THE CONSTRUCTION industry has been warned that new plain English standard-form building contracts are likely to spark increased litigation, rather than ease disputes.
A construction industry conference held by City firm Berrymans was told the New Engineering Contract (NEC), issued by the Institution of Civil Engineers, would ignite a series of legal disputes to establish new case law.
The new contract is a by-product of the 1994 Latham Report which outlined a 13-point recipe for the “ideal” standard-form contract.
An initial version of the
contract is already in use, with a revised version due for introduction within weeks.
But Berrymans construction law specialist, solicitor Keith Lonsdale, says the new contracts could fail to achieve their aim of avoiding disputes.
“If you are using a form of contract that has been tried and tested and subjected to litigation, at least it has been tested,” Lonsdale says.
“But if you start again from blank paper, no matter how perfect the contract is, the attitude of the parties will be to pick a fight over it,” he says.
Lonsdale says virtually all the language in the new contracts is legally novel and certain to lead to litigation over its interpretation.
Despite this potential for litigation, he says the new contract has so far enjoyed a relative freedom from conflict.
The contract provides a mechanism for dispute resolution through adjudication, and so far only four adjudications have been necessary in almost 2,000 uses of the contract. But Lonsdale says that this could be merely a “honeymoon period”.