Poorly written and ill-considered drafting of contracts is costing our industry a fortune each year - and placing a severe strain on a man’s sense of imperturbability
Consultancy Arcadis recently published the results of a survey on the causes of contractual disputes. At the top of the list was poor contract administration, followed closely by poor and ill-considered drafting, and errors and inconsistencies in contract documentation.
Here are some of my own bugbears:
Throwing everything into the contractual “pot” If one is on the receiving end of a pile of documentation - which often comes in a variety of digital formats - it could take days to unravel the verbiage. Nobody has bothered to work out what is relevant. Guidance documents, for example, are inserted or referred to which, by their very nature, cannot be enforced.
Lack of drafting precision “The contractor shall do everything necessary to design and install…” (my emphasis). Armed with this clause, the employer complains that the contractor has not done X, Y and Z which are all “necessary”. Then, why didn’t he specify X, Y and Z? This clause appeared in the works information of an NEC contract. The excellent NEC “How To” guide on drafting the works information places great emphasis on the need for precision.
Unless the context helps define the meaning, open-ended words are likely to be given an interpretation by the courts that is against the interests of the party relying upon them.
Failure of drafting to anticipate likely scenarios or risks “The works shall have a design life of 20 years before the first major maintenance is required.” From a commercial point of view this clause means that the works should be constructed so that they are able to function as their intended purpose for 20 years. Has that purpose been clearly defined? Does it apply to all parts of the works? What happens if after eight years there is a change of use that requires major maintenance? When does maintenance become “major”? Did the person drafting these words think about all these issues? Probably not.
But there is another issue here. A structural engineer will point out that BS EN 1990 contains a definition for “design working life” which is the “assumed period for which a structure or part of it is to be used for its intended purpose with anticipated maintenance but without major repair being necessary” (my emphasis). BS EN 1990 later goes into more detail about the indicative design working life for various structures. The point is that a clause like this is immediately setting up a conflict that is likely to lead to
disputes down the line.
Failure to include contractual yardsticks “The works shall be designed and constructed with due regard to minimising future maintenance and running costs.” Apart from the fact I dislike the use of “due regard”, which is a meaningless term, there is no yardstick against which compliance with this obligation can be measured. It, therefore, becomes unenforceable. Also, consider the constant references to “reasonable endeavours” and “best endeavours”. Why are these phrases used without any kind of yardstick? It’s not surprising that there have been numerous court cases on their meaning.
Another good example is: “The contractor shall proceed regularly and diligently…”. Without a yardstick these words make difficult the enforcement of the obligation and, not surprisingly, have been the subject of legal cases.
Seeking to re-write statutory requirements in contracts Over the years a common “amendment” has been to extend the statutory seven-day notice period of suspension to 42 days. Why stop at 42? Why not make it 42,000? This practice is sheer stupidity because what matters is compliance with the statute. Another example are clauses that state payment notices will not be issued for amounts less than, for example, £2,000. This is simply flouting the Construction Act. If quantity surveyors are doing this I can excuse them (because they know no better) but I cannot excuse lawyers.
I’m not sure whether drafting standards have slipped or whether all my bugbears are just cack-handed attempts at risk transfer. But what I do know is that the industry is picking up a massive bill (for both the transaction costs and the cost of the inevitable disputes) each year for the indecipherable verbiage that we respectfully refer to as “the contractual documentation”. Over the longer term this bill ends up in the prices charged to the industry’s clients.
Professor Rudi Klein is a barrister and chief executive of the Specialist Engineering Contractors’ Group