What are the most popular standard forms of contract? Do parties commonly amend these standard forms?
The Norwegian Standard (NS) set out standard terms and conditions for the contracting parties within constructing and engineering projects.
The most popular construction contracts in Norway are:
- NS 8405:2008 Norwegian building and civil engineering contract; and
- NS 8407:2011 General conditions of contract for design and build contracts.
NS 8405 has been prepared for general contracting, where the contractor agrees to build the design that is provided by the employer. There is also a NS 8406, which is a more simplified version of NS 8405 and is most popular for smaller projects. NS 8407 is a design and build contract, where the design and build contractor is responsible for both the design work and the execution of the building or civil engineering work.
NS contracts are initiated and prepared by a committee appointed by Standards Norway.
Even though the incorporation of NS in a contract is optional, any relevant NS is commonly used and considered as agreed terms. Furthermore, NS often refers to relevant EU directives, national laws and regulations, and provides a more detailed description of these.
For offshore projects, the Norwegian Fabrication Contract (NF) is a Norwegian standard offshore fabrication contract, where the constructor is responsible for the fabrication/construction. The Norwegian Total Contract (NTK) is used where the contractor is responsible for both design and construction.
Partnering contracts are becoming more popular in Norway. In a partnering contract the contractor is brought in on the project much earlier than what is traditionally the case. This way the employer and contractor can work together from the start, sharing risks, to optimize a successful completion of the project.
Public private partnership contracts are also used in Norway, although to a somewhat limited extent. Similar to partnering contracts, the private party/contractor is brought in early on the projects, but in public private partnerships the private party is responsible for the operation and maintenance of the project also for a significant period after its completion (for example 20 or 30 years).
There is no legislation on procurement for private employers. Private employers are free to procure their project in the way they want. The Public Procurement Act (which is based on the EU directives) applies to public procurement of construction works.
A number of standard form construction contracts have been developed specifically for use in Hong Kong. The most popular standard forms of contract are those published respectively by:
• the Hong Kong Government; and
• jointly by the Hong Kong Institute of Architects, the Royal Institution of Chartered Surveyors (Hong Kong Branch) and the Society of Builders, Hong Kong.
These standard forms range from traditional build-only and design and build contracts, to more specific documents such as a form of tender for capital works and consultancy agreements. There also are standard form sub-contracts, specifically for nominated or named sub-contractors. Significant players in the Hong Kong construction industry also often have their own in-house form, e.g. quasi-government bodies such as the Airport Authority and the Housing Authority. Many developers have their own “standard” form of conditions, and many large main contractor have a standard form set of (usually very onerous) sub-contract conditions.
It is common for employers either to use a design and construct contract or to engage a consultant or architect directly to provide a design and subsequently engage contractors to perform the works. Hong Kong standard forms are frequently preferred, although international standard forms, such as the UK-published New Engineering Contract, also are increasingly adopted. The Hong Kong Government adopted the NEC3 suite in late 2016 as the default procurement route for all major public works and consultancy projects in Hong Kong, on the basis that the NEC3 contracts promoted collaboration, mitigated risks and unleashed innovation.
It is common for developers to supplement the standard forms with various – sometimes voluminous - special conditions amending the risk allocation.
Some developers are adopting less traditional contracting models, such as management contracting. As there are no standard forms published in Hong Kong for this purpose, parties need to agree bespoke contracts or adopt international forms for such less traditional arrangements
The most commonly used forms of contract for large, complex projects in the UK are undoubtedly the JCT Standard Forms and the NEC4 suite of contracts.
JCT is typically used by developers for commercial and residential schemes, while NEC4 is more suited to civil engineering, infrastructure and public sector projects.
FIDIC is not as popular in the UK as it is in some jurisdictions (largely because it is seen as international, rather than UK specific), but it is still sometimes used for complex engineering projects.
For process plants, the IChemE form of contract is generally used. The MF suite of contracts is often utilised when the works entail the supply and installation of a specific piece of electrical or mechanical plant.
On large, complex projects, the standard forms of contract are usually subject to extensive amendment by the parties.
The most popular standard form contract in the United States is produced by the American Institute of Architects (“AIA”). AIA publishes a wide range of contracts for small, medium, and large projects. AIA documents cover a large variety of contract types, including fixed-price, cost-plus, and design-build. The most commonly used AIA contract for large or complex fixed-price projects is A-101, while A-102 is used for large or complex cost-plus (time and materials) projects with a guaranteed maximum. Both A-101 and A-102 are accompanied by the General Conditions (A-201) which set forth the general conditions for the contract, including the rights, responsibilities, and relationships of the owner, contractor, and architect.
Aside from the widely used AIA contracts, ConsensusDocs, Design Build Institute of America (“DBIA”) and Engineers Joint Contract Documents Committee (“EJCDC”) publish the most common forms used in the United States. Most of these organizations draft the forms in part to protect the parties that they represent. For example, the Association of General Contractors (“AGC” publishes a series of standard form contracts that tend to favor contractors (The AIA contracts are considered to favor owners). For international projects, the International Federation of Consulting Engineers and the International Chamber of Commerce offer forms that are frequently used.
Standard form contracts are typically amended by the parties during a negotiation process to protect the rights of both parties and to better align the contract requirements with the particular project being procured. For example, AIA contracts are written with the assumption that the owner has retained an architect to not only design the project, but to supervise construction and otherwise administer the contract. However, if the owner elects to use a construction manager to perform these tasks, the standard language will need to be amended. Additionally, certain types of projects may not be suited for the standard allocations of risk in form contracts and need to be amended to add protective clauses and other carve outs to account for proper risk allocation. The most highly modified and scrutinized provisions include those clauses dealing with payment, notice, changes, termination, indemnity, and liquidated damages.
There are no specific popular standard forms of contracts that are used locally. It is upon the free will of contractual parties to agree upon the relevant aspects of their business relationship when it comes to construction and building industry. Even when any kinds of templates are used for contracts, the parties do tend to amend them rather often. However, during the last decades the use of diverse FIDIC contracts has become rather widespread, at least in larger construction works.