and contractors since it is crucial to the appropriate structure completion. Thus, the contracting parties in a construction agreement have an ethical duty to disclose any details vital to the successful completion of the project. Further, all the parties to a construction project must clarify their financial requirements which is paramount to the effective funding of the project. Hence, the New York design professionals breached their ethical obligation of disclosure by failing to submit their designs to Miami Beach Building officials. This statement is because the officials perfectly acknowledge the initial structural design of the beach. As such, the officials could offer helpful insights to the NY design professionals, which would be massively essential in the redesigning of the hotel’s interior; internal structural walls, HVAC, plumbing and electric connections. This information is integral to the successful completion of the redesigning, which validates the claim that the subcontractors contradicted their ethical duty of disclosure. Notably, the subcontractors and contractors received the building designs from the NY professionals and immediately began their construction work without consulting the Miami Beach building officials. In so doing, they also infringed the ethical obligation that requires them to harmoniously collaborate on any fundamental issue with homeowners or employers, guaranteeing successful completion of the project. Therefore, the subcontractors and contractors may be held liable for any damaging construction defect emanating from the breach of their ethical disclosure obligation. Thus, to avoid this liability, the subcontractors and contractors should appraise the Miami Building Officials of the NY professionals building designs before commencing the redesigning process. In Equipe Regeneration Limited v Higgins Construction Limited and Others[1] the court held that all contracting parties in a construction agreement must strictly adhere to the principle of disclosure. In this landmark case, the court ruled against the claimant (ERL) who had prayed for the defendants (Higgins) to be fined for the harmful defects that had occurred to the project (Brockley Social Housing PFI project). The court ruled that the claimant had breached his disclosure duty by failing to appraise them on the possible damages that would be caused by their refurbishment work. Noteworthy, ERL was liable for maintenance works while Higgins was contracted to conduct refurbishment works. Therefore, the above locus classicus case reinforced the essentiality of ethical principles of disclosure and harmoniously cooperating while carrying out construction work.
Conflict of Interests
Conflict of interest refers to situations where parties or individuals have concerns or perspectives that do not align with the set or overall objectives. This dilemma to individuals in trust positions and have competing personal or professional interests, making it challenging to accomplish their obligations impartially (Adnan et.al 2011). Despite the lack of adequate evidence on inappropriate conduct, conflict of interests establishes an impropriety image, undermining an individual’s confidence and independence in fulfilling their professional obligations. Principally, conflict of interests comprises an individual interpretation on the acceptability or illegality of a specific behavior or conduct. In construction contracts, the onus lies with the contracting parties to decipher circumstances of possible adverse interpretation before starting a construction project. Collusion for fraudulent objectives comprises a conflict of interests or professional negligence. Collusion contradicts the free competition rules since only individuals involved in the collusive agreement benefit while parties privy to the contract receive zero benefits (Adnan et.al 2011). Research indices affirm that collusion guarantees higher discounted and adjusted profits, and also leads to increased higher joint risks. The practice is also attributed to guaranteeing a steady work flow. The fact scenario reveals that the subcontractors and contractors did not conduct a feasibility analysis to establish whether there is any issue in their agreement that comprises conflict of interests. First, the scenario explicitly states that the New York developer employed a construction manager from New Jersey to supervise the redesigning of the South Beach Hotel. The construction manager was unlicensed in Florida which invalidates his operations at the hotel. The hiring of the manager may be regarded as collusive since it denied other professionals or experts to work in the position The NY developer hired the construction manager not because of their qualifications but because of their personal relations which is illegal. This statement is because the practice comprises conflict of interests. Noteworthy, the contractor may later on be discharged of their obligations under the construction contract for operating without a valid license. Further, the personal connection or touch between the construction manager and the NY developer may hamper their professionalism detrimentally affecting how they perform their duties under the agreement. Besides, the relationship between the NY developer and the NY design professionals to affirm that they do not create a conflict of interest enabling them to effectively and professionally conduct their duties. Therefore, the NY developer should quickly sort out the construction manager’s license issue before they start carrying out the project. Notably, they should check peculiar tasks that demand statewide permits in Florida and confirm whether hotel designing is inclusive. Subcontractors or contractors who detect any conflict of interests on their position should adopt practical and appropriate measures to prevent such negative issues from inhibiting their professionalism. Lastly, this discussion also notes three factors that precipitate collusive tendering contracts adversely impacting the moral decision-making procedure. The factors are; whether one would be made accountable for their adverse actions, the legal issue in question and whether being involved in collusive tendering is chiefly distinguished by the ensuing legal consequences. Finally, the landmark case of Blackpool & Flyde Aero Club v Blackpool BC[2]required businesses requiring contractors and subcontractors to always conduct just and fair tendering processes to employed qualified individuals on a meritocracy basis, avoiding conflict of interests.
