www.fenwickelliott.co.

uk

David Bebb

Amending standard contracts:

Anarchy or common sense?
Introduction
Amending standard contracts
1.

I spoke at a seminar last year about various topical construction issues.

Having come through the questions and answers session relatively
unscathed, I was asked by one member of the audience on why it was that
lawyers felt the need to prepare pages of amendments as long as the
standard forms themselves; the clear message being that if it aint broke
dont fix it. I do not recall my talk actually relating in any way to
amending standard forms and so the question caught me a little off guard
to say the least.

2.

For a moment I actually had to consider this question very carefully

myself. From the day I started as a trainee in the construction department
of my firm, amendments to standard forms seemed to be the centre of the
construction world. It was all we did. All the non-contentious lawyers
were busy drafting them while the litigators were arguing about what they
meant. With a bit of luck, the litigators were not arguing over their own
colleagues drafting . As a mainly non-contentious lawyer in a firm with
some pretty well known litigators this particular risk has not escaped me.

3.

Anyway, coming back to my answer to the chap in the audience. It was

simply along the lines that we didnt produce those amendments unless
the client (usually an employer) wanted us to. They were not produced
simply to pass the time of day. I mentioned that the standard forms did
not address the specifics of the project, were often weighted too much in
favour of the contractor, needed updating to reflect changes in legislation
etc but, needless to say, this chap was clearly of the view that regardless
of this lawyers still felt the need to dabble with the wording far too much.

4.

However, what I had to do was acknowledge that amendments are

frequently sent out with a tender, without ever having been reviewed in
any detail by the client. Clients instructions are very often for the lawyer
to issue their standard amendments to a particular form of contract.
The only other clue as to what form these amendments are to take is that
some need to be bankable or employer friendly. The chap was not
convinced by this answer. I will touch on how I think the situation can be
improved later.

5.

Todays presentation will run through my experience and approach to using

standard forms and will include:

A reminder on why we use standard forms.

Why do lawyers feel the need to make so many amendments?

Examples of amendments

Some of the less clever amendments and the law of unintended

consequences.

How we can make the process a whole lot slicker.

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Why use a standard form?

6.

The theory, of course, is that both client and contractor recognise them.
Banks lending on projects also recognise them (although, as I mention
below, they will often not accept them in their unamended form). Those
administering the contracts understand what it is they are supposed to do
and by when. Contractors recognise the main differences and know how to
price the different forms of contract. All in all, everyone knows the
deal if presented with a standard form. It should make the whole process
of getting from the start of the project to final account a whole lot slicker,
but as many of us have experienced, the process is often fairly painful just
getting to contract in the first place.

7.

The other significant advantage is that the wording of many standard forms
has been subject to interpretation over the years by the courts. I can pick
any number of clauses from JCT dating back to the 1963 version onwards
and find a wealth of case law telling me what those clauses mean. Of
course, it is this Judicial interpretation which often drives new versions of
the contract or further amendments by the lawyers.

8.

Of course, the standard form is not for everyone. There are always those
who wish to go down the bespoke route. But even where you come across
bespoke contracts you often recognise vast chunks of text taken straight
from a standard form. Indeed, many bespoke forms seem to be nothing
more than a standard form with the amendments incorporated in the text
itself rather than in a schedule. I have even seen bespoke contracts where
the clause numbers tally almost perfectly so clauses 25 and 26 (time and
loss and expense in JCT 98) appear as clauses 25 and 26 in the bespoke
form. How convenient?

9.

However, one of the main problems with the bespoke form is that it always
rings alarm bells with contractors. They prefer the comfort of the
standard form; even though on most occasions what the standard form
gives with one hand the amendments take back with the other. But at
least with standard forms both employers and contractors know roughly
where they are starting from.

10. All in all then, this is appears a clear endorsement for the standard form.
11. So we know that standard form is generally a good thing and that provided
we have chosen the correct form in the first place which I touch on later
- why is it necessary to make so many amendments?

Why make so many amendments?

