Contract Awareness – Our Top 5 Tips

1 – “Oh no we won’t”, “oh yes you will”

When reviewing a contract on behalf of a client (and hopefully its not a scanned pdf copy), we search for some key phrases, these are “you must, you shall, you will” – why do we search for these phrases you ask? It is simple, we want to know what the client we are working for has to do, or more importantly what entitlement they will lose if they do not do what the contract states they have to. Once these clauses are identified they can be managed and by managed we mean procedures can be put in place that will allow them to comply with those clauses and avoid losing their entitlement.

2 – “What have we told you? You will not”

Similar here to the “you must, you shall, you will”, there will be clauses in the contract that will outright deny your business the opportunity to any entitlement for recovery of time and or cost under the contract. These clauses will, more than likely, include the following phrases, “you shall not, you will not”. When these clauses are identified, a simple solution, providing the change to the clause makes sense and will allow you the opportunity to recovery under the contract, is to remove the word “not”. A simple strikethrough of the word “not”, will change the whole meaning of the clause.

3 – And they’re off

What does the contract state as the Commence Date for your works and just as important, what date is stated as the Completion Date for your works? It is extremely important to identify these dates from the contract. The contractor should check the following:
a) has the Commencement Date already passed? If so and the contractor can determine or knows when they will start, they should change the Commencement Date so it reflects the correct position, and
b) can the work be completed in the time available and by the Completion Date? If not, the contractor should change the Completion Date to reflect the date it believes it will complete the work – note if you have changed the Commencement Date you are likely to have to change the Completion Date.

4 – Money (“that’s what we want”)

Cutting to the chase, a contractor needs to be paid for the work it has done. In order to be paid it must follow the procedures established in the contract under the payment clauses. Aspects to look out for are as follows:

a) lookout for condition precedent clauses in respect of payment, these clauses may include specific requirements for the issuing of an application for payment, such as, “for the application to be valid it must be submitted on the application date” and “for the application to be valid it must be sent by first class post only to the registered address stipulated in the these documents”

b) lookout for any contractual requirement to re-submit the application for payment as a Payee Notice in Default of a Payment Notice – basically you may need to submit your application again, if your client does not submit a Payment Notice.

There are other aspects, but contractor should look to “control the controllables” and this includes identifying what they need to do to get the money in. Ask yourself the question, “what do I have to do to get paid?” And once you establish this, make sure you do it.

5 – I’m a contractor, get me out of here!

What are you going to do if you do not get paid? What are you going to do if you are not being given access to do your works? These are two common instances that occur on construction projects. Often the contract will provide no entitlement for the contractor to terminate the works for non payment and or failure to be given access to carryout and complete the works.

Yes there is a entitlement under the Act to suspend works for non payment and yes there is likely to be a clause in the contract which allows the contractor to ask for more time to complete the works when there is a delay on site, but what if the payment never comes in and what if the date for access cannot be given? There may be opportunity at Common Law to do something (terminate the contract), but it could get messy.

When asked for help by contractors experiencing these issues the first thing we consider is the termination section under the contract. 99 times out of 100 the contractor has no contractual entitlement to terminate. The entitlement to terminate remains with their client. Contractor’s need to avoid this and seek to include termination rights to give themselves a way out. A termination clause must be carefully worded and most likely cross-linked to other clauses in the contract.

The above examples are by no means exhaustive. Contracting (agreeing and delivering a project under a construction contract) can be extremely complicated and stressful. It is a must for contractors to ensure that they start off on the right footing. This does not always mean wholesale changes to the contract, it means being better educated and better prepared and being willing to dig their heels to have changes made to the contract, where deemed it is to important to proceed without. A tough decision for all of us, but a necessary one, perhaps?

0161 711 0844 (Manchester)

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info@drakeqs.co.uk