Forms of contract
The provision of information by the employer or the employer's design team to a contractor and the allocation of responsibility for the accuracy of that information are key aspects of risk allocation under any construction contract. Information can extend to documents such as site investigations and site surveys, as well as technical information relevant to the works to be carried out. Such information may be provided either before a contract is entered into or during the course of the works. The Public Works Contracts in Ireland adopt an approach which seeks to pass as much risk as possible to the contractor for checking the accuracy of all information which may be provided. Changes made in the latest version of the Public Works Contracts (published in July 2011) have reinforced this philosophy.
Under the Public Works Contracts, various documents are included as part of the contract. These are listed in order of precedence and include the agreement, the schedule (which sets out the contract particulars) and the letter of acceptance, which may also incorporate any listed post-tender clarifications. The contractor's completed tender – excluding any attached documents (eg, the tender programme) – is also a contract document, followed by the conditions of contract. The works requirements, which are prepared by the employer or its design team, are an important contract document insofar as it is this document which describes the works to be constructed and will incorporate all drawings and specification requirements. The final documents included in the contract are the pricing document, the contractor's works proposals and any other documents in the contract.
Under the traditional form of public works building and civil engineering contracts, factual errors contained in the works requirements concerning the site or in relation to setting out information will constitute both a delay event and a compensation event. The Public Works Contracts are silent as to other information contained in the works requirements, although if a change is instructed by the employer's representative (eg, to amend a drawing), this will give rise to an entitlement to an extension of time and/or an adjustment to the contract sum. Under the design and build forms of contract, however, the contractor is required expressly to assume the risk of any inaccuracies in the works requirements. In Clause 1.7, the contractor confirms that before entering into the contract, it has satisfied itself as to the accuracy of the works requirements and assumes full responsibility for this. The only carve-out is in relation to any statements of intended purposes or criteria for testing and performance which are included within the works requirements. In addition, in the event of the works requirements failing to comply with legal requirements or being physically impossible to comply with, the contractor will be required to propose a change (to be agreed with the employer's representative), but will have no entitlement to claim an extension of time or an adjustment of the contract sum as a consequence. This, coupled with the further exclusions of liability introduced in both the traditional form and the design and build form of contracts in July 2011, places significant burden on the contractor either to check the information provided (which often simply will not be possible) or somehow to price the risk of errors.
Clause 1.9.1 sets out an entire agreement provision, which ensures that only those documents which are expressly stated as forming part of the contract, or which are incorporated by reference (eg, by being referred to in the works requirements) will be part of the contract. It is important, therefore, that both parties understand exactly which documents will form part of the contract. From the contractor's perspective, it is important to understand that documents which may have been provided as part of the tender process may not necessarily form part of the contract and cannot be relied upon if that information turns out to be incorrect. This ethos has been reinforced by the recent changes. Previously, there was an express statement that the employer did not warrant the correctness, completeness or suitability of any information provided to the contractor on, before or after the contract date. This further stated that the employer would have no liability for such information, except as expressly stated in the contract. This has been replaced by a far broader provision and the introduction of a new category of documents termed 'Background Information'. The intention of this change is to limit the liability which the employer may have for the accuracy of information that is provided to the contractor, either before or after the contract is entered into. The new definition captures any information made available to the contractor by the employer or the employer's design team which is stated to be background information (ie, the employer will be able to benefit from this new clause by attaching this denomination to information provided). This will mainly relate to information provided at tender stage, but is also likely to be extended far beyond this.
The new Clause 1.10 sets out a detailed list of exclusions in respect of such information which may be provided – including a disclaimer by the employer of any liability whatsoever in connection with background information, and a corresponding irrevocable and perpetual waiver by the contractor of any liability which the employer may have, regardless of any errors, incompleteness and negligence, among other things. This waiver extends to where the contractor has not had time to verify or otherwise check the information provided – for example, by carrying out its own tests or site investigation. The new provision concludes by stating that the contractor must include in the contract sum all risks associated with the background information.
The latest version of the Public Works Contracts makes clear that the employer will assume no liability for information provided to the contractor, notably information provided at tender stage and on which the contractor will in many instances have to rely in order to prepare its tender price. The motivation behind this change builds upon the philosophy underpinning the Public Works Contracts of pushing as much risk as possible onto contractors. As a consequence, however, when bidding for work, contractors will need to be mindful of this additional risk and will now have the additional challenge of factoring this into their pricing, insofar as they can.
For further information on this topic please contact Niav O'Higgins at Arthur Cox by telephone (+353 1 618 0000), fax (+353 1 618 0618) or email ([email protected]).