(i)

The contract does not reflect life on a real site

12. I used to work in-house for a developer/contractor and so have had more
than my fair share of meetings in site Portakabins sorting out problems.
One of the things this does teach you - and it teaches you a lot about
construction - is that what happens on a real site is often quite a
departure from what the contract says should happen.
13. A classic example of this is the snag list. I am not aware of a job where
practical completion (PC) has been granted without a snag list (but then
equally the fact that I am aware of these jobs is usually because there are
a whole host of other problems and the snagging may be the least of the
parties worries). I have seen snag lists that run to three lever arch files.
By snag list I mean a list that is issued at the same time as PC rather than
a list that is issued prior to PC listing those snags that need to be
completed before PC will actually be issued. From a contractual point of

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view they are very different.

14. On many jobs both the contractor and employer will be screaming out for
PC to be granted. The contractor wants PC for obvious reasons (it stops
LDs and insurance obligations, it starts the defects period, half retention is
due for release etc). However, employers are also frequently looking for
PC to be achieved prior to all the works being complete. For a developer
handing over space to tenants it is often the trigger for rent or a rent free
period to start. Shop fit outs in the lead up to Christmas are another
classic case of works being certified as PC despite long lists of snagging and
incomplete work. Once a major retailer has announced an opening date
for a new store there is no going back. It has to open on that day
regardless - within reason - of the state of completeness of those works.
15. However, despite there being a general misconception in the industry to
the contrary, JCT does not expressly provide for a snag list.1 It does allow
for defects which appear during the defects period to be rectified but this
is not the same as defects (or incomplete work) which are known to exist
at PC. On this basis there is no shortage of jobs that are being certified
practically complete subject to a snag list which the contract does not
recognise.
16. On this basis, one of the most frequent amendments is for the contract to
expressly include snag list provisions. If a contract administrator certifies
PC when there is substantial incomplete or defective work then they had
better be sure they have the clients agreement and then an undertaking
on the part of the contractor to remedy that snagging. Whilst the client
consent probably poses few issues in practice the undertaking by the
contractor could be more problematic. How is it documented? It is most
likely to take the form of an email from the contractor confirming he will
remedy the snags within a certain period of time. But is it effective?
What are the sanctions if the contractor does not? How does this breach
link in with the other conditions in the contract such as termination or the
right to engage others to do the work? The fact is that commercial reality
probably trumps the contract. In practice, whilst half retention is due at
pc this is unlikely to be released until the snags are put right. But it is a
classic example of where the standard form contract and real life on a
construction site part company.

1. Other standard forms deal with snagging as follows:

GC/Works 1998 (Without Quantities) makes no reference to snagging (see clause 39). MF/1 2001 (Revision
4) expressly allows for a Taking Over Certificate to be
issued where there are minor outstanding works and
the contractor is under an obligation to remedy those
within the time period stated in the Taking Over Certificate (see clause 29). ICE 7th Edition (Measurement
Edition) allows for a Certificate of Substantial Completion to be given despite minor items of outstanding
works and the contractor is required to give an undertaking to complete those works in a timescale agreed
with the Engineer (see clauses 48 and 49).
2. This is not the case under the Design and Build
contract where practical completion is a question of
fact and not opinion. Note the difference in wording
between clause 2.30 in the JCT 2005 Standard Building
Contract and clause 2.27 in the JCT 2005 Design and
Build Contract.
3. For example, under standard JCT the contractor
is required to provide as-built drawings, O&M manuals
(clause 2.40) and to provide such information as the
CDM-Co-ordinator reasonably requires for the preparation of the health and safety file (clause 3.25.4).
4. Jarvis & Sons v Westminster Cor. [1979] 1 WLR and
HW Nevil (Sunblest) v William Press (1081) 20 BLR.

17. A further example is practical completion itself. As I mention above this is

crucial for a number of reasons and yet is not defined. The reasoning, of
course, is that it is a matter of professional opinion for the architect.2 The
contract gives some guidance as to what is required3 but on the whole is it
simply the architects professional opinion. The Courts have given us
various guidance as to what it means and from this it is possible to draw
some conclusions:

the works can be practically complete even though there are latent
defects;

a Certificate of Practical Completion cannot be issued if there are

patent defects;4

the architect does have a discretion to certify practical completion

where there are very minor outstanding items work on a de minimis
principle.

