Aksum University

Aksum Institute of Technology (AiT)

Faculty of Civil Engineering and Construction Management

Department of Construction Technology and Management

CONSTRUCTION LAW

Background and Objective of the Course

 Construction Law
Background and Objective of the Course

Course Contents

I. Fundamentals
 Law, Legal Systems and the Ethiopian Context
 The Law of Contract
 Project Delivery System and Method of Procurement
 Construction, Construction Law and Contract
II. Construction Contract
 The International Context
 The Ethiopian Context
 The Sub-contract Regime
 Claims and Disputes
 Consulting Services
 Commercial Services
 Construction Law
III. Investment in Construction
 Construction Business
 Construction Project
 Regulating Contracts
 Dispute Resolution
 Regulating Ethics
 Decision Services
 Legal Liability
IV. Judicial Process and Enforcement
V. International Dimensions

June 2024
Aksum – Ethiopia
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By: Welday T.
 Construction Law
Background and Objective of the Course

Background and Objective of The Course

1. Background of the Course

The socio-economic development of a given country requires, among other things, the study, design, execution,
financing, supervision and management of infrastructural & other physical projects. The present course, however,
focuses on construction projects of Civil Engineering nature. These projects may contain certain forms. They may
express themselves, for example, in terms of Building Structures, Road Infrastructure, Hydraulic Structures &
Sanitary Structures or Facilities and so forth. These structures are facts of life both in rural and urban setting.

The study, design, execution, financing, supervision and management of Civil Engineering Works including building
structures, imperatively requires the role of law and contract.

To this effect, the Course is, generally, divided in to the following five major parts:

 Part I: Fundamentals;
 Part II: Construction Contract;
 Part III: Construction Law;
 Part IV: Judicial Process & Enforcement; and
 Part V: International Dimensions;
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By: Welday T.
 Construction Law
Background and Objective of the Course

PART - I FUNDAMENTALS

This part of the Course deals the following four areas of issues: a) Law, Legal Systems and the Ethiopian context; b) the
Law of Contract; c) Project Delivery System and other related Issues; and d) Construction, Construction Law and
Contract;

a) Law, Legal Systems & the Ethiopian Context

This sub-part of the Course deals with general introduction /background to law, the world’s two major legal systems,
i.e. the Common Law & the Continental (Civil Law) Legal System, the Ethiopian legal system & legal framework. This part
is very critical to discuss the fundamental concepts of law & legal systems including the Ethiopian dimension in respect
thereof.

b) The Law of Contract

The law of contract is a fundamental requirement to understand the nature, structure & effects of the construction
contract. Therefore, the Course attempts, under this sub-part, to cover the legal elements, in terms of capacity,
consent, object & form, to be fulfilled for the formation of a construction contract & the contractual & legal effects of
same including other pertinent issues as well.

c) Project Delivery System & Methods of Procurement

This sub-part deals with the importance of differentiating & understanding about the very concepts of project delivery
systems, type of contracting, forms of contract & method of procurement, specially with respect to public
procurement.

d) Construction, Construction Law & Contract

This sub-part of the Course deals with the definition & scope of construction, construction law & contract, components
of & parties to the construction contract, the legal status of being a contractor, concepts on conditions of contract &
possible stakeholders in the construction project.

PART - II CONSTRUCTION CONTRACT

The role of Contract is evident in Construction. The Construction Contract establishes a legally recognized and
enforceable contractual framework of roles, risks, rights, obligations and liabilities of and between the contracting
parties, notably, the employer & the contractor. It, thus, formalizes and legalizes the promises of the contracting
parties and provides sanctions & remedies in case of deviations from the said promises.

This part deals with about Construction Contract & further divided in to the following five contexts or sub-parts: a) the
International Context; b) the Ethiopian Context; c) the Sub-contract Regime; d) Construction Claims & Disputes; e)
Consulting Services; and f) Commercial Services;
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By: Welday T.
 Construction Law
Background and Objective of the Course

a) The International Context

This sub-part deals with international construction contract based on certain and relevant international conditions of
contract, notably of Federation Internationale Des Ingenieurs-Conseils (FIDIC) Multilateral Development Banks (MDB)
Harmonized Edition, 2006, developed based on the New Red Book.

b) The Ethiopian Context

This sub-part deals with construction contract within the Ethiopian context based on the Public Procurement &
Property Administration Agency (PPPAA) conditions of contract & other relevant conditions of contract in use, if any,
and including some concepts in relation to the law of administrative contract.

c) The Sub-contract Regime

This sub-part deals with the special features & issues within the context of international subcontracting arrangement
based on international (FIDIC) conditions of sub-contract. It identifies two types of arrangements: selected and
nominated sub-contractor including the legal relationship between the main contractor & the sub-contractor, the
prime liability of the main contractor for the sub-contractor, and the possible contractual relationship, obligation &
liability between the sub-contractor & the employer, if any.

d) Construction Claims and Disputes

This sub-part of the Course deals with the steps to be followed or the requirements to be fulfilled in submitting,
processing & finalizing construction claims & the different methods & approaches in relation to construction dispute
i.e. prevention, settlement & resolution of same.

