NEC3ECC Clause 10.1: An Enforceable Contractual Duty of Trust and Co-operation in the Construction Industry?

• Jurisdiction: South Africa
• Pages: 97-122
• Date: 27 May 2019
• Published date: 27 May 2019
• Author: Terry Boxall

97

NEC3ECC CLAUSE 10.1: AN ENFORCEABLE

CONTRACTUAL DUTY OF TRUST AND

CO-OPERATION IN THE CONSTRUCTION

INDUSTRY?*

Terry Boxall

BA (Hons) LLM MBA (UCT)

Senior Scholar in the Department of Construction Economics and Management,

University of Cape Town

Andrew Hutchison

BA LLB LLM PhD (UCT)

Associate Professor in the Department of Commercial Law, University of Cape Town

Michelle Wright**

BSc LLB (UCT) MSc (KCL)

Senior Associate, Dispute Resolution Practice Group, Baker & McKenzie,

Johannesburg

1 Introduction

This article explores the scope and the force of clause 10.1 of the third

edition of the New Engineering Contract Engineering and Constr uction

Contract (NEC3ECC),1 specically the phra se “and in a spirit of mutual trust

and co-operat ion”. The full text of this clause reads a s follows:

“The Employer, the Contractor, the Project Manager and the Supervisor shall act as stated in this

contract and in a spirit of mutual trust and co-operation.”

The authors of this contr ibution come from different sectors of the legal

spectrum: Terry Boxall and Andrew Hutchison are academics, whereas

Michelle Wright is a practitioner at a large Johannesburg law rm. All t hree

have engaged with the NEC3ECC in various contexts – Terry and Andrew

through their teaching of this document to students at the University of Cape

Town’s Faculty of Engineering and the Built Envi ronment, and Michelle

through hands-on engagement with this text in managing conict and resolving

disputes in the const ruction indust ry. All of the authors are interested from

a theoretical point of view in the idea of good faith in contract law, as well

as what duties of trust and co-operation might look like in practice. In this

article we have used clause 10.1 as a vehicle for exploring these concepts in

the construction industry. We hope, however, to shed light not only on the

* The authors would l ike to than k Professors Dav id Campbell an d Dale Hutchison – a s well as the

anonymous rev iewers – for their com ments on a draft of th is article.

** Michelle Wright r outinely assis ts clients in al l types of di spute proces s and dispute re solution. Thi s

includes inte rnationa l commercia l arbitratio n, litigation , and all form s of ADR. She also un dertake s

considerable pr oject counsel work.

1 Institut ion of Civil Engineers New Engineering Contra ct: Engineering and Construction Contract 3 ed

(2005). All contr act clause referenc es are to this sta ndard form contr act, unless othe rwise stated .

(2017) 28 Stell LR 97

© Juta and Company (Pty) Ltd

meaning of this par ticular text – which we will do by examining clause 10.1

in both its practical a nd legal context – but also to give more general point ers

on how a duty of good faith (in the sense of a duty of tr ust and co-operation)

might operate in a com mercial context. We have taken constr uction contracts

as our paradig m: both because these are highly relational in n ature, inherently

involving long-term tru st and co-operation; and be cause there is an established

discourse on this i ndustry, to which we hope to contribute.

The article proceed s as follows: in part two we will provide some pra ctical

context to contracti ng in the constr uction industr y. Part three will then

analyse the text of clause 10.1, aiming to provide insights into both the literal

and contextual meanings of this clause. In par t four, we will set out the legal

framework, from both a South African and an English perspective. Part

ve will provide a law-in-action account of the South African construction

industry dispute resolution environment and the typical dispute resolution

procedure under N EC3 contracts, drawing on the practical experience of

Michelle. Par t six will conclude.

2 Background: Construction industry contracting

A construction contract is the core contract in a constr uction project. It

is a contract between a n owner or developer (the employer) and a building

contractor (the contractor). Each of these par ties may be involved in other

project-related contracts (the owner or developer with members of his design

team, the contra ctor with sub-contractors and supplier s), but the construction

contract manages t he core activity.

Common features of a const ruction contra ct include a detailing of the proces s

to be followed to br ing the project to a timely and cost-efcient completion,

provisions for the allocation of risk and provisions for the regular assessment

of progress and the maki ng of payments. The nature of construction work

is such that a substantial pa rt of the contract establishes measures to cope

with circumstances and preferences that may change as the project it governs

moves forward. These measures are carefully crafted to keep the pa rties

within a binding relationship with predictable outcomes a nd rely to a large

extent on the judgement and the reaso nable exercise of discretion by the main

agent of the employer. Where the contractor disag rees with this exercise, he

may, as a nal recourse, invoke whatever dispute resolution mechanisms are

available to him. However, the smooth running of the project, which may

be measured in savi ngs of cost and time, relies on the degree to which the

decisions of the main agent, over the full r ange of his responsibilities, are

acceptable to the contra ctor.

It is usual for the contract for a par ticular construction project to be chosen

from a number of standa rd form contracts t hat have been developed for the

industry. These contr acts acquire a re putation for delivering on their key

features, par ticularly risk management and control of budget. Although

there are many expectations that the par ties to a constr uction contract would

have of each other that are not dependent on the for m of contract chosen for

their project (such as relational norms that st and apart from the terms of the

98 STELL LR 2017 1

© Juta and Company (Pty) Ltd