Construction contracts may involve certain complexities that are not generally seen in ordinary contracts. Risk and uncertainty is more commonly associated with construction as an activity and this an important factor that must be weighed in at the time of entering into a contract. Joint Contracts Tribunal (JCT) produces standard form contracts that are specifically made for construction contracts. If a contract is made under JCT terms, then the parties to the contract are bound by the particular provisions of JCT. The current JCT was issued in 2011. In this essay, the termination of contract with respect to JCT, 2011 is considered. The essay discusses the grounds for such termination, in particular, insolvency. The essay also discusses other relevant aspects of termination, such as the process to be followed under the JCT 2011 for the purpose of termination of contract.
The general principles of law of contract are applicable to construction contracts as well, however, the complexities of a construction contract does require a specialized outlook for these contracts (Murdoch & Hughes, 2008). It is also important to note that risk and uncertainty are important factors to be considered in construction contracts (Loots & Charrett, 2009, p. 1).
In general, the principles governing construction contracts relate to: formation of contract, performance of contract and breach of contract. For the formation of contract, there are three elements that are required: (a) and agreement between parties; (b) an intention to create legal relations; and (c) quid pro quo (Chappell, 2014, p. 3).
The agreement between parties is ensued when one party makes an offer to the other party and the other party accepts the offer (Poole, 2016). An intention to create legal relations is an important element here as this differentiates between a legal contract and moral promises made as between parties (Andrews, 2015). A quid pro quo is in the nature of ‘something in return for something’ (Andrews, 2015). Therefore, there must be a give and take as between parties as gratuitous promises on part of a person does not lead to a legally binding contract (Andrews, 2015).
If these conditions are met under a construction related contract or agreement, then the contract is a legally binding agreement between the two parties: contractor and employer. In the present case, the contract as between the contractor and employer is as per the JCT as explained below.
JCT contracts, which are made under the terms of JCT 2011 Standard Building Contract With Quantities (SBC/Q, hereinafter ‘JCT, 2011’), bind the employer and contractor to the specific terms of the JCT contract and enable each to have recourse to rights and remedies under the JCT, 2011.
There are certain circumstances that warrant the termination of contractor’s contract by the employer. These are the grounds of termination. First, the contractor may have wholly or substantially suspending the carrying out of the works. Under the JCT (2011, clause 8.4.1.2), the employer may find that the contractor has either suspended work or substantially stopped the progress of the work. In such a situation, the employer gets a ground for terminating the employment of the contractor. It is however important that before giving the notice of termination, the employer must try to enquire into the reason why the contractor has ceased or slowed down work. If the contractor has reasonable grounds for suspending work, then the employer would be in the wrong with the serving of notice to the contractor (Chappell, 2014). Second, the employer may find that the contractor has failed to proceed with the work in a regular and diligent manner (JCT, 2011, clause 8.4.1.3). Here it is important to note that a contractor’s programme is not really a contract, he is more or less expected to comply with the time line of the programme so as to show regularity of the work.
Third, the employer may find that the contractor had refused to neglected to comply with instructions given by the employer or the architect. Here, is important to note that every failure to comply with the instructions of the employer or architect does not entitle the employer to send the notice for termination. However, in such cases where the employer realizes that the non-compliance is of such a nature that it jeopardises the timely completion of the construction, the employer has a ground for termination of the contract.
Fourth, the employer may terminate the contract of the employment if he finds that the contractor has indulged in some corruption. Thus, if the contractor has either given or taken a bribe in relation to the contract, or the contractor commits an offence within the Bribery Act 2010. In case the employer is a local authority, then the employer may terminate the contract under the Local Government Act 1972, s.117(2).
Finally, in case of the insolvency of the contractor, the employer may terminate the contract of employment of the contractor.
There are some other neutral causes for termination of contract which apply to both the contractor as well as the employer. For instance, either the contractor as well as the employer may terminate the contract if the construction has been suspended for more that 2 months due to some force majeure or some other reason (Chappell, 2014).
The JCT (2011) sets down some procedural norms for termination of contract. First, the employer must give a notice to the contractor for terminating the contract. The notice has to be for a period of 14 days. The notice itself should be given within 21 days of the cause of termination, that is, the default by the contractor.
If the contractor stops its default within 14 days of receiving the notice, then the employer cannot take further action against him.
