I am officially a grumpy old man according to my colleague Lisa Bull.
And well I might be, having been in practice during three recessions and every time seeing the same mistakes being made: by the government, who seem to think that houses somehow get built by magic having failed to invest in apprenticeships; developers who still think they can get something for nothing; and bankers who seem to have forgotten about Lehman Brothers.
I earned my certificate of grumpiness when a young banker from one of the high street banks rang me to complain that I was delaying the completion of a deal by refusing to agree to a standard industry contract. The contract in question was a JCT Standard Building Contract 1980 Edition, okay it did incorporate amendments 1 to 15 so it was up-to-date in 1995.
“The government… seem to think that houses somehow get built by magic.”
Other causes of grumpiness are clients who seem to forget that it might be prudent to have a building contract recording what has been agreed until they are about to start on site.
When they contact me, the contract is all agreed until I start to ask about insurances, liquidated damages, commencement and completion dates - just like the client of a theatre group who had a six week slot to carry out refurbishment works. The only problem was I discovered their chosen contractor had priced the job and was working to a 12 week programme.
The stage set for their production of Mid-Summer Night’s Dream would have been on a building site.
This lack of foresight leads to the inevitable ‘letter of intent’, guaranteed to make me Mr Grumpy, when the rest of the project team seem to be eternal optimists who are sure this project will be different.
“This lack of foresight leads to the inevitable ‘letter of intent’, guaranteed to make me Mr Grumpy.”
If a letter of intent is to be anything other than a mere statement of future intent without any contractual obligation then it needs to deal with the same issues as a building contract: What work is to be carried out under the letter and price is to be paid for it; What valuation and payment procedures are to be adopted; If materials are to be ordered when do they become the property of the employer and when does risk pass to the employer; How are the obligations under the letter to be terminated or cease to be of effect; What insurance is to be effected and what liabilities do the parties have to each other; On what basis does the contractor occupy the site; What are the dispute resolution procedures?
By the time you have dealt with all of these issues you might as well sign the actual contract.
Or am I getting old?
Matthew Needham-Laing is head of construction & engineering at Stevens & Bolton LLP