The Construction Project, as any other project, is expected to be completed within the agreed time (schedule), cost
(budget), (technical) quality and (environmental) safety parameters.

However, deviations, due to various reasons, may occur during commencement, execution and completion phase of the
Construction Project with respect to the agreed parameters. Claims, if not well managed & resolved, will, definitely
arise, paving the way for disputes. Disputes, if not prevented, should amicably be settled or resolved by judgmental
process.

e) Consulting Services

Under this sub-part of the Course, we try to deal with some introductory concepts about the contractual arrangement
& the legal effects in selecting & engaging an architect or consulting engineer based on a given professional service
contract. The treatment of this part of the Course is very essential & desirable in terms of the role of the architect &
the consulting engineer in terms of studying, designing & supervising or administering/managing a construction
project & contract including that of building. The architect or the consulting engineer is not a party to the construction
contract, however.

f) Commercial Services

Under the commercial services, the Course attempts to deal with the provision of various possible commercial & other
services both to the construction business and to the construction project. Although, there is an indispensable legal
framework for most of the commercial & other services, such services are procured mostly on contractual basis.
What are such possible commercial & other services? What are their contractual features & legal framework?
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By: Welday T.
 Construction Law
Background and Objective of the Course

PART - III CONSTRUCTION LAW

There is no as such a unified & comprehensive construction law, which regulates the whole spectrum of a given
construction project or business & so forth. The relevant legal regulation of same is, however, scattered & diverse.
Some legal regulations are not, often, confined or unique to be applied for construction business or project and so
forth. They may also apply for other projects or business, as well.

Every critical phase & aspect of construction is rigorously regulated by law. The relevance and applicability of law to
the construction sector or industry is immense. However, for the purposes of the Course, the relevance and
applicability of law is treated in the following seven fundamentally interrelated categories.

The categories are: a) investment in construction sector; b) the construction business itself; c) the construction
project; d) regulating contracts; e) regulating dispute resolution; f) ethical issues in construction sector; g) public
decision services; and h) legal liability issues;

a) Regulating Investment in Construction

The legal framework on investment provides the very legal ground in which sector the government, the domestic
investor, and/or the foreign investor with or without domestic private or public capital to engage in a certain
investment area. The construction sector is not an exception in this regard. In this part of the Course, we shall try to
explore the legal regulation of the construction sector or industry in terms of investment laws of the country, the
formalities to be fulfilled, and the possible fiscal & other privileges available to such construction investment & so
forth.

b) Regulating the Construction Business

The construction business is a legally regulated business. In this part of the course, we shall deal with the
constitutional & legal framework with respect to the construction business, general concepts about commercial law,
forms of business organizations, and about the formation, operation, and closure of a construction business on the
legal and/or administrative grounds. The legal regulation thus mainly focuses on the formation, operation & closure of
the said business.

c) The Construction Project

A construction project is a highly regulated operation. The legal regulation of a construction project comes in to
picture in different phases & different ways.

The legal regulation in terms of the construction project shall be treated based on the phases of the said project: i.e.
during the study & design phase, during the procurement phase, during the execution & financing phase and finally
during the operation & use of the product of the project;

In such different phases of the construction project, a host of legal regimes especially in the area of public law come in
to play. The protection of public interest & safety in its widest ramification comes also in to picture.

The legal regulation may fall in to the following categories: legal regulation of input to the project (land, budget, human
resources …), regulatory requirements (like in terms of zoning & planning, environmental requirements, safety (in
terms of say building code …) requirements …), and process regulation (like in terms of procurement …);
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 Construction Law
Background and Objective of the Course

d) Regulating Contracts

Even if contracting parties to the construction contract, based on the doctrine of party autonomy, are free to
determine their promises, they are not absolutely free to do so. Their freedom of negotiation is relative, however. It
means that contracts are also regulated by law. The scope of legal regulation of contracts may come in to picture from
the following two sources: from contract law & from other relevant laws.

e) Regulating Dispute Resolution

Construction disputes are going to be resolved as provided in the specific contract document. In case of public
construction contract, the legal regulation may come in to picture in regulating the method of dispute resolution,
regulating the process of such chosen or specified dispute resolution method, in terms of providing judicial assistance
during the process, and in terms of recognizing & enforcing a product out of the said process. Both the relevant
substantive & procedural laws come in to play. The legal regulation, in this instance, may have domestic or
international dimension. The focus will be on arbitration.

f) Regulating Ethical Issues

Ethical issues may have different dimensions in the construction project. It may have business ethics dimension,
professional ethics dimension or contractually regulated ethics dimension, and finally a legally regulated ethics
dimension. The focus will be both on the contractual & legal dimensions of ethics. The importance of regulating ethical
issues is evident. Regulation of ethical issues benefits both the construction business itself & also the public at large.

g) Regulating Decision Services

In terms of studying, designing, procuring, financing, executing & completing … notably of a public construction project,
public decision services are imperatively evident. Such services are mostly governed by the regime of public law. They
are important in all relevant phases of the construction project.

h) Regulating Legal Liability

In all activities of mankind, be it in day-to-day life or in development process, a breach of law may become a reality.
Breach of law carries with it a liability. Such liability may contain the following forms & nature: penal liability, civil
liability and administrative liability.

