LEGAL RISK IN CONSTRUCTION

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

This literature review will be analyzing the contract law of the UK as well as risks associated with construction projects in the UK. It will also help in identifying ways in which these risks can affect construction projects. This literature review will also help in highlighting various ways in which legal risks associated with the contract law of the UK can affect construction projects and organizations doing construction projects in different ways. Other than this, this literature review will also focus on major implications in construction projects and ways in which improvement can be brought in contract law of the UK. Home Work Help can provide additional support in understanding these concepts.

Theme1: Legal risk in a 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, the construction industry is 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. Organizations or contractors need to identify these risks can it can further result in any kind of delay, contract issues, dispute and many more. Various kinds of legal responsibilities 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, contractors or organizations need 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 the 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, and 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 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.

Theme2: 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. Contractors need to commission Building regulations and fire safety reviews issued from the 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 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.

Theme3: 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 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, two types of construction contracts 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. Many more issues 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.

Theme4: 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 the construction industry can be brought in order to increase the effectiveness 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 or regulations can help in decreasing different types of legal issues associated with construction projects. It will be extremely helpful for contractors or organizations 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

The 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.
• To investigate main legal issues and their implication in construction projects in UK.
• To analyse contract law of UK that apply 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 risks be managed?

• What are the main legal issues and their implications in construction projects in 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

The 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 the 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.

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 the human mind. For this dissertation interpretivism research philosophy will be used as it is quite suitable philosophy for qualitative research where the 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 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

The 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, analyzing 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 based on results of data analysis overall results will be concluded and on the basis of which future recommendations will be provided.

 

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