Ambiguous or clear?
I am sure we have all been there, during the project delivery phase, there will be a time where you will hear… “…that is not what we meant.” or “…you are misinterpreting the contract” or even “…you should have allowed for that.” Ok, well, let us review the contract.
What is in this week’s blog post?
In this four-part blog series focusing on contract review practices, I will take you through the high-level items I look out for when reviewing contracts, scope of works, departure and clarification schedules, responsibility matrices and more.
In part one, I am highlighting the importance of looking for ‘ambiguity’ in the contract documentation. I will show you some examples of ambiguity in contracts and demonstrate the remedy. This is one of many ways one can ensure good communication, clear documentation and start to build trust with the other party.
Contract Review
Scope of Works
The scope of works document provided at tender stage can be ambiguous because a client may not be fully aware or have knowledge of the details for the package of work. This is why a client is engaging a contractor for the work, to get their expertise. However, the contractor must be aware that any ambiguous narrative must be clarified throughout the tender process. For example:
The Subcontractor acknowledges that is has inspected the site, is aware of and accepts the responsibility for all site conditions of which it ought to be reasonably aware of and the subcontract works must be constructed with due care taking into account those existing site conditions.
This scope of works item is perfectly fine being documented in an RFT or RFQ because it will allow the contractor to assess what information, data, evidence and visual inspection are available and the contractor can clarify. However, this item must not make it into the contract unless the contractor is in fact taking all risk on-site all conditions. If not, clarify what documents, information and data were available, if any geotechnical testing was conducted for example, and what was found on the site inspection. Further, detail out in a schedule what site conditions the contractor is willing to take a risk on. Request the following amendment for example:
The Subcontractor acknowledges that is has inspected the Site and the findings are documented within the site inspection schedule “xxx” completed on date (dd/mm/yy). The contractor is aware of and accepts the responsibility for all Site conditions as per report “yyy” of which it ought to be reasonably aware of and the Subcontract Works must be constructed with due care taking into account those existing Site conditions.
I can hear alarm bells ringing already from both sides of the fence. I am not saying the contractor should not take the risk of existing Site conditions but one must be aware of the risk(s) which allows for the valuation of said risk(s). A further amendment is to schedule out which party is responsible for each site condition if known. I have two personal experiences which come to mind, once we were lucky, the other not so much. So, let’s not leave this up to luck.
Contract Clauses
In Australia, we tend to use standard forms of contracts, AS4000 family of contracts and GC21 here in NSW for a range of construction, civil engineering, design and construct among others. There are others, of course, NEC3, JCT and FIDIC for our international friends. From recent statistics, 84% of AS Forms of Contracts were amended. Therefore, it is imperative we do not take these for granted, regardless of how long we have worked with them. Here is a straight forward example I found in a contract recently which I believe is ambiguous.
The Contractor may request that any Subcontract Services be tested. The Subcontractor shall provide such assistance and samples and make accessible such part of the Subcontract Services as may be required for such testing. If necessary, on completion of the tests, the Subcontractor shall make good the Subcontract Services in order that they fully comply with the Subcontract.
Let me give you some context, this clause was in a contract for a basement retention package of works, where the subcontractor’s works would have been disrupted by testing. In my view, this is an ambiguous clause because it does not clearly articulate or clarify what is to be tested, when, by what standard, to what quality. Further, “make good” wording is open-ended and cannot be quantified, therefore, ambiguous. One might say the keyword here is “Request” which constitutes a direction. Therefore, the subcontractor is entitled to notify the contractor of the direction and notify of a potential variation to the contract. You would be correct, but the clause is still ambiguous.
One way to approach such a clause would be to request the testing to be quantified and clarified through an Inspection and Test Plan for example. Further, any re-work due to works outside of the scope of works must be instructed.
Departure, Clarification and Other Return Schedules
My last point of this week’s blog is any correspondence which is returned to the client must be clear and not ambiguous. The same way you have reviewed the contract document is the same for the tender schedules in return.
I hope you have found this blog helpful and if you require further clarification please do not hesitate to get in contact with us at info@anvelo.com.au or LinkedIn
N.b. Nothing in this article constitutes legal, professional or financial advice.