The Merry Month : Contracts (continued)
Robert Merry is an independent stone consultant and project manager who ran his own company for 17 years. He also acts as an expert witness. Here he offers further advice on avoiding the pitfalls of contracts.
For a contractor or sub-contractor (in our case) to be in a position to make an informed decision about returning a quotation, we need to understand the type and conditions of the contract. These can be found in the contract documents, as opposed to the contract documentation. There is a difference.
Contract Documentation conveys the designer’s intentions for the building to all parties in the build process. With further input from specialist designers, the body of information to be disseminated grows… and grows. It can be, and often is, an administrative horror story.
Such is the complexity of the communication on larger contracts that intranet sites (such as Aconex and Project Centre) have been developed to deal solely with project co-ordination.
I’m sure many of you are swimming against the tide of information from one of these sites at this very moment. Improved ways of communicating seem to translate into quantity rather than quality. The main contractor and designer send everything in a massive brain dump of files and drawings on a daily basis. It swamps sub-contractors with wave after wave of useless information and the occasional nugget relevant to your work. Miss it at your peril!
Contract Documents are a different matter. They are legally binding and need scrutiny when you consider whether to tender or not to tender. Which is always the question.
There follows a brief description of the main Contract Documents.
Articles of Agreement (sometimes called the sub-contract agreement) offer a brief description of who the contract is between and the works to be carried out, the agreed sum to be paid, the method of dispute resolution, and the like.
Possibly the most important part of the Articles is the Contract Particulars section, containing detailed project specific data. Also known as the ‘appendix’, or ‘contract data’, or ‘abstract of particulars’, they contain the risky bits that will influence your decision to tender for the work and your price for it.
For instance, the start and completion dates and / or duration of the contract, rectification period and liquidated damages. In other words, the duration and amount of responsibility you will have to accept if you take on the contract.
The Conditions of Contract follow the articles of agreement and are the contract itself, such as JCT or NEC standard form contracts. Then come the ‘amendments’, often used to bend the standard contract in favour of the Main Contractor. I would suggest these need careful analysis by a construction lawyer as they contain clauses that could be used against you in a court of law… M’lud.
Schedules within the contract documents, particularly JCT Standard Building Contract, cover other vital pieces of information. Namely, insurance requirements, form of bonds, collateral warranties, design portion and so on. These are sometimes included in the contract particulars.
Drawings, specification and scope of works (possibly in the form of a bill of quantities) are also critical contract documents. These are your first port of call when the tender arrives. How big is it? Have I got time to tender? Can I afford not to return a quote, especially if it’s a valued customer?
In essence, careful attention and reading of the Contract Documents will reveal all the elements of risk you should consider.
There is an old adage that an estimate is not an offer to do the work but a quotation is. Though there is some legal truth in that, it is important that any estimate is qualified as ‘not an offer’ to do the work. Which seems contradictory. It is probably safer to assume any quotation you send back to the main contractor should be for work you are prepared to carry out for the sum you have quoted.
Of course there will be qualifications with your tender. But if you make a mistake, can you be bound to carry out the contract for the original sum offered?
It depends. Have both parties been in agreement at some point and therefore a contract formed? If so, then yes, you are bound. If not, then no, you’re free. It’s a tricky business.
Certainly using the words ‘subject to contract’ in any negotiations will usually prevent a document in which this appears being treated as a binding offer.
And then there is the battle of the forms. This is where companies enter into prolonged correspondence in an attempt to have their terms incorporated into the contract. Whoever sends the last letter wins, on the grounds that their terms have been accepted by conduct. However, proving this will take a court of law some considerable time and care.
There is always an argument and nothing is clear cut. There are legal precedents in every aspect of construction disputes where laws appear to have been interpreted differently for the very first time, sending lawyers into tail spins.
But if you arrive at court it’s probably already too late. My best advice is to read everything thoroughly, clarify with an expert what you don’t understand and qualify your bid.
As I’ve said before, the best contract stays in the drawer. But if it doesn’t…