We have previously blogged on this here.
A construction contract is a contract for the carrying out of construction operations and/or for the architectural, design or surveying work or the provision of advice on building, engineering, interior or exterior decoration or landscaping in relation to construction operations.
Over the years since HGCRA came into force the definition of what a construction contract is has not attracted too much judicial comment. More challenging scrutiny has been afforded to the specific exemptions from the legislation.
Section 105(2) excludes from the definition of construction operations a number of different categories of what may, on the face of it, be building works. The exclusions include: drilling for gas; extracting minerals; certain operations relating to nuclear processing, power generation, water or effluent treatment; production or storage of chemicals; manufacturing of materials etc unless installation is also included within the contract works; and the making installation and repair of artistic works being sculptures, murals and other works which are wholly artistic in nature.
Why is this important?
Often, a contract which on the face of it may appear to be excluded, might also comprise elements of work which are construction operations and therefore caught by the Act. A narrow interpretation of the exemptions limits them to work, on any given site where the primary activity is excluded, which is directly attributed to that activity. For example, in a power generation plant, the steel work which supports the plant would be excluded from the Act. The construction of the building which houses the plant would not be exempt, and therefore the provisions of the Act would apply.
The construction and fit out of an art gallery is likely to be a construction operation including the erection of the walls. The installation of a mural on a wall would be exempt.
Each specific case turns on its own facts - as lawyers are want to chime. It really is a question of fact and degree. If however, one part of the operation is caught by the Act and one part exempt there may be a situation where different contractors or subcontractors are on a different footing, particularly with regard to their entitlements to statutory payment procedures and the right to refer any dispute to adjudication.
As ever, these issues can normally be addressed at the outset of a project with a careful consideration of what it is that is being undertaken and whether, in fact, the specific work items are construction operations or not. It is important to remember though that a party to a construction contract is afforded some protection by the Act, whether enshrined in its contract or not. We could not of course have a series of blogs on HGCRA without dealing with payment and adjudication so watch this space for those.
The purpose of the exemptions lies in the early drafts of the Bill, a concern that the types of contract which are exempt by virtue of s105(2) would be too complex for the approach taken in the Act and a public policy interest that they ought to be dealt with separately. Given the types of construction contract which are covered by the Act (infrastructure etc), it remains to be seen whether such wide exemptions would survive further scrutiny.