Legal Risk Analysis: UK Construction Projects and Contract Law

This report provides a comprehensive analysis of legal risks in construction projects, focusing specifically on the UK construction industry and contract law. The report begins with an introduction outlining the research topic, aim, rationale, and significance of the study. A thorough literature review explores various themes, including legal risks in construction projects, major legal issues and their implications, the application of contract law, and required improvements within the UK construction industry. The methodology section details the research type, design, approach, philosophy, sampling, data collection, and analysis methods employed. The report identifies and analyzes common legal risks such as contractual risks, project structure and design issues, and financing and insurance legal risks. It also highlights major legal issues including changes in regulations due to Brexit, improper usage of BIM, gender pay gaps, and disputes. The report emphasizes the importance of understanding contract law principles and the role of construction contracts in managing legal issues. It concludes by suggesting areas for improvement in the UK construction industry to mitigate legal risks effectively.

LEGAL RISK IN
CONSTRUCTION

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Research Topic............................................................................................................................1
Research Aim...............................................................................................................................1
Rationale......................................................................................................................................1
Significance.................................................................................................................................1
LITERATURE REVIEW................................................................................................................1
Introduction..................................................................................................................................1
Theme 1 Legal risk in construction project.................................................................................1
Theme 2 Major legal issues and their implications in construction project................................3
Theme 3 Contract law applicable to Construction project..........................................................4
Theme 4 Improvements required to be brought in construction industry especially in
construction projects of UK.........................................................................................................5
Conclusion...................................................................................................................................6
Research Objectives.....................................................................................................................6
Research Questions......................................................................................................................7
METHODOLOGY..........................................................................................................................7
Introduction..................................................................................................................................7
Research type...............................................................................................................................7
Research design...........................................................................................................................7
Research approach.......................................................................................................................8
Research Philosophy....................................................................................................................8
Sampling......................................................................................................................................8
Data Collection............................................................................................................................8
Data Analysis...............................................................................................................................9
Structure of the proposed dissertation.........................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Research Topic
Main research topic of this dissertation is “Legal risk in Construction”.
Research Aim
Main research aim of this dissertation is “To analyse and identify legal risk associated with
contract law in construction project- A view of UK Construction law”.
Rationale
It (Legal risk in Construction) is one of the most important topics in which further research
is required to be done. This is mainly because there are various kinds of well-known common
risk that are associated with construction projects. It can also be said that this Construction sector
is full of risk because of this project done in this sector can get suffered. Major kind of legal risk
associated with construction projects are: project structure, financing, insurance and many more
(Maemura, Kim and Ozawa, 2018). It is important for construction industry organizations to
focus on these risks so that operations, design as well as construction does not get affected.
Significance
This research study will be useful for the readers as it will help them to understand major
types of legal risk in construction projects and ways in which it can affect these projects. This
research study will contribute in construction field in many ways as well as this research will be
useful for further researchers who will be conducting research in this field.
LITERATURE REVIEW
Introduction
This literature review will be analysing contract law of UK as well as risk associated with
construction project of UK as well as it will also help in identify ways in which these risks can
affect construction project. This literature review will also help in highlighting various in which
legal risk associated with contract law of UK can affect construction projects and organizations
doing construction projects in different ways. Other than this, this literature review will also
focus on major implication in construction projects and ways in which improvement can be
brought in contract law of UK.
Theme 1 Legal risk in construction project.
According to the view of Xu, Mi and Delcea, (2019) Today construction industry is one of
those industry in which continuous development is being done. In fact, construction industry is
1

