Contract Review

Submitting a tender is a period of intense activity, involving quantifying the scope of work, obtaining quotes and preparing the bid or proposal.

But what about the terms and conditions?

Have they been read?

Are the implications understood?

Whilst there are specialist published forms of contract, the terms and conditions for most contracts will have been tailored specifically to the project and could be a bespoke document, a contractor's own standard terms of sub-contract or a multitude of detailed amendments to a standard form of contract such as the JCT Standard Forms of Contract.

Regular vehicles for amendment are the DOM/1 and DOM/2 standard forms of sub-contract. Amendment can be effected in one of two ways.

The amendments can be detailed as they occur by way of the omission and insertion of the relevant phrases, sentences and clauses in a supplementary document or by way of reproducing the whole contract as an amended complete document. The latter method results in the amendments being hidden within the text and changes then have to be identified by reference to the original document.

A major contractor with both general contracting and services divisions has employed both methods of amending the DOM/1 and DOM/2 contracts. The detailed amendments to DOM/1 resulted in a supplementary document of 19 pages, however they now incorporate their changes within the body of the text.

Primary areas for concern would be payment, damages, set off, consequential liability, assignment and any terms stated as being a "condition precedent".

Adjudication has attracted a particular amendment, now referred to as a "Tolent clause" after the contractor involved in the litigation. Tolent Construction inserted a clause whereby the Referring Party, nearly always the sub-contractor, paid the costs and expenses of both parties, irrespective of who won the adjudication. The sub-contractor won the adjudication, but was then presented with a bill for costs from Tolent equating to the Adjudicator's Decision. When the clause was challenged in court, it was held that the clause was legal and enforceable and therefore sub-contractor had no practical recourse to challenge the costs claimed. This is now recognised as an effective method of preventing a party from participating in the adjudication process.

A Contract Review will study the documentation and the subsequent report will detail the salient points and highlight onerous conditions.

A commercial decision on the viability of the bid can then be based on the points raised in the report with the options including: