International Construction Law Review
VICARIOUS PERFORMANCE AND PRIVITY IN CONSTRUCTION CONTRACTS
PROFESSOR AYMEN MASADEH*
1. INTRODUCTION
Vicarious performance is quite common in construction projects. Vicarious performance refers to the performance of contract or part of it by a third party. It is quite rare for contractors to perform construction contracts without receiving help from specialised sub-contractors especially in cases of purpose-built premises such as hospitals, factories, etc. Such projects require diversity of expertise that one contractor rarely acquires. Construction projects are known for their multi-contractual relations. Under the traditional construction procurement, employers start by signing a service agreement with an architect or designing engineer. The latter prepares the drawings, specifications, bill of quantities and any other particular documents. The tender process starts with the help of the engineer who may have a significant role in selecting the right contractor for the project. The employer will then sign a construction contract with the contractor who will likely subcontract part of the work.
In principle, employers do not have a direct contract action against sub-contractors and vice versa. This is due to the long-established principle of privity,1 under which only parties to the contract can claim its enforcement. In the normal course of circumstances, employers and sub-contractors do not have a direct contractual link. Over the years, the privity principle was subjected to a number of restrictions. Perhaps in England, Wales and Northern Ireland the Contracts (Rights of Third Parties) Act 1999 is an obvious example. In construction cases, courts and arbitrators alike seem to be too conservative when it comes to the application of the principle of privity. They seem to be reluctant to abandon its rigorous application and, thus, employers cannot sue sub-contractors for defective workmanship or delayed performance; and, on the other hand, sub-contractors cannot claim payment from employers directly.
* Professor and Head of MSc Construction Law and Dispute Resolution at the British University in Dubai, UAE. (On Leave from Yarmouk University, Jordan).
1Under both UAE and English laws, privity is a long established principle. Article 250 of the UAE Civil Transactions Code states that “The effect of the contract shall extend to the contracting parties and their general …”. Article 252 of the same code states that “A contract may not impose an obligation upon a third party but it may vest a right in him”. The privity principle has similar application under English law. In Dunlop Pneumatic Tyre Company Ltd v Selfridge & Co Ltd [1915] AC 847 Viscount Haldane LC, said: “My Lords, in the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a jus quaesitum tertio arising by way of contract. Such a right may be conferred by way of property, as, for example, under a trust, but it cannot be conferred on a stranger to a contract as a right to enforce the contract in personam.”
Pt 1] Vicarious Performance and Privity in Construction Contracts
109