Legality to work in the Florida (South Beach Hotel)
The fact pattern avers that the NY developer hired a construction manager from New Jersey who was unlicensed in Florida State. As noted above, the developer should scrutinize the construction services in Florida that demand a license or permit and one’s that do not. Inherently, Florida grants licenses to contractors primarily on the duty being conducted rather than the contractors’ specialty. The contractor is first listed by the Construction Industry Licensing Board (CILB) if they intend to operate in the firm’s local region (Chapter et.al 2018). Nonetheless, in case an organization requires its contractors to function outside its local jurisdiction, they must undergo certification and licensing procedures. For instance, due to the multiple number of swimming pools in Florida, CILB has specified several tasks that demand special licenses. These tasks include; pooling finishing, piping, decking, trim installation, exaction and pool design and layout. On the contrary, there are some construction duties that allow foreign contractors to operate without a license. These tasks constitute; window treatments, wallpapering, painting, flooring and cabinet works. Nonetheless, contractors are also mandated to confirm with the city and local county governments if their contractual obligations require permits. Apparently, contractors who perform the above duties are only exempted from statewide certification but must be enlisted in their local regions. CILB further insists that foreign contractors must confirm if their contractual duty demands a permit as some are confusing. For instance, no permit is demanded to build a driveway while authorization is required to construct a driveway at a carport terminal. Moreover, the licensing requirements involving altering or building structures are also a bit contradictory. Lastly, CILB asserts that contractors can secure specialty licenses in pollutant storage, glazing, glass installation, underground utilities, plumbing, solar power, swimming pools, HVAC, roofing and sheet metal. A contractor can also acquire a general working permit. Therefore, in our scenario, the NY developer should secure a general license to cover for (redesigning internal and electric works), also they should acquire specialty licenses in (HVAC and plumbing) for the construction manager to legally operate in the State of Florida. Florida State allows contractors to function without a license if they conduct their operations within their local firm’s jurisdiction. Nonetheless, this discussion contends that the construction manager must secure a general and specialty license to ensure that they comply with all Florida’s laws and ethical principles.
The Dispute Resolution Technique that will be used to resolve any ensuing conflict between them
Further, the subcontractors and contractors should be concerned about the dispute resolution strategy that will be employed to resolve disputes ensuing between them. As a general rule, all business or commercial contracts must contain a conflict resolution clause. This clause dictates how any dispute arising between the contractual parties would be resolved. Some of the most effective dispute resolution methods include; arbitration, mediation, litigation, adjudication and expert determination. First, arbitration is the most commonly used technique to resolve construction agreements since it is quicker and confidential compared to litigation. An impartial group of arbitrators carefully listen to a dispute and later issue an arbitral award. The disputants are allowed to select experienced, professional and neutral arbitrators to resolve their disputes. The strategy is also more flexible than litigation as the parties are allowed to decide both the substantive and procedural rules to be applied. However, arbitration limits the appeal avenues for parties discontented with their awards and sometimes may be costly as the disputants are required to pay the arbitrators and the arbitration venue. On the other hand, mediation is also extensively utilized in resolving construction disputes. Mediator is similar to arbitration, but its decisions are not fully binding, hence, any discontented party may file an appeal in court. Mediation primarily focuses on retaining a positive business relationship between the contractual parties, thus, allows them to deliberate and propose a solution under the guidance of a mediator. Moreover, in most instances, Technology and Construction Court (TCC) judges who have vast experience in resolving disputes chair the arbitration and mediation proceedings. On the other hand, adjudication is a procedure where disputants narrate their story to an impartial third party (adjudicator) who later gives their determination. However, the adjudicator’s holding only becomes binding after being revised through litigation or arbitration. Lastly, litigation is mainly used to resolve complex disputes. However, litigation is inappropriate for contractual conflicts as it is time-consuming, costly and does not maintain confidentiality. Therefore, the subcontractors and contractors in the given scenario should solicit for the inclusion of a dispute resolution clause in their construction contracts. The parties should indicate arbitration as their principal dispute resolution mechanism as it is fast, confidential and guarantees just, fair and considerate decisions. Further, the clause should specify that if any of the parties is dissatisfied with the arbitrators’ determination, they can appeal in court.
