Comment: Never accept poorly drafted contracts

Tempting though it may be, it is vital that regional contractors do not fall into the trap of accepting poorly drafted legal documents for the sake of expediency

Saifee Tarwala is the chief of tenders and procurement at TAV Construction.
Saifee Tarwala is the chief of tenders and procurement at TAV Construction.

In its simplest form, to vet means to make a careful and critical examination of something. Within the context of construction, effective legal vetting involves the thorough checking of contracts, agreements drawn up by legal experts (often drafted or prepared by procurement and commercial executives following price negotiation), and the mutual recognition of other technical and commercial terms and conditions.

However, the agreed terms and conditions should be legally valid and binding for both parties. To confirm this validity, the draft copy of a contract or agreement should be forwarded to a licenced law firm, or to an in-house lawyer or legal affairs manager appointed by the organisation in question.

The individual or company responsible for vetting the contract or agreement must carefully study its legal, commercial and financial aspects, and verify it in line with local laws, civil codes, statutory legislation, and banking regulations.

The legal vetting of contracts and agreements is of paramount importance as, most often, the commercial teams preparing these documents are unaware of legal updates relating to statutory, banking, insurance, and financial regulations within their jurisdiction. If a document is found wanting in any of these respects, it may result in detrimental effects during the course of the contract’s execution.

As part of a proactive approach to the legal vetting of documents, prior to finalising or ratifying contracts and agreements, companies must ensure that documents are vetted by an appropriate expert. There are several advantages to adopting a proactive stance to legal vetting, and numerous risks involved in not doing so.

For example, this strategy helps to develop a contractual language that is free from ambiguity, time pressure, false optimism, and misplaced trust. If left unchecked, such factors may ultimately conspire to undermine and weaken contract documents.

Effective legal vetting avoids the doctrine of contra proferentem, a legal principle whereby if a court finds a clause to be ambiguous, it determines which party benefits from the inclusion of the clause, and rules in favour of the opposing party.

Furthermore, the early involvement of legal experts offers a smooth mechanism for dispute resolution in the instance of breach of contract. It sees that contracts have properly defined jurisdictions, and sets legal limits with regards to the amount that can be claimed if breach of contract does occur, irrespective of actual loss or damage.

In short, adopting a proactive approach to the vetting of construction contracts and agreements helps to establish the simplest legal course of action for the settlement of claims and damages when they do arise. It also makes clear the statutory liability of each party, and enables all stakeholders to better understand the legal concept of privity, thereby minimising the risk of employees making undue commitments to sub-contractors and suppliers.

By ensuring all of the aforementioned advantages, regional contractors can prevent major mishaps from occurring during the course of their transactions. A proactive approach to legal vetting is an effective way to engender safe business operations, to mitigate major financial and contractual risks, and to avoid costly disputes.

Expertly-drafted, watertight contracts and agreements play an essential role in the success of any construction outfit operating in the Middle East. With this in mind, it is of the utmost importance that companies do not fall into the trap of accepting poorly prepared legal documents.

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Construction Week - Issue 767
Sep 01, 2020