Contracts 101

Many of us have seen or been involved as a Contractor (or Sub-Contractor) in construction contracts that have ended in disputes. Regardless of who is involved, the desired result is always to end with a “fair and reasonable” outcome for both Contractor and Sub-Contractor.

With so many projects falling victim to disputes, I hear Clients, Contractors and Sub-Contractors ask:

  • Why does this happen?
  • Who or what is the root cause?
  • Can this be prevented?

Unfortunately, there are no magical answers to these questions, but putting a balanced contract in place that meets the needs of both Clients and Contractor/Sub-Contractors from the outset certainly goes some way to eliminating issues along the way.  I’ve created a simple list of recommendations on how to avoid costly disputes, and retain positive and fruitful business relationships with Clients, Contractors and Sub-Contractors.

Prior to award contract, Contractors and Sub-Contractors should at tender stage:
Carefully review contracts to identify and assess the risks of any time bar clauses

Ensure your team can quantify and resource every element of the project

 

Verify that the resource profile is logically linked to the proposed contract programme

 

Review the contract programme to ensure it is sufficiently detailed and accurate; set the baseline of how the project will be delivered
During the contract negotiations, Contractors and Sub-Contractors should attempt to delete or amend time bar clauses so that they are commercially manageable:
Specifically looking a notices, conditions precedent, level of details required and frequency for continuing updates Check alignment for a balance in the response period from the other party in closing out events and bring them to conclusion

Ensure all processes have remedies to get to a final position

 

During the project, contracts and sub-contractors should ensure adequate commercial systems are in place to ensure contractual compliance, including:
Maintenance of adequate records (including creation of systems / processes if necessary) Sound reporting systems between the site and commercial teams to identify claims in time

Appropriate personnel administering the contract

 

Contract manuals or flowcharts accurately setting out the contract’s notice and
claiming procedures

Accurate templates for required notices and claims

 

Updated claim registers to monitor and manage contractual compliance

 

Regular reviews of the status of claims at practical intervals

Calendar reminders set for critical dates

 

Maintain an as-built programme throughout the project

 

Contractors and Sub-Contractors should always remember that the rules outlined in a contract need to be followed at all costs. Don’t fall into the trap of believing that issuing contractual notices and claims is counterproductive for the project or may count as provocative action against the other party. The contract is an agreement between two parties to outline how you will work together to deliver a successful project. If one party states certain clauses “will not be used”, then ensure that clause is removed from the contract, before signing.

Whilst having a contract in place does not guarantee avoiding a dispute situation, having the rules and processes in writing and agreed upon by all parties will likely mitigate any implications should a dispute arise.

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