18. But isnt the point that as an employer you should have more of a say in
whether what you asked for in the contract (and have paid for) is actually
complete? For this reason it is not uncommon for amendments (and often
the specification itself) to list the hurdles that need to be cleared before

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practical completion can be achieved. These frequently include:

the provision of all fire, gas, electrical safety certificates;

as-built drawings in a particular format (at least in draft form with

final versions being issued within a specified time after practical
completion);5
on larger projects, compliance with specific requirements eg the
Green Guide which deals with safety requirements of sports stadia.6
This can be particularly onerous for contractors. For example, a
large football stadium cannot be operated until all safety licences
have been granted. These will inevitably involve a certain amount of
discretion on the part of the authority granting the licence and the
person in charge of safety at the particular stadium. This can be a
major sticking point; the contractor has designed and built the
stadium in accordance with the contract and yet the stadium cannot
operate and generate revenue for the employer until it has all the
requisite operating licences. A brief reference to all licences being in
place as a pre-condition to practical completion could prove
expensive for the contractor if LDs are running.

completion of all tests/commissioning. As buildings become

increasingly hi-tech there is a greater need to commission the various
systems. In many respects is a modern hi-tech office building (the
domain of standard building contracts) any different to a process
plant? It needs to perform as required by the contract and the only
way this is verified is by way of complicated commissioning tests. For
many years those building process plants have used specific forms of
contract which contain all these testing provisions.7 It is for this
reason that is it not uncommon for an amendment to be made so as
to define practical completion as having been achieved only where
the tests referred to in the contract documents have been passed.

19. Obviously, contractors should be extremely wary of these pre-conditions to

practical completion. The contractor is not going to want liquidated
damages clocking up simply because he is missing one tick in the box on
the list of conditions for practical completion.
(ii) The contract does not reflect the particulars of this project
20. No standard contract could ever reflect all the specifics of a project and
some changes inevitably need to be made. The skill, of course, is
amending only those parts which are relevant. There is rarely any point in
having extensive amendments dealing with ground conditions when the
works comprise the fit out of the 17th floor of an office block and yet I
continually see these types of amendment. All this demonstrates is that
someone has located the firms precedent, added the parties details and
clicked print.
(iii) The contract does not reflect the commercial bargaining strength of
the parties.
5. Standard JCT provides for this (see, for example,
clause 2.30 and 2.40 in the Standard Building Contract), but the obligation is often amended further.
6. Guide to Safety at Sports Grounds, The Football
Licensing Authority (commissioned by the Department
for Culture, Media and Sport).
7. See, for example, the FIDIC Conditions of Contract
for EPC/Turnkey Projects (Silver Book) at clause 9.
The FIDC Conditions of Contract for Building and Engineering Works Designed by the Employer (Red Book)
also contains extensive provisions even though, as the
name suggests, it is aimed more at traditional building
projects rather than process plant.

21. This, of course, is one of the main drivers in amending contracts.

Standard forms seek to achieve a balance between the parties but rarely
is there a true balance in the bargaining strength of those parties. For the
last few years some contractors have been able to pick and choose jobs in
certain niche areas. This was particularly the case in high-end residential
refurbishment where, if acting for employers, you would be lucky to get
away with half a dozen amendments to a standard form. I suspect that if
this has not already changed then it will do so over the coming months.
However, I have yet to see a day where the contractor is in such a good

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position that he actually wishes to amend standard forms in his favour but
those times may come.
(iv) The Bank wont accept an unamended standard form
22. Again, another key driver in amending the contracts is the banks
requirements. To a certain degree banks have always been able to dictate
terms and a convenient excuse for lawyers acting for employers is to say
that the amendment is bank-driven and therefore non-negotiable. In the
current climate this is unlikely to change.

Examples of Amendment Overkill

23. I recently came across the following amendment in the GC/Works/5
Framework Agreement (the amendment is underlined):
The Partner or Director named by the Consultant in accordance with the
instruction contained in the Appointment Particularsshall be the point of
contact between the Employer and the Consultant throughout the course of
this Appointment and, subject to reasonable notice, will, on behalf of the
consultant, attend all meetings with the Employer regarding matters relevant
to this Appointment and will approve and sign all reports submitted to the
Employer by the Consultant. No change in this named individual shall be made
by the Consultant without receiving the prior written approval of the
Employer. If such approval is given the Consultant shall be responsible for
replacing any such Partner or Director with a person appropriately qualified to
carry out such duties who shall have been previously approved by the
Employer.

