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30 June 2015 | Comment | Article by Ioan Prydderch

A cautionary tale about the IRS (this is not a tax story!)

An Information Release Schedule, or “IRS”, is often included as part of a construction contract. An IRS is a schedule setting out the dates by which certain design information is to be released to, say, the contractor. An IRS is an important tool that can be utilised by all parties to a construction project in order to ensure that the works are properly programmed and delivered without delay. A recent Scottish case has declared that an IRS and outline programme formed part of a sub-contract, but did not have the effect contended for.

The case of Martifer UK Ltd v Lend Lease Construction (EMEA) Ltd [2015] ScotCS CSOH_81 was a piece of litigation arising out of the construction of SSE Hydro in Glasgow. The defendant was the main contractor for the construction of the arena and the claimant was engaged by the defendant as subcontractor in respect of the construction of the structural and roof steelwork and roof cladding.

Article 1.5 of the subcontract stated:

“The Sub-Contract Works shall be completed in accordance with and the rights and duties of the Contractor and the Sub-Contractor shall be regulated by … the Sub-Contract Documents listed in Part Three of the Schedule all of which are held to be incorporated in and form part of the Sub-Contract.”

The IRS was referenced in the “Sub-Contract Documents” together with an outline programme.

Lord Tyre in the Outer House of the Court of Session decided that the IRS showed the earliest dates the main contractor could expect to receive detailed information from the professional team. It also held that an outline programme provided the parties with information about the key sequencing of works.

However, importantly, he decided:

“In my opinion, inclusion of [the outline programme] and [the IRS] within the Sub‑Contract Documents by which the sub‑contract was “regulated” in terms of article1.5 did not have the effect of imposing on the parties an obligation to complete the Sub‑Contract Works in accordance with the programme contained in IRS4…”

In reaching his decision Lord Tyre referred to the following passage from Chitty on Contracts:

“Depending upon a true construction of the contract as a whole, certain documents may be intended not to bind the parties to their literal terms, but to have more limited effect. Thus, a programme setting out the contractor’s intended sequence of work, even though the contract may require its provision, will generally not constitute a contract document. Were it to bind the parties literally, the inevitable failure of one or both parties to comply in every respect would render one or both parties in breach. Where programmes are to be referred to in the contract documents, the obligation will generally be to produce and review a sequence of working, but not to comply with each detail. There will be other documents which are supplied to the contractor by the employer (or a member of the professional team) which form part of the background information available to the contractor…”

While this is of course a case decided in Scotland (which has a separate legal jurisdiction to England and Wales), the judgment provides helpful guidance on incorporating documents into a construction contract. The case highlights that while a document may be included in a construction contract, that alone does not necessarily place a specific obligation on the parties to comply with every word, date or other detail. Instead, the case emphasises that clear drafting about which documents form part of the contract can help prevent disputes.

Author bio

Ioan is head of the firm’s business services division, which comprises all of the teams which provide transactional, contractual, advisory and dispute resolution advice to businesses and organisations.  Ioan is also Head of our Construction, Energy and Projects team and has spent almost 20 years advising clients on non-contentious and contentious construction matters. He has extensive experience in the construction and engineering sector and has acted in a number of high value and complicated disputes.

Ioan’s role involves advising the firm’s key clients on some of the most significant construction projects and disputes in Wales and the wider UK.

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.

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