breaking all records and is continuously expanding. But with this expansion, risk associated with
these construction projects are increased and these risks are affecting most of the construction
projects. One of the main types of risk associated with construction projects that can affect these
kinds of projects drastically are legal risk associated with the projects. It is extremely important
for organizations or contractors to identify these risks can it can further result in any kind of
delay, contract issues, dispute and many more. There are various kinds of legal responsibilities
that are required to be taken care of so that legal risks associated with these construction projects
can be reduced. Some of the most common legal risks associated with construction project are:
contract clauses, code, regulations, changes in labour safety law or regulations and many more.
Other than legal risk that are many other kinds of risk associated with construction projects but
the manner in which legal risk can affect these projects, no other kind of risk can affect. Xu, Mi
and Delcea, (2019) further explains that, one of the most common type of legal risk associated
with construction project is contractual risk. Contractual risk is those risk that are assigned by the
contract on which contractor or organizations doing construction project have no control. In
order to reduce these contract law risk, it is important for contractors or organizations to
understand all terms, conditions, clauses of the contract so that further risk associated with it can
be reduced.
As per the view of Yin, Bai and Yuan, (2019) because of these legal risks it is important to
continuously identify legal risk associated with construction project. This identification of legal
risks can help in reducing risk related to contract law, delay in project and can also help in
resolving any kind of dispute. However, it has been seen that many small organizations or small
contractors that do construction projects are not aware of many kinds of legal risk associated
with these projects and because of which handing these risks when occurred becomes difficult
for them. Yin, Bai and Yuan, (2019) further explains that in order to manage legal risk within
construction industry it is important to understand types of legal risk that can be faced by
contractors or organizations doing construction projects so that ways in which it can be managed
can be identified. According to the view of Ozkaptan Alptekin, G., (2017), Legal risk in
designing, operations, constructions in construction projects are: many construction projects
require significant amount of space and in order to complete the construction organizations are
required to rent some real estate land or building so that they can keep all of their required
materials or facilities in it. So, renting a real estate building can be a bit risky. Another type of
2

legal risk is project structure and design as it should be approved by all the involved stakeholders
because in future it can create legal issues that can be faced by the organization or contractors.
Another kind of legal risk it is extremely important to be focused is contract law risk. Most of the
legal issues faced by construction projects are due to contract law. Next is financing and
insurance legal risk. When insurance of construction projects is done it is important for
contractors to read all kinds of terms and conditions so that in future when required legal risk
associated with it can be reduced.
Theme 2 Major legal issues and their implications in construction project
As per the view of Havenvid, Hakansson and Linne, (2016) there are various kinds of legal
issues that contractors of construction project are required to be aware of so that it can least
affect those projects as well as contractors of construction project. FIDIC form have been
updated with new contract suits that were published in December, 2017. NEC4 alliance have also
been published in 2018 and many contractors will be receiving project tenders using NEC4 suits.
These new forms can be a legal issue for the contractors that can affect them and they
construction project contracts. It is important for contractors to commission Building regulations
and fire safety reviews issued from government. Main reason of this review is to ensure that
there are sufficient robust regulatory systems and for this government examines the building, fire
safety regulations and if there is any kind of changes required to be made only after those
changes these regulations are issued by the government. Havenvid, Hakansson and Linne, (2016)
further explains that there are many other legal issues related to construction projects that can
affect them as well as the contractors. Such as contractors are required to adhere implementation
of the Housing Grants, Construction and Regeneration Act 1996 as this act includes misuse of
adjudication. One of the major legal issue that can be faced by construction projects is because of
Brexit. Because of Brexit various kinds of regulatory and legislative changes have been made
that has affected construction industry in many ways because of which it has become important
for contractors to conduct a risk identification check so that legal issues related to these changes
does not affect construction project.
As cited by Kwofie, Adinyira and Fugar, (2017) explains that, improper usage of BIM is
another kind of legal issue that can be faced by construction industry. international BIM standard
ISO 19650 are changing and developing continuously. These changes are being made so that
BIM can be used more securely in the process of construction. Keeping an eye on these changing
3

