Contractor’s standard supply agreement contains a clause on the ownership of the goods supplied by suppliers, it’s required to transfer the ownership of the goods upon the delivery, upon payment or upon the incorporation of the material, whichever is occurred earlier. However, a meticulous subcontractor may object during the tender stage to the standard clause and propose to transfer the ownership of the goods only upon they received payments (i.e. retention of title clause) for the goods, which is reasonable from their end.
As the employer’s QS you may have to value progress payments including payments for material on-site for a contract where the agreement between Contractor and Suppler is required to transfer the ownership of the goods upon, the supplier received the payment.
So, if the employer paid the Contractor for the material on-site based on your valuation even though the Contractor has no ownership for the goods/materials, you may be putting yourself and the employer on a risk, especially in case the contractor becomes bankrupted before making payment for the supplier.
However, in some jurisdictions, there are laws which protect the employer in such circumstances. According to the Sale of Goods Act 1979 (in Australia, for Goods supply only), if the employer has purchased goods in good faith and without notice of any lien or other right of the supplier in respect of the goods, then the title will transfer to the employer (this is an exception to the rule ‘nemo dat quod non habet’ (no person can give what he does not have)). However, such similar protection is not available for the purchasers under the Supply of Goods and Services Act 1982 (Australia – for Goods and Services contacts)
Therefore, it is important to make sure that the Contractor has the ownership of the material and no retention of title clause in the further down the supply chain, before you include them with your valuation.
However, the situation is much clear once the material was incorporated into the works as the right of anything incorporated to the building pass to the employer/owner under the rule of ‘quicquid plantatur’ (whatever is affixed to the soil belongs to the soil: therefore, whosoever owns that piece of land will also own the things attached). Anyway, its complex matter to decide which are fixed and which are not, as even the ‘Hot Strip Steel Mill 1’ was held as a fixed since it can be removed by only through a very lengthy and expensive process, ‘television cable installed in conduit 2’ was held as not fixed as since its merely a service to the residents.
1. Lictor
Anstaldt v Mir Steel UK Ltd [2014] EWHC 3316 (Ch)
2. Credit
Valley Cable v Peel (1980) 27 O.R. (2d) 433
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