Assembling contract documents correctly is the secret to ensuring a smooth and dispute-free construction process, says John Hughes D’Aeth. And here’s how it’s done
Surely this is easy – what’s the problem?
Well, it should be, but in practice a high proportion of disputes arise from carelessness in putting together contract documents. A sloppy package of documents is a recipe for confusion at best and litigation at worst. A little time spent getting it right at the outset can save many hours of argument later.
Okay, so where do I start?
Here are a few tips:
- If your starting-point is a standard form, check that you are using the correct version and that it’s up to date
- Make sure the parties are correctly named and described. This may be critical when it comes to enforcement or if, for example, the employer wishes to use an offshore vehicle for tax reasons. Check the company number and registered office address (a search on the Companies House website will reveal this)
- Ensure that the entries in the contract particulars match those in the preliminaries.
How do I incorporate amendments to the standard form?
This needs particular care. Under most JCT forms, the articles and conditions have priority over the other contract documents, so any amendments should be referred to expressly in the articles of agreement. Simply including them in the preliminaries may not be good enough. Indeed, the common practice of writing contract amendments into the preliminaries is undesirable and should be avoided, especially if they may conflict with the remainder of the conditions.
Anything else on the preliminaries?
Read through them carefully to ensure they are suitable for the project. If taken from a previous job, be sure to remove any job-specific provisions. Check carefully that nothing in the preliminaries conflicts with the conditions. Remember the purpose of the preliminaries (and other technical or commercial documents) is to describe the works and any constraints affecting how they are carried out, not to rewrite the parties’ legal obligations. The conditions may require procedures such as design reviews to be spelt out in the preliminaries. If so, ensure they are.
What about other documents?
If you need to refer to obligations in other documents (for example planning requirements or third party agreements), make sure they are properly incorporated and not merely attached without explanation. At all costs avoid attaching post-tender correspondence, which by its nature is likely to be vague and contain conflicting statements. The only satisfactory way of including changes agreed during the tender process is to amend the documents themselves. Once signed, the formal contract will (or should) supersede anything issued at tender stage, so earlier versions of documents should be discarded.
How do I deal with warranties and bonds?
Blank copies of any ancillary documents should be included in the contract package. If executed versions are needed, print them separately for the parties to sign, with any blanks correctly filled in.
What about getting the contract signed?
The most important thing is for the articles of agreement to be properly executed. For a simple contract, the signature of a director or partner (in the presence of a witness) will suffice. Contracts executed as a deed – to provide a longer (12 year) limitation period for claims – must be signed in accordance with the firm’s constitution and, in the case of a company, with the rules contained in the Companies Act. These have changed recently, so it is best to check if you are unsure.
It is usually good practice to initial the front page of any ancillary documents. However, there is no need to initial every drawing. A signed list of drawing numbers will suffice.
Can I issue a letter of intent to buy time?
Letters of intent are commonly used to authorise expenditure before a contract is signed, for example to pre-order materials. They can be a useful short-term expedient, but they are no substitute for a formal contract. They invariably lack detail and precision and frequently lead to disputes. In particular, allowing work to start on site under a letter of intent is almost always a bad idea and should be avoided if at all possible.
So, the message is … ?
The task of assembling contract documents may sound like a burden, but it is a worthwhile investment. A clear set of documents is an invaluable aid to head off potential issues and allow differences to be resolved before they escalate into disputes.
This article was printed under the headline: ’Good on paper: guide to assembling contract documents’
John Hughes D’Aeth is a partner at Berwin Leighton Paisner