Industry is driven in part by developments in technology and construction is no exception. Technology in the construction industry brings about positive change — cost effectiveness, increased efficiency and safer projects. However, technology also means new concepts, new products and new processes, all of which bring about new legal risk. The Canadian Construction Association thinks that when compared to their international counterparts, Canadian contractors are falling behind on the development and acquisition of cost-saving technologies. That doesn’t mean that change isn’t coming — it is and Canadian construction sector companies should be prepared.
In large part, technological advancements in construction are brought about to fill labour shortages and supplement the current productivity of the workforce. Adoption of new products and methods can automate some jobs. Drones, 3D printing, building information modelling (BIM) and smart contracts are some of the trends in the construction industry that could see widespread use over the next five to 15 years.
There are plenty of potential uses for drones on a construction project. Drone technology and other aerial photography are used increasingly to track project status, progression of work and to increase and monitor safety. Contractors should be aware that just like taking pictures on a smart phone to track work progress, the data drones collect is likely evidence in a subsequent legal action. Furthermore, contractors should be aware of any jurisdictional restrictions on drone flying patterns. Municipalities in the United States have already fined contractors on several occasions for operating drones in unauthorized flight zones.
It should also be noted that drones may not be up to the task for certain inspections. If drones are being used for any inspections subject to governmental regulation or owner approval, don’t presume the governing regulatory body or owner will accept drone results to satisfy the conditions of the inspection — check first. In the United States, certain regulatory bodies are already contemplating amending federal standards for bridge inspections to include that drones cannot fully take over the job.
BIM software allows 3D models of a construction project to be generated and continuously managed. Unlike a basic paper CAD drawing, a BIM model addresses a variety of data other than graphical representation (even available money) and may act as a central database for nearly all aspects of a job. The use of BIM software and other 3D modelling will likely augment Newfoundland and Labrador’s construction workforce before outright automating aspects of it. However, if and when it does automate jobs, it could mean a reduction in workplace compensation claims for contractors.
BIM and other advanced software bring about a number of legal questions. Intellectual property rights stand to be an issue, as does the blurring of contractual rights and obligations. For example, how will the BIM model and data interact with any existing drawings, plans, specifications or previous agreements in respect of compensation? To avoid having to address these questions after a dispute has arisen, these issues need to be addressed clearly and ahead of time in construction contracts.
BIM software may also play a crucial role in another advancing trend — smart contract. Time, effort and money are spent trying to reduce the risks associated with executing contracts — the potential and eventual breaches of the contract by the opposing party and the resulting losses in time and money that could arise from those breaches. Smart contracts seek to limit that energy and cost by making the transfer of the asset or instrument in question a matter of complete certainty by virtue of automatic performance.
At their most basic level, smart contracts are computer programs that can self-execute in accordance with terms previously agreed to and defined between the parties, which utilize distributed ledger technology. Smart contracts, like regular contracts, can be legally binding. Presently, they must meet traditional legal elements that show a contract has been formed to be binding — but the law around smart contracts could develop its own nuances and idiosyncrasies as they are tested by Canadian courts. Smart contracts run on Blockchain technology, the same software that supports crypto-currencies and uses shared database software. The users (the parties to the contract) design the contracts and they are automatically executed by a triggering event, which dispenses with the need for expensive third party monitoring services. BIM’s role in a smart contract is to supply information that acts as the factors that may trigger the execution of the contract.
Smart contracts may lower compliance costs by including relevant legislation as part of its code. The provisions of Newfoundland and Labrador’s Mechanics’ Lien Act that address payment and holdbacks could be coded into the contract, allowing the inevitable and efficient performance of obligations arising from those provisions. But like other contracts that aren’t initially constructed with legal assistance, lawyer’s concerns surrounding smart contracts is their potential inability to code all the legal complexities that should be addressed —such as “best industry practices” and “force majeure events” — for automatic execution. Ensuring that there are proper dispute resolution mechanisms for smart contracts is another concern.
The above innovations are in the early stages of development and use in the construction industry and may not be adopted in our province for quite some time. But getting ahead of the curve and understanding the risks that entails, can help construction firms streamline processes, create safer projects and ultimately improve the bottom line.
Thomas is an associate at Cox & Palmer’s St. John’s office, practicing in commercial and finance law, with a focus on negotiating and drafting construction contracts. He is currently a member of the Canadian Bar Association Construction Law Young Lawyers Committee.
This article is designed to provide a general overview of its topic. It does not cover every issue or exception and is not intended to form a legal opinion in relation to any specific set of facts. Neither Cox & Palmer, nor its partners, associates or staff shall be liable for any loss or damage arising out of the use of this information or the application of concepts set out therein. Individuals are advised to obtain legal advice when it comes to their specific circumstances.