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Responsible contract drafting can help collaboration: construction body

Out-Law News | 14 Jun 2019 | 9:34 am | 2 min. read

Industry body Build UK has identified a number of legal terms in construction contracts which it says undermine collaboration in the construction supply chain.

Build UK believes its contract terms recommendation will build a more collaborative approach between clients and the supply chain and encourage a fairer allocation of risk to deliver better project outcomes.

Build UK's recommendation includes that contracts should not contain a “fitness for purpose” standard of care for design, except in the process sector, or a blanket indemnity for breach of contract. 

It recommends parties do not pass extension of time or loss and expense risk to contractors for dealing with asbestos, fossils and antiquities, unexploded bombs, or the carrying out of – or failure to carry out – work by a statutory undertaker where the time and cost impact is not reasonably ascertainable at the point when the contract is entered into.

Build UK also recommends that contracts should not include a clause which states that “specified perils” will not give rise to extensions of time where caused by the contractor or sub-contractor. It recommends that uncapped contractor or sub-contractor liability should be excluded, except for aggregate cap carve-outs such as fraud, misrepresentation, or personal injury.

When it comes to performance securities, the body recommends that pure on-demand performance bonds should not be used. It also recommends that parties avoid collateral warranties that do not include “no greater liability” clauses, and parent company guarantees that do not include “no greater liability” clauses or equivalent rights of defence.

Construction law expert Richard Laudy of Pinsent Masons, the law firm behind Out-Law.com, welcomed the recommendation as a contribution to ongoing debate in the industry around what may and may not constitute best practice.  He also suggested the recommendation could help boost productivity within the sector.

“Productivity is a real challenge facing multiple industries. Collaboration within the infrastructure sector is essential at local, regional and global levels - and the future of the sector depends on it,” Laudy said.

“Where processes and technology can be aligned, and knowledge can be shared, the sector should be working together to promote best practice across the full project life cycle so that real differences can be made,” Laudy said.

Collaborative working practices have been a topic for discussion within the construction industry for some time. Pinsent Masons published an initial report on collaborative construction in 2016 with recommendations based on discussions with industry figures.

More recently, last year’s publication of the NEC4 Alliance Contract by the Institution of Civil Engineers also focused on collaboration with the aim of encouraging parties involved in an infrastructure project to take an equal share of risk and reward.

In accordance with competition law, Build UK's recommendation is non-binding and members must consider on an individual basis whether they wish to accept or reject all or some of the terms in their own contracts. Build UK said it would review the contract terms recommendations regularly, and invited feedback from industry. 

See Contract Terms Recommendation