24. It is clear why an employer wants continuity on the project and these
types of provision are not uncommon in other standard and bespoke
contracts.8 But is the amendment needed from a practical point of view?
Is it really the case that on a long term framework agreement9 the
consultant is likely to suggest that the main point of contact for the client
is someone without the relevant qualifications and who risks jeopardising
the relationship? This is particularly the case given there is no obligation
to instruct services under the appointment in any event10 and so the
consultant will be constantly pitching for the work by, you would
assume, putting forward their best person for the job?

8. See for example clause 4.3 in the FIDIC Red Book.

9. The introduction to the GC/Works/ Framework
Agreement (page 7) says that it is designed to
facilitate the procurement of consultancy services in
connection with construction works for a period of
three of three to five years.
10. Clause 1.9(2) provides that During the term of
the Consultants Appointmentthe Employer at its sole
discretion may from time to time issue Orders to the
Consultant. Clause 1.9(3) goes on to say Whilst
it is the Employers intention to give a reasonable
number of Orders to the Consultant the Employer is
under no obligation to give the Consultant any or any
number of such Orders.

25. Is the amendment needed from a legal point of view? Firstly, the clause
already says that the Partner or Director is to be the point of contact
throughout the course of the Appointment (i.e. it is an ongoing
obligation) and so there is no need for the amendment to state that
Consultant is responsible for replacing that person; the clause already
say this. Secondly, the clause already provides that any replacement must
be approved by the employer and so the part of the amendment dealing
with approval is unnecessary. Thirdly, in the unlikely event there is a
breach of this clause what does the employer do about it? It is difficult to
imagine how such a breach could give rise to a right to terminate without
some very clear wording. On this basis, will the employer have to consider
applying to court for an order for specific performance? It is not a case
many employers would wish to run; the simple fact is that the consultant
will receive no further work under the framework agreement.
26. The fact is that the amendment is both practically and legally unnecessary
and yet adds to the time spent in agreeing the appointment.

Amendments worth considering

27. There are occasions when amending a standard form is necessary for
clarification. It may be that in striving to achieve a fair balance between

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the employer and the contractor the drafting is not as clear as it could be.
By way of example, the following wording dealing with the defects appears
in the GC/Works two stage design and build contract:11
21(1) The Contractor shall without delay make good at its own cost any
defects in the Works, resulting from what the Employer considers to be
default by the Contractor or his agent or subcontractors or suppliers, which
appear during the relevant Maintenance Period.
21(2) After completion of the remedial works by the Contractor, the Employer
shall reimburse the Contractor for any cost the Contractor has incurred to the
extent that the Contractor demonstrates that any defects were not caused by(a) the Contractors neglect or default, or the neglect or default of any agent
or subcontractor of his; or
(b) by any circumstance within his or their control.

28. Clause 21(1) adopts a fairly standard approach with regards defects
(although leaves the decision as to what constitutes a defect firmly with
the Employer). However, it is clause 21(2), and in particular paragraph
(b), that requires further consideration. Having remedied the defects at
his own cost this gives the contractor an opportunity to argue that the
cause of the defect was not within his control or the control of his
subcontractors. The guidance notes give no examples of when this
provision may be relied upon by the contractor but it is potentially very
wide reaching.12 It seems more sensible to delete 21(2) and rely on
whether or not something is, in fact, a defect for which the contractor is
responsible (although in this case the compromise position is for a defect
to be an objective determination and not the subjective view of the
employer).

