Drafting Engineering Contracts

H Henkin

• Publisher: Routledge
• Year: 2005
• Print ISBN: 9780367580254
• eBook ISBN: 9781135382841
• Edition: 1
• Topic: Architecture
• Subtopic: Architecture General

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CHAPTER 1: General Principles

1.1: Introduction

A large Japanese contractor has said that he has “completed work on a 50 storey office block at a cost of £29 m without any contract”. His reference was to lack of a formal contract; there must, of course, have been a verbal contract in which the parties agreed that the work would be carried out for a particular price or based upon a particular method of pricing and there must have been drawings and a specification describing the work to be done. There may even have been a pricing document, or access to the contractor’s estimate, for the purpose of pricing variations.

In theory, engineering or building contracts can consist solely of a simple agreement in which the Contractor agrees to carry out the work for a fixed sum. In practice the complexity of the work demands drawings and documentation, usually of considerable length, to supplement the simple contract and to provide the rules governing the carrying out of the work and the relations between the parties.

Provided that the legal requirements for a valid contract are observed, a formal agreement is not required; many commercial contracts for engineering work are in the form of a simple exchange of letters, but they are backed by formal documentation which, in most English speaking countries, usually comprises:

Conditions of Contract

Specification

Drawings

Bills of Quantities or Schedules of Rates or some other Payment Document.

Contracts with public authorities and, usually, with large commercial companies, will have a simple formal agreement which incorporates a formal tender by the Contractor. The formal agreement is usually (as in the ICE Agreement form) a simple listing of the contract documents and a legal agreement to abide by them.

The form of the basic documents may vary widely. For example, some engineers consider the Specification to be an extension of the Conditions of Contract and draft it accordingly, numbering the clauses in continuation of the clause numbers in the Conditions. In building contracts, on the other hand, the Specification usually forms part of the Bills of Quantities, the theoretical intention being that tenderers should have the opportunity of pricing the various items of the Specification (in practice this does not usually occur). Bills of Quantities or Schedules of Rates may be absent or may vary widely in form according to the method of measurement; in the case of a lump sum contract there may be merely a schedule of interim payments, although it is common to include a schedule of rates to enable variations to be easily priced. The above list of basic documents is not exhaustive; other documents such as drainage schedules and earthwork schedules, performance bonds and retention bonds, supplementary agreements with outside parties, nominated subcontract forms, quotations for pre-ordered materials, forms of tender, instructions for tendering, etc, are common. Package deal contracts and management contracts may have different documentation, although, in the absence of nationally agreed forms specific to package deal or management contracts, there is often a tendency to incorporate standard documents used in other types of contracts. This documention is in addition to the large number of drawings which usually form part of the contract. The wide variety and type of documentation, the variety of site and manufacturing conditions and the variety of financial arrangements makes each engineering contract unique, requiring careful consideration and preparation of the documentation and modification of those standard documents which are incorporated in it.

A large engineering contract may have between 500 and 1500 pages of written documentation in addition to up to perhaps 2000 or more drawings. Apart from the drafting of bonds and similar documents and the checking of standard documentation, the whole of this very large and complex legal document is usually drafted by engineers, with varying degrees of skill. The preparation of the various contract documents requires a substantial knowledge of the design and construction of engineering works and of the manner in which they are supervised and administered. With the exception of those rare individuals who qualified and worked as engineers before becoming lawyers, it is not practical for lawyers to acquire this knowledge in order to draft engineering documents, although some specialist lawyers have acquired sufficient knowledge of the administration of the contracts and of employer-contractor-engineer relationships to be able to advise on contract conditions and to take instructions and draft Conditions of Contract. There is really no satisfactory alternative to engineers acquiring the necessary skills in legal drafting to enable them to prepare sound contract documents.

Drafting skills have generally been acquired by ‘apprenticeship’, the young engineer copying previous documentation with minor modifications and gradually acquiring the prevailing style and thereafter proceeding to draft documents which require more original work than is forthcoming in available or standard documentation. For historical reasons, legal documents were, in the past, lengthy, complex in construction and verbose, written in a legal jargon which was often incomprehensible to the clients for whom the documents had been prepared. In the past century the legal profession and legislation has been moving toward clear and less verbose documents, less complex in verbal construction and easier for the layman to read, understand, and administer.

There have been many legal volumes dealing with the drafting of particular types of document, based upon standard forms produced by their authors or generally in current use, but very few dealing solely with the general and detailed requirements for legal drafting. However, of recent years there appears to have been moves in the legal community to provide lawyers with education in legal drafting to improve and supplement the knowledge acquired by ‘apprenticeship’. A number of books have appeared dealing solely or mainly with the general and detailed requirements for legal drafting (as distinct from the requirements for individual documents). The stress among these and earlier authorities is on clear and straightforward writing with the minimum of legal jargon, so as to make the documents intelligible to all who have to use them.