regulations can help in making BIM a significant part of various large construction projects.
Gender pay gap is another legal issue that can be faced by contractors of major construction
projects. Kwofie, Adinyira and Fugar, (2017) further explains that, Employers who have more
than 250 employees are required to submit their gender pay gap figure to the government. This
figure helps the government in analysing amount all the employees receives as their salary or
bonus according to their gender. Other than this, construction industry is one of those industry in
which disputes can occur quite easily. If these disputes are not taken care of then it can convert
into legal issues which can further affect construction projects in many ways. ADR also known
as alternative dispute resolution has been given a central role in UK Civil Procedure Rules in
order to reduce cost of parties and legal case settlements. Construction and Regeneration Act
1996 focuses on entitlement of adjudicator in order to reach to a binding solution or it can also be
said that this act helps in ensuring that all kinds of payments are made promptly in order to
resolve dispute smoothly.
Theme 3 Contract law applicable to Construction project
According to the view of Apollo, Siemaszko and Kristowski, (2018) Construction
contracts can be defined as legal binding agreement between two parties based on condition
recorded in document form. A Valid contract requires three main elements: agreement, intention
to create legal relation and considerations. In construction industry most of the work is done on
then basis of contracts. If any party involved in construction project breaks a contract the then
they can face legal issues. Many times, these construction contracts are a base of legal
construction. Contract law in UK is legislated through Sales and Supply of goods Act, 1994
which helps in protecting both the seller party and the receiving party. In construction industry
especially for large construction projects first of all formation of valid contract is required to be
formed only on the basis of that contract. Legal and valid contract helps in resolving many kinds
of legal issues or risk associated with construction projects. As illustrated by Apollo, Siemaszko
and Kristowski, (2018) also explains that, construction contract law plays a vital role in
construction industry as construction projects involve large capital sum and because of this
construction contract law helps in ensuring relationship between contractors and clients,
monitors as well as administers the project. All the contraction contracts are done on the basis of
few sets of rules, legislation as well as principles of contract law. Few of the common principles
of contract law are: Contract offer should be accepted by the offered party, all kinds of simplex
4

and complex terms should be included in the contract, contract breeching terms should also be
included in the contract so that if any one party breech the contract then conditions should be
known by both the parities.
In addition to this Juszczyk, Lesniak and Zima, (2017) illustrated that, there are two types
of construction contracts that are: claims and delay, and sub contracts. Claims and delays
contract helps in getting legal and contractual issues resolved at the beginning of the project i.e.
in these contracts various kinds of terms, conditions and clauses are already specified at the
starting of the project. However, many times construction project on sight staff members of
employees do not have any kind of knowledge or proficiency to identify claims. According to a
research conducted by Ozkaptan Alptekin, G., (2017) it was identified that construction projects
are identified as leading cause of claims that are further followed by delays. Delay in
construction projects are followed by claims by the contractors in order to recover claims
because of this it is important for contractors or organizations involved in construction projects
are required to understand various methods that are used in disruption claims and delays.
Juszczyk, Lesniak and Zima, (2017) further explains that another type of contract in construction
industry is sub-contracts. Construction industry frequently uses sub-contracting because of which
various kinds of legal issues occurs such as undesirable terms and conditions of sub-contractors,
undesirable amount demands and many more. There are many more issues that can occur in
construction projects due to construction contracts. So in order to resolve any kind of legal issue
or dispute, before making a valid contract terms and conditions of the contract are required to be
discussed by both the parties so that any kind of other legal risk related to this contract can be
avoided.
Theme 4 Improvements required to be brought in construction industry especially in construction
projects of UK
As per the view of Hanák, Marović and Jajac, (2018) there are various ways in which
improvement within construction industry can be brought in order to increase effectivity of
construction projects. First of all, it was identified that there is a need to bring changes or reshare
regulation in this industry in order to increase legislation transparency. Many times, due to
legislative complications overall productivity of construction projects is affected and many times
chances of legal issues also increases such as increased budget, delay in project and many more.
Hanák, Marović and Jajac, (2018) further explains that, bringing improvement within legislation
5