Some of the less clever amendments and the law of

unintended consequences
29. The knack to amending contracts is to think very carefully about the
impact a change to one clause may have to the rest of the contract. At
the end of the day, the more you dabble the greater the risk of
something slipping through the net, however careful you think you may
have been. This sounds like a get out of jail card for the lawyer but is
something clients need to be made aware of. A client should always be
warned that the more they wish to amend contracts the greater this risk
becomes.
30. Those amending contracts must always have in the back of their minds the
contra proferentum rule. For those of you not familiar with this rule,
essentially it provides that if there is an ambiguity in a document which
means a clause could have two alternative meanings (which other methods
of construction have failed to resolve), then a court may construe the
words against the party who put the document forward (i.e. usually the
employer) to give effect to the meaning more favourable to the other
party. This can be a significant risk for employers.

11. GC/Works/1 Two Stage Design & Build (1999).

12. GC/Works/1 Model Forms & Commentary at page
80.
13. (1996) 78 Build. L.R. 42

31. The case of Balfour Beatty Civil Engineering Ltd v Docklands Light
Railway13 is a good example of the dangers involved in amending standard
forms. In this case the contract was an ICE 5th Edition, but two significant
amendments had been made. Firstly, the independent engineer was
replaced by an Employers Representative and, secondly, clause 66
(containing the dispute provisions, in particular the arbitration clause) had
been deleted entirely. It is important to note that had the arbitration
clause not been deleted it would have contained the right of the arbitrator
to open up, review and revise decisions of the contract administrator.

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Given the clause had been deleted, did the court have the power to open
up, review and revise decisions of the Employers Representative? The
court held that they did not have such power and the contractors
entitlement to payment and extensions of time was dependent on the
judgement of the Employers Representative. Whilst it was held that the
Employers Representative had a duty to act honestly, fairly and reasonably
(although the contract did not say this expressly), the court held that
there was no means of challenging the Employers Representatives
decisions and that they became final and binding. I suspect this was not
the intention of either party but it is a stark lesson that the law of
unintended consequences applies to what appear to be the most innocuous
of amendments.
32. A further example is the case of Masons v WD King Ltd.14 In this case the
court had to consider an amendment to the GC/Works/115 contract
regarding acceleration. Masons (the law firm) had started proceedings
against the defendant for unpaid fees in relation to a project for new
university accommodation in Bath. The defendant was part of a joint
venture which had agreed to provide the accommodation to the university
on terms that if it was not ready on time then the university would not pay
rent until the following year. On this basis Masons had redrafted the
standard contract to give the project manager a power to instruct the
contractor to re-sequence, accelerate etc. Under the standard form,
clause 38 already includes acceleration provisions but these are essentially
at the employers cost. The new clause 38 provided:
In the event the PM is of the opinion that the Contractors rate of progress in
carrying out the works is likely to prejudice completion of the works or any
section by its date for completion, and to the extent that in the opinion of the
PM this is due to a cause which is not listed in Condition 36(1), the PM, acting
reasonably, and taking account of the Contractors representations may
instruct the Contractor as to the measures he requires the Contractor to take
to retrieve the position and the Contractor shall comply with the same at no
cost to the Employer. Without prejudice to the generality of the foregoing,
such instructions may include the requirement to re-sequence works, to
accelerate completion of the works and/or require the Contractor to increase
his on and off site resources

33. Unsurprisingly, the works started to fall behind and the PM instructed the
contractor to take various measures under clause 38 but the works still
completed late. Worse still for the employer was that an agreed cap on
liquidated damages under the contract had been reached and so the
employer lost a years rental income and so looked to the contractor to
recover this. Under the adjudication which ensued between the employer
and the contractor, the adjudicator decided that whilst the contractor had
made no effort to comply with the PMs instructions under clause 38 as the
damages for delay were governed solely by clause 55 (liquidated damages)
the employer could not recover further for breach of clause 38.
Essentially, there was no sanction for failing to comply with clause 38 and
it did not give rise to a liability for unliquidated damages.
34. This is a further lesson in the need to think through what the amendment
is seeking to achieve and the consequences and sanctions available in the
event of non-compliance.

How to make the process a whole lot slicker

14. [2003] EWHC 3124 (TCC)
15. The contract was the Single Stage Design & Build
(1998) version.