This book deals with all those aspects of writing, style, form and presentation required in the drafting of engineering contract documents. It is only incidentally concerned with the substance of the matters with which those documents deal. In consequence it deals only incidentally with the subject of drawings, although they form part of the documentation. Many examples are given to illustrate the text, but those examples are not necessarily suited to all contracts and should not be slavishly copied.

1.2: Knowing The Subject

To draft legal documents one must obviously have some knowledge of law. The young engineer commencing to draft part of a large specification (usually based on a specification for a previous job) requires only a very rudimentary knowledge, but the more senior engineer responsible for preparing the whole of the documentation for a contract ought to have a sound knowledge of construction law. The engineer cannot be expected to have the knowledge of a lawyer or the outlook and background which comes from the full time study and practice of law. He would not expect to be able to quote precedents, nor to delve into related subjects such as insurance law and practice or company law, which affects some aspects of engineering contracts. He must expect to have a sufficient knowledge to recognise legal problems and to seek advice on matters outside his experience. It is more important to have a good knowledge of the standard forms of Conditions of Contract and of the legal implications of the various clauses in them than to have a high standard of theoretical knowledge of the law of contracts.

In legal theory, an independent contractor who has contracted to carry out work is free to carry it out in the manner he considers best. In engineering contracts this freedom of action is severely circumscribed; limitations are placed upon the contractor so as to ensure that:

1. (i) his actions do not make the Employer vicariously liable in respect of special and general legal obligations;
2. (ii) the Contractor has a management control system which will ensure that the work is properly carried out (in the Employer’s interest) and not merely for the purpose of maximising profit (in the Contractor’s interest);
3. (iii) the Contractor demonstrates that his construction methods and materials are satisfactory for the work;
4. (iv) methods of construction are those current in the industry or which can be proved, by demonstration, to be satisfactory in the circumstances of the site and the work;
5. (v) if possible, the Employer is provided with sanctions within the Contract (without prior legal action) if the Contractor fails to fulfil his responsibilities.

All the documents have to take account of the foregoing requirements; engineering knowledge and experience is required to deal with all but the first of these requirements and such knowledge is, therefore, an essential part of the qualifications for drafting engineering contracts. These requirements are particularly applicable to engineering construction contracts because:

1. (i) in many cases examination of the finished work will not reveal whether the work has been properly carried out;
2. (ii) the incorporation of unacceptable materials or workmanship may prove irreversible without substantial demolition and considerable delay or may even prove impracticable due to site conditions;
3. (iii) the Employer usually wishes to minimise his own involvement in the construction process and to minimise additional costs.

The requirements outlined apply also, to a greater or lesser extent, to contracts involving manufacturing and erection of engineering work and, to a lesser extent, to the manufacture of specially designed engineering structures or machines.

It is important for the draftsman to know the requirements of his client, whether that client be a public authority instructing a consulting engineer or the estimating director of a contractor offering a package deal contract. Client’s instructions fall into two parts:—

1. (1) Direct instructions concerning matters such as the form of Conditions of Contract and any amendments thereto, methods of calculating liquidated damages, special requirements to be incorporated in the Specification and in the Payment Documents, requirements concerning performance bonds, and the like.
2. (2) Instructions concerning the design of the Works including client’s approval of drawings, of draft documents and of tender particulars (such as contract period, etc.).

The draftsman must work closely with the designer to ensure that the materials and methods of construction required by the design are properly incorporated in the documents and that there is proper crossreferencing between the documents and the drawings; all too often it is found that drawings and specifications are contradictory because of lack of such liaison. Although, in theory, the designer and the document draftsman might be the same person, in practice they are often separate individuals. Because of the importance of design liaison and involvement in the preparation of contract documents, it is essential that the document draftsman commence work at an early stage in the design process. This should preferably be when the preliminary design has been agreed with the client and instructions have been given to commence detailed design.

The last, but by no means the least, requirement for document drafting is the ability to write clear and unambiguous English. This requires the avoidance of unnecessary jargon and a knowledge of modern English usage, rather than familiarity with pedagogic grammatical rules.

1.3: Intention of Parties to a Contract

The purpose of contract documents is to express and record unambiguously the matters intended by the parties to the contract. However, that intention is expressed by the words of the contract and not by what the parties supposed or claim as their intention. If the intention to be adduced from the contract wording does not correspond to what either of the parties believe was intended, then that belief is of no avail, for the contract will be interpreted in accordance with the wording. In a judgement in 1861 Lord Wensleydale said—

“The question is not what the parties to a deed or other documents may have intended to do by entering into that deed, but what is the meaning of the words used in that deed: a most important distinction in all cases of construction and disregard of which often leads to erroneous conclusions”.

