1. When the ancient mariners in their merchant ships crossed the unpredictable oceans, they needed meticulous planning and a deep understanding on what lay ahead in those unchartered waters, to ensure they stayed on course to deliver its cargo on time and were able to navigate challenges and risks they would face on a daily basis, such as the ever-changing weather conditions, rogue waves, headwinds, rocks, fog, and extremely big icebergs.

2. Entering into a building contract and executing the works in terms thereof, whether as contractor or subcontractor, will face its own set of risks and challenges, which will need to be navigated. This requires planning and a full and proper understating of the project and the contractual terms to avoid the project sinking or hitting those metaphorical rocks.

3. I set out hereunder some of the key issues which can help a contractor or subcontractor navigate a construction contract and the execution of the works.

4. The Building Contract

4.1 Similar to the sailor venturing out to the seas and having a seaworthy and well-constructed ship, the contractor/subcontractor requires a well drafted and solid building contract. A badly drafted or defective contract is thus akin to a ship full of holes. It cannot end well. The following contacts should thus be avoided.

4.1.1 The “cut & paste” contract, aka the “Frankenstein Agreement”, which has been cobbled and stitched together from various contacts. There is a high risk that the contract may omit critical clauses, contain contradictory or inapplicable contractual terms, which could result in an incoherent contract making it difficult to enforce. Such contracts are a recipe for disputes.

4.1.2 A derivative of the “Frankenstein Agreement” is the standard form building contract with an addendum thereto, in terms of which wholesale changes are made to the contract, culling critical clauses, adding contradictory, unreasonable and highly prejudicial, clauses or leaving gaps in the contract rendering it vague or difficult to enforce. The same applies if one of the parties. standard terms and conditions are attached to the standard form agreement, and it then becomes a somewhat difficult task determining which clauses apply.

4.1.3 The AI generated building contact, as there is a risk that such contacts may contain clauses badly worded, vague, inapplicable provisions, use incorrect terminology and phrases or pull from templates that favour one party without balancing risk and protections. AI may produce generic contracts unsuitable for specific projects (e.g., high-rise construction vs. residential builds). AI may hallucinate or cite non-existent laws, regulations or obligations.

4.1.4 The “Take-it-or-leave-it Contract”, which has been drafted by one of the parties to the contract and is presented for acceptance on that basis. Such contacts are generally extremely one-sided and allocate risk against the other party to the contract. These types of contracts are thus likely to contain unfair or unreasonable terms such as far-reaching indemnities, disclaimers for liability, stringent claims procedures, forfeitures of rights, shopping list of milestones to be achieved before work considered complete, excessive penalties, and specifically in contractor/subcontractor contacts, the insertion of “pay-whenpaid”.

4.2 Depending on the size of the project or the works to be executed, it is recommended that the parties enter into a standard form contract, such as the JBCC, MBASA, FIDIC, that have been developed and evolved over decades by industry bodies which aims for equitable risk distribution, both parties’ interests, employs industry standard language with defined contractual terms and is structured logically. It is furthermore imperative that standard form contract, which is project specific, is chosen and that any amendments/additions are limited as much as possible.

5. Understanding the Building Contract

5.1 If a party is unfamiliar with the contract to be concluded, as obvious as this may sound, it is essential that the contract is read (and re-read a good few times) and rights and obligations are fully understood. The contractor/subcontractor needs to appreciate where his/her rights, obligations and risks in the contract lie.

5.2 If a party is unsure of their rights and obligations as set out in the building contract it is crucial that the party seek advice from an attorney or construction specialist before entering into the contract. This applies equally to amendments made to the standard form contacts.

5.3 A failure to fully appreciate the terms of the contract is similar to the captain of a ship, who embarks on a sea voyage in the fog and without looking at or understanding the map. There is a high probability that the ship will veer off course and end up drifting and lost at sea. Referring to the contract only after an issue has arisen may by then be too late to take the necessary remedial steps.

6. Proper Contract Management and Administration

6.1 Like the sailors of old who observed the oceans from their crow’s nest and the captain of the ship, who kept meticulous records in his daily log, there is a similar need to not only remain vigilant during the execution of the work in respect of any event that could impact on the works, the contract value and the contractual time periods, but to fastidiously maintain records of progress of the works, site meeting minutes, programme updates & photographic records.

6.2 The need to centralize and maintain digital record of all email correspondence and notices, entered into with the developer, employer, architect, principal agent, other professional and subcontractors, cannot be over emphasized. These records must be accessible at all times and sometimes years after the project has been completed if the parties are locked in dispute resolution proceedings.

7. Train Your Team

As important as it is to enter into the most appropriate building contract and to understand the terms thereof, it is essential that all resources allocated to the project are informed and aware of all contractual obligations to ensure that the works are executed for example in accordance with contract documents, specifications, programme sequencing, project timelines, & communication protocols and notice period requirements.

8. Forewarned is Forearmed.

When in doubt seek advice. Besides obtaining advice before entering into the building contract if you are unsure of your rights and obligations during the execution of the works, or should a disagreement start festering, before doing (or not doing) anything that could prejudice your rights, seek advice thereon. Rather incur the cost of getting advice, which can avoid disputes and even worse costly and time-consuming dispute resolution proceedings.

9. Conclusion

To sum up, a well navigated construction contract should lead to calm seas and clear horizons.

Contact Antony Arvan to navigate your construction contract.