Tips for using standard form contracts

Government departments and agencies frequently use standard form contracts because they help to minimise risks, reduce legal costs and help to ensure a consistent approach to legal issues and consistent implementation of Government policies.

Using standard form contracts does have a number of risks. This can make them difficult to use effectively, particularly for those without a legal background. This article provides some practical advice that will help you to use standard form contracts effectively.

When to use standard form contracts

The single biggest risk in using a standard form contract is using it where it is not appropriate. As Cinderella's ugly sisters discovered, you can't fit an ill-sized shoe on the wrong foot, no matter how attractive it seems. Before using a standard from contract for a project, you need to work out whether it fits that transaction.

The first step is to check whether the transaction you are dealing with is the type of transaction for which the standard form contract was designed. You also need to think about the complexity and risk involved in your transaction - the more complex or risky your transaction, the less appropriate a standard form contract.

You should also consider:

• whether industry has been consulted on the standard form contract. A standard form contract is more likely to be appropriate where it has been developed in consultation with industry;
• whether you have sufficient project resources available to develop a one-off contract; and
• whether there are novel or unusual aspects of the transaction that are not properly provided for in the standard form contract.

It is important not to ignore other options. Sometimes the time and cost involved in using a one-off contract will be worth it. In this case you may be able to use the standard form contract as a starting point for developing the one-off contract. However, converting a standard form contract into a more tailored document can be quite complex and difficult, and you should contact your lawyers for help.

Practical tips for using standard form contracts

1. Make sure all schedules and annexures are properly completed. Standard form contracts express rights and obligations in fairly generally terms so that they can be used in a range of circumstances. As a result, they rely heavily on schedules and annexures which contain the details of the particular transaction such as the price and quantity of goods or services being purchased. This makes it essential that the schedules and annexures contain all of the information necessary for the standard form contract to work and are clear and unambiguous. Check that you have included the basic details of who, what, where and when in relation to each obligation. To improve clarity, use the active voice to describe obligations (ie identify who must do the action at the start of the sentence).
2. Don't include unnecessary documents. A common pitfall when using standard form contracts is to annex every guideline, code or policy document which appears even slightly relevant. The requirements detailed in these documents may be inappropriate in the transaction or inconsistent with clauses in the standard form contract. Unnecessary extra documents make your contract hard to read and even harder to interpret. As a judge once observed, it is "like tipping an entirely gratuitous truck load of manure into this already sufficiently muddy stream." Only include extra documents when they are needed to make the contract work.
3. Don't let the standard form contract replace what has actually been agreed. You will need to check that the standard terms and conditions reflect what the parties have agreed. This may mean that you need to remove or modify clauses which are inappropriate for your transaction. Seek legal advice where this is required.
4. You don't have to include every term or condition just because they're standard. In some cases, strict adherence to the standard terms and conditions will be inappropriate and may mean that the Government does not secure the best value for money deal. For example, the default position in a standard form contract may be that the Government owns any IP produced by the project. Insisting on this where the Government has no need to own the IP will increase the contract price without providing any benefit to the Government.
5. Check that the standard form contract is up to date. Most Government departments and agencies update their standard form contracts fairly regularly. However, if there has been a recent change in policy or law, your standard form contract may be out of date. If this is the case contact your legal officers or external lawyers for assistance.
6. Be careful! Standard form contracts are designed to save time and reduce risks but careless preparation of a standard form contract can quickly negate these advantages. You should always review and proofread your standard form contract. In particular, check that the clauses work with the completed schedules and annexures.

Standard term contracts have a lot of advantages but it is important to remember that they can be a double-edged sword. If you only use standard form contracts when it is appropriate and follow the practical tips above, you will maximise the advantages and minimise the disadvantages in using them.