or regulations can help in decreasing different types of legal issues associated with construction
projects. It will be extremely helpful for contractors or organization that does construction
projects and for government organizations that does construction project, reshaping regulations
can help them enhancing effectivity of their large projects as well as can also help in bringing
innovation within their projects.
As cited by Maemura, Kim and Ozawa, (2018) explains that, another one of the best ways
to bring improvement in construction projects is by improving contractual framework so that
contracts made between two parties can be improved. Legal contracts should not be bind only on
the basis of cost and time period it should be made on the basis of defined outcomes, past
performance of the organization, cost target, schedule and interest of other party. It can help in
reducing legal complications as well as will help in enhancing overall value of the project.
Maemura, Kim and Ozawa, (2018) also says that, another way of bringing improvement within
construction projects is by doing risk assessment. It will help the contractors to identify any kind
of legal risk, issue associated with the project which is required to be improved. On the basis of
this assessment if any kind of clause, term or condition is required to be added within the legal
and valid contract then it can be added in a much better manner. This will also help them to
define their own working approach.
Conclusion
From the above literature review it can be clearly explained that there are various kinds of
flaws that are required to be addressed in construction industry. These flaws are affecting
construction projects of UK in many ways. Due to these flaws, construction projects are getting
affected in many different ways. Review of this literature review clearly states that there is a
need to bring improvement within contract laws associated with construction projects in order to
reduce legal issues or risk associated with these projects. So, it can be concluded that this
research paper will be focusing analyse and identify legal risk associated with contract law in
construction project. Based on this, research objectives and research questions identified for this
research study have been explained below.
Research Objectives
Main research objectives of this dissertation are:
 To identify legal risks faced by construction projects in UK and ways in which these risks
can be managed.
6

 To investigate main legal issues and their implication in construction projects in UK.
 To analyse contract law of UK that are applicable to construction project
 To recommend ways in which improvement can be brought in contract law of UK.
Research Questions
Main research Questions of this dissertation are:
 What are some legal risks that are faced by construction project in UK and how can those
risk be managed?
 What are the main legal issues and their implications in construction projects of UK?
 What are the main contract laws that are applicable in construction project of UK?
 Recommend some ways in which improvement can be brought in contract law of UK?
METHODOLOGY
Introduction
Methodology is one of the most important part of a research paper as in this all kinds of
methods that will be used in research paper in order to reach to a conclusion or answer research
questions are specified as well as justification for selected method is also provided i.e. why those
method was selected. Methods that will be used for this dissertation are
Research type
There are two main type of research: qualitative and quantitative research type. In
quantitative research method research problem is solved using numbers whereas in qualitative
research type research questions are answered using non-numerical methods (De Costa,
Crowther and Maloney, 2019). This dissertation will be a qualitative type of research as in this
research questions will be answered using non-numerical methods as non-numerical methods can
enhance effectivity of results that can help in reaching to a conclusion in a better manner.
Research design
There are three main type of research design: descriptive, exploratory and casual.
Descriptive research design is used to observe and measure research variables without
manipulating them. Casual research design is mostly used to study cause and effect relationship
between variable. Exploratory research design is used to explore specific aspects of research
area. For this dissertation exploratory research design will be used as will help in exploring legal
risk in construction research area in a more detailed manner.
7

Research approach
There are three types of research approaches: inductive, abductive and deductive. In
deductive research approach formulation of hypothesis is done that are conformed/rejected
during the research process. In inductive research approach research aim objective and research
questions are formed in order to generate a new theory. Lastly, abductive research approach is
used when incomplete observations are associated with research (Clandinin, Cave and
Berendonk, 2017). For this dissertation inductive research approach will be used is it is one of
the best suited approach that can be used in qualitative research paper to answer the research
questions.
Research Philosophy
There are three main types of research philosophies: positivism, interpretivism and realism.
Positivism is used to adhere only factual knowledge. Interpretivism is used to study elements of a
study to be interpreted. Lastly, realism is a kind of research philosophy that completely relies on
idea of independence from human mind. For this dissertation interpretivism research philosophy
will be used as it is quite suitable philosophy for qualitative research where sample size taken is
quite small.
Sampling
There are mainly two types of sampling methods: probability and non-probability sampling
methods. In probability sampling each selected member has a known chance of participating in
the study whereas in non-probability sampling not each member has a chance of participating in
the study (Caillaud, Rose and Goepp, 2016). Both the type of sampling methods is further
divided into many sub methods. For this dissertation sample population will be selected using
probability sampling as for this research study all the selected members of the population will be
participate in the study. Sample population of this research study will be 30 contractors working
in construction industry.
Data Collection
There are two main types of data collection methods primary and secondary. Secondary
data is a kind of data will is collected from already published sources such as books, journals,
articles and many more whereas, primary data is a kind of data which is collected at researcher’s
end. Primary data can be collected using surveys. Observations, interviews etc. For this
dissertation both primary and secondary data will be used where primary data will be collected
8

