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Understanding the standard form of building contract

Uwe Putlitz, CEO of the JBCC

by Uwe Putlitz, CEO Joint Building Contracts Committee (JBCC)

Standard forms of building contract have evolved since 1879 when the first recorded form of a standard building contract was jointly published by the Royal Institute of British Architects and the Association of Master Builders in London.

The environment in which projects are executed may have changed but the relationship between the client and the contractor is essentially the same.  The contractor undertakes to execute the specified work for an agreed price, within an agreed period of time – failing which the employer may penalise the contractor. Standard forms of contract are drafted to ensure an equitable distribution of risk between the parties – often by appointing a neutral person to administer the execution of a contract

The use of standard contracts seeks to avoid disputes – or at least minimise potential disputes – by following the respective rights and the obligations described in individual clauses.

The employer generally appoints a professional team to deal with the design and related planning and legal issues, the building component of which is described uniquely in drawings and specifications, as is the relationship between the employer and the contractor. The standard form of building contract is an industry constant to ensure fair performance and pricing criteria. Changes to the accepted industry standard often cause avoidable disputes, delays and cost overruns. Obviously, the parties could agree to a bespoke form of contract.

The employer and the professional team must timeously resolve the purpose of the project, its location, unique building features, choice of materials and finishes, maintenance criteria, and the most appropriate form of construction – which may determine the form of contract – before a contractor is appointed to reduce the risk exposure of all concerned. Points to consider in contracts include:

  • Accurate and complete definition of the scope of a project and, if applicable, enabling works
  • Timeous involvement of all stakeholders, including suppliers, customers, staff, and the local community
  • Sufficient time to explore the optimum design solution(s), and the “build-abilty” of such solutions, and obtaining all statutory approvals before construction commences
  • Ensuring that sufficient funds are available should a project extend beyond the initial budget period
  • Paying the professional team realistic fees appropriate to the project’s complexity and the contractor for work properly completed, both in full and on time
  • Cognisance of novel construction techniques or materials – their statutory compliance, and the ability to service or maintain such products
  • Compliance with recognised performance standards
  • Creation of a simple communication and speedy approval mechanism

Unresolved issues will result in uncertainty in the execution of a contract increasing the risk of claims from the contractor for delays and additional expense. Consequently, disputes are likely but can largely be avoided if the parties cooperate and immediately communicate in writing by following the procedures and using the terminology in the form of contract.

All verbal communications should be confirmed in writing – verbal communications are difficult to quantify or enforce when the parties are no longer on speaking terms.   Should any disagreement arise, it is essential to notify and meet with all involved to resolve such issues whist the information is fresh and accessible. All claims should also be processed promptly.

Most standard forms of contract refer to a ‘neutral administrator’, usually appointed by the employer at a cost to the project. Proper contract administration is no simple or casual task. This person must interpret the employer’s defined project requirements and, should any disagreement arise between the parties, such issues should be resolved in a fair and speedy manner.

 

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