Tailoring Your Contract to Your Project
It is important to tailor your contract to your project, rather than vice-versa. It is acceptable to use standard forms, as long as one does not become a slave to standard form contracts. There is no single standard form contract that can apply to every permutation and combination of situations that might arise on a construction project. It is important to understand the particularities and requirements of a particular project and the participants to that project so that you can tailor your contract to your project in a manner that will serve the best purposes of all of the contracting parties. Problems with contracts are endemic to the construction industry and as indicated above, represent the source of most of the claims that occur on a day-to-day basis.
This brings up the seven "I"s of contract that graphically illustrate most of the problems associated with construction contracts. These include the following:
- Inappropriate contracts
- Incomplete contracts
- Incomprehensible contracts
- Incompatible contracts
- Inequitable contracts
- Incommunicado contracts
- Incredible contracts
In order to assess the appropriate contractual agreement to employ on a particular construction project, it is first necessary to undertake a complete risk assessment. The foreseeing of risk and project-related factors affecting the contracting parties is key to developing a contractual arrangement that will work to the benefit of the project and its participants. Before considering a particular project delivery alternative, the parties should undergo a thorough assessment and evaluation process that should include the following:
- Assessing and evaluating the particularities and needs of the various project participants;
- Assessing and evaluating the individual peculiarities and sensitivities of each project;
- Assessing and evaluating the role to be played by each of the project participants on the project and how they will interact with one another.
Deciding how best to allocate project risk amongst project participants is a critical exercise. In particular contractual situations, a number of factors should be reviewed, including the ability of the parties to bear risk. So generally:
Risk Should Be Born By the Party Best Able to Handle It
The major sources of disputes on construction projects including the following:
- Incomplete scope definition.
- Inappropriate contract type.
- Poor communications.
- Uncertainty and unrealistic expectations.