by Philip Adams

I am increasingly fascinated by the extent to which clients and to a certain extent their lawyers, feel compelled to amend standard forms of contract, especially, bearing in mind the involvement of such organisations in the initial drafting. Next time you look at the Fidic Red Book for example, take a look at the ‘acknowledgements’ as these make for very interesting reading.

The ‘acknowledgements’ state that the drafts were reviewed by many persons and organisations, and that their comments were ‘duly studied by the Update Task Group and, where considered appropriate, have influenced the wording of the clauses.’

The list includes approximately 30 different organisations of various types including seven multi-national law firms.

These highly experienced construction lawyers have been given an opportunity to review the draft to assess the balance of risk between contractor and client. Now it is possible that Fidic may have found their comments ‘inappropriate’ and consequently they had no ‘influence’ on the wording, but I must confess I find that hard to believe.

Therefore, during the drafting process presumably, they have become reasonably satisfied as to the contracts fairness, with respect to the commercial interests of their various clients. So why do they and more importantly their clients, feel the need to amend it in practice and shift the balance of risk so drastically? If the contract is amended so that it becomes onerous, there is nearly always a premium to pay in lost time and cost to administer the inevitable disputes and disagreements.

On a few occasions I have read the web profile of the person who has drafted such amendments and the description often includes the term ‘non-contentious’! I’d hate to meet them when they may be feeling particularly contentious!

For example, I once read an amendment that sought to distinguish between ‘design development’ and ‘variation’ with the result that the former would not entitle the contractor to an extension of time.

Subsequently, nearly every change that was issued regardless of scope or complexity was conveniently labelled ‘design development’. Mutual trust and cooperation be damned!

In another example, terrorism was included in the list of excusable delays contained in a standard form, however this had been amended to exclude terrorist acts which were ‘reasonably foreseeable by an experienced contractor’! Even the CIA and MI6, with all their extensive worldwide resources, are unable to foresee every terrorist event, so how is this fair balance of risk?

However, I should point out that the examples above emanate from the financial fit-out sector, where the banks flex their commercial muscles by often instructing their lawyers to remove all employer risk from a standard form. In other sectors, where the bargaining position of the respective parties is more even, the amendments may be less onerous.

Wherever possible contractors should continue to price such risk and perhaps make that more transparent. However, in the current climate this could be a risky strategy and therefore contractors may consider offering a reduction in their price if the onerous provisions were omitted.

Finally, when faced with a set of bespoke amendments there are several things a contractor can do, not least of which a thorough risk assessment, including recommendations and strategies for managing the risk. From a practical perspective a good tip is to prepare a cut and pasted version of the contract so that the amendments can be read in context without the need to constantly flick between documents.

Similar Topics