Property and Construction: The Law and IT

April 30, 2001

Severe snow storms, which may have deterred the less hardy, were not enoughto put off the construction lawyers and professionals from attending thesociety’s conference entitled ‘Property and Construction: the Law and IT’at the Scottish Exhibition and Conference Centre in Glasgow.

Session 1 – IT Applications Session

John Sibbald, Chairman of the Scottish Society for Computers and Law, whoopened the first session explained that the conference was conceived as a resultof the Scottish Society’s interest in exploring the legal issues arising asvarious professional and industry sectors increasingly harness the power of ITto develop their businesses. The construction industry, worth some £520 billionper annum, is one that offers huge potential for the more effective deploymentof IT to achieve greater efficiency and cost saving. A recent survey disclosedthat the use of IT and Internet-based products, such as online tendering,contract negotiation and amendment, were estimated to save up to 23% of buildingcosts and cut completion time by up to 15%! The possibilities of expandingbeyond Europe into the world market were more than a mere pipe-dream.

Lawyers too were keen to integrate and improve their client services with theuse of IT applications. Several Scottish law firms have already moved in thisdirection. Services with a broader focus were also being introduced and Johnnoted the recently launched online dispute resolution service, ‘Intersettle.’

John closed his welcome speech by offering the hope the conference wouldhighlight the need of the legal profession to keep abreast of IT developmentswhich will be necessary for providing a comprehensive and valuable service tothe construction industry.

JCT on Disk

The first speaker was Professor Peter Hibbard, Secretary-General of the JointContracts Tribunal, who demonstrated the new CD-ROM version of JCT and spokeabout some of the resulting implications of a digital version.

Despite the ‘standard’ name given to the contract forms produced by theJCT, when they actually came to be used, the contracts more often became bespokecontracts, subject to amendments suitable for use between particular parties andon particular projects. In producing a digital version, the JCT give theconstruction industry an extremely useful and viable tool to bring differentideas together and to facilitate changes while assuring and maintaining theintegrity of JCT documents. However, the application is not simply the JCT formson CD-ROM. It also allows parties to negotiate custom-made contracts online,which is certainly a step on the journey into more widespread use of IT by theindustry.

The JCT was determined to keep abreast of further technology developments andhoped that in time the software would become more ‘intelligent’. Forexample, by allowing the user when deleting or amending a clause to be promptedwith questions on the implications of making that change or deletion. Anotherkey development would be the provision of a Web-based service. To achieve theseaims it would be of critical importance to maintain an appropriate paymentregime to provide a continuing stream of income.

The demonstration gave rise to some lively discussion. including problemsarising, in a Scottish contract, where it may be difficult to prove whatalterations or deletions had been agreed between the parties in acomputer-generated standard form contract which was simply signed on the lastpage. Although extremely useful, this demonstrated that some fine tuning to or a‘health warning’ on the application is required.

IT Usage in Construction

Brandon Malone read John George’s paper, the intended speaker, as the snowhad prevented him from travelling. According to Mr George, a former ChiefExecutive of the Building Centre Trust, the construction industry has notembraced IT in any meaningful way or recognised its potential in saving time andcost and improving efficiency in the industry. One of the main barriers toeffective integration is the lack of knowledge regarding the uses andinteroperability of systems. Each system tends to be viewed as an ‘island ofknowledge’, with no link to other similar ‘islands.’ While the systemswork effectively when independent, harnessing them together would see increasedefficiency and decreases in costs.

There are many different stages to a construction contract involving manydifferent parties, with each of them using different software. Effectiveintegration will require a unification of the diverse software used by thevarious parties to the contract. Additionally, one would have to ensure that anyelectronic documents fulfilled the law’s evidential requirements. At present,paper is retained for legal reasons to prove the contract or to demonstratecompliance with the specification.

The first step is to convince senior management at board level. They would berequired to assess the risks of converting to the paperless office. Smallerfirms and companies will not have the financial resources to fund a major ITrevolution in-house, so the spectrum of differing capabilities may still prove abarrier to effective integration of IT systems industry-wide.

Wider adoption of IT integration will be achieved through greater‘understanding’. That is the understanding of the benefits of control,recording and communications that existing IT systems can provide. Effectively,all parties from conception to handing over the completed building would beusing a unified IT system. At the design and contracting stage, effectivemanagement systems would be in place to ensure that records will be available tosupport any current or future need for their production.

