Contracts - separating the legal woods from the legal trees

While good contract management is a key factor in avoiding disputes, there are a number of steps that consultants should look to take to avoid them altogether, says Tim Benbow.

Good contract management is an essential factor in the success of projects and programmes. In this article we look at five ways to avoid or limit disputes. But before that, I want to take a step back and briefly consider what can happen at the start of contract discussions. 

Before the contracts are signed

Enlightened and repeat customers will have contracting strategies in place well before any contract-specific consultancy/representation engagement. If so, then representation may then provide advisory adjustments and/or proposals based on current knowledge, recent case law, new and updated legislation and the basis of their own experience.

Less experienced and/or one-off project customers, on the other hand, may well rely heavily upon their consultants for recommendations for contract selection, structure, content and the balance of responsibilities under that contract as a whole.

The length of time these discussions take place before signing depends entirely upon the factors which go into making up any contract. Where is it? What is it? How big is it? What industry capability is there to do it? How soon is it required? How soon is the capability and all of its componentry available to start and to build the project? What is the legislative environment in which it has to take place? Has anyone ever done this before? How many are required? 

Discussions for a single substantial replacement dwelling in the home counties of England, for example, may take weeks. Discussions regarding a set of four refineries on the coast of Brazil with which to process Brazil’s new offshore oil discoveries could take years, not least due to the care, attention to detail and management of interested and impacted parties required and the ten-figure sum involved. It is very much a case of “horses for courses”. One size very much does not fit all.

Steps to take to avoid disputes

Once the contracts are in place, so many of the key elements which project teams can utilise to avoid disputes on projects and contracts of all sizes are available from the moment contracts are signed. By far and away the largest of these is the suite of documents collectively comprising the contract. Knowing, understanding, appreciating and administering the contract as a single entity is one of the very best ways of avoiding disputes. 

1. View the contract as a single entity
This cannot be stressed enough. You may well find elements of the contract which are not to your liking, are difficult, costly, time-consuming and/or administration heavy. They may even not have been sufficiently allowed for within tendering. In addition, they may well be different from what you are used to, particularly from your last project. 

However, this suite of documents is what everyone has signed up to on this contract. What has been the suite of requirements on any previous contract has to be regarded as history when it comes to starting a new one. Recognising this and acting upon it is a key way of avoiding or minimising disputes on any construction contract.

2. Be aware of the wider picture
The second key method of avoiding disputes is to recognise the documents not comprising the physical contract documents but which are referenced within them. These may involve customer processes and procedures, site-specific management instructions, legislation, regulatory requirements and the cut-off date or dates applicable to them and to their application and pertinence. Requirements and coverage “goal posts” come in many guises and forms. Suffering unnecessarily as a consequence of them, be it contractually and/or financially, can be avoided. 

3. Manage every timescale
The third key way to avoid disputes is to schedule out and manage each and every timescale stipulated for by each contract. Contracts are not all the same. They have to be reviewed individually. Assuming can be very dangerous and expensive but it can be avoided. Managing timescales successfully can be accomplished in many ways. The setting of delegated timescales for response can be carried out with modern e-mail communication systems and packages. Document controllers can manage team- response timescales through computer-based time-controlled systems through cost-effective administration. 

However, such systems and the people to run them need to be in place from contract day one. Having pertinent team members in place is just as important for avoiding disputes for commercial, planning, project management, document control and other team elements. Trying to save staff costs at the start of a job can have costly consequences later and must be avoided.

4. Understand all the requirements
The fourth key way to avoid or limit disputes involves the quantity, quality, sufficiency and submission of both contractually-required and additional beneficial records. There are usually a series of different sections of the requirements placed upon contracting parties within contracts regarding the keeping, maintaining, format, layout, templating and submission of site and contract records. 

The works information document is usually one of the largest elements of many forms of contract stipulating what is required under any given contract, i.e. “the rulebook”. Different contract types, particularly on larger projects, have standalone contract specifications, particular specifications and other documents serving the same purpose. 

When projects start you should have read the contract and to be fully aware of all information gathering, retaining, submitting and reporting requirements. These will serve two critical purposes as the contract progresses. The first of these is contractual compliance. The second of these is as submitted documentation upon which cost and/or time submissions can be based by reference to historically submitted information.

5. Keep good records
The fifth and final of the key ways to avoid disputes addressed in this article is to recognise and appreciate the many different forms of records and information which can be kept on a contract and to only add to the recordkeeping requirements of the specific contract where it is really necessary. 

After all, there is a project to manage and build. Extensive photographic records can particularly help with complex mechanical, access-critical, existing live operational or multiple contractor-occupied sites. Photographs of such and similarly complicated sites and contracts can do the work of a thousand words and save time and cost. But remember that they can be used to show what has not or cannot be done just as well as any recording of what has been completed.

Tim Benbow is a dispute manager at Costain.