Contracts are not just about what scope your supplier is providing – they also explain how you are going to work with your supplier. For example, a subcontract should set out the processes for getting the subcontract works to dovetail smoothly into the wider project.
Procedures deal with everything from payment, communicating information, project modelling, assisting each other and managing changes, to remedies when the project goes wrong – including how you resolve disputes. Procedures put some detail into the general principle of trust and co-operation.
Most construction contracts implicitly rely on industry practices, professional processes and standard behaviours to supplement their express terms. The vast majority of procedures are not written out in full. Some may exist in internal handbooks, some are ‘too obvious’ to reduce to writing and others are unwritten rules of conduct.
Keeping it practical
Your contract needs to strike a balance between including too many procedures (bamboozling the parties and making it inflexible) and too few (making it useless as a guide). It also needs to strike a balance between being highly prescriptive (which may not reflect the parties’ internal processes) and being too vague (and impossible to follow).
For most construction projects, these are the procedures you need to help you and your supplier work together:
- Payment: required to build trust, avoid friction and meet any specific requirements (such as the Construction Acts 1996 and 2009).
- Scope change: setting out how/whether the scope can be extended or varied, including how the parties will agree the impact of that change on the contract’s aims.
- Time change: allowing the completion date or works period to be extended for changes or for other unexpected risk events.
- Defects: giving your supplier the right and obligation to repair any defects during a fixed period.
- Information exchange: ensuring your supplier gives you the information you need.
- Ending the contract: rights to terminate future works for default, insolvency or if a related contract comes to an end.
What should you do?
Any procedure in your contract should be able to be represented in a simple flowchart. This ensures that all possible options have been considered and there are no dead-ends. You can include a text version, the flowchart and/or a visual representing the process to make it even clearer to follow.
This post is based on a chapter in four of the books in the series on Construction Contracts in Just 500 Words (Chapter 14 for small works contracts and subcontract agreements, Chapter 17 for letters of intent and Chapter 19 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.