Ireland: Construction & Engineering Law, Ireland 2017

1 Making Construction Projects

1.1 What are the standard types of construction contract in your jurisdiction? Do you have contracts which place both design and construction obligations upon contractors? If so, please describe the types of contract. Please also describe any forms of design-only contract common in your jurisdiction. Do you have any arrangement known as management contracting, with one main managing contractor and with the construction work done by a series of package contractors? (NB For ease of reference throughout the chapter, we refer to "construction contracts" as an abbreviation for construction and engineering contracts.)

There are a number of standard-form construction contracts used in this jurisdiction. The most commonly used forms are as follows:

  1. Conditions of Building Contract issued by the Royal Institute of the Architects of Ireland ("RIAI") (together with a sub-contract form); and
  2. Engineers Ireland conditions of contract for works of civil engineering construction (together with a form of sub-contract).

These conditions of contract are, particularly with respect to larger projects, usually heavily amended through a schedule of amendments to reflect risk profile currently acceptable in the market. In a design and build scenario, a further set of amendments can be incorporated into these conditions to facilitate a design and build procurement route.

In the case of more complicated projects, for example, in the pharmaceutical, information technology and energy market, there are a number of other types of contracts which are commonly used. For example:

  1. the Fédération Internationale des Ingénieurs-Conseils ("FIDIC") suite of contracts, which includes a build-only form of contract, a design and build mechanical and electrical contract and a turnkey or engineering, procurement and construction ("EPC") contract;
  2. management contracts (which, in this jurisdiction, are typically based on the RIAI form);
  3. Institution of Engineering and Technology MF/1;
  4. New Engineering Contract ("NEC") Forms; and
  5. Joint Contracts Tribunal ("JCT") Forms.

In the case of public sector works, the Government Construction Contracts Committee ("GCCC") have produced a suite of standard documents (including a build only, design and build, (for both building works and civil engineering works) site investigation contract, framework agreement, minor works contract, a short form contract plus a contract for early collaboration) for use in public sector construction procurement.

The most commonly used design only contracts in this jurisdiction are those contracts which are produced by the regulatory bodies for disciplines like mechanical and electrical consultancy, civil engineering and architecture together with bespoke forms. When used, certainly in the context of larger projects, these contracts are often heavily amended. In addition, the GCCC has produced a design only contract for use in the case of public sector projects.

1.2 Are there either any legally essential qualities needed to create a legally binding contract (e.g. in common law jurisdictions, offer, acceptance, consideration and intention to create legal relations), or any specific requirements which need to be included in a construction contract (e.g. provision for adjudication or any need for the contract to be evidenced in writing)?

The legal essential requirements of a contract in this jurisdiction are: agreement; consideration; certainty; intention to create legal relations; and capacity. Generally, there is no requirement for a construction contract to be in writing. Recent legislation in this jurisdiction, the Construction Contracts Act, 2013 (which came into force on 25 July 2016), includes a right on the part of parties to a construction contract to refer payment disputes to adjudication, provides for certain new payment provisions and includes a statutory right on the part of a contractor/sub-contractor to suspend works under a construction contract for non-payment.

1.3 In your jurisdiction please identify whether there is a concept of what is known as a "letter of intent", in which an employer can give either a legally binding or non-legally binding indication of willingness either to enter into a contract later or to commit itself to meet certain costs to be incurred by the contractor whether or not a full contract is ever concluded.

In general, a letter of intent ("LOI") may be issued to indicate an employer's intention to create a contract or similar arrangement with a contractor in due course. The phrase LOI is not a legal term of art in Ireland, however, and as such the effect of each LOI will depend on the individual LOI's terms and on the context in which the LOI is issued. In the context of a construction project, an LOI may be issued when the parties to a construction contract are negotiating contract particulars so that, for example, the employer can induce the contractor to begin preliminary contract work (e.g., begin site clearance and site preparation, the ordering of equipment) before the parties execute a final contract.

1.4 Are there any statutory or standard types of insurance which it would be commonplace or compulsory to have in place when carrying out construction work? For example, is there employer's liability insurance for contractors in respect of death and personal injury, or is there a requirement for the contractor to have contractors' all-risk insurance?

