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Amending standard form contracts

Summary The construction industry has long made use of 'standard form' contracts. Practitioners use them every day, either in their original printed form or with amendments. Bespoke contracts are still, of course, used but nearly all of them have their beginnings, one way or another, from the various standard forms that are available. This section discusses the processes and reasons to amend standard form contracts. What are standard form contracts? What are standard form contracts? Standard forms have not always enjoyed the commanding position that they do today. The RIBA 1963 Form of Building Contract (the forerunner of the JCT Form) came in for considerable judicial criticism (see English Industrial Estates Corporation v George Wimpy & Co (1973), 1 Lloyd's Report 118 at 126). The earlier editions of the ICE form were criticised for their 'obscurity, difficulty of prolix and often near-archaic language' (Duncan Wallace in his commentary on the International Civil Engineering Contract (Sweet & Maxwell 1974) at 7). Possibly because of this and other criticisms (traditionally that STCs are adversarial and lead to disputes, per Sir Michael Latham, Constructing the Team (1994)), and the extensive amendments made to the forms by practitioners to make them more workable, the contract drafting bodies made a concerted effort to raise their game. As a result we now have a whole new suite of JCT Building Contracts (2005), including a Major Projects Form (2005) and JCT Pre-Construction Services Agreement (2008), a new family of NEC contracts and in particular the NEC3 Engineering and Construction Contract (2005), new ICE Conditions of Contract (2006) and a new FIDIC Design-Build-Operate Contract (2008). These new forms are the result of efforts by the various industry bodies to improve standards and reduce conflict in the industry. It is early days, but there has been very little criticism of or court decisions on these latest forms and some have received positive endorsement by Government. The Office of Government Commerce has formally recommended the use of NEC 3 by public sector construction procurers on all their construction projects. The NEC 3 Engineering and Construction Contract has been recognised by the House of Commons' Business & Enterprise Committee in its review of the UK construction industry (July 2008) as 'setting the benchmark'. The report states: 'The legal framework for contracts can affect the way in which parties behave. If integrated supply chains are to function effectively, they need to be supported by contractual arrangements which ensure risk is owned and shared by the entire project team. They should also be transparent and non-adversarial in style. The Institution of Civil Engineers' NEC 3 Engineering & Construction Contract has set the benchmark in this area'. Why therefore, do we still feel it necessary to amend standard forms? With the possible exception of NEC 3, which the ICE claims can be used on any type of construction project (building, engineering, home or overseas) at home or abroad, most standard forms are devised with a particular procurement objective in mind. Thus the JCT Design & Build Form (2005) is to be used in a situation where the contractor is designing as well as building the works (typically where the employer has appointed design consultants to prepare the base/schematic designs for tendering purposes and their appointments are later novated to the D&B contractor); and the JCT Minor Building Works Form (2005) is obviously unsuitable for major projects. But there are times when the standard form does not fit the project in hand and needs to be adapted. Also, each form represents a balance of risk between the contracting parties which may not be appropriate to every situation, particularly where one party has more commercial muscle than the other.

