Industry is driven, in part, by developments in technology — 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.
Change is coming, and companies in Canada’s construction sector must prepare for it. Technology and the construction industry are increasingly intertwined in today’s environment. Technological advancements in construction largely address labour shortages and enhance the productivity of the existing 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. Moreover, technology and the construction industry continue to evolve together, shaping the future of building.
Drones
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. As a result, technology and the construction industry must navigate both practical and legal challenges together.
Professionals should also recognize that drones may not be suitable for certain inspections. When inspections fall under governmental regulation or require owner approval, teams must not assume that authorities or owners will accept drone-generated results. Instead, they should confirm acceptance requirements in advance. 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.
Building Information Modelling (BIM)
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.
Smart contracts
BIM software may also play a crucial role in another advancing trend — smart contract. Professionals invest time, effort, and money to reduce the risks associated with executing contracts, including potential breaches by the opposing party and the resulting losses in both time and financial resources. 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.
Understanding Smart Contracts and Their Legal Foundations
At their most basic level, smart contracts are computer programs that can self-execute in accordance with terms previously agreed to and defined between parties, which utilize distributed ledger technology. Smart contracts, like regular contracts, can be legally binding.
Currently, smart contracts must satisfy traditional legal elements to establish a binding agreement. However, as Canadian courts continue to test them, the legal framework governing smart contracts may evolve to reflect their unique nuances and characteristics.
Smart contracts operate on Blockchain technology—the same system that supports cryptocurrencies and relies on shared database architecture. The contracting parties design these agreements, and a predefined triggering event automatically executes them, eliminating the need for costly 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.
Enhancing Compliance Through Automation
Smart contracts may lower compliance costs by including relevant legislation as part of its code. Developers can code the provisions of Newfoundland and Labrador’s Mechanics’ Lien Act that govern payment and holdbacks directly into the contract, enabling the efficient and predictable execution of the resulting obligations. However, lawyers remain concerned that, like other contracts created without legal input, smart contracts may fail to capture and encode all necessary legal complexities—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.
Conclusion
These innovations remain in the early stages of development and adoption within the construction industry, and our province may not adopt them for 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. Finally, staying informed about technology and the construction industry will be key to future success.
Thomas M. Munn
ASSOCIATE
St. John’s
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