Irish statute law does not require specific insurances in relation to construction projects, save for motor vehicle insurance where appropriate. However, construction projects will typically involve some/all of the following insurances:

  1. insurance of the project works (typically referred to as "All Risks" insurance), taken out by either the contractor or the employer to cover loss or damage to the works and/or project materials;
  2. employer's liability insurance, taken out by the contractor to cover injury to or the death of its employees during the course of a construction project;
  3. public liability insurance, taken out by the contractor to cover third party claims in relation to personal injury, death or injury to third parties and property damage (other than damage to the works); and
  4. professional indemnity ("PI") insurance, taken out by any party with design responsibility to cover design liability.

1.5 Are there any statutory requirements in relation to construction contracts in terms of: (a) general requirements; (b) labour (i.e. the legal status of those working on site as employees or as self-employed sub-contractors); (c) tax (payment of income tax of employees); or (d) health and safety?

  1. General Requirements

The Construction Contracts Act 2013 (the "CCA") applies to all construction contracts (as defined under the CCA) entered into after 25 July 2016. The CCA applies to oral and written agreements. The CCA:

1. introduces requirements in relation to payment under a construction contract;

2. renders "ineffective" "pay when paid" clauses in construction contracts; and

3. provides for an adjudication regime in relation to payment disputes under construction contracts.

The Building Control (Amendment) Regulations 2014 also introduced a new regime in this jurisdiction aimed at achieving minimum standards in building practice in relation to design and construction methods.

  1. Labour

The following principal legislation relating to labour must be taken into account when drafting construction contracts in Ireland, however, there is a large body of broader employment law that will also apply depending on the issue and circumstances:

  1. The Employment Equality Acts 1998 to 2015: these acts deal with employment discrimination on the grounds of gender, civil status, family status, sexual orientation, religion, age, disability, race and membership of the traveller community. They also regulate issues such as harassment, sexual harassment, discriminatory dismissal,
  2. Data Protection Acts 1988 to 2003: these acts outline obligations regarding the type of data an employer may hold on employees, the background checks that an employer can carry out on potential employees, seeking Garda vetting of potential employees and how long an organisation can retain employee data.
  3. The Minimum Wage Act 2000: provides for a national minimum wage per hour for an adult employee which is €9.25 per hour. In the construction sector, employers usually pay at a higher rate as a matter of sector level practice.
  4. The Industrial Relations Acts 1942 to 2015: this legislation provides the overall industrial relations framework for resolving industrial disputes in Ireland. It is based on a predominantly voluntarist system, the central feature of which is that an employer cannot be required to recognise a trade union or to negotiate directly with it. The recommendations from the Workplace Relations Commission or the Labour Court are in most cases non-binding, however, in certain circumstances the Labour Court can issue binding orders in relation to terms and conditions.
  5. The Organisation of Working Time Act 1997: regulates working time, annual leave and public holiday leave. It provides for a maximum working week of 48 hours averaged over a four-month period (or in certain cases longer averaging periods), daily and weekly rest periods, and minimum annual leave entitlements.
  6. The Protected Disclosures Act 2014: this is the Irish general whistleblower code and allows employees to raise concerns regarding potential health and safety issues at the workplace and failure of the employer to comply with legal obligations, amongst other issues.
  7. The Protection of Employees (Part-Time Work) Act 2001: in addition to providing protection to part-time employees against less favourable treatment, this legislation implements the EU posted workers directive, imposing certain minimum mandatory standards under local law to any employees working in the jurisdiction, irrespective of nationality, where they were originally hired or the place of residence. In short, this prevents against foreign service providers using foreign labour on more cost effective terms and conditions to undercut local service providers.
  8. The Protection of Employees (Transfer of Undertakings) Regulations 2003: the rules ("known as TUPE") provide that where a business or part of a business transfers from one employer to another, any employees attached to that business will be entitled to transfer with it on the same terms and conditions, and with their service recognised in full. Changes or dismissals related to the transfer are not permitted, though redundancies are.
  9. EU legislation such as the Equal Pay Directive, the Equal Treatment Directive and the General Framework Directive must also be considered when drafting construction contracts.
  1. Tax

As with all employed/self-employed persons working in Ireland, workers on a construction project are invariably subject to the payment of income tax, universal social charge ("USC") and pay-related social insurance ("PRSI") either through self-assessment as self-employed persons or through Irish Revenue's pay-as-you-earn or PAYE system. In the case of employees, the employer needs to correctly operate the PAYE system and be mindful of its obligations and its filing requirements in this regard. In the case of individuals engaged as independent contractors, the contracting entity needs to be entirely satisfied that they are genuine independent contractors from an Irish tax, social security and employment law perspective.

To view the full article please click here.

Previously published in the International Comparative Legal Guide

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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