25 Tips to Help You Avoid Costly Claims and Disputes
Often people ask us, 'what are the key things we must do to avoid disputes and claims?'. Good news - we've compiled all of them into one handy document of top tips to avoid claims and disputes!
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Omission of Items Included in the Bill of Quantities, But Not Shown on the Drawings
Bills of Quantities, Omissions and Claims: I recently received a request for advice from one of our course attendees. It related to the Bill of Quantities and later drawing issues. This topic has arisen on several occasions so I thought it worthy of a blog. The situation and query was as follows:Read more
Implications of Poorly Drafted Contract Documents
Poorly drafted contract documents are often the source of claims. If they contain contradictions or ambiguities, it is natural for each party to interpret the inconsistencies to their advantage, thus giving grounds for contention and dispute.
One of our distance-learning students recently asked for my opinion on the following case, and I thought it would be worth sharing. The student’s description was as follows:
“Although it was understood by the parties that the contract was to be a lump sum price, Clause 14.1 of the FIDIC Red Book in the conditions of contract was not amended to reflect this. (Note: the unamended FIDIC Red Book includes provisions for the Works to be remeasured.) In various other places, such as the contract agreement, the letter of intent, and the cover page, it clearly states that the type of contract is a lump sum. Our client's auditors have issued a report to the client that the contractor may dispute the type of contract in the future.
The client now wants the contract amended and is seeking our opinion as well as legal advice. The lawyers have advised the client to replace the Red Book with the Yellow Book, to which we responded that this is ridiculous because, while the Yellow Book is for a lump sum price, it is also for design and build, which does not apply to this project.”
This is a perfect example of poor contract administration. If the effort is not put into getting the contract right in the first place, the likelihood of claims and disputes is increased. Questions must be asked about the consultant’s and the client's procedures in this instance.
It is easy to see how contention could arise here. If the Contractor believes that a remeasurement would put them at a financial advantage, they could argue that the conditions of contract should be applied. However, if Sub-Clause 1.5 (Priority of Documents) is taken into account, it will be seen that the Contract Agreement and the Letter of Acceptance take precedence over the Particular and General Conditions, so consequently, the lump-sum provisions are applicable. Additionally, it seems fairly obvious that at the time of tender, the intention was to enter into a lump-sum contract.
In order to resolve the matter, I would suggest proposing a contract amendment to the Contractor. This could involve substituting the Clause 14 wording from the Red Book with that of the Yellow Book, which would neatly change the remeasurable contract to a lump sum without changing the whole contract from a construct-only agreement to a design-and-build agreement, as suggested by the lawyers. If the Contractor objects to this, then Sub-Clause 1.5 (Priority of Documents) could be used to argue the case.
It took me about five minutes to come up with this solution. I wonder how much the lawyers charged the client for proposing their totally uninformed and unworkable solution?
What’s your opinion?