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Tim wrote this article for the Winter 2016 issue of Alberta Construction Magazine.
I’m told that a bespoke suit is a lovely thing. Custom-tailored and hand-stitched from the finest fabric, it fits perfectly regardless of one’s shape or size. Sure, it costs a bundle and takes months to make, but it’s undoubtedly worth it when ringing the bell for your first IPO, accepting an Oscar or running for high office.
But for the rest of us, off-the-rack is just fine. So long as we start with the right size, choose a decent fabric and select appropriate styling, a few alterations make it fit nicely.
Construction contracts are much the same. Sometimes it makes sense to start from scratch, drafting a custom document for the unique requirements of a complex project. A major-league arena, an iconic bridge or a heavy-oil upgrader all demand sophisticated, project-specific contracts.
But many projects don’t warrant the time or money needed for a custom contract. Take a warehouse, tenant improvements or a straightforward commercial building, for example. The business deal, the scope of work, and the rights and obligations of the parties involved can be captured quite nicely with a pre-printed standard-form document.
Some familiar standard-form documents include Canadian Construction Documents Committee contracts, Calgary Construction Association and Alberta Construction Association subcontracts, and Royal Architectural Institute of Canada contracts for architects. They ca n be found online or through various industry organizations.
These standard-form documents are efficient, cost effective and certain. The parties can prepare them quickly. They don’t have to pay to reinvent the wheel. And they ca n have confidence in what the contracts say.
But that doesn’t mean one size fits all. Just like off-the-rack suits, standard-form contracts often need to be tweaked to fit. At the very least, information about the parties, the price and the scope of work will have to be inserted. In some cases, additional specific terms—say, payment terms, warranty obligations or maybe insurance requirements—need to be modified to reflect the particular deal.
There are some things to remember when altering standard-form contracts.
First, start with the right document. It would seem an obvious mistake to use a prime contract document as a subcontract or vice versa. But we’ve seen both scenarios and suffered the headaches that followed. Similarly, it’s a waste of time and money to squeeze a design-build project into a lump-sum contract or a unit-price deal into a cost-plus document. The extensive (and expensive) amendments wipe out the advantage of the standard wording.
Next, respect the copyright. The form and content of standard contracts are owned by the parties who publish them. You show the world that you are an honourable, decent, upstanding businessperson who respects copyright and abides by the terms-of-use by buying (at a modest price) a small sticky label or seal from the publisher and affixing it to the document. (Sometimes we see preprinted contracts without the seal; I won’t share our thoughts.)
Respecting the copyright also means that you don’t strike out, write over or annotate the printed portion of the document itself. Aside from being unsightly, such scrawls undermine the certainty that the parties depend on. To amend or alter the contract, the parties should prepare a separate list of supplementary conditions and attach them to the pre-printed documents. These supplementary conditions expressly say what is added, deleted or amended, leaving the printed portion unmarked.
And that leads to the worst mistake. Sometimes people get electronic versions of standard-form contracts, either as Word or PDF files. Often with innocent intentions, they alter or amend the text in such a way that the resulting document, on a casual glance, looks like the original standard-form contract. The result might be pretty, but it’s misleading. It’s no longer a standard-form document that the parties can depend on. An unwitting user might agree to something he or she didn’t expect, thinking the words were unchanged. Except it’s now a custom document that has to be read word for word, from beginning to end, with each of the terms parsed and weighed anew. The benefit of the standard-form is lost.