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Don't Cry Over Spilled Milk!

Having just Google'd the topic.... I can categorically say the internet is a wash with quotes about contracts and how they are initially banished to the bottom draw only to be dusted off in a time of dire need or catastrophe. There are many tails of woe out there explaining how and why we never read agreements and simply banish the agreement to the bottom draw. These include my all time favorites "....we work together all the time and have a great business relationship....", which is probably high up there on the chart of the all time favorite quotes from many a lawyers and consultant and of course lets not forget "...we are friends...how can things go wrong..."!

Well sometimes projects go wrong for reasons that you, your business acquaintance, your friend nor even a professional crystal ball gazer could have predicted, influenced let alone changed. When such things happen what are you going to do? Better still, what is that life long business acquaintance or friend going to do? As Mr. Dennis Norden would say in one of the British TV Bloopers show ...of course "it'll be alright on the night".... Won't it?

Well here's where I even have to come clean!

I have fallen foul personally on this and have my own story to tell about trust and not preparing, reading let alone following a contract! It was a big, big mistake, that could have been financially crippling if not for swift action. Unfortunately the line that I fell for was probably the hardest hitting of them all "...don't worry he's a friend...". Still annoys me now to this day - but, looking back with the brains emotion filters firmly switched off, what a great learning experience, particularly on the psychology of the human mind and how we react when things don't quite go or work out as we had planned or hoped.

What I learned in my experience, is that when the chips are down and the stakes are high enough (and believe me they do not have to be that high), we arguably will all become the person we said we wouldn't be - we become protectionists and protect us, ourselves and our nearest and dearest and all that we have worked for! Those deal negotiating softer words, spoken from your counter part, on how they will never walk away or how a dispute will be discussed and worked through sensibly, will all too easily fade into obscurity as the stark realism that they themselves may loose a few quid, comes barreling to the forefront of their minds like a tsunami. Even where there is the clearest of clear situation, clarity can be shadowed by the emotion of the situation, with individuals forgetting or worse, attempting to manipulate the underlying story of what was actually the underlying reason why things have gone wrong! As I learned the hard way, people will even protect themselves when they are clearly in the wrong!

Now, if we had placed the agreement in the bottom draw and had not read it or administered it in any way, the Claims Consultants, Lawyers and Co. would be reaching for the dusters, dusting off the covers and then embarking upon a shaking head lecture, that no doubt you are paying for in your hour of need.

Contracting is a tough game at the best of times - so our advice is simple ...don't pay for the lecture after the event and certainly don't cry over the spilled milk..... it has happened and unless we are Dr. Emmett Brown (that's a Back to the Future reference for all the youngsters out there... classic film from the 1980's!) and can go back to the "past", absolutely nothing that we can do to prevent the milk from spilling once it has actually spilt!

In our experience, even during a recession businesses, particularly those in contracting, where the finish line hovers above everyone involved like a dark cloud, tend to run at a pace, normally a quick one and this pace can mean that every now and again we all forget our ability to read, understand and absorb the true meaning!

Recently I asked a colleague to read a clause in a Health and Safety Plan. I purposefully asked him walking down a corridor.... unsurprisingly he read what he knew.....! He did not read what was stated. Being heavily involved in the detail can mean that we can fail to pick up that subtle difference or that nuance. In this instance the difference between what was written and what was read/ understood came down to one simple word.... NO!

It is no surprise then that sometimes contracts are entered into that are.... lets say... not reflective of what everyone actually thought they were!

In our experience when companies enter into the melee of negotiations around agreements there is either a focus and emphasis on reviewing the legal-ese, you know, such clauses dealing with limits on liabilities, indemnities, warranties or they go completely the other way and forget (or accept Armageddon is unlikely) and focus simply upon the more commonly understood parts of an agreement, such as the commercial terms around payment, delivery, etc.

Our advice on this is very simple as always...in any contract negotiations and formation be proactive! Control the timing, control the outcome and if like us you do not want to place all of your faith in the bottom draw, and you are of course the Offerer in this scenario, please consider the following few points.

(1) Use Your Own Order Forms Of Agreement

The easiest way to understand whats in an agreement you are signing is to use a document you know and trust - whats better than this than your own document or one that you or your team have drafted!!

(2) Read the Agreement before you sign it!

Achieving what is arguably utopia through point (1) is not always that easy. Some Employers, Contractors may demand that there purchase terms and agreements are to be used. If they do and they have taken the time and effort to write there own documents, they will be unlikely to move away from their document - after all its the document they know and trust!

Never fear if you can not move to point (1), start by reading the agreement and reading it in full. Those legalese clauses are only one part of any agreement. Equally as important are the Management Clauses, prescribing how the project will be completed and the Technical Clauses, dictating the performance, specification, etc. of the works/ services to be provided or materials to be supplied.

