Standard terms and conditions should be a key document for any business, but particularly for those working on construction projects. Although express (written) terms do not necessarily constitute all of the relevant terms of the agreement and in some circumstances the courts will imply terms into a contract, a written contract between the parties helps to avoid uncertainty.
Benefits of written terms and conditions
There are many advantages to having written terms and conditions, not least of which are the following:
- Providing clarity by way of terms and conditions provides certainty as to what is expected from each party and helps them remain mindful of exactly what they have contracted to do, therefore reducing conflict and increasing focus. If there are no clear written terms, there will be considerable uncertainty as to what the parties intended to agree and the contract may need to be construed in accordance with implied terms, legislation and if a dispute were to ever arise.
- Having a written contract in place will save both parties time and money should a dispute ever arise. Litigation is a costly process and to be avoided wherever possible.
- Written terms and conditions can help you enforce agreements. While written terms and conditions can’t prevent a dispute occurring, they provide a clear framework and should make it easier for you to sort things out without the need for litigation.
- A well drafted set of terms and conditions can include provisions limiting liability, disclaiming liability for delay caused by force majeure and protecting your intellectual property rights. They can also help to demonstrate that yours is a professional business which takes its obligations seriously.
- Written terms and conditions help you comply with the law. There will also be certain terms that are implied by statute and common law. If a dispute were to arise, the court would imply the terms provided they are necessary to provide business efficacy to the terms and conditions or in situations where it is not possible to ‘contract out’ of certain statutory requirements.
An example of this is the payment provisions in the Housing Grants Construction and Regeneration Act 1996 (“the HGCRA”) as amended by the Local Democracy Economic Developments and Construction Act 2009. If your terms and conditions do not include the clear payment provisions required by the HGCRA, the Scheme for Construction Contracts (“the Scheme”) will be implied into the terms and conditions. The Scheme lays down a statutory payment regime which must be complied with in all construction contracts. While these implied terms make the “pay when paid” and “pay if paid” clauses unenforceable, you may feel the statutory payment periods are too long; if so you will need to include adequate payment provisions in your terms and conditions.
Must have provisions for construction based terms and conditions:
- Adjudication – If the works fall under a definition of a construction contract under the HGCRA then you should set out details of the nominating party, and any amendments to the Scheme will have to be clearly set out.
- Termination provisions – it is important to include clearly set out termination rights for both parties and to include the implications of such termination and the steps that would follow i.e. notice periods, collection of tools, payment, etc.
- Insurance (particularly for clients who are designers) – having your own standard terms and conditions that are approved by your insurers may help in the event of a claim against you and will give you greater confidence that you will be covered.
- Variations – it is very common in construction contracts for variations to occur during the course of the project and it is often difficult for people to obtain payment for variations. Clear provisions should help; it is important to include the mechanism to be followed when the need for a variation becomes apparent, i.e. variations need to be agreed in writing.
- Confidentiality – clauses on confidentiality are not implied and therefore it is important that these are included in your terms and conditions. You may want to keep details of the project confidential and this will have to be expressed in the contract.
- Delays – it is important to establish what the parties’ rights are in the event of a delay, when extensions of time are granted and whether any liquidated and ascertained damages are agreed. These points should be clearly dealt with in your terms and conditions.
Finally, when you have a clear set of standard terms and conditions you want to roll out, it is important to make sure you send them to your customer/client at the outset. My advice would be to send them out with every quotation and ensure that you have a signed copy back before you start works on site. This will ensure that you deal head-on with any potential conflict and it stops your customer/client trying to impose their own terms and conditions. It is always a good idea to seek advice if your customer/client seeks to impose their own terms or sends you a copy of their own terms in order to ensure that you are not caught out in a ‘battle of the forms’ scenario.
In comparison to the costs of a complex legal dispute, having a set of terms and conditions in place is not an expensive step to take. BPE will draft terms and conditions that are bespoke for your business taking into consideration your business processes, which will offer you considerable protection. To obtain a fixed fee quotation please contact Katie Pickering on 01242 248271.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.