The stronger party may want to change the risk profile or introduce its own standard clauses which are familiar to its personnel insurers. These amendments may be so extensive and widely used that their effect is to create standard terms of business with unexpected legal consequences. Under the Unfair Contract Terms Act 1977 where one party deals on the other's standard terms of business, the other cannot by reference to a contract term exclude or restrict its liability for breach of contract except insofar as the term satisfies the test of reasonableness. For a case where a contractor's conditions of sale were not reasonable; see Edmund Murray v. BSP International Foundations (1992) Con. LR. The same principle is followed in Continental jurisdictions, e.g. section 1(2) of the German Civil Code makes void provisions in standard contracts which unreasonably disadvantage the counterparty 'contrary to the requirements of good faith'. Accordingly, what is the purpose of standard forms and, if they are meant to be standard, why amend them? The reasons for amending standard forms Standard forms are intended to facilitate contracting across the industry without the need to re-invent the wheel on each project. The forms are drafted by contracting experts engaged by the industry bodies and represent best practice at the time they are issued. In course of time, however, certain terms may fall behind best practice and become out of date. To some extent this is inevitable - an example is the current move towards integrated project teams and so called 'supply-chain contracting'. The typical two-party standard form does not lend itself to multi-party contracting between members of the supply chain. This has led to the forms being amended and the adoption of new contracting techniques, such as alliancing, which have met with a mixed degree of success. For an example of a case involving an Alliance Agreement which supplemented and in part superseded a formal subcontract see Carillion Construction Limited v. Devonport Royal Dockyard Limited (2005) BLR 310. In practice once an amendment becomes accepted in the market-place, it will soon be adopted by the relevant industry body either by a formal amendment to its standard form (where a series of amendments are issued these will be numbered) or in the next Edition of the form. This is an iterative process which allows for some experimentation along the way and is therefore a positive thing. An example is the recognition of third party rights in the JCT (2005) Forms which followed the increasing use of third-party rights by practitioners following the passing of the Contracts (Rights of Third Parties) Act 1999, also in JCT 2005, the recognition of the value of collateral warranties. Standard forms reduce transaction costs both in terms of negotiating contract documents and administering contracts. Familiarity does not always breed contempt. By and large, experienced procurement practitioners know which forms to use for particular projects and are skilled at putting together the appropriate contract documents. Contract administrators also know their way around the contract conditions without too much difficulty. When a new standard form is launched by an industry body, it is generally accompanied by a road-show and workshops to explain to the administrators and other users how the form works. There is generally good follow-up through newsletters and seminars where common questions are answered and industry feedback is obtained. The most commonly used standard forms are taught as part of the curriculum in schools of planning, architecture and engineering. The curriculum generally includes a section on standard forms and how to use them. New entrants to the professions, therefore, gain early exposure to the forms and basic contract law. Whilst this helps to raise their awareness and improve professionalism, problems can still arise when they first encounter amendments to the standard forms or bespoke contracts. Depending upon the extent of the amendments and nature of the bespoke contract, they may need to take legal advice. Contract administrators are under a duty to administer the contracts for which they are

responsible carefully with reasonable skill and care. If they ignore the amendments or bespoke terms and apply the standard terms regardless they will be negligent. If they are asked to advise on amendments when putting together the contract documents they should be especially careful; even though the courts, when confronted with ambiguities in contract wording, do appear more willing today than before to: '... read the words in question fairly as a whole in the context of the document as a whole and in the light of the commercial and factual background known to both parties in order to ascertain what they were intending to achieve...' (As in Ravennavie SpA v. New Century Shipbuilding Co. Limited (2007) 2 Lloyd's REP 24.) For example the court in Proforce Recruit Limited v. Rugby Group Limited (2006) EWCA Civ 69 had regard to pre-contract negotiations where the parties agreed a word or expression should have a particular meaning but failed to define it in the contract - the so-called 'Private Dictionary Principle'. The courts, however, are much more likely to hold the parties to their written word where the contract has been drafted by lawyers and been the subject of intensive negotiations, particularly if the parties are significant industry players. New flexible options When drafting the new forms, the industry bodies have tried to make them more flexible by building-in options to meet different situations. They have also introduced, in the case of the JCT, computerised contract drafting. The NEC Conditions are in pdf format (except for the Contract Data), but the NEC will for a fee grant a copyright licence in Word format which permits amendments to be made by users. The JCT and ICE forms have traditionally used an appendix (now in the case of JCT called the 'Contract Particulars') as a means for focusing the user's mind on the specific issues relating to the project, such as dates of possession, rates of liquidated damages, insurances etc. The appendix or Contract Particulars not only acts as an aide memoire, but is also an