In the construction industry, successful project delivery starts long before the first brick is laid. One of the most critical foundations is the preparation of clear, comprehensive contract documents. Well-drafted contract documents not only set out the rights and obligations of all parties but also help prevent disputes, delays, and costly misunderstandings during the project.
For contractors, subcontractors, and employers alike, taking the time to get contract documentation right is an investment in a smoother, efficient and more predictable construction process. It can also help in providing clarity and minimising the risks of disputes.
Why Proper Contract Documentation Matters
Construction projects are complex, involving multiple parties, varied scopes of work, and changing circumstances. Poorly prepared contracts often lead to confusion over:
- Scope of work
- Payment terms
- Programme and timelines
- Variations and changes
- Responsibilities for delays and defects
- Dispute resolution mechanisms
By contrast, well-prepared contract documents provide clarity, align expectations, and offer a clear roadmap for managing the project from start to finish.
It is important to remember that the contract documents are the most fundamental allocation of rights, obligations and risk in a construction project. The contract documents are also the basis on which disputes are generally assessed.
Key Steps to Prepare Effective Contract Documents
Define the Scope Clearly
A well-defined scope provides a detailed description of the work to be performed. It is important to ensure the documents are accurate and that the price and programme align with the drawings, specifications, and any relevant standards or codes to be precise in the contract. Ambiguity in the scope can cause disputes over whether certain tasks are included, leading to disagreements and claims in relation to delays and variations. This is one of the major causes of the disputes that we routinely see.
Choose the Right Contract Form
Selecting a contract form suited to the project’s size, complexity, risk profile, and the type of work package can be very crucial. Common standard forms in the UK include JCT, NEC, and FIDIC. You should ensure that the contract is fully completed, especially the particulars, and that the contract is tailored to the project’s specific requirements rather than relying solely on standard templates. This will often involve bespoke amendments to the standard terms.
Include Clear Timeframes and Milestones
Setting realistic and detailed timelines for project stages and completion can be critical in a construction project. Define what constitutes “completion”, including the necessary documentation that you may require, and include provisions for extensions of time to cover unforeseen delays in construction works.
Payment Terms and Procedures
Specify the payment schedule or milestones for interim stage payments as well as mechanisms for valuing variations and assessing retention. Clarity on payment triggers can be crucial to avoid payment disputes.
Variations and Changes
Including procedures for requesting, approving, and pricing variations can provide the necessary clarity to all parties. It is also necessary to ensure that all the parties understand how changes will be managed, agreed, and documented to avoid any arguments at a later stage.
Allocate Risk and Responsibility Clearly
Identifying which party is responsible for key risks such as delays, site conditions, design information, and defects can help in minimising disputes and efficiency in managing a project. Clear risk allocation also reduces putting blame on one party by managing expectations, and also helps in managing claims.
Set Out Dispute Resolution Procedures
It is important to agree on how disputes will be handled from the beginning, and including clear processes and timeframes can help minimise risks and avoid unnecessary delays.
Some Tips for Contractors and Subcontractors
- Review contracts
It is essential to review contracts before they are signed. Parties should not assume standard clauses will work for every project, and contracts should be suited to the specific projects.
- Keep thorough records
Record keeping is integral to a project, and all communications, instructions, and changes throughout the project should be recorded and maintained. Setting up processes to ensure compliance and record keeping can be a great commercial asset. It is also notable that good record-keeping can be the defining difference between winning and losing in a dispute.
- Understand your contractual rights, obligations and risks
It is important for the parties to understand their respective rights and obligations, especially regarding notices and claims for extensions or variations. Recognising and understanding the allocation of risks can also help in adequate pricing and assessment, which can not only avoid disputes but also ensure the success of the project.
- Seek expert advice
If the contract terms are unclear or you have any concerns, it is highly advisable to seek expert advice early. This small exercise can ensure that you understand the rights, obligations and risks under a contract and that the contract is reflective of what has been agreed and priced for.
Conclusion
Preparation of contract documents is a crucial step in reducing risk and ensuring a smoother path for successful project delivery. By investing time and expertise upfront to clarify scope, responsibilities, timelines, and procedures, all parties can better avoid disputes, delays, and financial losses.
How can CCC help?
CCC has decades of experience specifically in the field of construction law and dispute resolution, including adjudications. We assist our clients with:
- Conducting robust contract reviews
- Assist in setting up contracts to set you up for success
- Identify risks, rights and obligations in a contract to better equip you for negotiations
- Provide bespoke training seminars to your team to help administer any project effectively
- Provide advice and legal support if you end up in a dispute
Get in touch to ensure your contracts, claims, and compliance strategies are up to date and effective.
