Risky Business

Jessica Taylor, building partner at national law firm Clarke Willmott LLP describes how risk may be converted into a competitive advantage

No firm wants to experience a lawsuit or disagreement, yet in the construction industry they are fairly common. There are ways in which firms can avoid risk, through strong contractual procedures and controls, adopting the correct procurement route and informed leadership decisions.

From the site’s characteristics to materials availability and contractor capabilities, there are numerous factors that can influence a project. Many things can go wrong during the process, so firms must have a solid risk and liability management strategy in place to deal with these issues before they arise.

For instance, in the High Court case of The Trustees of Ampleforth Abbey Trust v. Turner & Townsend Project Management Limited, the project managers had been responsible with signing the building contract up. The court had to interpret a slew of letters of intent they’d already issued. The contract was never signed by the contractor and this left the school greatly vulnerable contractually particularly since none of the letters of intent addressed crucial duties with regard to completion and delay.

Dispute avoidance and management demands clear and constant evaluation of risk and liability. Proactive approaches, such as having precise paperwork and allocating risk among the contracting parties, are also important. For example even contractors who are financially solid struggle with 90 day payment intervals. While they don’t expect a ‘click and collect’ payment method cash flow, insolvency is still one of the biggest hazards in construction.

Proactive dispute avoidance entails anticipating and resolving potential conflicts before they arise. A range of skills and approaches are needed including detecting when legal help would be useful.

There are a number of basic procedures that can be performed in order to decrease the danger of exposure. Among them are:

1. Clear contract documentation: Ambiguity is the root of many problems; hence it is worth the effort to acquire clear and accurate contract working following strong negotiation. In the event of a disagreement, you may rest assured that all duties, rights, and remedies are clearly spelled out in your contracts. The most important thing is to have the contract exactly accurate and to sign it as soon as it has been;

You should never put your faith on letters of intent. The person whose job it is to get the contractor to sign the contract should make sure that they do it on your behalf. The courts have lately evaluated a number of projects where letters of intent have ended up being relied on the client’s considerable cost when the Contract was never executed.

3. Good management: A surveyor, who proactively manages a project for which he or she is accountable, builds on the basis created by the Contract and can enable early detection of variables that could generate conflict. Issues of concern can be recognised and efforts taken to deal with them before they become formal and costly. Do not overlook difficulties in the expectation that they might go away- they won’t.

4. Collaboration works: Building co-operation amongst the project participants in order to develop team working, issue resolution and an emphasis on project delivery can assist in the avoidance of disagreements. A significant amount of work has taken place in the industry to migrate from unenforceable partnership charters in the 1990s to strong partnering contracts. But these won’t be helpful if in actuality the culture of the connection is distrusting and combative. No one should be rushed into adopting a partnering contract without fully comprehending the implications as this can produce as many issues as two party contracts.

5. Clear client objectives: the client itself must have a clear grasp of its own aims and approach to risk; and this includes its own judgement of what a “win” would be in any dispute. Effective conflict management against the background of defined objectives helps salvage projects and relationships and even prevent Contractors from going bust.

6. Keep talking: Sharing information is vital. A constant discourse with relevant persons on the issues minimises the chance of parties and personalities getting entrenched;

7. Good payment practises: Constructors rely upon cash flow. Once payment provisions have been approved, valuations should be carried out and payments paid promptly.

8. Keep correct records: Do you have your contract and documentation in order? Rather of debating right and wrong or who was out of line, stick to the facts and the law if a disagreement arises. Evidence is vital to this and the better or more full your records are the more probable it is that you will be in the stronger position. If a conflict is unavoidable consult lawyers as early as you can as this is the greatest approach to keep costs down and end the matter swiftly.

In addition to her work as a published author, Jessica Taylor also lectures on many aspects of construction law. Her 20 years’ experience includes all facets of both construction and engineering legislation. She advises on a wide range of projects as well as on commercial construction disputes.

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Last Updated on December 29, 2021


Author: Indra Gupta

Indra is an in-house writer with a love of Newcastle United and all things sustainable.

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