It would be hoped that in due course paper used on site by craftsmen wouldgradually be phased out by the use of lap-top generated information. Meanwhile,training classes on the interoperability of systems could be used as an means ofincreasing access to the industry’s integrated system. Managers must also findthe time to develop an understanding of the facilities and capabilities of ITsystems so that they can implement such systems throughout their own businessand encourage those with whom they work to do likewise so that effectiveintegration can take place.

Electronic Arbitration

Concluding the first session, John D. Campbell, QC, Chairman of the ScottishBranch of the Chartered Institute of Arbitrators, addressed the delegates onwhether arbitration practitioners can dispense with the tomes of paperworkindigenous to this dispute resolution process. Can arbitration, he asked, beecologically friendly?

In response, he boldly proposed that paper-based arbitrations could bedispensed with in favour of using laptops, e-mail and scanners to present a casewith the supporting documentation available on CD-ROM. Much could be learnedfrom the example set by the Official Referees Solicitors Association (ORSA).ORSA has pioneered the ORSA IT Protocol, the purpose of which is to facilitateand encourage the exchange of information through the use of IT amongst thoseusing the Official Referees Court, a division of the High Court in England. Forthe more simple cases, information could be exchanged by e-mail or floppy disks,whereas the more complex case would require CD-ROMs and more sophisticatedviewing equipment. As had been highlighted before, uniform usage of IT softwareand hardware is essential for such a system to work effectively, coupled with amutual understanding of how the process works. In the Official Referees Court,unless parties disagree, all information is exchanged in electronic form, inaddition to hard copies, on pre-agreed software packages.

The benefits of electronic arbitration are multi-fold. Instructions from theclient can be taken by e-mail. The client can approve and amend documents onlineand pleadings may be amended using different colours, all as provided for in theProtocol. Of course, if we are to use electronic means for conductingarbitration, it will be essential that prevention measures are in place toprevent digital ailments such as viruses.

The IT Working Party of the Chartered Institute of Arbitrators has producedits own protocol for the use of IT which is not mandatory for use inarbitration. Nevertheless, the Institute wishes to encourage parties andarbiters to consider the use of IT as regulated by the Protocol in proceedings.This usage is envisaged to come about by a direction from the Arbiter at thepreliminary meeting. Again, however, a back-up, hard copy of any electronicdocument should be provided. The speaker wondered what value there is in aseemingly progressive system which provides for electronic transmission of dataand information, but at the same time insists on back-up hard copies beingprovided. It seems that technology is not to be trusted, just yet!

Some larger legal firms have taken this idea further. Exchange of documentstake place on a dedicated site, accessed by means of a password. Proponents ofthis method suggest that the following could be among some of the advantages toadopting such a system

  • quick and easy access to information enabling the process to be conducted expeditiously
  • access to entitled parties including the clients, with different levels of access, from anywhere in the world at any time
  • notification to parties by e-mail when a change has occurred
  • ultimately, savings in time and expense to the client.

It may not be possible just yet to get rid of the paper altogether. If, atthe Arbitration hearing, questions are raised relating to authenticity of paperdocuments, electronic media will not be helpful. However, if those questions donot arise, there is ample room for the technology to be used in the conduct of ahearing.

In summary, common language, common software and common sense will berequired if electronic arbitration is to be a success. However, althoughprogress is being made, the technology will have to improve before such a systemcan compete with the existing ‘hard copy’ world. The trees may not yet sighwith relief.

Session 2 – E-Commerce Session

The second session was chaired by Professor James M. Arnott, of MacRobertsSolicitors, visiting professor of construction law of the University ofStrathclyde and Secretary of the Scottish Building Contracts Committee.

E-Commerce and Legal Practice

Iain MacDonald, of Bell and Scott, opened his address by defining whatlawyers do: lawyers sell knowledge: be it in their head, on file or in alibrary. IT has led to considerable improvements in the way in which lawyers canbe capture, organise, store and retrieve such knowledge. However, theincreasingly aware clients in the 21st century is putting the lawyer underpressure to make this knowledge more immediately and directly available to them.The more progressive law firms are trying to accommodate this demand by offeringvarious external online services.

