Alternative Dispute Resolution Methods in the Construction Industry

Running head: BUSINESS LAW
Business Law
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BUSINESS LAW
Table of Contents
Question 1......................................................................................................................2
Question 2.1...................................................................................................................4
Question 2.2...................................................................................................................6
Question 3......................................................................................................................8
References....................................................................................................................11

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BUSINESS LAW
Question 1
The two parties to the contract, Custom Street Hotel Ltd and Plus Construction NZ
Ltd had entered into a contract worth $14.45m for converting an existing building into a
hotel. The project faced several issues. Custom Street was the principal where Plus was the
contractor who was making extreme delay in finishing its work and finally stopped working
on 23 July 2014. When litigation was brought against it under Construction Contracts Act
2002, Plus Construction referred to several disputes. One of the main issue that was raised
before the court was that Plus Construction had enough time to complete the work that was
stipulated in the contract. It was also reported by the Engineers that Plus was neglecting its
contractual obligation for a long time and at last it abandoned that project midway. Plus was
also given reasonable time to amend its faults.
However, on non-payment of dues by Custom street, Plus Construction repudiated
the contract, but it was not unlawful on its part if it is seen from Plus’s perspective as
Custom was not paid the amount that was laid down under the contract that it signed with
Plus, thereby giving rise to a breach of contract. However, several reasons could be put
forwarded in favour of as well as against Plus terminating the contract. Plus Construction had
given a notice to Custom Street stating that Plus had failed to pay the amount that was owed
to Custom, under clause 14.3.3 of NZS 3910, thus leaving it no way other than directing the
engineers to stop the construction work. Plus wanted to terminate the contract itself for non-
payment even before it had ordered the engineers to suspend further work. It could be stated
that Plus had to take such step for not being paid for a long time, the amount that was due to
the company. Therefore, it could be stated that Plus’s decision to cease work and
subsequently repudiating the contract could not be held unjustified and unlawful, unless
mentioned under the agreement between the two parties. After repudiating the contract, Plus
took the matter to Arbitration and subsequently the matter went up to the High Court which

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gave its decision in favour of Plus, favouring the construction company on all the points that
it had raised. The main question of the suit was whether the contractor was entitled to
abandon the contract in case he is not paid as per the agreement. The Court of Appeal, on an
appeal by Custom Street, held that Plus construction was entitled to terminated the contract:
a) under Clause 14 of NZS 3910; or
b) under the Contract and Commercial Law Act 2017 (CCL Act).
By the following remedies held under the NZS 3910 and Contract and Commercial
Law Act 2017 (CCL Act), Plus could sue Custom for recovering the money due to it. Plus had
followed the proper procedure before terminating the contract as well, by serving a notice to
Custom that it seeks its due payment within 10 days or otherwise it should cease work and
terminated the contract. Plus had followed the rules laid down under clause 14.3.3 by serving
a notice to Custom. After serving the notice and waiting for the mentioned 10 days, Plus
repudiated the contract and it cannot be held unlawful as held in Custom Street Hotel Ltd
v Plus Construction NZ Ltd (2018) 3 NZLR 34.
The Court of Appeal, on an appeal made by Custom Street, interpreted clause 14.3.3
of NZS 3910 and held that Plus, being a Contractor had two independent right: a) to suspend
the contractual work for non-payment, and b) to terminate the contract. Clause 14.3.3 of the
NZS 3910 expressly states that it is a requisite to suspend the engineers before terminating
the contract of construction and Plus complied by the clause. Here, no ambiguity can be seen
in this situation, as per the provision of the NZS3910 and CCL Act, also by the decision of
the court. Although there is no proper interface between the provisions laid down under CCL
Act and the provisions of the NZS 3910, which is why it needs further verification and
discussion. However, by interpreting the relevant provisions the court held that it was right on
the part o Plus Construction to terminate the contract, thereby giving a new positive
dimension to the contractor. It was held that when the principal fails to make payment for the