09/07/12
Why do you need a written contract?
Why do you need a written contract?
In the current economic climate, where a move to new premises
may not be an option, many businesses are looking to reconfigure
their premises to make the existing situation better for the
business.
But no matter what the size or value of these construction
works, it is essential to ensure that agreements with contractors
are correctly documented in writing.
A number of construction projects, especially works of a smaller
nature, may still be commissioned by an oral agreement or “on the
back of a cigarette packet”.
However, despite this reluctance to document arrangements, a
written contract provides certainty and if things do go wrong, it
gives a better chance of a successful claim (with better recovery
of damages).
It can be difficult to prove anything if the necessary paperwork
is not in place.
The most important points to consider in a construction contract
are:
Insolvency: Given the current market, consideration needs to be
given to what will happen if there is insolvency, either of the
developer or the contractor, or even, unthinkable until recently, a
bank providing funding.
Risk: There should be the appropriate risk allocation between
the parties, ideally to those parties who are best placed to manage
and deal with it.
For example, who is to bear the risk of any delay or cost
implications for actions which are either unforeseen or due to the
activities, or inactions, of one party or the other?
Alterations: In what circumstances can the price, works or the
completion date be altered?
Insurances: Are the necessary property/third party insurances in
place?
Dispute: In the event of a dispute what procedures are in place for
resolution?
It will be time and money well spent to ensure matters are clear
from the start.