Compensation or payment laws
Moving on, the subcontractors and contractors should be concerned about the payment laws attached to their construction contract. Over the years, construction courts have resolved numerous disputes involving compensation not remitted for accomplished tasks and money due. Conversely, in case the parties have a dispute with the South Beach Hotel management, they can sue for mechanic lien. A mechanic lien which allowed in Florida under §713.01(15 constitutes a legal petition to other property or home and is mostly instituted by an unpaid material supplier or contractor. The lien provides the unpaid individual with a security interest in the real property. Failure to settle the claim mainly results in appropriation necessitating the sale of the foreclosed property to settle the pending debts. Mechanical lien is also referred to as construction lien and is chiefly applicable to private construction projects such as; industrial, commercial or residential. Thus, the subcontractors and contractors in the given scenario should claim mechanical lien in case they experience unpaid or delayed payments. On the other hand, bail claim lien specifically applies to government construction agreements (public) where contractors issues of unpaid salaries. The bond claim is fulfilled through payment of the bond by the federal or state government. Lastly, the contractors and subcontractors should be concerned about the retainage rules. Retainage comprises the funds withheld from a subcontractors or contractors salaries and are mostly paid after the successful completion of a construction project. Inherently, many states require that the withheld funds or retainage must be reasonable. Therefore, the subcontractors and contractors should clarify the issues of retainage and unpaid or delayed payments to appropriately respond to such matters if they transpire.
Resolving Workmanship disputes and Contractor’s safety ethics
In addition, the contractors and subcontractors should be concerned about how any ensuing workmanship conflict would be resolved and their safety ethics. Workmanship disputes are mainly correlated with payment conflicts, however, the former mainly transpires when the contractor’s work is of insufficient quality. Most state laws mandate contractors to conduct their construction contractual duties to a specific minimum workmanship and quality. As such, any lawsuit instituted with the licensing board and against the contractor’s permit or license is gauged using the set minimum quality standard. Thus, in case of a workmanship dispute, a contractor should not be denied the entire contractual amount but it should be calculated using the minimum agreed quality standard. Lastly, the contractors and subcontractors must learn the workman safety ethics. First, these ethical standards require them to always critically consider their professional and personal reputation while carrying out their construction obligations (Uff 2003). By adhering to the above ethical rule, contractors diligently undertake the assigned construction work to avoid damaging their professional reputation by delivering poor quality work. To maintain their personal reputation, contractors always avoid immoral acts like bribery, fraud and conflict of interests. Further, the subcontractors and contractors should also highly contemplate about public interest while redesigning the South Beach Hotel since it is mostly used by the public. For this reason, they must do their due diligence to ensure that they redesign the hotel in the best, quality and conducive condition. Lastly, the contractors must enhance professionalism while undertaking their construction work.
Conclusion
Therefore, this discussion affirms that there are several ethical and legal concerns on the subcontractors and contractors part. First, is whether they breached the principle of disclosure by failing to submit their designs to Miami Beach Officials? The NY design professionals contradicted the above rule as it requires parties in a construction contract to always divulge any paramount information before the start of the construction work. The parties should also be concerned about the conflict of interests and their legality to work in South Beach Hotel-located in Florida State. Notably, the construction manager should acquire general and specialty licenses for both parties to legalize their operation in Florida before starting the construction work. Moreover, the contractors and subcontractors should also propose arbitration to be dispute resolution technique if a dispute arises between them. How potential payment or compensation will be resolved is also a legal concern for the contractors and subcontracts. Lastly, the parties above should be enlightened on the resolution of workmanship disputes among them and the importance of adhering to the contractors’ safety ethics.
References
Adnan, H., Hashim, N., Yusuwan, N. M., & Ahmad, N. (2011). AicE-Bs 2011 Famagusta Asia Pacific International Conference on Environment-Behaviour Studies. Salamis Bay Conti Resort Hotel, Famagusta, North Cyprus, 7-9. https://www.sciencedirect.com/science/article/pii/S1877042812004545
Chapter, B., Borozny, J., Chapter, F. G. C., Brown, J., & Knowlton, M. (2018). 2017 Service Professionals of the Year. http://www.floridapoolpro.com/newsletters/April%202018/files/assets/common/downloads/April%202018.pdf
Hamzah, N., Khoury, M. A., Arshad, I., Tawil, N. M., & Ani, A. C. (2011). Cause of construction delay-Theoretical framework. Procedia Engineering, 20, 490-495. https://www.sciencedirect.com/science/article/pii/S1877705811030013
Uff, J. (2003). Duties on the legal fringe: ethics in construction law. Fourth Public lecture delivered at The Great Hall, King’s College, London.
[1] [2015] UKSC 38, [2015] All ER (D) 185 (Jun).
[2] [1990] EWCA Civ 13.
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