It is important that the employer should not terminate the contract arbitrarily or in a vexatious manner. The term ‘vexatiously’ has been defined as an ulterior motive that is aimed at oppressing, harassing or annoying one party by the other (Reinwood Ltd v L Brown & Sons Ltd [2007] BLR 10, 2007). In case if insolvency, the question of vexatious or oppressive conduct of the employer does not arise because the test for insolvency is an objective one and even if the employer does not give a notice, his liability to pay the contractor and the contractor’s liability to carry on the work, is suspended after the insolvency of the contractor.
The JCT (2011, clause 8.1) defines insolvency as an arrangement or a compromise in satisfaction of debts, resolution for winding up, bankruptcy order, etc.
Insolvency of the contractor may put the construction into jeopardy. One complication that arises out of insolvency of contractor is that the unpaid suppliers may attempt to recover the materials that are not yet fixed by the contractor (Chappell, 2014, p. 286). The suppliers may not actually be able to do so, however, the employer is definitely put in the position of uncertainty with respect to the project completion due to the insolvency of the contractor (Chappell, 2014, p. 286). The contractor must inform the employer immediately when he realizes that insolvency is likely. In this case, the employer heard a rumour of insolvency during week 18, however, the contractor did not inform him of the impending insolvency.
The employer may terminate the employment of the contractor at any time after he comes to know of the contractor’s insolvency (JCT, 2011, Clause 8.5.1). Such a termination must only be made with a written notice that is served on the contractor by a special delivery that is recorded signed for post or for hand delivery (Chappell, 2014).
It is important to note that even if no such notice has been given by the employer, there is an assumption that such a notice has been given and the provisions of 8.7 and 8.8 become applicable and the employer is not liable to make any further payments. The fact is that the consequences of contractor’s insolvency apply even if the employer has not given a notice to the contractor. Therefore, the consequences are triggered by the insolvency itself and not by the notice of the contractor (Chappell, 2014).
Here even if it is assumed that the contractor informed the employer about the insolvency, it is not a relevant fact as to the consequences, as the intention of the contractor is not relevant.
When the contractor becomes insolvent, the employer may terminate the contract or may even continue the contract. The matter is up to the employer (Chappell, 2014). In general, it is advisable for the employer to terminate the employment of an insolvent contractor because there are several complications that do arise due to insolvency of the contractor. In fact, even without the notice being given by the employer, the contractor may stop working towards the completion of the construction. Therefore, it is advisable for the employer to send a notice for termination of the employment of the insolvent contractor.
The employer may employ a new contractor in order to complete the railway project. This is permissible under the JCT, 2011. As the work of the employer should not suffer due to the insolvency of the contractor, the JCT, 2011 makes provisions that enable the employer to continue the project by employing a new contractor.
When the employer replaces the old contractor with the new contractor, he must hand over the work site to the other contractor (JCT, 2011, clause 8.7.1). Here, the previous contractor is legally obliged to vacate the premises of the employer and to not come in the way of the new contractor finishing the work of construction. It is generally advised that in order to limit the possibility of conflict with the previous contractor with respect to the work completed by the contractor and consequently any payment due to him, the employer may take the reasonable and prudent precaution of taking photographs of the work site and also conducting a full inspection of the work site in order to create a record of the work site as on the date of termination (Chappell, 2014).
The employer in this situation is in a stronger position that the contractor because the latter’s insolvency implies an immediate right of the employer to suspend or terminate the contract of employment with the contractor. Therefore, he can take advantage of that in order to terminate the contract with immediate effect. This will allow the employer to ensure the appointment of new contractor who would finish the work on time.
The consequences of termination of employment are provided in JCT (2011). These consequences may be particular as well as general (Chappell, 2014). Particular consequences include the following.
First, the contractor’s obligation to complete the works is suspended and there is no assumption as to how long the suspension will last (JCT, 2011, clause 8.5.3.2). This is effective even without a notice of suspension given by the employer. Once the notice is actually given by the employer, the suspension is permanent in nature. However, in absence of the notice, if the contractor knows that he is insolvent, he may cease to work without receiving the notice from the employer (JCT 2011, clause 8.5.3.2).
