Standard form of contract
General and consumer contracts
Standard Form Contracts are agreements that employ standardised, non-negotiated provisions, usually in pre-printed forms. These are sometimes referred to as “boilerplate contracts,” "contracts of adhesion," or "take it or leave it" contracts.
The terms may be drafted (or selected) by or on behalf of one party to the transaction – generally the party with superior bargaining power who routinely engages in such transactions. With few exceptions, the terms are not negotiable by the other party.
Standard form, business-to-consumer contracts fulfil an important efficiency role in the mass distribution of goods and services. These contracts have the potential to reduce transaction costs by eliminating the need to negotiate the many details of a contract for each instance a product is sold or a service is used. However, these contracts also have the ability to trick or abuse consumers because of the unequal bargaining power between the parties. For example, where a standard form contract is entered into between an ordinary consumer and the salesperson of a multinational corporation, the consumer typically is in no position to negotiate the standard terms; indeed, the company’s representative often does not have the authority to alter the terms, even if either side to the transaction were capable of understanding all the terms in the fine print. These contracts are typically drafted by corporate lawyers far away from where the underlying consumer and vendor transaction takes place.
The danger of accepting unreasonable terms is greatest where drafters of such contracts present consumers with attractive terms on the visible or “shopped” terms of most interest to consumers, such as price and quality, but include one-sided terms benefiting the seller into the less visible, fine print clauses least likely to be read or understood by consumers. In many cases, the consumer may not even see these contracts until the transaction has occurred. In some cases, the seller knows and takes advantage of the knowledge that consumers will not read or make decisions on these terms.
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 useful as they have a track record of being used between parties, and their precise meaning has been tested by case law.
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. Standard Form Contracts (SFC) aim to minimise the time and cost of negotiating contracts.
Purpose-written, or bespoke contracts are often considered inadvisable because of the risk they may not adequately or fairly make provision for all circumstances, and that they are not supported by a history of case law. Their continued use however is a reflection of how inflexible some parts of the industry perceive standard forms of contract to be.
Amendment of standard contracts should be approached with reluctance and caution as they can disrupt the balance of risk and impact on the true purpose. See Modifying clauses in standard forms of construction contract for more information.
NB The Housing Grants, Construction and Regeneration Act applies to all contracts for 'construction operations' (including construction contracts and consultants’ appointments). The Act sets out requirements relating to payment and adjudication. The Scheme for Construction Contracts (England and Wales) Regulations (also known as The Scheme for Construction Contracts) is a scheme which applies when construction contracts do not comply with the Housing Grants, Construction and Regeneration Act. The Scheme either supplements the provisions of the contract where it has deficiencies relative to the requirements of the Housing Grants, Construction and Regeneration Act, or replaces the contract where it is non-compliant.
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