using survey method. Secondary data will be collected from books, journals etc. in order to build
a base of research study.
Data Analysis
There are two types of data analysis methods: thematic and statistical data analysis (Bilau,
Witt and Lill, 2018). Thematic is a qualitative data analysis method in which similar type of data
is converted into a theme and is used for analysis. Whereas, in statistical method statistical
operations are performed for analysis. As it is a qualitative kind of research so for this
dissertation thematic data analysis will be used.
Structure of the proposed dissertation
Structure of overall proposed dissertation is as follows:
 Chapter 1-Introduction: In this Chapter Main title of the research paper will be explained
with background study. After that significance and importance of the research will be
explained with future scope.
 Chapter 2-Literature review: In this secondary research will be conducted by reviewing
already published research papers of other researchers. This will help in explaining gaps in
their research so that on the basis of which research question will be formed and research
objectives will be identified.
 Chapter 3-Methodology: In this chapter theoretical perspective of all the methods that will be
used for doing research, analysing the data collected in order to reach to a conclusion will be
identified and specified.
 Chapter 4-Data Analysis: In this Chapter, data analysis of all the collected primary and
secondary data will be done.
 Chapter 5: Conclusion and Recommendation: Lastly, in this chapter on the basis of results of
data analysis overall results will be concluded and on the basis of which future
recommendation will be provided.
9

REFERENCES
Books and Journals
Apollo, M., Siemaszko, A. and Kristowski, A., 2018. Risk sharing in the contract for
construction work.
Bilau, A.A., Witt, E. and Lill, I., 2018. Research methodology for the development of a
framework for managing post-disaster housing reconstruction. Procedia engineering.
212. pp.598-605.
Caillaud, E., Rose, B. and Goepp, V., 2016. Research methodology for systems engineering:
some recommendations. IFAC-PapersOnLine. 49(12). pp.1567-1572.
Clandinin, D.J., Cave, M.T. and Berendonk, C., 2017. Narrative inquiry: a relational research
methodology for medical education. Medical education. 51(1). pp.89-96.
De Costa, P.I., Crowther, D. and Maloney, J. eds., 2019. Investigating World Englishes:
Research Methodology and Practical Applications. Routledge.
Hanák, T., Marović, I. and Jajac, N., 2018. Effect of Electronic Reverse Auctions on
Competition and Abnormally Low Bids in Public Construction Procurement. Tehnički
vjesnik, 25(Supplement 1), pp.144-148.
Havenvid, M.I., Håkansson, H. and Linné, Å., 2016. Economic deals in the construction
industry: Implications for socio-material interaction and monetary processes. IMP
Journal. 10(3). pp.364-389.
Juszczyk, M., Leśniak, A. and Zima, K., 2017. Selected issues of bills of quantities in
construction works in Poland. Zeszyty Naukowe/Wyższa Szkoła Oficerska Wojsk
Lądowych im. gen. T. Kościuszki.
Kwofie, T.E., Adinyira, E. and Fugar, F., 2017. Theoretical and practical implications for
engendering project team communication effectiveness in mass housing project delivery
in Ghana. Journal of Engineering, Design and Technology. 15(6). pp.826-844.
Maemura, Y., Kim, E. and Ozawa, K., 2018. Root causes of recurring contractual conflicts in
international construction projects: Five case studies from Vietnam. Journal of
Construction Engineering and Management. 144(8). p.05018008.
Ozkaptan Alptekin, G., 2017. Comparison in terms of delays in the construction contracts used in
Turkey.
Xu, R., Mi, C. and Delcea, C., 2019. Complex Network Construction of Internet Financial risk.
Yin, J., Bai, X. and Yuan, M., 2019, March. Construction and application of risk assessment
system for environmental PPP projects. In IOP Conference Series: Earth and
Environmental Science (Vol. 242, No. 5, p. 052005). IOP Publishing.
10