Your contract can create trust and make your lives infinitely better if it includes simple remedies. These are contractual processes that deal with what happens when the project doesn’t go precisely to plan.
All express (contractual) remedies are far simpler, cheaper and quicker to use for both parties. They provide a route-map for use in terms of uncertainty, help you avoid lawyers and tribunals, and maintain trust between you and your supplier. A true win-win!
Common remedies used in the construction sector include:
- Financial compensation when the works are completed late, called liquidated or delay damages
- Extensions for specific events that delay completion
- A period during which your supplier can repair or replace defects, called a defects period
- Remedies for late payment, introduced by the Construction Acts and the Late Payment Act
- Rights to end future obligations under the contract, known as termination
- Remedies for resolving disputes.
The biggest mistake that contract writers make is not realising that each of these express contractual remedies is a quick-fix solution. They help you both avoid the courts as well as having to prove:
- the existence of a relevant express or implied term,
- a party has not complied with (or has breached) that term,
- that breach has caused the ‘innocent’ party to incur costs or suffer losses, and
- the precise amount of those costs or losses which can be attributed to the breach.
One of the critical remedies your contract needs to include is a right for the parties to end (terminate) future obligations for specific events. This right needs to reflect any relevant laws – for example, contracts with consumers under English law need a right to cancel for 14 days after signing – and be fair and balanced between the parties.
Typical events allowing the parties to terminate under an express remedy would include refusing to carry out their obligations (refusal to pay or repeated late/non-payment for the paying party, or suspending performing the scope by the supplier), insolvency, illegality or serious breach of regulations that apply.
What should you do?
You could rely on implied remedies eg those relating to payment or adjudication for UK construction, or just bring any dipsutes before a suitable tribunal.
However, it is far better to deal clearly and proactively with potential issues and define how you want to resolve disputes before you fall out. During the 2020 pandemic, parties with contracts containing clear simple remedies found it much easier to work out what to do next, compared to those flicking through a complex process based on legal jargon.
This post is based on a chapter in four of the books in the series on Construction Contracts in Just 500 Words (Chapter 17 for small works contracts and subcontract agreements, Chapter 18 for letters of intent and Chapter 11 for consultant appointments). Each of these chapters also illustrates the perils of getting it wrong, based on a real-life case study, as well as how you can write it simply.