About to sign a construction contract? Don’t forget to check the annexures

Negotiating a construction contract can be a long and drawn-out process, with much of that time being spent on the terms and conditions (T&Cs).

That said, those T&Cs will only operate as intended if the documents attached to the contract or referenced in it (we will call these ‘annexures’ in this article for convenience) show exactly what it is assumed they will reflect during the negotiations. This makes those documents as important, and sometimes more important, than the T&Cs.

Why are annexures in construction contracts important?

The annexures contain the ‘nuts and bolts’ of a contract. While the T&Cs provide the framework, the annexures substantively set out the finer commercial points, the works to be delivered, how they will be delivered and any plans or policies that must be complied with, amongst other things.

Examples of key annexures include:

• the contract information (or ‘contract data’) which includes the commercial details of the project, such as the contract sum and rates for profit and overhead on variations
• the scope documents (in a construct-only contract) or the principal’s project requirements or brief (in a design-and-construct contract)
• the preliminary design (if applicable)
• the preliminaries (if applicable)
• any clarifications schedule
• any third-party documents or passthrough schedule.

It is not uncommon to see either an executed construction contract with annexures that are incomplete, internally inconsistent or simply unclear. Equally, when preparing a contract, compressed project timelines can mean that annexures displaying one or more of those flaws are included without a full understanding of their potential impact later.

Tips for reviewing annexures

The annexures that are most critical will ultimately depend on the project. However, it may be useful to keep in mind the following four benchmarks when reviewing annexures.

1. Are the annexures consistent with the general conditions?

Quotes and tenders often include reference to the tenderer’s own T&Cs or set out clarifications which may be inconsistent with the T&Cs. Accordingly, the tender or quote itself should be carefully reviewed for consistency before it is included. Usually, it is more efficient and transparent to import the agreed items (such as price and schedule of rates) into the contract and then discuss any excluded items to agree on how they should be treated.

Another important step is to ensure that where the T&Cs assume that an annexure includes certain information or operates in a certain way, the information in the annexure accurately reflects this.

For example:

• if a clarifications schedule conflicts with the T&Cs or another annexure, ensure that the contract specifically deals with this, such as through the order of precedence or amending the clarifications to an agreed wording
• if the annexures include information which has been repurposed from the contractor’s tender, consider if it includes anything which is out of date and which has been supplanted by conflicting information elsewhere in the contract
• if the same information has been duplicated in different annexures, consider how this interacts with the T&Cs (including any order of precedence).

2. Do the annexures set out the works to be delivered in sufficient detail?

From time to time, we see contracts where the scope has not been sufficiently detailed. Given this is at the heart of the bargain, it is essential that the relevant documents set out the agreed scope and any delivery methodology with enough detail that the requirements for the works are clear and capable of being objectively ascertained. This is for the benefit of both parties.

For example:

• if the works are being procured for a specific purpose or outcome, this should be clearly stated in the scope documents rather than relying on general descriptions
• if the owner has specific performance or other requirements, these requirements must be stated clearly together with any acceptable thresholds or alternatives
• in a design-and-construct contract, the principal’s project requirements or brief must set out a clear benchmark for the scope to be delivered, especially where the preliminary design has not been completed.

3. Do the annexures identify any relevant rights and obligations of the parties?

Construction contracts are often burdened with vast quantities of documents, not all of which are relevant and appropriate. While it might be comforting to ‘have it all there’, if those documents do not work together, the contract annexures will become ripe grounds for dispute.

Some examples include:

• if third party documents such a lease or a licence have been included, identify the obligations that the contractor must comply with. Otherwise, the passthrough may not work in the way it was intended
• if site information reports are included in the annexures, identify why they are being included and whether they are included for information only, or whether for example, they can be relied on for the purpose of claiming latent conditions
• if correspondence between the parties is included in the annexures (such as email chains), consider if they are sufficiently clear on their face or if they need to be distilled into a clarification statement of the agreed outcome to avoid ambiguity later.

4. Are the forms in the annexure appropriate?

Contract forms, such as forms of novation deed or certificates under the contract, often attract the least attention in a contract review. However, this can cause problems down the track if they are called upon.

For example:

• if consultants or subcontractors are being novated to the contractor, the contractor will generally be obliged to enter into a form of novation deed set out in the annexures. If this form contains provisions which are inappropriate, the contractor may have limited leverage to change this once the construction contract has been signed and the works are underway
• if certificates (such as design certificates) are overly onerous, contractors may have difficulty in obtaining these from their consultants or subcontractors if they are not already requirements in the consultancy agreement or the subcontract
• if forms such as deeds of release following practical completion are too broad, they could amount to a wavier of subrogation.

Takeaway

Although annexures are the often-forgotten sibling of the T&Cs, they are a critical part of the contract. Courts will generally try to read the various documents making up a contract harmoniously, and the annexures are an important part of the puzzle making up the bargain that has been signed.

If you have any questions regarding construction contracts or the inclusion of annexures, please contact us here.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Helena Golovanoff

Krishneel Kumar

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