Construction Contracts: Is it a “one-size-fits-all” decision?

Clients often have very different perceptions about the necessity and type of contract they may need for their construction contract. Surprisingly, even with large development projects, there is often the view that if you have the quote and designs, why then bother with a contract? In this article, we provide some guidance on the various types of construction contracts that can be considered for a building project, large or small.

Firstly, it must be emphasised that for any building, construction or engineering works to be done it is always highly recommended that a written contract is concluded and governs the required work to be performed.

There are four recommended standard forms of contract in South Africa according to the Construction Industry Development Board (“CIDB”) of South Africa. These recommended standard forms are:

  • FIDIC (French acronym for International Federation of Consulting Engineers)
  • GCC (General Conditions of Contract for Construction Works)
  • JBCC Series
  • NEC3 family of standard contracts

Each of the standard forms of contract has its benefits and is tailored to provide solutions for certain projects or types of projects, the choice between them will therefore depend on several questions that you need to consider in advance before deciding on which form best suits the project’s needs. Some of the questions that you would need to consider before deciding on the form of contract are the following:

  • What are your needs?
  • What is the value of the project?
  • What are the risks associated with the project?
  • How complex is the project?
  • What are the regulatory or compliance requirements associated with the project?
  • What are the industry standards for the associated project?

By way of example, the FIDIC contracts are most often used for major projects, such as infrastructure development. The NEC3 suite of contracts is versatile and can be used for small, medium or large building and engineering works. JBCC is only suitable for building works and not engineering works and is very widely used as such in South Africa for a range of projects. These examples illustrate that whilst standard contracts can often be used in various projects, choosing the best option for your project is very beneficial for effective and positive outcomes that serve the needs of the project.

The age-old adage, “don’t use a cannon to kill a mosquito” is very much applicable as difficulties may arise if a very detailed, complex and lengthy contract is used for a relatively minor project. The correct type of standard form contract can also improve the experience of the parties in concluding and executing the project and limit unnecessary risk as the contract is more fit-for-purpose to the project.

A standard form contract is not a necessity and a bespoke drafted construction agreement can also be used. However, given the extensive use, accepted provisions and terminology and relatively minor cost of using standard-form contracts, there is a strong case for considering a standard-form contract before a bespoke agreement.

Before you therefore proceed with your building project consult your attorney or construction law specialist for guidance on the correct contract form for your project and avoid issues and headaches arising later.

Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken based on this content without further written confirmation by the author(s).

February 22, 2024
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