It was even more strongly put in the judgement by Sir Gorell Barnes in 1907 when he said—

“What a man intends and the expression of his intention are two different things. He is bound and those who take after him are bound by his expressed intention. If that expressed intention is unfortunately different from what he really desires, so much the worse for those who wish the actual intention to prevail.”

These judgements underline the need for clear accurate drafting to express correctly and unambiguously the intention of the contract. To ensure that the intention is correctly expressed, it is necessary to consider all the alternative possibilities that might arise from the wording being used, and so to guard against unforeseen interpretations. Generally, engineering documents tend to be lengthy and usually have to be drafted to a tight time schedule: it is often impossible to find the time to examine every possibility on all the clauses. It is common, therefore, to rely to a considerable extent on standard forms which have been carefully thought out and used over a number of years or on clauses from previous documents which appear to have proved satisfactory. Unfortunately, clauses from previous documents do not always prove adequate for the other work and there is really no substitute for experience and care. Drafting is an art which can only be acquired with practice, but a little study of the principles involved will undoubtedly help.

1.4: Basic Requirements for Document Drafting

Writers on legal drafting have summarised the methodology of drafting; the following five basic precepts, based on that methodology, provide good general guidance in the drafting of engineering contracts.

1. Before work commences on drafting the wording of the document, the whole layout and overall design should be conceived as a framework for drafting. It is worthwhile preparing a drafting plan in the form of a contents list divided into section headings and clause headings. During drafting it may be necessary to change or add to or rearrange the clauses in the original contents list, but such changes should concern matters of detail. The basic content and outline should be retained; if changes of principle are to be made then the outline and content should be redrawn rather than amended, even if a substantial part of the document has been drafted. Obviously, if an engineering structure is to be steel framed instead of concrete framed, there has to be a radical change of plan. Even the clauses concerning the concrete will have to be reconsidered and rearranged; they cannot merely be transferred as a whole from one specification to the other. Unfortunately, in the case of Conditions of Contract this precept is more often honoured in the breach; attempts are made to adopt standard forms (often written for conventional measure and value contracts) with minor modifications to suit radically different concepts, such as design and construct contracts or contracts involving a degree of consultancy, such as those for site investigation.
2. A logical order should be adopted for the various sections and clauses. The actual logic applicable will depend upon the nature of the document and the nature of the work as well as the personal opinions of the draftsman. The order appropriate to various documents is discussed in later chapters. The precise order adopted by the draftsman is not of importance so long as it is logical and the logic of the arrangement is clear to the reader so that he is able to understand particular requirements in relation to the general requirements for the work.
3. Nothing should be included or omitted at random. If, during drafting, the draftsman cannot appreciate the relevance of some provision which it has become common to include or which has been included in a similar previous document, then he must either satisfy himself by further inquiries that the provision is necessary or he should omit it. Unnecessary repetition is also an irrelevance; where definitions are given in the document, repetition of part of the definition may be a dangerous irrelevance. As an example, the FIDIC Civil Conditions define ‘approved’ as meaning ‘approved in writing’; to continually refer to approval ‘in writing’ in the Specification amounts to depreciating the definition and suggesting that there may be occasions when verbal approval is acceptable.
4. The documents should be in a form with which the reader will be familiar and the technical language should be that which is ordinarily used in the class of work. This does not preclude change of form to suit new types of work or new concepts, but it does assume that the draftsman will, in such cases, so far as possible retain familiar concepts and technical terms.
5. The language used should be precise and accurate, so that every phrase has a clear meaning and phrases are interconnected in a manner which will not give rise to ambiguity. It should be appreciated that clarity may be achieved equally by the omission of irrelevant phrases as by the use of apt wording.

1.5: Communication and Drafting

An engineering contract is only part of the process of construction of a project or of fabrication of some elements of it. The purpose of the contract documents is not only to set out the legal rules which are to govern the parties contractual conduct but also to communicate the requirements for carrying out the work and the stipulations and limitations applicable to materials and workmanship. The drafting of the documents is not, therefore, only a matter between the draftsman and his client, but has to be understood by a wide range of people who have to construct the work, or to receive instructions in connection with it, or to claim payment for it, or to provide insurance, or to carry out any of the many other functions involved. To ensure that the many people concerned correctly interpret the requirements, the draftsman must follow the principles of communication applicable to all written statements.

Reed Dickerson (in The Fundamentals of Legal Drafting) postulates four main elements in the written comm...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Foreword
• Preface
• Acknowledgements
• Terminology and Abbreviations
• Chapter 1: General Principles
• Chapter 2: Words, Sentences and Punctuation
• Chapter 3: Arrangement and Form of Documents
• Chapter 4: Conditions of Contract
• Chapter 5: Specifications
• Chapter 6: Payment Documents
• Chapter 7: Miscellaneous Documents
• Bibliography