Although an acquisition certificate can be used with contracts that do not contain such provisions, the status of these certificates may not be clear compared to other provisions of the main contract (see Olswang, Contractor Acquisition Certificates – What Legal Protection Do They Offer?). They are often used when it comes to off-site or modular construction, and are likely to be more common as more and more projects include elements of MMC. Optilan has issued acquisition certificates for long-delay items. The acquisition certificates largely reflected the acquisition provisions of the subcontract, but also contained the following additional conditions: Optilan submitted a request for provisional payment, including for items with a long delivery time under the acquisition certificates. The VRL payment certificate issued in response contained value for these items, but certified the net payment due to Optilan as “zero”. VRL then issued a no-payment notification, which increased the value assigned to the long-delay items, but still resulted in a zero payment by Optilan. A recent case highlights the role that acquisition clauses and acquisition certificates can play when it comes to the ownership of materials. The court took into account the ambiguously worded conditions of the acquisition certificates in determining whether a transfer of ownership of the goods and materials had taken place. In other words, VVB`s promise was not to make the payment of the value of the materials, but to include the corresponding amount in the next intermediate payment certificate, and then address it alongside other certified items and against payments previously made.
For more information about legal issues, see Offsite Goods and Materials – Legal Issues. “. Ownership of the documents is transferred unconditionally [to the purchaser] upon receipt of the above intermediate payment. The contract should also govern the continued liability of the supplier/contractor for the risk of damage to the goods during storage or transport. This should be rejected by an appropriate insurance policy of the party concerned. As provided in the YCW contract forms above, items must be marked as the property of the buyer/employer and proof that they will be transferred to the contractor and covered by an insurance policy until they arrive on site. While factual, the Court`s approach to interpreting the ambiguous wording of acquisition certificates in the context of the construction contract payment process is of general interest. If the acquisition of materials is related to the payment process, it is likely that the interim payment process will allow the paying party to make a deduction from the amount claimed, taking into account issues other than the value of the materials.
As part of the subcontract, Optilan is expected to procure items on a long-term basis. In order to guarantee payment for these items, the subcontract contained a provision that the goods could be transferred to the VRL site prior to delivery “in order to secure payment in accordance with clause 60.1” (clause 60.1 on interim payments). Contracts such as the JCT Standard Construction Contract and NEC Contracts already contain provisions requiring the contractor to provide reasonable proof that off-site ownership is due to the customer, that materials are separated or clearly marked, and that they are insured. As is obvious, the application of acquisition clauses will often involve subtle distinctions. This underscores the importance of ensuring that acquisition clauses clearly reflect the mutual intention of the parties as to when ownership will be transferred and that the parties understand when the transfer will take place. In particular, it is important that construction and engineering contracts are clear about the act or event that causes the transfer of ownership, whether it is delivery, marking, certification, actual payment of money or any other matter. This case highlights the crucial role that acquisition clauses and certificates in construction and engineering contracts can play in determining the “who-owns-what”. In practice, there is a certain variety in the details of these clauses. For example: Acquisition certificates may be required if certain goods or materials are stored off-site, but upon payment, ownership of those goods or materials passes to the paying party. Essentially, acquisition certificates prove the transfer of ownership.
The FIDIC form is different from the JCT and NEC forms, which explicitly provide for payment when materials are delivered off-site: Click here to download “Construction contracts: transfer of ownership of goods” (PDF) If the customer has agreed to pay for off-site materials, it is necessary to enter into an acquisition agreement with certain conditions, such as: acquisition certificates provide a guarantee, if the supplier of goods or materials becomes insolvent before the items are delivered on site. They help to defend against third party claims of retention of title on these goods or materials. The contract stipulated that the goods would be transferred to VVB prior to delivery on site. This should be achieved by issuing an acquisition certificate by Optilan. The special wording of the acquisition certificate stated that “the ownership of the materials is unconditional”. after receipt of the above-mentioned interim payment`. Optilan`s payment application No 39 requested that the following interim payment be mentioned in the acquisition certificate, together with the `abovementioned interim payment`. When does ownership of property change from a contractor to an employer? This can be a critical issue, especially if part of the project has become insolvent.
A recent English case concerned this issue and the application of acquisition clauses and certificates. As such, the Court concluded that the long-term acquisition of the items did not depend on the transfer of a sum of money. It was sufficient for the documents to be included in the notice of payment without payment and taken into account in the intermediate payment certificate. As the court noted, the transfer of £1 million of material should not depend on the existence of a £1 net certificate or a zero certificate. Given the differences between contracts, parties wishing to invoke acquisition clauses should carefully consider the impact of acquisition certificates (if used) in relation to other provisions of the contract. There is a lot of discussion about the pros and cons of off-site manufacturing, and there is no doubt that it is being adopted by the industry. From a legal point of view, the main issues to be addressed in a contract that contemplates off-site manufacturing are the legal ownership of goods manufactured off-site prior to delivery and the risk of damage if these goods are in the warehouse or in transit. .