Introduction

Commercial contracts are how buildings are built! No matter how good the design, engineering and construction, without arranging a suitable means for specifying, ordering and paying for work, nothing will happen. This means that it is vitally important to understand how to arrange and administer building contracts. Without this understanding, whether you are a client, architect, quantity surveyor, contractor or sub-contractor, you might not get what you expected. Additionally, the fact that contracts involve different parties with different interests leads to a natural tension between client and contractor. A client will naturally want the best building as quickly as possible at the lowest possible price. If a client fails to do this, it will be accused of not obtaining value for money. A contractor must be commercially oriented towards maximising profit for the firm. If a contractor fails to do this, its share price will dip and it will be vulnerable to take over from another firm, perhaps with a more robust intent! Although it is in the long-term interest of all parties to produce good buildings, it is naïve to expect all parties in a project to work to the benefit of the project and deny that strong commercial pressures exist to extract the most from the other party. Cooperative forms of working such as partnering based on negotiation are, therefore, of limited practical applicability. Sooner or later, one party will feel aggrieved that they are being taken advantage of by the other and the love affair will be over. This falling out is often seen at the start of a recession in the industry, when margins tighten and pencils are sharpened. Parties are happy to cooperate when there is plenty of work to go around, but as soon as profits or cash flow are threatened, they start to look for any additional benefits by scouring the contract.