Last edited 10 Feb 2017

Bespoke construction contract

Most construction projects are procured using a standard form of contract that includes standardised, non-negotiated provisions, usually in pre-printed, or digital form. These are sometimes referred to as boilerplate contracts, contracts of adhesion, or take it or leave it contracts.

In the construction industry, there are a number of standard contracts, subcontracts, warranties and appointment agreements published by organisations such as the Joint Contracts Tribunal (JCT), the Royal Institute of British Architects (RIBA), the Institution of Civil Engineers and so on. Such agreements can be effective as they have a track record of being used between parties, and their precise meaning has been tested by case law. Standard form contracts are very often cheaper than bespoke alternatives, familiar to the parties involved (reducing tendering, negotiation and administration costs), and tend to contain fewer unforeseen anomalies.

They can also allow some flexibility, with a wide range of variations, options and schedules that can be tailored to meet the needs of a specific project without altering the construction of the contract clauses.

For more information see: Standard form of contract.

Where this does not give sufficient flexibility, it is possible to amend standard forms of contract. However, this is not always recommended, as there is a complex interaction between many of the terms of standard forms, and modification can change the balance of risk and create legal uncertainty.

For more information see: Modifying clauses in standard forms of construction contract.

Bespoke contracts are specially drafted to suit the specific requirements of a particular project. On some projects, in particular the more complex ones, creating a bespoke contract may be seen as the most efficient means of agreeing terms. Bespoke contracts are also commonly used for very simple supply agreements, where the standard forms may be considered unnecessarily complex and inflexible.

The seminal Latham Report advised against the use of bespoke contracts, but despite this, 24% of respondents to the National Construction Contracts and Law Survey 2012 indicated that they choose to use purpose-written bespoke contracts.

Bespoke contracts may not adequately or fairly make provision for all circumstances, and they are not supported by a history of case law. A large number of legal issues have been created by non-standard bespoke contracts, and they are often costly and time consuming to draft, and disputes can be costly and time consuming to resolve in court.

Bespoke clauses can unintentionally make the meaning of contracts ambiguous, and this can be seized upon by parties in dispute, or seeking additional time or payment. On large projects, there can also be extensive schedules, specifications and other contract documents which may also contain conflicting or ambiguous provisions.

For these and other reasons, contractors tend to be wary of bespoke contracts, with the perception that most clients’ create bespoke contracts to transfer risk.

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

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).
What the potential risks and costs are.
How much they can charge to do the job and whether this makes 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 and all legal issues considered. This may require seeking legal advice.

English law does not require a particular form to contracts, and so the terms and ultimately the risk allocation is the choice of the parties involved. However, the Housing Grants, Construction and Regeneration Act applies to all contracts for 'construction operations' setting out requirements relating to payment and adjudication. The Scheme for Construction Contracts (England and Wales) Regulations applies when construction contracts do not comply with the Act