Infrastructure contracts: tailor-made or off-the-rack?

Deciding between using a standard form or a bespoke document is quite often a question of culture and business practice. Following the release of the FIDIC yellow book contract guidance publication, author Jakob B. Sørensen discusses the choice between standard and customised contracts.

Deciding between using a standard form or a bespoke document is quite often a question of culture and business practice. However, using standard documents does have a significant advantage over drafting everything from scratch. 

The above applies not only to legal documents but also when preparing budgets, business plans, and even love letters or Christmas cards. Most standard documents will cover all the relevant topics you need to cover and using a standard document as starting point at least provides you with a checklist of issues to be addressed.

The benefits of starting with a standard form

Many standard documents will also be seen as inherently fair or balanced and the parties will be more likely to accept risk distribution, liability etc. as drafted rather than argue about these topics. If you're comfortable with the writing in the standard document, it will also save you time drafting as you can just use the text from the standard document. 

If the standard document is industry-standard or at least generally accepted or used in the industry, the parties involved with have experience in drafting documents based on it. In respect of construction contracts, this will be a great advantage during execution as the parties involved will also have experience in managing projects based on the standard. 

In respect of contracts, widely used standard forms will, over time, establish precedence from arbitrations or court cases, further clarifying the scope and interpretation of these forms providing a more firm basis for the parties. 

As you can see, there's a strong case in favour of using a standard form as your starting point; but even if you decide to modify a standard form (or even design a bespoke contract), you can still use a standard document as a checklist.

In addition, even with a heavily modified standard form (which is then no longer a standard form), if the structure of the standard form is maintained, the structure itself provides some recognisable guidance to the readers and, therefore, presumably also leads to savings in cost and time, at least during the tender or contract negotiation procedure. 

Construction projects frequently end in cost overruns, delays and disputes. Therefore, it's important that the contract you prepare is tailored for the specific project, protects your legitimate interests and stipulates relevant dispute prevention and resolution. 

A companion to the FIDIC forms

From my experience, it's usually beneficial to start with a generally recognised standard form of contract; FIDIC standard forms of construction contracts are widely used and recognised and so are the NEC standard forms prepared by ICE.

In more specialised areas, other forms will be industry standards, e.g. for offshore UK construction work where the forms prepared by LOGIC are widely used. 

If you start with any of the FIDIC contract forms, my companions to the forms will provide you with a guide to draft the contract and they'll also serve as a useful handbook when managing the contract during execution. 

It's not all about the contract

Remember, the contract isn't the only important aspect of a project. It could be argued that a carefully and diligently prepared contract is the best way to ensure that the contract supports the project’s requirements and that any disputes are resolved in an appropriate manner.

Although this is, generally speaking, correct, far more important than the choice of contract paradigm or standard is the choice of contractor, the general preparation of the project and the experience of the parties involved.

If the basic design is rubbish, it doesn't matter if the contractor is skilled and the contract is perfect. If the contractor is incompetent, it doesn't matter if the design and the contract are perfect. If the engineer is incompetent, little else matters. 

Each contributor to the project should understand and respect the competences and contributions from the other disciplines.

To expand upon this information, Infrastructure professionals are advised to consider which contract is right.  Full, comprehensive information is available for review via the ICE bookshop:

Jakob B. Sørensen is a Partner at Holst, Advokater. He lives in Denmark with his wife and their five children.

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