It’s easier to learn from the mistakes of others so let me tell you about one of the worst works contracts I’ve ever reviewed.

Although just over 6,000 words (10 pages) long, the building contract was incredibly one-sided because of these terms:

  • A right for the client to cancel the remainder of the project without any liability. The purpose of a contract is to legally oblige the supplier to provide everything and the client to pay for everything. Why contract for something you might not want?
  • A right for the client to vary the scope by withdrawing or omitting elements of the project from the supplier, and do them itself – under English law, a client can only omit elements if they no longer need them at all. Another clause against the very purpose of the contract.
  • Wide rights for the client to end (terminate or cancel) the contract for minor breaches – this should be a remedy of last resort, not a threat hanging over a supplier.
  • No rights for the supplier to end the contract, not even for insolvency.
  • A payment schedule which the client has the right to alter on short notice without reason. Since payment is a major cause of friction, a contract should to ensure when, how and how much the supplier gets paid is clear from the start and only changed by mutual agreement.
  • Conditions precedent on invoicing which, if missed, would wipe out the supplier’s profit. A fixed admin charge for missing a specific deadline would be better. 
  • Wide rights for the client to deduct sums without proper notice or justification. The contract should set out limited occasions entitling the client to withhold money.
  • Wide overlapping and ambiguous quality standards from reasonable skill and care (the minimum implied by law) to the absolute satisfaction of the client. This leaves the supplier at the client’s whim.
  • No limits on the supplier’s liability, but several limits on the client’s liability. A perennial bug bear of mine.

Together these clauses suggested that – at best – the client wasn’t really committed to and ready to contract for the whole project… and that the supplier could not trust the client. 

What should you do?

Create balanced contracts if you want to demonstrate your trust and trustworthiness, reduce cycle times for negotiations, and build fairer foundations for success.

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