Modifying standard form contracts

Our legal guru Dennis Brand from HBJ Gateley Wareing takes a closer look at the issues surrounding standard form contracts.

In the construction and engineering industries there are various industry bodies that publish standard form contracts – for example, FIDIC, IChemE, ICE, JCT and NEC3. While some publish standalone contracts, others publish full suites of contracts, allowing a varied choice of contract procurement.

There is also what might be termed ‘company standard’ contracts; these are not to be confused with a company’s standard terms and conditions of trading, which might be appended to a purchase order, but are contracts not dissimilar to the industry standard forms, with terms and provisions that a company will seek to impose on the other contracting party. These types of contract are difficult to change; the issuing company often fiercely resists any changes, even those that do not alter the basic terms of the contract.

As to the industry standard form of contracts, these frequently comprise two main sections, namely ‘General Conditions’ and ‘Special Conditions’. The ‘General Conditions’ are the main terms and conditions of the contract. The ‘Special Conditions’, sometimes called ‘Conditions of Particular Application’, is the section of the contract which allows for changes to be made to the ‘General Conditions’.

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This is not to be confused with another important section of the contract being what FIDIC describes as the ‘Appendix to Tender’, or JCT as ‘Contract Particulars’, or NEC3 as ‘Contract Data’. Those sections do not in anyway change the ‘General Conditions’ but, because the ‘General Conditions’ (as the term implies), are non-specific to the parties or the subject matter of the contract, they allow for both contract and project specific information to be included – for example, the amount of an advance payment or performance bond, the duration of the contract and length of the defects liability period, etc.

The ‘Special Conditions’ change the ‘General Conditions’ – that is, should the parties wish to change any of the ‘General Conditions’, then this can be done in the form of ‘Special Conditions’. So why would anybody want to change the ‘General Conditions’? The answer is that the ‘General Conditions’ of a standard form contract are prepared on what might be termed a ‘one size fits all’ basis.

The FIDIC suite of contracts, for example, is used in many countries throughout the world, and therefore will be used in different jurisdictions, where it may be necessary to change the ‘General Conditions’. One reason for making changes to the ‘General Conditions’ may be because of a legal requirement – for example, payment of interest being contrary to the applicable law, or perhaps because the existence of exchange control or other currency restrictions.

Culture or religion

Perhaps there is an aspect of the culture or religion of the country where the work is to be performed that requires a change to be made to the ‘General Conditions’, or perhaps there is something missing from the ‘General Conditions’, or a particular project requirement that requires a change to the ‘General Conditions’ – for example, a particular method of importing or exporting equipment and materials or obligations in relation to import duty, sales tax or withholding tax.