What are the most popular standard forms of contract? Do parties commonly amend these standard forms?
In private construction contracts, the use of standard forms (e.g. FIDIC-contracts and the like), is not very common. Standard forms are mostly used in more international settings. A multitude of different contracts is in use (based on templates provided by i.a. professional associations).
In public construction projects, public authorities are obligated to apply the Royal decree of 14 January 2013 on the general rules of performance of public procurement contracts. This royal decree establishes a set of rules dealing with all kinds of execution issues, normally dealt with within a construction contract (payment clauses, completion mechanisms, contractor liability, etc.). Deviating from these rules requires specific motivation and justification in the tender documents and is even excluded for certain rules.
Contracts awarded by public authorities will typically use the Oman Standard Documents (modelled on early iterations of the FIDIC contracts) which include:
- Sultanate of Oman Standard Documents for Building and Civil Engineering Works (both the third edition 1981 and the fourth edition 1999 are widely used) – risk allocation follows that of the FIDIC Red Book (Employer designs; Contractor builds); and
- Sultanate of Oman Standard Documents for Electrical and Mechanical Works (first edition 1987) – risk allocation follows that of the FIDIC Yellow Book (Contractor responsible for design and construction/installation).
(together “Oman Standard Form Contracts”)
However, parties are at liberty to use other standard forms of contract and negotiate terms and amendments subject to compliance with the applicable laws of Oman. The FIDIC suite of contracts is widely used.
The vast majority of construction contracts in Denmark are based on one of the national standard forms of contract (AB Standards). The AB Standards are agreed documents that have been negotiated by various stakeholders in the Danish construction industry. The four AB Standards are:
- AB 92 (General Conditions for the Provision of Works and Supplies within Building and Engineering).
- ABT 93 (General Conditions for Turnkey Contracts).
- AB-Consumers (General Conditions for Provision of Building Works for Consumers).
- ABR 89 (General Conditions on Technical Advice and Assistance).
Public authorities and other public-sector employers are obligated to use the AB Standards.
The AB Standards are commonly amended by the parties.
Updated standard forms of contract named AB 18 and ABR 18 are expected to be adopted this year and to come into force in 2019.
This question does not adapt to Spanish Law. We do not have standard forms of contract. Each contract is newly drafted for each relevant case between the parties according to their will. In a subsidiary way, the law regulating the specific type of contract and the Civil Code will apply. The number and types of contracts in Spanish Law is “apertus” and there are atypical or mixed contracts.
In general, the principles of freedom of contract as contained in Article 1338 of the ICC will apply in relation to construction contracts in Indonesia, but subject to the minimum requirement as mentioned in Question no. 2.
For private sector construction contracts, there is no standard form. However, the standard form adopted Fédération Internationale Des Ingénieurs-Conseils (“FIDIC”) is commonly used as a reference. In Indonesia, it is common to amend the standard FIDIC form to suit the requirements of the contracting parties.
For projects funded by APBN, the Ministry of PWPH has regulated a form of standard contract (which will be used as reference) in undertaking construction and consultancy works.
Mexico does not have standard forms of contracts as in other jurisdictions. Some private contracts in Mexico have used FIDIC contracts, but they are not used in general.
In the case of government contracts, since the contracts are governed by the Public Works laws or equivalente, the contracts follow a certain order and form that satisfies the laws requirements.
Colombia has no tradition for standard forms of contracts related with construction projects. However, there has been recent development in this sense, involving the use of FIDIC models for certain kind of projects (specially on the private sector and in port projects) and PPP contracts based on international standards.
The standard form regulations issued by the SIA (www.sia.ch) are the most popular standard forms of contract used in practice, in particular by architects, engineers and contractors.
The blanks of the standard forms and the multiple choices questions have first to be completed by the parties, so as the standard form be adjusted to the relevant construction project.
In view of the multiple possible types and characteristics of construction projects, the standard forms are usually amended by the parties in order to fit the actual construction project or to balance-out standard clauses that may be deemed too favorable to architects, engineers and contractors.
Whilst parties are free to use any contract, standard form contracts are commonly used as base documents for construct and design-and-build projects. These are generally modified to make them 'principal-friendly'. Large PPP and other infrastructure projects will commonly use 'bespoke' forms of contract.
The most widely used standard form contracts are published by Standards Australia. Other commonly used forms are published by the Master Builders Association and Australian Institute of Architects. For major projects, traditional construct-only and D&C/EPC/EPCM contracts are common, along with BOOT/DCM style contracts for major public-private partnerships.
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.
The FIDIC suite provides the basis for most standard forms of contract in the UAE. However, it is common for these standard forms to be heavily amended.
The balance of negotiating power usually lies with Employer and, therefore, it is common to see the standard forms amended in their favour. This balance of power is also a reason why the 1987 version of the Red Book is still widely used as it is perhaps more “Employer-friendly” than the 1999 version and, therefore, requires fewer particular conditions.