integral part of the contract. If it is not completed, the contract may be ineffective. In Amec Capital Projects Limited v Whitefriars City Estate Limited (2003) TCC the court observed that it would not be possible to carry out the work on a Standard JCT Form that did not have some of appendix completed since that appendix required decisions as to options set out in the standard form and matters essential to an effective contract for the works. Further, where part of the appendix is left blank, evidence is generally not admissible to complete the blank (see Kemp v Rose (1858)). By contrast, inserting the expression ' Nil' in the Appendix against clause 24.2 of the JCT 1980 Form was held not to amount to a blank but was construed as an agreement that there should be no damages for delayed completion (see Temloc v Errill Properties (1987) 39 BLR, followed in Chattan Developments Ltd v. Reigill Civil Engineering contractors Ltd (2007) TCC). Those responsible for completing contract documents must, therefore, exercise care to make sure that all the relevant sections of the Appendix or Contract Particulars are completed appropriately. The NEC form is divided into core clauses, main option and secondary option clauses. There are also separate dispute resolution options depending upon whether the Construction Act applies. One of the main options (Options A, B, C, D, E or F) is chosen depending upon the nature of the contract (lump sum with activity schedule, target contract with bill of quantities, cost reimbursable contract, etc.). Any number of secondary options may be chosen, e.g. option X2 providing for changes in law, option X5 for sectional completion, etc. The NEC3 is a dynamic document which requires the completion of Contract Data, broadly equivalent to the appendix and Contract Particulars in the ICE and JCT forms. One of the key documents in NEC3 is the works information which will set out the employer's requirements and specifications. In mid 2008, the RICS published a Standard Form of Consultant's Appointment which contains optional provisions in an appendix. This is the primary source of project-specific information. The appendix provides for a default situation if no option is chosen with the first of the emboldened options being

deemed to have been chosen. This reduces the risk of the contract being ineffective. The Services in Schedule 1 (which include building surveying, project management and quantity surveying services) are completed by 'ticking the box' adjacent to the particular service required. The completion of this contract requires thought which is intended to bring a greater focus to the task in hand and specific services required. There are now standard forms of framework contract published by the NEC and JCT which are designed to enable employers to call-off contracts on agreed terms over a defined period, generally not exceeding five years. Under the Public Sector Procurement Rules no substantial amendments can be made to the framework terms during the period of the framework (by implication, therefore, non-substantial changes may be made). Letters of intent It can take time to negotiate a formal contract and there are often commercial pressures to begin work before the contract is signed. For example, there may be long lead times for the procurement of certain items of equipment and materials which necessitate orders being placed early with subsuppliers: programming advantages may be gained by carrying out preliminary design work early or at the same time as the civil engineering works. The temptation to begin work early under letters of intent can be great, but should if possible be resisted. Letters of intent give rise to uncertainty and are a fertile area of dispute. The rights and obligations of the parties in respect of the work to be undertaken are often not properly set out in the letter. The risk for the employer is that if the letter of intent is not a contract, the contractor may be entitled to be paid a reasonable sum (a quantum meruit) for the value of the work done and materials supplied (see Haden Young Limited v. Laing O'Rourke Midlands Limited (2008)). This sum may be greater than the sum calculated by applying the agreed contract rates. The risk for the contractor is that where the letter of intent includes a financial cap on the amount of expenditure the contractor is permitted to incur, the excess may not be recoverable if the cap is exceeded (see Diamond Build Limited v. Clapham Park Homes Limited (2008) EWHC 1439). Further, if the letter of intent is not a contract, then when a dispute arises the safeguards provided by the Construction Act will not apply and the parties will not have the right to refer the dispute to adjudication (see Bryen & Langley v. Martin Boston (2005), which on its facts was decided the other way on appeal). The application of the Act depends on there being a contract. The result is wasted time and money for both parties and possible long-term damage to their commercial relationship. If the commercial pressures are such that a letter of intent has to be signed, then it should be properly drafted by a lawyer to ensure that it amounts to a preliminary or interim contract in its own right (for examples of letters of intent amounting to interim contracts see Mowlem PLC (trading as Mowlem Marine) v. Stena Line Ports Ltd (2004) EWHC 2206 and Hall v. Towse South Ltd v. Ivory Gate Ltd (1997) 62 Con LR 117). There should be a clear mechanism for calculating the value of work done/materials supplied and a cap on that value. The work itself must be properly described and where it is to be undertaken by subcontractors, then if the contract is terminated, the employer should have rights in the subcontract work. If design work is undertaken, the employer should either have the copyright in the designs or the right to use them for tendering purposes. The letter should provide for what happens on entering into a formal contract. Work carried out under the letter is normally deemed to have been carried out under the terms of the later formal contract. These terms may have to be amended, e.g. by providing for payments made under the letter to be off-set against the payments to be made under the formal contract.

