Legal

Dysfunctional contracts don’t speak our language

10 January 2018 | By Sarah Fox

When a renowned semantics expert finds our favoured construction contracts wanting, it’s high time we considered a whole new approach, says Sarah Fox. 

We all seem to have our favourite contract, one that despite it being a little tattered, old‑fashioned or simply threadbare, we prefer over all others. 

Like a childhood teddy that we cling to when we really should know better, our familiarity with our favourite contract hinders us looking at it too closely. But if we critically analysed each contract, would it really stand scrutiny as the perfect tool for this project?

I am not mad enough to believe you have the time, never mind the inclination, to review your contracts in forensic detail. So it’s good to know someone has taken on that mantle. Ken Adams, a US proponent of clear contracts, has spent 20 years reviewing the detail. Although not a construction specialist, he is a contract geek and semantics expert.

Adams reviewed FIDIC – a contract used on international projects – and found it severely wanting. The excuse he was given? It is written by engineers for engineers. But since every user should be able to use a contract, that doesn’t really stand muster.

Adams is not a fan – to put it politely – of the simple present tense adopted by NEC4. His book states, “in standard English, expressing obligations is not one of the functions of the present tense used with the third person”. He’s not alone. Recently, an English judge agreed, saying “it seems to me to represent a triumph of form over substance.”

Clauses in NEC4 in the passive voice also fail the Adams clarity test, for example clauses 51.2 “interest is assessed” or 53.4 “the assessment is changed”. Neither explains who has to carry out the act or duty, and his view is that “the consequences of obscuring the actor’s identity can be drastic”.

Of the big three, that just leaves the JCT suite. These have not come to the attention of the US author, and probably just as well. The suite relies on the “security of tried and tested wording”, something Adams decries – because the writers are relying on terms which had to go to court to be interpreted. That’s rather like relying on a wobbly wheel instead of creating the perfect tool for the job.

When a world-leading expert takes one look at our industry’s suites of contracts and finds all of them dysfunctional, each in its own way, it’s a good indication that we need a whole new approach, instead of more tinkering.

Sarah Fox is author and founder of contracts business 500 Words

Comments

The deficiencies are noted, but then what is the way forward? Presumably the way forward needs to address the issue of BIM on all projects as well?
Are you suggesting a new form of contract, or new relationships?

Alan Edwards, 18 January 2018

Great article.
This issue is not only a problem of the language being used and the target markets ("contracts for engineers by engineers", yet they are so often used as overriding contracts on large scale mixed use developments which involve a lot of professionals and trades other than engineers!), but also of the fluidity of the industry. With the massive integration of tech into our industry now, the pending involvement of robotics, HR, Fiscal Responsibility and H&S law to name a few, contracts need to be malleable enough to adapt themselves to the constant and rapid changes. In my mind, the more simple and clear a contract the better. We cannot spell out every eventuality nor possibility. We can set basic, simple and clear rules which cover all (I hope!).

Anthony Bonnett MCIOB, 19 January 2018

The problem generally is that the people (Client's and Contractors)that really matter have little or no involvement in the drafting. One of the few exceptions is the CRINE now Logic suite (however take up is not that which was anticipated as it was preaching to an industry that already had pretty good and balanced/ appropriate risk bespoke contracts). CCCWks and GC Works contracts as they envisaged and dealt with the Client (their consultants) doing something wrong (not just the contractor) and how it was dealt with and settled. Unfortunately the PSA and Central Claims that dealt with is long gone.

Of the standard forms for design and build probably the best is the IChemE Red Book (doesn't need much if any changes to use for buildings or civils) includes a schedule of items with limited lives which not only makes 'fit for purpose' fairer and clearer but makes TCO (Total Cost of Ownership) tender evaluation, in preference to cheapest wins, possible.

All contract terms in tender packages need to be tested on a 'what if' (yes you can cover almost every eventuality) basis and adjustments (in the text not as special conditions) made by a construction contract specialist and checked by a lawyer.

I trust this helps all our CIOB members and their clients/employers.

DAVID ALUN ROBERTS – MSc, FCIArb, FFB, FQSi, MRICS, MACostE, MCIOB, MASI, MCIPS, MInstPet, MEI.

David Roberts, 22 January 2018

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