Many contracts ‘try to take account of all eventualities that can be foreseen’ – this means they are comprehensive. What are the advantages of these, often lengthy, contracts?
Some of these are set out in a 10-point blog by DLH Solicitors. I want to respond to that blog, based on my experience in drafting construction contracts:
1 Certainty in the case of dispute – agreed; certainty is also critical to ensure the parties know what is expected of them before and during the project.
2 Bespoke and tailored to your industry’s needs – agreed; not that this means long contracts.
3 To protect your interests – in theory yes, but potentially no! Disputes occur to test whether those very clauses which are intended to protect one party’s interests, such as the two mentioned in the DLH blog (limitations on liability or title), are effective.
4 Save time and money if there is a dispute – in theory yes, but potentially no! Some of the shortest contracts used in the construction industry are letters of intent. In 2010, a Supreme Court decision (RTS v Molkerei) took over 90 paragraphs and many pages to debate both the existence of a contract and its terms.
5 Compliance with industry standards – statutory regulations are musts and industry standards are imported into a contract under the requirement to use reasonable skill and care; the purpose of including industry standards in a contract is to allow a party to terminate the contract if the other breaches those standards in the event of breach. The DLH blog states that these terms provide ‘evidence of compliance’. They don’t! They provide evidence of intended compliance and/or knowledge, but only the services, works and goods provided are evidence of actual compliance.
6 Shows professionalism – the mere existence of a robust contract has little/no bearing on the success of a project, or the professionalism of the parties involved. Professionalism is better demonstrated pre-contract through tender information and references, and during the contract period by carrying out your role to an excellent standard, almost irrespective of what the contract says.
7 Peace of mind – the blog refers to terms and conditions providing ‘peace of mind’. Since the 1994 Latham Report, there have been a number of government reports into the construction industry which have queried whether standard form contracts actually stoke disputes.
8 Quicker to agree – agreed; this is undoubtedly true for bilateral standard form contracts acceptable to the project parties and other stakeholders without amendments.
9 Clear dispute procedures – agreed; as the construction industry now has mandatory adjudication, so the role of contracts in setting dispute mechanisms is limited (I’m not sure unilateral T&C are ever able to ‘safeguard client rights’ as the DLH blog suggests).
10 Easy to change – agreed; but just as easy to forget to change! Thankfully, the construction industry can rely on the publishers of standard form contracts to ensure their contracts are up-to-date.
But, is it really true that comprehensive contracts provide all these advantages to all the parties? Even in a two-party (bilateral) contract there can be wide differences in how successfully the contract meets the needs of each party.
What do you think? Is it better to have simple, clear contracts which the parties can understand – comprehensible rather than comprehensive?