Tips on putting together your contract documents

By Stuart Connor.

Key Points:
Parties should consider the time and cost won now by just bundling up the documents is lost later when the parties have to work out what it is they have to do.

On construction projects, there is a stage that often occurs at the end of a tender evaluation process, or following negotiations between principal and proposed contractor, when what the parties have agreed on needs to be documented. As this stage is often accompanied by time and cost pressures, parties often seek to take the easy path in preparing the contract for signing by simply bundling up all the documents that have circulated between the parties to date and calling them the documents constituting the contract.

These documents can include not only the commercial conditions of contract and technical specification, but also:

• the call for tenders and addenda to it
• returnable schedules provided by the successful tenderer
• the successful tenderer's tender
• the successful tenderer's post-tender qualifications and clarifications
• selected post-tender correspondence or even all post-tender correspondence
• other requirements of the contract such as conditions of approval.

In an ideal world the contract would consist solely of the commercial conditions of contract and a technical specification, amended as necessary to reflect the deal struck with the successful tenderer. However time and cost pressures often lead to all the above documents being included as contract documents, with the implications of this to be sorted out later.

Before doing so, you should consider whether the time and cost won now by just bundling up the documents are lost later when the parties have to work out what it is they have to do.

In the recent case Thiess Services Pty Ltd v Mirvac Queensland Pty Ltd [2005] QSC 364 - discussed in detail by Frazer Moss later in this edition - there was such confusion that the parties had to go to court seeking a declaration as to whether the contractor was required to remediate the site fully, or only to the extent that it could be done so economically. The court considered that it was a close run thing, in the end making a decision in favour of the principal that the contractor was required to remediate the site fully.

The contract in that case referred to a "Remediation Action Plan" which was not one of the documents expressed to form the contract. It was however referred to in the contract, and in particular was referred to as stating the "Intent of the Remediation". The Remediation Action Plan, unlike the contract, contemplated less than full remediation. However the court held that this document shouldn't overturn the evidence of the parties' intention in the contract documents. The court also doubted that provisions which refer to "intent", "objectives", goals and "preferred option" are normally appropriate for fixing contractual obligations.

Sensibly though, the court did find that commercial contracts are to be construed with a view to making commercial sense of them and not unduly literally.

In order to help keep you out of court, here are some practical tips in putting together contract documents:

• Ideally the contract should consist solely of the commercial conditions of contract and a technical specification. Amend these documents to reflect the deal struck with the successful tender.
• If returnable schedules are included as contract documents, ensure that the application of the returnable schedules is clearly explained in the conditions of contract. Indeed, ensure that you explain what the effect will be of all documents attached to the conditions of contract.
• Include an appropriate order of precedence clause, setting out what happens if there is an inconsistency between the various contract documents. Provide an order of precedence for as many parts of the contract documents as possible, including the various parts of the technical specification.
• Avoid attaching the contractor's tender as a contract document. It is likely to contain qualifications and other provisions inconsistent with the conditions of contract and technical specification. If there are parts of the tender which need to be attached (such as a concept design), separate these and attach them with appropriate wording in the conditions of contract or technical specification. Take particular care in dealing with the permitted level of design development, ie. the extent to which the contractor must comply with its concept design.
• Be wary of including "qualifications or assumptions" as a contractual document. By their nature these are likely to be inconsistent with the conditions of contract or technical specification. Ensure that the contract clearly explains what the consequences of a qualification are, and what happens if an assumption turns out to be false (eg. the contractor is entitled to additional time and cost, the contractor is entitled to treat any additional work as a variation, etc).

For further information, please contact Stuart Connor.