By penal liability it means taking a legal sanction against the violator of law in terms of life, loss of liberty and/or fine
or other penal sanctions. By civil liability it means, for example, the payment of compensation. By administrative
liability it means, for example, the suspension of license or revocation of same.

The liability may apply both against the physical person or a juridical/legal person. The liability may relate with the
dimensions as set forth from (a)-(g) under the construction law discussions, hereinabove. The liabilities are differing
both in the degree of proof to establish the respective liability and in the nature of sanctions (i.e. in terms of legal
consequences) they bring with them.
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By: Welday T.
 Construction Law
Background and Objective of the Course

PART - IV JUDICIAL PROCESS AND ENFORCEMENT

Judicial process and enforcement of the outcome of the said process is an important aspect in the construction sector
in general, and in the construction project in particular. This part of the Course deals with aspects arising out of
contractual liabilities & legal (i.e. in terms of penal & civil) liabilities of the parties to the construction contract & other
third parties, how to enforce the available contractual and/or legal remedial rights against the other party.

With special emphasis to the role of the courts, this part of the Course, deals also about the role of extra or quasi-
judicial and institutions and their proceedings, relative to the construction sector.

PART V: INTERNATIONAL DIMENSIONS

Under this final part of the Course, some relevant areas in terms of international dimensions pertaining to the
construction sector shall be dealt with. The selected areas are international financing & its procurement & other
implications, and international commercial arbitration & its possible national & international legal implications.
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By: Welday T.
 Construction Law
Background and Objective of the Course

2. General Objectives of the Course

By the end of the Course, the student is expected to:

(i) with respect to Fundamentals

 Understand the general concepts about law & the (world) legal systems, the Ethiopian legal system &
framework & their significance to the construction law & contract;

 Understand the general concepts of the Law of Contract particularly of the legal elements for the formation
of a valid (construction) contract & the effects of same, and other related concepts;

 Distinguish & understand the different forms project delivery systems & their implications on the rights-
obligations-liability-structure of the employer & the contractor, forms of contracting, forms of contract &
method of procurement;

 Understand the legal definition, scope & possible dimensions of construction, construction law & construction
contract & other related concepts & issues;

(ii) with respect to Construction Contract

 Know the very structure, detail contents and features & the possible rights, obligations & remedial rights or
liabilities of the contracting parties to the Construction Contract based on suitable & applicable Standard
Conditions of Contract both within the international and local construction contract context and the
application of same including the concept of administrative contract within the context of the local
construction contract;

 Understand the definition, special features & key issues of a construction subcontract specially in its
international dimension;

 Understand the causes, dimensions and management of construction claims, the possible legal and/or
contractual remedies to the claims, the requirements to be fulfilled for the existence of valid construction
claims & the processes of same, and the definition, causes & nature or dimensions of construction disputes,
the possibility of preventing disputes and the available consensual and/or coercive resolution mechanisms of
construction disputes;

 Understand, in general terms, the role of an architect & consulting engineer both in building & other civil
engineering works & the background to the Architectural and Consulting Engineering Professional Service
Agreements;

 Identify & understand the possible commercial & other services which complement the construction service
including their legal framework & some contractual features;

(iii) with respect to Construction Law

 Understand the possible legal regulation of: a) investment in construction sector, b) the construction
business, c) the construction project; d) contracts including the construction contract; e) construction
disputes settlement & resolution mechanisms; f) ethics in the construction sector; g) public decision
services; and h) the possible dimensions of legal liabilities within the context of the construction sector,
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project & contract in general;

By: Welday T.
 Construction Law
Background and Objective of the Course

(iv) with respect to Judicial Process & Enforcement

 Understand about the role of courts & other extra or quasi-judicial institutions, their process & the
enforcement mechanisms in general & within the context of the construction sector & project in particular;

(v) with respect to International Dimensions

 Understand the legitimate & legal implications of the source of finance being international & international
arbitration within the context of the construction project;

Academic Issues

(1) Reference Materials

 Lecture Notes;
 Laws;
 Books;
 Standard Conditions of Contract (local & international);
 Website References;
 Other Materials;

(2) Group Work and Presentations

 Areas of Group Work: It may encompass the following areas:

 time, cost, variation, risks, payment, safety, dispute resolution, engineer’s role, securities, claims, sub-
contracting, price escalation, defects liability; and also, other issues;
 The concrete title of the project work, the percentage it may contain in the final evaluation of the students &
the members to each group including information & instruction in relation to the group work shall be
disclosed in due time;

(3) Evaluation

 Class Activity; (NB: Class attendance is compulsory)

 Group Work;
 Individual Presentation;
 Final Examination;
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By: Welday T.