35. The comments from some within the industry about lawyers unnecessarily
amending standard forms may not be wholly unfounded. I come across
pages of amendments which are often wholly irrelevant to the project (as I

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touch on above, lots of amendments about ground conditions when the

work is the fit out of a 17th storey office block) or amendments which are
far in excess of the commercial risk involved. So how can things be
improved?
(i)

Understand the project

36. This may seem so obvious but it is surprising how there can be
fundamental breakdowns in communication between lawyers, clients and
their project teams actually doing the work on site.
37. It is useful to read some of the contract documents which have been
produced by the project team, such as the employers requirements,
preliminaries or specification. There is a tendency for lawyers to regard
these as beyond their remit. Whilst they may not be able to advise on all
the technical aspects when you actually read these documents, there are
all sorts of issues that crop up and that are often either not covered by
the contract at all or, even worse, the contract actually says something
completely different.
38. A good example of this is work by the employers own direct contractors.
I have seen provisions in the specification/scope which seek to place all
this risk firmly with the contractor. This, of course, is not what a standard
contract will generally say and would need a very clear amendment to
achieve this. Time spent reviewing these documents is often far more
productive in terms of dealing with project specific issues than trying to
guess at what amendments may be needed by speaking generally with
project teams. Remember, the project documents are, by their very
nature, project specific and have been written by those who will work on
the project and have probably been involved from the outset. The
standard contract is not.
(ii) Understand your clients business and what concerns him
39. Developing and contracting is a risky business. Those involved in the
construction business are risk takers; something us risk averse lawyers
often fail to understand. Lawyers have to consider this when amending
standard forms or reviewing amendments from the contractors point of
view. As part of the exercise of drafting or reviewing contracts
(depending on who I am acting for) I will often ask the client to list the 10
worst projects they have been involved in and why they went wrong. This
exercise tends to separate the lawyers understanding of risk from the
risks which your own clients experience says are most likely to occur on
site. It also results in much better drafted amendments.
(iii) Choose the right standard form
40. This has got to be the starting point. In writing this talk I had a quick look
in our contracts library. By the time you have looked at all the main
publishers forms (JCT, FIDIC, ICE, IChemE, IMechE, GC Works, NEC, etc.)
it contained over 50 standard forms of contract. This is before you
consider the relevant subcontracts and any standard professional
appointments.
41. So at the end of the day it is likely there is a contract to suit your project.
However, many employers like the familiarity of a particular standard
form they have used over the years; even though using a different
standard form may make life a whole lot easier for all concerned. I have
seen IChemE Green Books (cost reimbursable) with target costs provisions
added on. But IChemE actually publish the Burgundy Book which is a
specific target cost contract. It seems to be making work for all

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concerned. I have also seen traditional design and build projects

shoehorned into the FIDIC Silver Book (which places much more risk on the
contractor than traditional design and build and so the contract had to be
de-risked). It results in so many amendments that you risk the contract
simply no longer hanging together. So the moral has to be to choose
the right standard form in the first place to minimise the need for
amendments. This way, there is far more chance of the final contract
actually working.
(iv) Be able to explain and justify your amendments
42. Whilst the first set of the amendments may be drafted by the employers
lawyers and then, but not always, reviewed by the contractors lawyers,
the final negotiations are sometimes left to the respective project teams.
If I am asked to draft or review amendments I make a conscious effort to
explain them (ideally what the effect of this amendment is in practice by
use of examples). This sounds obvious but you would be surprised at the
number of times I simply see the words not agreed against a schedule of
amendments. An explanation next to a not agreed comment can often
elicit what the real issue is and perhaps why the amendment is justified
on the particular project.
43. Given that project teams may finalise the amendments, the lawyer should
be proactive and suggest possible compromise positions. At what point in
the negotiations these are offered up is a matter of tactics but having it
ready to go means it speeds the process along and there is a better chance
of getting what you want instead of being presented with a less than
attractive compromise by the other side.
(v) Keep the amendments simple and to a minimum
44. This goes without saying. The record, as far as I am aware, for the most
amendments made to a standard form goes to a fairly well-known law firm
which produced 226 pages of amendments to the standard JCT design and
build contract. That standard contract is 106 pages long. In fairness,
those amendments did include a couple of warranties, a parent company
guarantee and a list of pre-construction services but even so.
David Bebb
November 2008