May be like watching paint dry but this tends to tell you what you are buying or selling. If you read it and you do not understand what you have agreed or it says something different to what you think..... you know not to put pen to paper and sign it!

If after all that reading you are uncertain what things mean ask - or better still ask someone else for some help and advice.

(3) Check that your Quotation is Included in the Contract!

In the Construction Industry there is a habit on some to avoid referencing your quotation/ offer in the agreement. In turn they make reference to the plethora of specifications, standards, procedures and processes that, you could, as noted, make an appointment to review in the Outer Hebrides for one hour, on the third Sunday of the Year.

If the other documents are still listed, check to ensure that your quotation has some priority and significance over all of them-remember specific takes precedence over general!

(4) Know who you are dealing with!

Know who you are dealing with.... not just the face of the business but the full entity, the decision makers, the governance that it lives by, its strengths and weaknesses, it ability to fulfill its obligations! Something that is all too easy to forget about. Understand the risks of them failing to pay or worse failing to give you the information you need on time or failing to do something that then delays/ disrupts all of the proceedings.

If things do go wrong it is very, very difficult to get blood out of the proverbial stone!

(5) Understand the Timing of Deliveries or Programme within the Contract

Time for completion of the Works is becoming all too complicated. What does "unlimited visits" really mean? Or for that matter "Coordinated with other trades" and Specialist Subcontractors? All too often we are finding that agreements are signed where the time elements are far from clear or where the two parties have a very different interpretations of how long they expect the works to take or materials to arrive.

Have you had an experience of being on a contract for twice as long as you expected? Who covered the costs of increased management time, etc.?

(6) Understand how you are expected to act and fulfill your obligations?

Are you really free to choose the methodology you see fit? Can your men arrive and leave at will or do they need to sit 5 days of training courses before they can even get close to the front door? Management practices, training requirements, security provisions and method of undertaking work, including deliveries can vary wildly from site to site, project to project. Whilst the general is for any works to be undertaken safely, some projects demand more supervision, more engagement and expect that your labour teams comply without residence. These can vary depending upon the nature of the project but can have a significant impact upon your business.

We have experience on one project where the expectations was fr the works to be undertaken in a normal shift pattern of Monday to Friday 9am until 5pm, however the agreements small print implied out of hours during the night..... think of the NPO!?

Additionally don't forget to deliver some projects we may need a helping hand - after all a leading high street retailer of electronics will only carry goods up one flight of stairs! So you need to be clear that the agreement states what the other party is going to do to assist you and how and when this assistance is going to be provided.

Now, if your quotations included then these should all be covered through your assumptions and qualifications (!!??), but if they aren't spell out what you need.Don't assume that things will be there or that another specialist Contractor on the same site will come to your rescue at no cost (seen that s many times you wouldn't believe).

Where on one project the use of Tower Crane may be free, on another it may be GBP 1k per hour! Likewise that TV you are delivering may be to the 42nd floor.... is there a lift? I know I would not fancy walking up that many flights of stairs.

(7) Remember there is no such thing these days as Standard!

Just trying to think how many standard (un-amended standard that is!) agreements we have seen in the last 12 months...... erm, erm,... still thinking..... nope.... can not think of one!

Every NEC3, JCT, FIDIC, etc. document that we have received for comment has some changes. Some quite complicated with "Z" Clauses amassing the 100's. Be wary of these.... subtle changes can be significant enough to change a promoted fair contract into the one side battleaxe that we are all warned off, so think about what 100's of them can do.

(8) Know how to escalate a problem

Understand what the process is when things do go wrong. Adjudication, Arbitration, Litigation.... to mention but a few. However not all Adjudications, Arbitration's are the same.... read the finite details - can you really cover the costs if the Adjudication is to be heard in Dubai when you are based in London. Or before exercising your statutory rights, would you have the means to exhaust an all too complex management process with your counterpart.

Such provisions are all too common - think of this though - If you have not been paid properly for a few months could you cover the excess costs while you dance around these procedures.... and risk loosing, if you chose not to!?

(9) Remember - you are responsible!!!

A signed contract is a legal document, so you will have to live with what you agreed to. Generally, a contract cannot be changed or broken unless you and the other party both agree.

(10) Sleep on it!

It's always good to take a breath and think. Is this what you really have priced, need and/ or want? Can you fulfill your obligations under the contract? Have you got the correct resources, etc.? You Know it’s OK to change your mind before signing or agreeing to a contract -don't you?

Remember don't going crying over spilled milk because you thought it would be alright on the night...... read, understand and think.... before committing that pen to paper.