Third, the clauses in the agreement related to payment or release of retention to the contractor does not apply anymore (JCT, 2011, clause 8.9). The consequence is that the employer may withhold payments from the contractor as he is not bound to pay as per the agreement once the contractor is known to be insolvent. Other general consequences of termination of the employment are also discussed here. First, the employer may employ another contractor to complete the works and hand over the work site to the other contractor (JCT, 2011, clause 8.7.1). The employer may take the reasonable and prudent precaution of taking photographs of the work site and also conducting a full inspection of the work site in order to create a record of the work site as on the date of termination (Chappell, 2014). Second, the contractor must vacate the premises within a reasonable period of time after receiving the notice from the employer. In case, the contractor fails to vacate the premises within a reasonable period of time or within the time required, then the contractor becomes a trespasser on the premises and the employer may take action against the contractor (JCT, 2011, clause 8.7.2.1). Third, the contractor in no longer liable for the insurance and the employer should take out the insurance at the time of terminating the employment (JCT, 2011, clause 8.7.2.1).
The JCT, 2011 provides the procedure for termination of contract. In this case, the contractor is insolvent and therefore, there is a ground for termination of contract by the employer under the JCT, 2011, clause 8. The employer, which is this case is a local authority, can give a notice of termination of contract at any time when it has come to know of the insolvency of the contractor. Even if the employer does not serve such a notice, there is an assumption of termination of contract due to insolvency. Because of this assumption, the employer’s notice of termination is not the key to setting in motion the consequences of termination of contract.
The contractor may cease work immediately when he realizes that he is insolvent, irrespective of whether he has received a notice from the employer or not. The employer may give a notice for termination, employ another contractor in the place of the present contractor and ask the present contractor to vacate the Works site. In case, the contractor fails to vacate the Works site, the contractor is deemed to be trespassing on the property of the employer. For his part, the employer has to ensure that the notice of termination is given on time.
The JCT, 2011, is useful in laying down clear conditions that are applicable where the contractor is insolvent and it provides a clear and simple process for the termination of notice.
Reorganization usually involves restructuring the operations of a company to focus on the main activities and outsource others (Grant, 2001). It results from the economic pressure that firms face due to the effects of globalization. This will lead to many changes in the organization, and one of them might be the need to downsize its labour force. In this particular organization, the reorganization will involve relocating employees too other and outsourcing a certain function from a subcontractor.
In case of outsourcing work to a subcontractor, the employees and the work remain the same, but the employer changes. This situation is governed by the Transfer of Undertakings (Protection of Employment) Regulations 2006. Here the previous employer is the outgoing employer and the new employer (sub contractor) is the incoming employer. This is a ‘service provision change’ (ACAS 2015). In a service provision change, employees assigned to the organised grouping of employees automatically transfer to the incoming employer at the point of transfer. Thus, contracts of employment, including all terms and conditions of employment such as pay, commission and bonus entitlements, holidays, job title and function, and sick pay provisions also transfer to the incoming employer (ACAS 2015). It is important to remember that in case of a transfer, the rights and liabilities of the employees remain the same and the incoming employer cannot change the terms and conditions of their work substantially. In case that happens, the employee can terminate the contract of employment and this may be treated as a dismissal. The employee can then claim constructive unfair dismissal at the Tribunal.
For this particular organization, the employer will need to consider various aspects concerning the idea to move the employees to new sites. One of the aspects is the nearness between the current work site and the intended one. Another aspect that the employer should consider is the consideration about the employee's family, and how it will be affected if the employee moves to the new site.
In any case, in cases of redundancy, employers should offer alternative work to employees in order to avoid redundancy. Such offers should be unconditional and in writing, and made before the employee’s current contract ends (BIS 2016).
Bullying at work involves words or acts committed against an employee that are intended to offend, intimidate, humiliate or degrade them, and that can end up isolating the employee in the workplace or affecting them mentally (Walsh, 2013). Bullying comes under the generic definition of harassment. Both statutory and common law provide specific duties to the employer to prevent and take action against bullying. Under the common law, employers have certain implied duties that are part of the employment agreement, although not specifically or expressly provided in the contract. There is an implied duty of health, safety and welfare wherein the employer impliedly agrees to take reasonable care to ensure it employees' health, safety and welfare at work. Another implied duty of the employer is to provide a safe working environment to the employees (Painter and Holmes, 2015, p.142). When an employee is bullied at the workplace, the employer breaches the implied duty to take care of health and safety of the employee. The employee may then claim breach of contract by the employer.