Some Government Authorities and major land developers have generated their own standard forms of contract (usually heavily amended versions of the FIDIC suite), which are used as a template from which further amends are made.
While FIDIC remains the preeminent standard form of contract in the UAE, other international standard forms are also used such as the NEC family of contracts.
Any construction project is unique. So standard forms can not sufficiently address the particular situations occurring in the course of a construction project. However, experienced legal advisers have a great deal of experience in contract drafting and in finding adequate contractual solutions for their client’s construction projects.
Due to the fact that many construction contracts incorporate the Standard Building Contract Terms (Vergabe- und Vertragsordnung für Bauleistungen – VOB/B), there is some standardization in German construction contracts.
Construction contracts, as a rule, are unit price contracts or lump-sum price contracts. On the unit price contracts, the client is charged based on the quantities actually used. On lump-sum contracts, there is no charging by quantities. There is also the option of agreeing to an hourly rate. On contracts with an hourly rate, the client is charged based on the actual hours expended.
For public contracts, the public authority often refers to official standard general terms (called Cahiers des Clauses Administratives Générales or CCAG) which are official forms regularly updated by the French authorities. The parties will complete these general terms and amend them through the specific terms of their agreement (generally called the Cahier des Clauses Administratives Particulières or CCAP).
For private contracts, AFNOR, the French national organization for standardization, issued and updates from time to time a specific norm (the NF P 03-001 Norm) applicable to contractor agreement for private works. This norm, which was recently updated, is often used as general terms for the basis of contractor agreements. Here again the parties will complete and amend these general terms in the specific terms of their agreement.
For large infrastructure or industrial projects involving international investors, the standard forms of contracts issued by the FIDIC organization are also sometimes used. However, considering the important number of specific and mandatory rules provided by French law, the use of these international template requires numerous adaptations.
Pursuant to Art. 681-702 of GCC, a works contract is defined as a contract where the contractor undertakes to conduct a specific scope of work assigned thereto by the employer, whereas the latter undertakes to pay the stipulated remuneration. As a general rule, the parties to a commercial contract may agree any terms they wish, based on the freedom to contract (361 GCC), which is primarily enshrined in the right to develop a person's personality (Art. 5 paragraph 1 of the Constitution). Such freedom, however, is restricted by the mandatory law provisions (such as criminal or competition), as well as the general principles of civil law (such as good faith).
As opposed to private contracts, public contracts of a value exceeding the amount of EUR 2,500 are subject to the written formality requirement (Art. 130 of Law 4270/2014). Pursuant to Art. 53 and 181 para. 5 of the Public Procurement Law in combination with Art. 2 para. 2 (e) of Law 4013/2011, the Single Public Procurement Independent Authority (the 'Authority'), upon consultation with the competent public bodies, issues mandatory contract documents for contracts falling within the scope of Directive 2014/24/EU ('Book I Contracts') and provisional model contract documents for contracts falling under Directive 2014/25/EU ('Book II Contracts'). In implementation of the above provisions, the Authority has issued model tender documents: (a) for public works contracts and designs contests through its Decisions No. 127/2017 (Government Gazette B' 4534/21.12.2017) and 134/2017 (Government Gazette B' 66/19.1.2018), respectively, which are mandatory for Book I Contracts, regardless of the value of the contract, whereas provisional for Book II Contracts; (b) for supply of goods and general services contracts (approved at Authority's Meeting 72/21.12.2017), which are provisional for both Book I and Book II Contracts, irrespective of the value thereof; (c) for combined design/works contracts, which are shortly expected to be finalised.
Government contracts must be on standard forms approved by the Ministry of Finance, such as the standard Public Works Contract, Consultancy Engineering Services Contract (Design) and the Consultancy Engineering Services Contract (Supervision), which can only be amended to a limited extent. Saudi Aramco has its own standard form contracts, which ordinarily cannot be amended.
There are a number of standard forms of contract specifically catered for the construction industry in Malaysia. Amongst others, the following institutions/government body have developed contracts that are widely adopted:
(a) the Public Works Department (“PWD”) (also commonly known as the Jabatan Kerja Raya (“JKR”). These are commonly used for projects where the employer is the Federal Government, a State Government or a Government-Linked Company;
(b) the Malaysian Institute of Architects (otherwise known as the Pertubuhan Akitek Malaysia (“PAM”). These are commonly used for private building works; and
(c) Institute of Engineers, Malaysia (“IEM”). These are usually used for engineering projects.
The FIDIC Yellow Book (Plant and Design Build) is popular for private projects involving large-scale infrastructure or international parties, often with parties amending various provisions to cater for the individual needs of the project.
Certain multi-national corporations, for instances Petroliam Nasional Berhad (“PETRONAS”) and Tenaga Nasional Berhad (“TNB”) have their respective in-house suites of bespoke contracts.