Even if the terms of the preliminary or interim contract are clear, there are still risks for both parties. For example if the employer allows the value of the work done to exceed the cap, he runs the risk of the contractor being entitled to payment on a quantum meruit basis for this additional work. In the absence of a contract covering the additional work, the employer will not be able to claim for breach of contract and the cost of any additional work which is defective. The risk for the contractor is that it will have no right to payment for the additional work unless a further letter of intent (amounting to a second interim contract) is entered into. He must also ensure that the terms of this contract are passed down in second interim contracts to the subcontractors. On balance, therefore, letters of intent should be avoided even if it takes a little more time to agree a formal contract. In rare cases the court has held that a letter of intent amounts to a formal contract notwithstanding that the formal contract is never signed. This is where the letter in fact incorporates all the terms of the formal contract and the parties either expressly or by implication agreed to dispense with the need to sign the formal contract (see Durabella Ltd v. Jarvis & Son Ltd (2001) 83 Con LR) Pre-contract amendments to standard forms Amendments can arise either during the tender period or after the closing date for tenders prior to contract award. In the former situation the amendments are often initiated by the employer as an after thought or in response to queries from tenderers. These amendments are normally dealt with by way of addenda to the tender documents or letters of clarification which are sent out simultaneously to all the tenderers. Amendments made after the closing date for tenders during contract negotiations with the preferred tenderer may be recorded in correspondence and incorporated into the contract through a letter of acceptance or merged into the set of employer's amendments sent out with the tender documents. The timeline looks as follows:

As can be seen from the cases listed at the end of this section, it is important to ensure that all agreed amendments are properly incorporated into the contract. The customary way of doing this in the case of JCT standard forms is to physically amend the Articles of Agreement within the Contract itself by wording such as: 'The modifications to the [Design and Build Contract (DB) 2005 Edition] set out in the Schedule of Amendments annexed hereto are hereby incorporated into this Contract and the provisions of the Agreement and the Conditions shall have effect as so modified.' The Schedule of Amendments is then annexed to the Articles of Agreement and initialled by the parties by way of identification. The 'Agreement' by definition includes the Contract Particulars therefore, the Amendments relate to all the main contract documents (the Articles, the Conditions and the Contract Particulars). This can be important as is illustrated by the case of Inverclyde DC v. Hardstock (Scotland) Limited (1983) where the parties entered into a contract based on the old RIBA JCT (1963) Form of Building Contract.

The contract bills specified various sectional completion dates but the contract itself contained no provision for sectional completion. The issue arose as to whether liquidated damages could be deducted by reference to the sectional completion dates. It was held that because clause 12 of the standard form accorded priority to the Standard Conditions over the contract bills, liquidated damages could only be deducted by reference to the overall completion date. Subsequently in 1980 (the Standard form of Building Contract (Private Edition with Quantities)) the wording of the standard form was amended to accord priority to the Articles of Agreement, Appendix and Conditions therefore, today the problem will not arise since these other documents when read together do refer to sectional completion (see Barry D Trentham Limited v. McNeil (1996) SLT 202). NEC3 In the case of NEC3 the mechanism for amending the core clauses and option wording is through secondary option Z which states: 'The additional conditions of contract stated in the Contract Data are part of this contract.' The additional conditions are then listed in the Contract Data Part one (Data provided by the employer) and, if extensive, may be incorporated into the contract by reference to a separate Schedule of Z clauses. In some cases a distinction is made between Z clauses which amend the core, main and secondary option clauses and those which are additional to such clauses. The first may be called Z1 clauses and the second Z2 clauses which then allows, should it be so desired, the Agreement to give priority to the Z2 clauses. In this context it should be noted that there is no Form of Agreement in the printed NEC 3 document, therefore one has to be specifically drafted for each contract. Many public bodies which use NEC 3 include a form in their standard set of amendments to NEC 3. ICE By contrast, the ICE Conditions of Contract provide for amendments to be made by way of Special Conditions which are deemed to form part of the Conditions of Contract. The Guidance Notes state that Special Conditions should be kept to 'the minimum necessary to cover the special circumstances of the particular project' and that amendments more appropriate to the Specification should be avoided (Clause 72 ICE Conditions of Contract-Target Cost Version (2006)). FIDIC FIDIC recognises that on most major projects its General Conditions are negotiated and, therefore, provides for Particular Conditions (PCs) to be added. The PCs by definition are included in the Conditions of Contract. Following the general rule that the particular overrides the general in cases of ambiguity or conflict, the PCs are given priority over the General Conditions but otherwise the contract documents are mutually explanatory of one another (clause 1.5 of the General Conditions). The above-mentioned rule of construction is illustrated further by the rule that in the event of an inconsistency between the printed clauses and written words, the latter will prevail. Thus, where the appendix to a standard form is completed, the written words in the appendix (whether written in hand or typed) will be given priority in the event of an inconsistency with the printed conditions. Moreover, in the event of an ambiguity the court will strain to give some effect to the written word on the presumption that the parties have agreed that the expressly chosen words should have some effect, not no effect (see AIC Limited v. Marine Pilot Limited (The Archimidis) (2007) EWHC 1182). Difficulties of construction can arise where there have been deletions from the printed form and it is unclear whether the court can look at the deletions when construing the contract. One line of authority suggests that no account should be taken of the deletions at all whilst another, and probably the better view, is that the court can look at the deletions when resolving an ambiguity in the retained words. The reasoning is that the deletion can throw light on the meaning of the retained words (see Mineralimportexport v. Eastern Mediterranean Maritime (1980) 2 Lloyd's REP. 572 at 575).