Where employees are being bullied, they have an option to take an action to the Employment Tribunal. It is important to note that employers are responsible for preventing bullying and harassment and they may be liable for any harassment suffered by their employees, even if such harassment was not known to them.
Bullying at workplace falls under the Health and Safety at Work, etc. Act 1974. This Act, s.2 enjoins upon the employers the general obligation to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all his employees. In the case of bullying, employers work against their legal obligation of ensuring that the employees are safe at work.
One of the three employees is being bullied for their nationality. While discrimination can take different forms and can happen in a number of settings, discrimination in employment is more commonly litigated against (Barnard 2016). As discrimination in workplace can be effected from recruitment to retirement, the state takes it very seriously and in the UK there are a number of measures that the state has taken to contextualize and penalize such discrimination (Leigh 2008). Another important point to remember is that there are certain protected characteristics that are recognized under the Equality Act 2010, s.4. Race, which includes nationality is a protected characteristic of the employee and therefore there cannot be any discrimination or harassment on the ground of nationality (Wadham et al, 2012).
In this case, the employer breaks the obligation of duty of care towards the employee because bullying him because of his nationality interferes with his wellbeing making him not good health wise. The employer causes stress to the employee by bullying him on the ground of his nationality.
Employers have a ‘duty of care’ for all their employees. If the mutual trust and confidence between employer and employee is broken – for example, through bullying and harassment at work – then an employee can resign and claim ‘constructive dismissal’, at an Employment Tribunal on the grounds of breach of contract (ACAS 2014).
The second employee who was bullied for refusing to join a trade union was protected by the employment law, which gives various rights to employees concerning joining trade unions. These rights include the right to or not join the trade union, to quit or retain membership of a trade union or be a member of more than one trade union (Cihon & Castagnera, 2011). The Equality Act 2010 is important in this context because it prohibits discrimination in the context of work, membership of associations, access to goods, education, services and facilities, including housing. The European Convention of Human Rights (ECHR), article 11, read with the Human Rights Act 1998 (HRA 1998) also protects freedom of association. This includes freedom to join or to not join a trade union. A compulsion to join a trade union will be an infringement of this rights. The employer is under a duty to protect this right of the employee. Under Safety and Health Act, this employer is under obligation to exercise a duty of care by providing safety to the employees at their workplace. Bullying them for refusal to join a trade union, therefore, amounts to a breach of this duty of care. The employee can, therefore, claim damages for this breach of duty by the employer.
The third employee is bullied for supporting a certain football club. Under the employment law, it is unjust to bully employees at the workplace for their preferences or opinions that are not even related to their job or the specific organization. Under the Equality Act 2010, discrimination on the basis of membership of association is prohibited and the employer in under a duty to provide a work environment where such bullying is taken action against. Bullying the employee for supporting a certain football club is a breach of this duty because it causes stress to the employee and consequently affecting his health to a point where he needs to seek medical help. The employee may also claim damages in the Employment Tribunal.
Employees in an organization are expected to observe the rules and regulations set for the operation of the particular organization. Some employees might at times, go against these rules and therefore calling for disciplinary action to be taken against them as a corrective measure for their behavior. The employment law advocates for disciplinary actions to be taken upon the employees who go against the rules and regulations of the organization as well as reward mechanisms for those who perform exceptionally. The workplace rules and regulations in any organization are intended to maintain order, protect employees’ rights and maintain a high level of operational efficiency. Under the Health and Safety at Work Act, there should be a safe working environment in every organization, whose maintenance requires the efforts of the employer as well as employees. Therefore, an employee under drugs influence might result in acts that compromise the safety of the work environment. The employer should come up with policies that prevent employees from going to work being under drugs influence (Guerin, 2011).
The ACAS Code of Practice (2015) is to be followed by the employer in dealing with this employee. This will ensure that the employer follows all the rules regarding disciplinary action and minimize the chance of an employee action through the Employment Tribunal. As there is an allegation of the employee’s drug abuse while at work, the employer must carry out a fair and transparent investigation to find out if that really was the case (ACAS 2015). The employer must also ensure that the employee is informed of the basis of the problem and give him an opportunity to put his case before any decisions are made (ACAS 2015). An important provision is that employers should allow employees to be accompanied at any formal disciplinary or grievance meeting (ACAS 2015). This is a statutory right and employees have the right to be accompanied by a companion at meetings where some warning may be made to the employee, or some disciplinary action can be taken against him (ACAS 2015). The employer must ensure that the person carrying out the investigation and the person carrying out the disciplinary hearing are not the same (ACAS 2015).
