Top Tips Contract Documents
More often than not, the contract documents will form the basis of any claim. If something has changed, the extent of the change may only be measured and evaluated by reference to the drawings and specification upon which the Contract is based. The claimant’s entitlement will usually be spelled out in the conditions of contract as will the procedure to be followed in the case of a claim. If there is a disagreement between the parties as to design, quality, responsibility, scope of works or procedures, the contract is the place to look for guidance and resolution.
The contract documents will typically comprise of the following:
- The agreement
- The particular conditions of contract
- The general conditions of contract
- The specification
- The drawings
- The bills of quantities
- Any other documents
Most contracts will provide that all the documents shall be mutually explanatory, but in the case of ambiguity or discrepancy, they are to be read in a stated order of precedence. The list above is fairly typical of an order of precedence.
With regard to the last point ‘Any other documents’, there is a great temptation for those whose job it is to prepare the contract documents to dump all sorts of documents into this section. Typically, these may consist of correspondence between the parties between the time of tender and the letter of acceptance, minutes of meetings during the negotiation process, the Contractor’s proposals for executing the works, or offers to complete the project differently to that of the tender documents, possibly through some value engineering proposals. The potential for conflict between such documents and the preceding documents becomes high in such a situation and may, according to the order of precedence stated in the contract, not reflect the pre-contract negotiations and a subsequent agreement between the parties. If we look at a situation whereby the contractor had negotiated a reduction in the time for interim payments to be made from 56 to 40 days and this was recorded in meeting minutes included in ‘Any other documents’, then the 56 days in the general conditions would still have precedence over such an agreement. The possibility for error is also increased if important points are ‘hidden’ away in the back of the contract documents. Whilst a good contracts person should be aware of potential hazards, would a busy site engineer ever think to look through such a section to check whether a specification had been changed and recorded in a letter or meeting minutes?
Disputes often arise through the interpretation of the contract and it is true to say that if the contract documents are poorly drafted and compiled, the potential for disputes increases tremendously. For these reasons it is infinitely preferable to keep the ‘Any other documents’ section as small as possible and to amend the tender documents to take into account any changes that have been negotiated and agreed between the parties, within the appropriate section of the contract documents. This also applies to tender queries and their responses, which are usually the result of lack of clarity, ambiguity, or conflict between documents. Rather than just including the tender queries and responses as an addendum to the Contract as is often the practice, the contract documents should be amended to reflect the response.
The best time to complete and sign the contract is as soon as possible after the agreement has been made. If this is not done, the people involved in the negotiations will often be replaced by the people responsible for the construction and administration of the project, memories will grow dim and worse, a situation could arise on site which would make the inclusion, or not, of a particular item of negotiation extremely important, a situation which could encourage people to acquire a selective memory of the pre-contract negotiations. In any case, the people on site need to have a set of documents to tell them what they are supposed to be building and how they are supposed to build it. Whilst there should be pressure to produce the contract documents for completion and signature as soon as possible, it should always be remembered that rushing this very important task and producing a poor set of contract documents could have drastic consequences later on.
It is essential that each of the parties and the person responsible for administering the contract on behalf of the Employer, have a full set of contract documents for reference. A good contract administration system would ensure that a controlled set of the contract documents is kept on site and each individual page or sheet of the documents is clearly marked to show that it is a contract document. This last requirement is useful to ensure that when sections of the documents are copied at a later date when revised drawings and specifications have been issued, these is no confusion with regard to each document’s status.
If there are documents included within the ‘Any other documents’ section, then it is a good idea to annotate the controlled copy of the contract documents to draw attention to the fact. For example, a specification clause could be annotated to refer to a tender query and response within the contract documents that includes a change or clarification to the particular specification item. Better still, the query and response could be photocopied and pasted into the specification at the appropriate place. This will ensure that all of the team who need to refer to the contract documents will be aware of the true meaning of the contract and mistakes and wasted effort will be eliminated.
It should go without saying that a person responsible for dealing with claims should have accurate information available as to the provisions of the contract because this will be the very basis of almost all claims. Anyone dealing with contractual matters will inevitably deal with the conditions of contract on a regular basis. It is therefore good practice to prepare a document that consolidates the particular conditions and the general conditions of contract. This should consist of a copy of the general conditions of contract to which the particular conditions of contract have been incorporated on a clause-by-clause basis, either electronically or manually. This will ensure that no misinterpretations will occur through someone forgetting to check if the particular conditions have amended a clause, which needs to be referred to or relied upon.
Finally, the people responsible for administering the contract and anyone involved in contractual letters and claims will often have cause to quote from the contract conditions or to reproduce clauses for one reason or another. If a soft copy of the contract is available, then this task becomes quite easy and provided that the particular conditions of contract have been incorporated, this will prove to be a useful document throughout the life of the project, particularly, if it becomes necessary to prepare or to respond to claims. If an editable copy is not available, it is a good idea, each time you need to quote a clause, to first type the clause into a separate document and thereby gradually build up a library of clauses for later use.
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