What type of Contract is this?

I have just started work with a new Employer and inherited a few jobs from my predecessor. One of them has got me totally puzzled.

It expressly states the contract is NEC3 Option A but also states that it is also remeasurable!!. There is no Activity Schedule as such, although the subcontract data does reference an Activity Schedule which contains 20 odd items. However, this is more of a BQ since it contains quants, units, rates and the total of each item. The document is headed Tender Sum Analysis.

What’s more confusing are the Pre-Order Meeting Minutes which are incorporated as a contract document and which contain a section called Variations. These are more akin to JCT VO provisions but with the added headache of a priority clause which gives these provisions precedence over any other ‘Variation Provisions’ in the Subcontract. How can NEC3 work if the compensation event process is trumped by provisions that appear to have been lifted from a JCT contract?

Finally, throughout the course of the contract, both parties have been remeasuring the works and payments have been made accordingly. The contract had already begun to turn smelly and I know it is going to end in tears…

Your opinions would be greatly appreciated

Q1 - What type of Contract is it? Option A or perhaps Option B by the conduct/ intention to remeasure it?
Q2 - Would an adjudicator throw out the variation provisions and stick with the CE procedure or would he try to mould them into some form of hybrid contract so that they coexist in the same contract?

Hi DarrylW

There is no easy answer to this and establishing what the contractual obligations are will need consideration of the all the terms, conditions and documents that make up the contract and applying the rules the courts have adopted to interpret contracts. If you were to google ‘rules for interpreting contracts’ you’ll get results for many different articles that should give you a good idea of how those rules work.

I can give you some steer on your particular questions…

Q1. You say the contract expressly states main Option A. In that case, it will be main Option A. If the parties had intended something else, then either they can agree now that they intended something else and agree a replacement contract, or one party could make a claim that there was a mistake. If successful, the current contract would be void or voidable depending on the claim and the outcome. A couple of potential other issues may arise here: firstly, you say the contract also states that it is remeasurable. The extent to which that statement has effect will depend on how it is stated, where it is stated and in what detail. The outcome might be anywhere between ‘it has no effect’ to ‘it makes the contract remeasurable, displacing the usual PWDD calculation in the unamended Option A’.

Q2. There are potentially 2 questions here: what an adjudicator should do or what an adjudicator is likely to do. In respect of the first question, the adjudicator should apply the rules of interpreting contracts to ascertain what the ‘variation’ provisions are. The adjudicator might also have to take into account matters of waiver or estoppel if the parties have acted in a particular way that departs from the contract and now seek to return to the contract to the detriment of the other party. What an adjudicator is likely to do is to try and come up with some sort of fair and reasonable outcome. The problem with such an outcome is that one party’s idea of what is fair and reasonable may not be the same as the other party’s or the adjudicator.

If the contract is started to ‘turn smelly’, you should probably get expert advice on it as soon as possible.

1 Like

I agree with your analysis. To understand the contract and what has been agreed would require a very careful examination of the contract documents and the facts surrounding the contract and its formation. Expert advice is the sensible way forward. best. Mike