CAN YOU AFFORD NOT TO?

The predicament is somewhat different but the root cause is the same, the parties have failed to understand and administer the contract as per the terms and conditions laid down. They started out in the usual commercial love up condition, both parties having a different view of how the contract was to be administered but neither administrating it correctly.

This situation is precarious for both parties but especially so for the contracting party, as the project continues along its merry path for the first part QS and commercial staff on both sides talk and resolve minor differences, but then something changes, unforeseen conditions, asbestos, a change of staff at the Employers office and the battle begins.

The latest payment application has been rejected, with or without a withhold notice, Pay less notice, suddenly in a meeting the employers commercial manager states you are time barred, under FIDIC clause 20.1 under NEC core clause 61.3 or JCT 80 (Private with Quantities) clause 13.8.1 and 13.8.5 amended. Sound Familiar?

How do you attempt to avoid this situation? One way is to ask an expert to review the contract as a whole. Recently a large construction company received a contract from a nuclear operator under the NEC form of contract with 61 pages of Z clauses… what happened next?

• We received the request to audit the contract from the Construction Company on a Monday
• A complete audit of the contract and a report highlighting any clauses considered onerous, contradictory, unfair or poorly drafted.
• The client asked us to attend a meeting to explain what we found and suggest alternative with the employer.
• After certain amendments were agreed and completed a route map of all the critical timing was completed this included:

• Early Warning notifications.
• Notification of compensation events.
• Risk register and risk meetings.
• Notification templates
• Delay notification
• When to submit the programme and the consequence of not submitting on time.
• Payment schedule map defining
  • The payment due date;
  • The final date for payment; and
  • The prescribed period.

Finally a meeting was arranged between the commercial teams of both employer and contractor where the commercial and contractual obligations of both parties were explained, templates were shown and agreed and route maps though the contract were handed out.

All this happened in 5 days and this set the parties off on a good commercial footing, it may not stop disagreements in the future but it put both parties in a better place to avoid some of the contentious issues that arise.

And it does not have to costs the earth, for small construction companies a review can take a half a day and for a fixed fee, helping to identify those terms that may cause problems in the future, or if the dispute has already crystallised then having a commercial specialist attend a meeting with the employer can help. For medium and large companies a strategy can be worked out and implemented that is a cost benefit to the company or a commercial due diligence report can be complied.

At Priory Contract Law, we know flexibility is the key in commercial success and our aim is to assist small, medium and large companies gain the best commercial advantage where possible.

For free advice or to discuss further call Colin on 07539 036470 or email '[email protected]'