Clause for thought

The latest addition to the suite of New Engineering Contract documents, the engineering and construction short contract, landed on my desk the other day. I have been waiting to see how the panel of wise men that drafted the NEC and the ECC would approach a minor works contract form. Would it be possible to compress the already pithy style of the ECC still further? Would the ECC approach work on a short-term contract?

In my humble opinion, they have done a good job. The short form contract has clearly been carefully thought through and represents more than simply a cut-and-paste version of the ECC. Some clauses have been re-ordered to make them flow more logically and a number of omissions have been made that reflect the less elaborate mechanisms required for a minor works format.

Of particular note are:

• The contract data section, which can be found at the back of the ECC, has been moved to the front of the short form. Notes about completing the contract data are found in boxes dispersed throughout the text.

• Usefully, the contractor’s offer and the employer’s acceptance of that offer are clearly set out, emphasising the basis legal requirements for the formation of a contract and thereby, hopefully, reducing the possibility that something will be overlooked.

• The section headed “price list” indicates that the contract can be used either as a lump sum or remeasurement contract.

• The works information, which in the ECC should be incorporated or referred to elsewhere, now appears at the front of the contract as well, although it can also be contained in an instruction given by the employer, as in the ECC. This is sensible, encouraging the parties to ensure that all the relevant information is gathered together in one place. There is also a section headed “site information” that requires the employer to provide details of ground conditions and other matters such as access limitations that may affect the contractor’s work.

Looking through the general conditions of contract, the first thing that strikes the eye is that in clause 10.1, which contains the now famous obligation to act in a spirit of mutual trust and co-operation, the only parties mentioned are the employer and the contractor.

Consistent with the minor works format, there is no project manager or supervisor; their functions are carried out by the employer. Interestingly, the requirement for the adjudicator to act as stated in the contract and in a spirit of independence has also been removed.

The guidance notes, which have not yet been published, may tell us why this has happened, although I wonder whether it is related to the fact that this obligation would be unenforceable against the adjudicator because he is not a party to the contract.

Compensation

• Information is clearly set out, which should help minimise disputes

• Appropriately, it is simple to administer

• Compensation events may cause some difficulty

What about the compensation events clause? Administration of the compensation events provision in clause 60 of the ECC requires a considerable management resource on the contractor’s side in particular to ensure that the contractor does not lose the opportunity to obtain proper recompense for additional work. Would this be appropriate in a minor works form?

Interestingly, the short form contract does not significantly reduce the compensation events mechanism. There are, of course, differences – there are five fewer compensation events and some events have been simplified. For example, the use of the weather measurement is replaced by a calculation relating to the ratio of days disrupted by weather against the total contract period.

An interesting additional clause in the short form contract states that only the decision of the adjudicator can change the assessment of a compensation event after the employer has “either accepted a quotation for it or notified an assessment for it” (I wonder whether that should read “… notified an assessment of it”, relating to the employer’s power to assess a compensation event as set out in clause 62.4). This is a useful clarification of the status of assessments.

A welcome addition to the insurance table in clause 80 is an additional column that shows for how long the relevant cover has to be provided. Other than that, the clause is, in common with the rest of the contract, simplified to provide the more basic information required for the minor works format.

Clause 90, dealing with disputes and termination, has been reversed so that the termination provisions now come first. Again, these set out reasons for termination and payment on termination in much the same way as the ECC itself.

Clauses 93 to 95 refer to adjudication. Alternative clauses 93UK to 95UK are to be used for domestic contracts subject to the Construction Act.

These clauses provide for a reference to adjudication broadly similar to that adopted in the ICE conditions of contract, as one would expect. This draws the ICE distinction between a notice of “dissatisfaction” and a notice of dispute. But where as the ICE adopted this distinction to allow the engineer’s decision under clause 66 to occur before the adjudication, the short form contract uses this distinction to allow parties to meet to seek to resolve the dispute before the adjudication.

Although it is sensible to allow the parties time to negotiate, the distinction between “dissatisfaction” and “dispute” remains difficult to justify in the context of the wide application of the Construction Act. We will have to see whether the courts are prepared to agree that this change in terminology is sufficient to prevent the application of the act.

If you did not like the ECC in the first place, you will not like the short-form contract either. But if, like me, you think the ECC represents a new approach to the procurement of construction projects, this contract is to be welcomed.