In the context of passing down amendments in subcontracts, it is vital that the subcontractor knows what amendments are being made to the main contract since he is normally obliged to comply with the main contract provisions insofar as they relate to his or her subcontract works. The subcontractor will wish to consider amendments which reflect the nature of the subcontract works and would want to limit his liability to the subcontract price or a percentage of the subcontract price in the case of liquidated damages. If there is any conflict or ambiguity between the special subcontract conditions and the provisions of the main contract, the former should prevail. This should be specifically provided for in the subcontract. The basic message on amending standard forms is to incorporate the amendments in the contract properly and when making amendments to follow the recommended procedure of the drafting body. If there is no recommended procedure, then it is good practice to prepare a Schedule of Amendments to be incorporated by reference into the Form of Agreement. Signing the contract In the rush to begin work some of the formalities of signing the formal contract may be forgotten. The consequences can be serious. For example, it is important to ensure that the persons signing on behalf of each party have authority to sign, particularly in the case of joint ventures where one of the joint venturers is given power to sign on behalf of the other joint venturers and the joint venture. It will be necessary to see board resolutions and powers of attorney. However, a contractor entering into a contract with a local authority is not bound to see that its standing orders have been complied with (s.135(2) of the Local Government Act 1972). Apart from such formalities, all ancillary documents (such as bonds, parent company guarantees and collateral warranties) which need to be delivered to the employer before the contract can come into effect or subsequently under its terms should be in agreed form. Ideally these forms should be attached to the contract. If the documents are not in the agreed form when the contract is signed, the employer may not be able to enforce his right to have them delivered if the terms are uncertain. The undertaking to deliver the document may be no more than an agreement to agree, e.g. to agree a form of bond in due course. If the bond is deemed to be a vital term of the contract, the whole contract could be rendered unenforceable. The identity of the surety should also be agreed at the outset. In order to speed up the completion process the parties may be tempted to execute the signature pages of the contract before all the other pages have been finally agreed. This is dangerous practice even if all the parties and their advisers agree that it is the best way forward. The court has held that in the case of a deed this practice would invalidate the document, which would then be unenforceable. (See R (on the application of Mercury Tax Group Ltd and another) v. HMRC and others (2008) EWHC 2721 (Admin). The court in this case also doubted whether the practice of signing signature pages before the terms of the documents were finally agreed would be effective for contracts that were not deeds). Key cases Balfour Beatty Civil Engineering Limited v. Docklands Light Railway Limited (1996) CA In this case, BB was employed by the DLR to carry out civil engineering works for the construction of the DLR. BB was appointed on the ICE 5th Edition which was amended in two important respects. Firstly, the 'independent' Engineer was replaced by an employer's Representative and, secondly, Clause 66 (the dispute resolution clause providing for disputes to be referred to arbitration) was deleted. Accordingly, the power given to an arbitrator to 'open up, review and revise' decisions of the Engineer was lost. The question was whether the court had a similar power to 'open up, review and revise' decisions and certificates of the employer's representative on extensions of time and payment. The court held that,

provided the employer's representative had acted honestly, fairly and reasonably, the court would not look behind his decisions and certificates (The obligation to act in good faith is now enshrined in Clause 10.1 of NEC3 (note in this context, the obligation to act in a 'spirit of mutual trust and co-operation'). In this context see Costain Limited v. Bechtel Limited (2005) EWHC which re-affirmed the duty on a project manager to exercise his functions under a contract impartially and not in the interests of the employer.) The court was not an arbitrator and did not have the powers of an arbitrator. It could only rule on breaches of legal rights such as breaches of contract. BB, therefore, had no remedy and the decisions and certificates of the employer's representative became final and binding on the parties. The point is that the parties probably never intended that result when making the amendments to the contract. They failed to think through the consequences. Bovis Construction ( Scotland ) Limited v. Whatlings Construction Limited (1995) HL B employed W as subcontractors for the construction of part of a concert hall. The contract was constituted by an exchange of letters which incorporated certain correspondence in which it was agreed that W's liability 'in respect of time-related costs' should be limited to 100,000. The contract was terminated on the grounds of W's alleged failure to proceed diligently with the work and B sought damages of 1,041,000. W contended that the damages were limited to 100,000. The House of Lords held that the limitation did not extend to cover damages flowing from a repudiatory breach on the part of W leading to termination and hence non-performance of the subcontract. Limitation clauses were to be construed strictly and the agreed limitation was concerned only with W's failure to complete the works on time. Accordingly B's claim was allowed. The point is that whilst W presumably intended the limitation to apply to all their liability, their Lordships construed the wording strictly against it. Exclusions and limitations of liability and indemnity clauses are always construed strictly, but this decision may also be seen as an example of the application of the contra preferentum rule, meaning if there is an ambiguity in a document, the wording is construed against the party who drafted it. Mitsui Babcock Energy Limited v. John Brown Engineering Limited (1996) QBD 51 CON LR JB employed M to install two generators in a power station. It was agreed that the generators would be performance-tested to see whether they met their performance guarantees, but at the time of entering into the contract the parties were unable to agree on the nature of the tests, in particular the tolerances. The clause headed 'Performance Tests' was struck out and a marginal note added 'To be discussed and agreed'. There was a dispute over the performance of the generators and M argued that because no performance tests had been agreed, the contract was unworkable and void for uncertainty. The court held that there was a binding contract and, in reaching its decision, was influenced by the fact that M had acted on the contractual terms and in particular been paid under the contract prior to the dispute arising. Failure to agree on the tests did not, therefore, render the contract as a whole unworkable or void for uncertainty. The point is that, because of the failure to complete the contract properly, the parties wasted a great deal of time and effort on resolving the issue including legal fees. The case also illustrates the rule that, where possible, the court will try to find a contract where that would be consistent with the parties' presumed expectations (see Trentham (G Percy Limited) v. Archital Luxfer Limited (1993) Lloyds' Report 25 for the application of the rule to a case involving a letter of intent.).

L Brown & Sons Limited v. Crosby Homes (North West) Limited (2005) TCC CH sought a declaration from the court that an adjudicator appointed to determine a dispute between it and LB had no jurisdiction and that his decision was, therefore, of no legal effect. The parties had contracted under an amended version of the JCT 1998 standard form of Building Contract with contractor's Design. Article 5 of the standard form provided that any dispute arising 'under this contract' could be referred to adjudication in accordance with Clause 39A. Clause 39A had been amended by the parties to permit the reference of disputes 'arising under, out of or in connection with' the contract without making any change to Article 5. There was a dispute over C's right to retain liquidated damages and its obligation to pay a completion bonus under certain side agreements entered into during the course of the work. The adjudicator decided that the dispute arose 'out of or in connection with' the contract and resolved in favour of L. CH contended that the only right to adjudication was under the unamended Article 5 and the dispute could not be said to have arisen 'under the contract' since it arose out of completely separate side letters. The court held that the amended wording in Clause 39A should prevail even though Article 5 had itself not been amended. Words used by way of amendment to a standard form were to be given greater weight than the printed words. To have given preference to Article 5 would have been to negate Clause 39A altogether. This reaffirmed the rule that where a printed form contains wording inserted or filled in which is inconsistent with the printed words, the inserted or filled in wording prevails (see Robertson v. French (1803)). Apart form this, Clause 2.4.4 of the JCT form expressly provided that amendments were to prevail over all other contract documents and thus put amendments at the top of the order of precedence among the documents. Many standard forms provide for priority of documents (e.g. Clause 1.5 of the FIDIC Yellow Book (2006)), but some forms, such as the new ICE (2006) Target Cost Conditions of Contract, do not give any priority. Instead, the documents forming