Forfeiture Clauses in Construction Contract
In building and engineering contracts it is usual to insert a provision empowering the employer to forfeit certain rights or property of the contractor on the occurrence of certain events. “Forfeiture clause” is a loose term usually used to describe a clause in a written building contract giving the employer the right upon the happening of an event to determine the contract or the contractor’s employment under it, or to eject the contractor from the site, or otherwise to take the work substantially out of his hands. In standard form building contracts it is usually referred to as ‘determination of employment’ or termination. In this sense JCT SBC 05 clauses 8.4 and 8.9 which relates to termination by employer and contractor respectively are forfeiture clauses.
It is common in construction contracts to find determination clauses allowing either side to bring their contractual obligations to an end should an event specified occur due to the actions or inactions of the other. It would seem that common law determination and determination under a clause of contract are alternatives. There are differences between the processes. First, whereas common law determination depends upon repudiatory conduct or a fundamental breach, the grounds of determination specified by the contract need not exhibit these features, although frequently such will be present. Second, the remedies for common law determination are provided by law, whereas with a contractual determination the clause itself must expressly deal with the issue of remedies. Third, at common law in the face of repudiatory conduct or fundamental breach the innocent party need only indicate to the other that he accepts the breach and considers the contract discharged. Under a contractual determination clause the procedure specified must be carefully followed, failure to so may prevent a successful determination.
The right of forfeiture may be stipulated to accrue either
It is common in construction contracts to find determination clauses allowing either side to bring their contractual obligations to an end should an event specified occur due to the actions or inactions of the other. It would seem that common law determination and determination under a clause of contract are alternatives. There are differences between the processes. First, whereas common law determination depends upon repudiatory conduct or a fundamental breach, the grounds of determination specified by the contract need not exhibit these features, although frequently such will be present. Second, the remedies for common law determination are provided by law, whereas with a contractual determination the clause itself must expressly deal with the issue of remedies. Third, at common law in the face of repudiatory conduct or fundamental breach the innocent party need only indicate to the other that he accepts the breach and considers the contract discharged. Under a contractual determination clause the procedure specified must be carefully followed, failure to so may prevent a successful determination.
The right of forfeiture may be stipulated to accrue either
Bibliography: [1] Bankruptcy Act, 1914, 2167 [2] Re Garraud, ex parte Newitt [1881], 16 Ch.D.522, at p.533 [28] (1854) 5.H..L.C at p.72 [29] [1968] 13 BLR 26