Review Your Contract: Use STAR

Do you have a ‘haphazard’ or ‘cavalier’ approach to the terms of your contracts?

Back in 2011, the OFT found evidence that contract users did not “properly assess the transaction or deal they enter into.” It is not a luxury to make sure your contract helps you do business, and the process can take just a few minutes.

My STAR analysis makes it simple to check whether a contract is ‘good to go’ or a ‘disaster waiting to happen’. It takes a ‘balanced scorecard’ approach.

Scope

Scope means the information which sets out the identity of the contract partners and their roles/ responsibilities. It describes the works, goods and services being provided, so you both know what is expected of you. In many contracts, the details are included in a specification, or proposal, not the terms and conditions. [read more]

Tip: If you are writing your own contract, you should focus on what you are doing, what your client is doing and what each of you is not doing.

Trust

Although your contract is not solely designed to protect you from disputes, it should anticipate events that might cause trouble, and provide simple procedures to resolve them. The most troublesome events depend on the project, people involved, industry, economic climate and so on. These terms help you when your business relationship starts to turn rocky. [read more]

Tip: if you are writing your contract, focus on limiting your liability, cancellation or termination rights, and problems you have encountered (late payment, copyright or confidentiality issues).

Aims

The three key aims are for most construction projects are time, cost and quality. You can’t have the best of all of these and your contract should set out which takes priority [read more]. For example, commercial aims, like completing the popcorn plant in time for the Christmas rush, might need to take a back-seat to producing a safe popcorn plant. Aims may be generic (reducing the fire risk) or highly detailed (detecting specific types of fire in listed items of plant).

Tip: if you are writing your contract, explain why you are working together i.e. the aim you are helping your partner to achieve. The clearer that aim, the easier it is for you to achieve it!

Risks

Construction projects are not risk-free and it is in the nature of a construction project that risks cannot be avoided. However, your contract can help manage risks by (a) ensuring that the price properly reflects the risks borne by the partners and (b) identifies all relevant risks and how those risks are best dealt with. Don’t do as they did in the popcorn case which was to assess the risk only after they had agreed the scope. [read more]

Tip: if you are writing your contract, brainstorm what external events can de-rail the project, then decide who will manage and mitigate those events, changing the scope and price accordingly.

Case: Trebor Bassett Holdings Ltd & Anor v ADT Fire and Security Plc [2012] EWCA Civ 1158

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