Hong Kong Institute of Vocational Education CON4126 - Building Procurement and Contract Administration

Department of Construction

Chapter 5 – Standard Forms of Building Contract

5.1 Introduction
When the HK Standard Form of Contract is used, the main contract is between the
employer and the main contractor (the parties to the contract). Various other contractual
relationships are established in addition to the main contract, some are mandatory as is
the NSC contract between the main contractor and NSC and some are optional. An
example would be domestic subcontracts.

A construction contract may be formed orally or by written agreement and the contract
consists of its terms. For the majority of building contracts, it is essential to set out all
the details of the work, and state each party’s duties, obligations and rights. Failure to do
this may cause difficulties, especially when disputes arise that could lead to arbitration or
court proceedings. For these reasons, it is now a common practice to use standard forms
of contract in the construction industry. They establish the legal framework under which
the work is to be undertaken. Their purpose is to attempt to clarify the rights and
responsibilities of the various parties in the event of a dispute.

5.2 Reasons to Use of a Standard Form of Contract

 The parties to the contract become familiar with - and therefore gain a greater
understanding of - the document through the practice of using it for each
successive contract.

 The parties to the contract are clearly made aware of their duties, obligations and
rights, as they are all written in one well-referenced document. The terms have
been carefully worded so as to avoid any ambiguity and are referred to by clause
name and number.

 The use of standard conditions of contract will not only facilitate the successful
completion of a contract but will, in all probability, result in lower tender prices,
as tenderers will be familiar with the conditions that will apply under the contract.

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Hong Kong Institute of Vocational Education CON4126 - Building Procurement and Contract Administration
Department of Construction

This implies that they will not make financial provision for contract conditions
that they are not familiar with or have difficulty assessing.

 Using a standard document avoids the waste of time that would result from
having to individually draft the many terms necessary for each new document.

There are, on the other hand, some arguments against the use of a standard form of
construction contract:

 Because the terms are written using legal jargon, the parties to the contract might
not understand the full consequences of the various clauses, and their inter-
relationship to each other.

 Standard forms do not cover every event which might lead to a dispute, because
they do not consider all the peculiarities of each individual contract.

5.3 HK Standard Forms of Construction Contract

Forms of Main Contract for Private Sector:

 HKIA/RICS Standard Form - Agreement & Schedule of Conditions of Building

Contract for use in Hong Kong by RICS (HK Branch) Edition 1986 (The newest
edition was jointly published by the HKIA, HKICM and HKIS in 2005) is simply
called SFC. This is the most widely used private sector standard form of building
contract between the client and the main contractor. The form has been printed
two ways: “with quantities” (2005 Edition), and “without quantities” (2006
Edition). The latter is normally used whenever drawings and specification are
adopted for the project. The ensuing discussion of this module will be based upon
the “with quantities’ form which covers 41 Clauses.

HKIA: Hong Kong Institute of Architects

HKICM: Hong Kong Institute of Construction Managers
RICS: Royal Institution of Chartered Surveyors

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Hong Kong Institute of Vocational Education CON4126 - Building Procurement and Contract Administration
Department of Construction

A Standard Form of Contract for Minor Works has also been produced for use in the
private sector. It is a simplified version for use on small projects.

 FIDIC Contract - This is the most widely used standard form of contract for the
purpose of construction work (both building and civil engineering) where
tenders are invited on an international basis. The full name is the Federation
Internationale des Ingenieurs Conseils (International Federation of Consulting
Engineers in French). Currently the FIDIC condition of contract is applied
worldwide. It is also widely used in Hong Kong where many large construction
projects employ overseas contractors, particularly Japanese, thereby making the
contract international by nature.

 Exclusive Standard Forms - Certain employers, such as the Hong Kong and
Kowloon Wharf Company, the Mass Transit Railway Corporation and the
Housing Authority each produce an exclusive form of contract, for use on their
own projects.

Standard Forms of Main Contract for Public Sector (Government of the HKSAR)
 Building Works - General Conditions of Contract for Building Works, 1999
Edition

 Civil Engineering Works - General Conditions of Contract for Civil Engineering

Works, 1999 Edition

 E&M Works - General Conditions of Contract for Electrical and Mechanical

Engineering Works, 1999 Edition

 Design and Build Works - General Conditions of Contract for Design and Build
Contracts, 1999 Edition

http://www.devb.gov.hk/en/publications_and_press_releases/publications/standard_contr
act_documents/index.html.

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Hong Kong Institute of Vocational Education CON4126 - Building Procurement and Contract Administration
Department of Construction

There is no civil engineering standard form for the private sector, nor is there a private
sector building services form because this type of work is usually carried out by
nominated subcontractors. If either of these were needed, they would probably be
adapted from the government standard forms.

5.4 Obligations of Contracting Parties under Standard form of Contract

5.4.1 Main Contractor

The contract provides the employer with a number of remedies in the event that the
contractor fails to meet his contractual obligations. In some cases, the breach may be of
such a fundamental nature as to entitle the employer to treat it as a repudiation, and give
the right to rescind the contract. Details are given in Section 7.6.1.

Some of the major obligations of the main contractor are:

 To progress and complete the works in accordance with the contract, the contract
drawings and the contract bills

 To comply with all instructions that the architect has been authorized to issue

 To provide the necessary indemnities, such as fees and charges legally

demandable by Government Ordinance or claims from injury to persons or
property connected with the works

 To provide necessary insurance

 To keep a competent foreman-in-charge constantly upon the works

 To allow the architect and his representatives access to the site

 To permit inspection and reports by the clerk of works

 To rectify all defects, shrinkages or other faults which are identified during the
Defects Liability Period of the Works.
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Department of Construction

 To submit any claims to the architect within a reasonable time

 To submit all necessary documents for the adjustment of the contract sum

5.4.2 Employer
The contractor is provided with a number of contractual remedies in respect to delays
or losses arising from acts or defaults of the employer or his architect.

Some of the major obligations of the employer are:

 To provide payment. It is the fundamental obligation of the employer to pay the

main contractor.

 To give possession of the site - another fundamental obligation. Failure to do so

may frustrate the contract.

 To state the time schedule - the start and completion dates

 To appoint an architect and quantity surveyor (described in the articles of

agreement under the standard form of contract)

 To supply instructions

 To not interfere with the progress of works

If it is a fundamental breach, the main contractor may abandon the works and seek
damages. If the breach is not fundamental, the main contract must continue; however,
the contractor may eventually sue for damages over the contract terms.

End of Chapter 5

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