Keith Bishop, head of construction and engineering at Muckle LLP, shares advice on avoiding legal issues on building projects.
It is a strange title for an article written by a construction lawyer, but helping businesses avoid risks, claims and other lawyers is what we do best.
A construction project or, more particularly the contractual matrix behind it, is unlike many other commercial arrangements. In most cases the main contractor developing the land won’t actually own it. Also, much of that work will actually be done by others, such as consultants or subcontractors. It may be funded by a party other than the owner and used by yet another party who wants to rent or buy the developed site. Large sums of money are committed before a spade even hits the ground.
Against that complicated backdrop, a number of steps are essential to avoid a pretty major and costly fall-out between two or more of the key players. That’s why it helps to have the right advice and consider all the possibilities right from the start.
Design for life
One of the first things to consider is the design of the project. Even with the most talented construction professionals at your side, design can often be found wanting or the way in which it is expressed in a subsequent contract can become muddled.
Design needs to be complete, not merely an expression of what something might look like (which is basically just an idea). When design is complete the words or drawings which encapsulate it need to be precise and consistent throughout.
Agree contracts early
Often approached with a mixture of apathy and foreboding, most projects do demand a complex array of interlinked obligations to be drafted. That requires thought and attention to detail. In my experience the fewer cooks the better and above all focusing on the purpose of these contracts is key.
The objective is to set out the rights and obligations of everyone involved. Who will do what, when and for what price? The process is really one of allocating risk. The more clearly that is done the easier it will be for the main contractors to understand what risks they have passed to others and what risks they have accepted and have to manage. That risk assessment is important for many things, especially price.
Now that might sound blindingly obvious but, consistently, I see problems with projects that could have been resolved without ever crossing my computer screen, had the key parties involved focused on these issues at the start. It’s too late once the ink has dried on a contract to argue that it doesn’t cover this or that point. It’s all very well engaging expensive lawyers but none truly has a ‘get out of jail free’ card. It’s better to spend time with advisers at the start and get clarity and understanding into your contract terms from the off.
Work with the right people
Care in the design and contract procurement process can, of course, be undone if the contractor or other key players simply aren’t up to the task. To a degree this risk is the hardest to manage but proper due diligence can help secure the right people, not just the right company.
Remember human beings do the work, not companies, and we are fallible. Nobody suggests they might not be quite the best people for the job or that they are merely the cheapest. Such hyperbole needs to be dealt with in the contractual terms as well as it can be. However, placing an obligation on someone to do something is not tantamount to a guarantee that they will actually do it.
Stay on top of your terms
I don’t believe in just putting your contract in a drawer once it’s signed and forgetting about it until you need to refer to it. Many standard form contracts encourage you to continually reference what’s been agreed. Even then, progress can be held back because notices and communications aren’t regularly maintained during the course of the project.
This can include supplying information late (or not at all) or not issuing formal notices of delay or non-payment. Simple human error, in other words, can cause enormous problems and land a project in hot water. It’s important not to take your eye off the ball from start to finish because trying to excuse the failure to take action after the event is, at best, incredibly uncomfortable.
It’s another reason why getting the right advice up front can make a huge difference to how smoothly a project runs and how cost efficiently it is completed.
For more specialist construction and engineering legal advice contact Keith Bishop.