the contract are 'to be taken as mutually explanatory of one another' and in the case of an ambiguity they are to be 'adjusted' by the Engineer. The point is the parties must ensure that so far as possible there are no ambiguities, particularly ambiguities resulting from amendments to a standard form. C J P Builders Limited v. William Verry Limited (2008) EWHC 2025 C employed WV under a subcontract to carry out certain development works. There was a dispute over payment and C commenced adjudication proceedings for an allegedly outstanding amount. The subcontract documents, which had been produced by WV, amended the DOM/2 Form of Domestic SubContract and incorporated a large number of other 'Sub-Contract Documents'. A preliminary issue arose over whether the adjudicator had been validly appointed. The appointment was made under the DOM/2 rules and C contended that the TeCSA adjudication rules should apply by virtue of the amendments made to the subcontract, particularly the amended Clause 38. The court held that there was a 'straight conflict' between these provisions. DOM/2 provided a 'clear and comprehensible code for adjudication' and the amended Clause 38 required any adjudication to be carried out under a different code in accordance with the main contract. It was clear that WV 'in putting together the subcontract documentation did not think clearly about the consequence of inserting clause 38.1 without deleting the DOM/2 condition'. In fact, the amendment was part of WV's own standard set of amendments and had not been specifically prepared for this subcontract with C. The court resolved the conflict by applying Clause 2.2 of the DOM/2 conditions which provides that, in the event of a conflict, the Appendix should prevail. In this subcontract the appendix had been replaced by a set of 'Pre-Order Meeting Minutes' which referred to DOM/2. Therefore, the adjudication code in DOM/2 applied and not the one in the main contract. The court also held that the contra preferentum rule applied and the ambiguity should be resolved against the author of the amendments, who in this case was WV.

The point is that considerable time and effort was wasted on resolving this issue including legal fees. This defeated the whole purpose of the Construction Act which was intended to provide for the speedy resolution of disputes under construction contracts through adjudication. The case also illustrates the dangers of adopting standard sets of amendments to standard forms without thinking through the consequences. Key points on amending a standard form Tips When amending standard forms regard should be had to the following: only make amendments which are strictly necessary to comply with the parties' requirements; if the guidance notes to the standard form recommend a particular way of making amendments, follow the recommended practice; check whether the relevant industry body has already drafted an amendment which meets the particular requirement and, if it is appropriate, follow their recommended wording; if the employer is making amendments, remember these may have the affect of increasing the contract price; amendments to one clause may have a consequential effect on other clauses including the clause-numbering; amendments to the conditions of contract may necessitate amendments to ancillary documents such as agreements for lease, financing documents, bonds and guarantees where the same terminology including and for example, contract periods should be referred to throughout; always attach to the contract copies of the agreed forms of ancillary documents; avoid letters of intent wherever possible and, if it is not possible to do so for commercial reasons, make sure the letters are preliminary or interim contracts which can be enforced subject to a financial cap; if amending a subcontract, remember to delete inappropriate main contract terms which may otherwise be incorporated by reference; make sure the subcontract contains appropriate limitations of liability, normally by reference to the subcontract price; take legal advice on complex amendments or when unsure of the affect of an amendment; make sure that the Appendix or Contract Particulars are properly completed, otherwise the contract may be unworkable or ineffective; always ensure that the contract is signed properly by duly authorised persons, and resist the temptation to sign contracts before all the detailed terms have been agreed; if a contract has to be varied after it has been signed, make sure the variation is made by authorised representatives of the parties in accordance with the requirements, if any, specified in the contract; if there are no specified requirements for varying the contract, make them by way of a Deed of a Variation to avoid any argument over lack of consideration; check all ancillary documents such as bonds and guarantees to see whether they are affected by the variation and notify bondsmen/guarantors; make sure each party to the contract has a copy of the signed contract documents and any subsequent variations to the contract.