Many legal firms now have a Web site. However, these are often not much morethan a digital version of the firm’s brochure offering standard informationabout the services it can provide and personal information on fee earners. Bycontrast, a number of firms are making use of extranets to give clients directaccess to specialised information or to work in progress. The concern is that iflawyers do not provide the services the clients want, such services will all tooreadily come to be offered by other professions such as accountants orspecialised consultants. Iain offered several suggestions as to how the legalWeb site will develop over the next few years such as

  • improvements on existing sites which provide the answers to legal queries online
  • ‘Document assembly’ sites which, after input of information by the client, produce the finished document, such as a bespoke employment contract
  • sites targeted to assist certain projects, such as a development, where you can buy land and source your professional team from one site, or even tender on a secured site.

He went onto explain how this view came from his own experience in workingwith clients. In house building and purchase, clients may want to know at anytime the stage their transaction has reached, eg have the missives beenconcluded. Bell & Scott developed an e-mail service to provide clients withinformation at landmark stages of the transaction. Extranet facilities areavailable to clients, one of the benefits of which is to update builders withprogress on a case, which information they can then use on site to adviseprospective purchasers. The firm has also developed a CD-ROM for purchasers ofnew house property with which the firm has been involved, providing informationon the new house.

Iain believed that the provision of these services had resulted in

  • greater efficiency and cost effectiveness,
  • better marketing tools,
  • long term cost reduction,
  • generation of different income streams, and
  • making the business of law more fun!

Impact of E Commerce in Construction

Fraser Milligan, a partner in Masons, opened by asking why the ConstructionIndustry seem so reluctant to embrace e-commerce. He saw this as surprising whenone considered the advantages of an e-marketplace, such as increasing themarkets in which business can be done, economising processes such asprocurement, and generally expediting project procedure.

He suggested that some of the reasons for this waning enthusiasm for dotcoms,particularly in business to business (B2B) transactions, was due to the hype ofbusiness to consumer services (B2C). Further, small and medium-sizedenterprises, who carry out a lot of the work in the construction sector, do nothave the technology and the infrastructures to take advantage of thee-marketplace. In addition, one of the main selling points (cost savings) may,from the experience of the car manufacturing industry, appear to be exaggerated.

Agreement on standardising the marketplace remains a problem. Substantialinvestment in the construction industry would be required, as at the moment evensimple procedures such as using brochures, ordering goods and services andpayment through Web sites is restricted. It is for these reasons that the impactof the e-marketplace in the construction industry is very limited.

There is some light for the future potential of the e-marketplace. Companiesare now becoming more familiar with the e-marketplace and already collaborationsoftware and project collaborations are being created. He saw developments notso much as the electronic revolution predicted in Y2K, but as a more gradualevolution.

Electronic Contracts – Transactions in cyberspace

The final speaker of the day was James P. Connelly of the Robert GordonUniversity in Aberdeen. James considered that most obvious implication fortransacting in cyberspace is choice of law. E-commerce gives a whole newdimension to private international law, there being no separate jurisdiction of‘cyberspace’ with laws of its own. The terrestrial laws will have to applyas best they can for now.

Domicile being the principal determination of jurisdiction, what happens, heasked, with a Web-based business? Where is there jurisdiction? If thetransacting is done on one server, it was suggested that jurisdiction is foundin the country where the server is located, but most of the time, more than oneserver may be used and these may be located in different countries. If a breachof contract were to occur in the UK (no matter where that contract was enteredinto), would it be possible to extend to contractual disputes the legalproposition throughout the UK applicable to legal wrongs? Namely that the courtsin England and Scotland have jurisdiction where the injurious act took placewithin their jurisdiction. Only time and the courts will tell.

One of the up and coming issues in cyberspace transacting is the role of theB2B enterprises. There are already several in the construction industry,including ‘’and ‘’ which provide such services ase-tendering, e-procurement, online project collaborations and informationservices. One concern surrounding B2Bs is to ensure that they do not monopolisethe marketplace in their chosen sectors. No report has been carried out in theUK in respect of the construction industry, however, on the world stage theFederal Trade Commission issued a report into the dealings of a motor trade B2B,‘Covisinit’ (as did the German Cartel Office on the same company) and theEuropean Commission were asked to adjudicate on the position of ‘’In both cases, agreements from the B2Bs regulating their market positions werearranged.


There is no doubt that the law and the legal and construction professionscannot afford to ignore the developments in technology, and the speed with whichthese developments occur is a challenge to those in practice in the constructionindustry and to the lawyers advising them.