There is no point deciding to write a contract until you have decided it’s purpose. What is your contract meant to do? Here are some suggestions:
You may decide that your contract should create trust between you and your business partners. Your contract acts as a joint document that the partners trust. It has to accurately record your agreement with no hidden surprises.
Some construction professionals say the terms of a contract don’t matter because:
“[of] the importance of trust. They blandly talk of the best kind of contract as being the one which is put into the drawer and only taken out when things go wrong.” (Which Contract?)
“contracts exist to serve the construction process, not vice versa. During successful projects the contract document is ‘left in the drawer’.” (Latham Report, 1995)
Others talk of contracts showing mistrust, stoking controversy or being based on silo mentalities. That might work in the short-term but for construction projects, we need trust.
A contract based on trust still needs to have some minimum to be workable: a blank sheet of paper will not do. So what sort of content do you need?
Define and Motivate
Your contract needs to set out and define the ‘what’ and the ‘why’ of the transaction. It answers who, what, why, when, how:
“The three main functions of contracts are work transfer (to define the work that one party will do for the other), risk transfer (to define how the risks inherent in doing the work will be allocated between the parties) and motive transfer (to implant motives in the contractor that match those of the client).”
Most contracts are good at defining the ‘who’, ‘what’, ‘how’ and ‘when’ but less clear on the ‘why’. Your contract can include the aims of you and your transaction to make it easier for your business partner to meet them. If you keep them secret, how can your partner possibly comply?
If you keep them secret how will that help you do business?
Help You Do Business
The OFT’s Report (1312) on Consumer Contracts defined contracts as:
“legally binding agreements that facilitate trade.”
Contracts are not meant to tie you up in knots, confuse your partner, threaten or cajole them. They are meant to record, in clear trusting terms, how you and your business partner will work together to create profits for both your companies.
Your contracts should help you do business.
- “Which Contract?” by Clamp, Cox, Stanley and Udom (2012, 5th edition, RIBA Publishing)
- “Managing Risk in Construction Projects” by Smith, Merna and Jobling (2nd edition, 2006, Blackwell Publishing). Both available from BLISS Books.