Communicating these policies to employees is another important step that the employer should take, and this should be done using a staff handbook. Employers may also use newsletters, email alerts and publicity campaigns to communicate the policies on use of drugs at the work place. In this case, the employer is going against the standards and policies preventing employees from going to work being under drugs influence. The disciplinary procedure, therefore, should be on this employee.
It is also pertinent to note that a decision to dismiss should only be taken by a manager who has the authority to do so. The employee should be informed as soon as possible of the reasons for the dismissal, the date on which the employment contract will end, the appropriate period of notice and their right of appeal (ACAS 2015). The right to appeal is an important right of the employee and not providing it will expose the employer to a risk of action in the employment tribunal, irrespective of how justified the dismissal may be in light of the actions of the employees.
The disciplinary procedure is usually applied in an organization upon an employee who goes against the set standards. This encourages other employees to follow the set standards at the place of work. A formal disciplinary action for the employee will start with an investigation, which should be conducted by a person from the department of human resource. The will help the investigator find information regarding the employee’s guiltiness of the suspected allegations. If following the investigation, the representative concludes that the employee has a case to answer, the employee b is then called to attend to attend a disciplinary hearing. The employee is allowed to be accompanied by a colleague or by a representative of the trade union. A letter is sent to the involved employee to notify him of this hearing, and it should contain the venue and date of hearing, as well as the allegation against him, explaining why he should not be under drugs influence while at work. It should also contain a statement of why the allegation is serious in the place of work and a statement confirming his approval of the employee being accompanied by a colleague or a representative of the trade union. The head of the human resource department heads this hearing, and it will enable the employee to answer the drugs allegations against him and challenge the evidence obtained from the investigation that they feel is not true (Willey & Murton, 2009).
The employee should be granted a notice of not less than ten working days to enable him to prepare for this hearing. In the presence of a witness statement, the witness obtained during the investigation should be available at the hearing to give confirmation to the witness statement and give the concerned employee answers to his questions as well as the person leading this disciplinary hearing. Considering the information from either side, the head of the human resource department or any other person heading the hearing should come up with a conclusive decision, which should be communicated to the employee, detailing the kind of disciplinary action taken against them (Nairns, 2011). If an employee does not attend the disciplinary hearing for unavoidable reasons such as sickness, the hearing is rearranged for another day, and if he still fails to attend, the department head makes the final decision using the information obtained from the prior investigation. In the case of this particular employee, it is important for him to understand the allegations before attending the hearing. The allegations in this case if confirmed true may lead to the dismissal of the employee. The evidence of the allegations should be provided, as well as the dates that employee was under drugs influence. If the employee is found guilty at the disciplinary hearing, he will be evaluated to determine whether he had committed such misconduct before and if not, he will be issued with a warning letter and any other applicable form of punishment such as suspension. However, if the employee had been accused of such misconduct before, he will be dismissed without the issue of any notice to him.
Dismissing or taking any other action against this employee without going through the disciplinary hearing within the organization will lead the employee raising claims of unfair dismissal in an employment tribunal. The hearing procedure, therefore, is important because it reduces the chances that the case is to be defended in an employment tribunal. The head of the disciplinary hearing should also ensure that a fair decision is arrived at, considering all the matters and information provided before or at the time of the hearing, which should as well be discussed at
the hearing time. This will prevent the employee from raising a petition at the employment tribunal on the grounds of unfair judgment in a disciplinary hearing (Daniels, 2004). The decision will be dependent upon how serious the allegation is, what disciplinary action was taken before regarding a similar case as well as the previous record of the employee. In this case, the decision will be dependent upon other cases regarding employees being under drugs influence at work, the record of this employee determining whether he has had any form of misconduct before and the seriousness of the allegation about rules and regulation of the organization. What the decision arrived at is communicated to the employee using a written document which should contain a summary of the hearing’s discussion, the reason for the decision made, the applicable corrective measure, the applicable assistance that management can offer, and what repercussion will follow if the employee fails to comply with the decision. This will be a formal procedure for disciplining the employee and at the same time reducing the chance of solving the case in an employment tribunal.
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