Last edited 11 Jan 2017

Bespoke construction contract

A bespoke construction contract is a specially-defined contract in accordance with the requirements of a particular project. For some projects, especially more complex ones, amending a standard form of contract will be deemed insufficient, and creating a bespoke contract may be seen as being the most efficient means of achieving a client’s requirements. However, for more routine projects, the disadvantages of using bespoke contracts, very often outweigh the advantages.

Although the Latham Report advised against the reliance on bespoke contracts, 24% of respondents to the National Construction Contracts and Law Survey 2012 indicated that they choose to use purpose-written bespoke contracts. Not only is this considered inadvisable because of the risk that bespoke contracts may not adequately or fairly make provision for all circumstances, and that they are not supported by a history of case law, but it is also a poor reflection of how inflexible and ineffective the industry perceives many of the standard forms of contract to be.

Standard form contracts are very often cheaper, familiar to the parties involved (therefore reducing the tendering costs), and tend to contain fewer unforeseen anomalies which can cause problems in the form of legal issues.

A large number of legal issues can be created by non-standard bespoke contracts, and they are often costly and time-consuming to produce, as well as being untested in court.

There is a risk that the insertion of new provisions can make the contract appear ambiguous in places. These uncertainties can be seized upon by parties where they can give rise to potential entitlement to change and thereby additional time and costs. For major infrastructure projects, there can also be extensive schedules to the contract which may also contain conflicting or ambiguous provisions.

For these and other reasons, contractors are usually quite wary of bespoke contracts, with the perception being that most clients’ bespoke contracts are about the transfer of risk to them.

However, the contractor often has little choice but to accept the client’s bespoke contract if they want the work. The commercial judgment should consider the following key issues:

  • How much they want the job in question (perhaps they see it as being a high-profile project that will reap benefits in terms of publicity and future business opportunities).
  • How much they are prepared to do for the client in question (perhaps if they have a good working history with the client, or hope that they will offer them more work in the future).
  • How much they can charge to do the job and make it worth taking on the contractual risks.

Since the contract will govern the relationship between the parties, it is important that it is carefully reviewed with all legal issues considered. The obligations it seeks to impose and the proposed remuneration should be fully understood.

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