I have worked with building projects for over 30 years in many different roles. In the last few years, I have mostly acted as attorney advising my clients in drafting contracts, in disagreements during the construction phase as well as in disputes after the building project has finished. Disputes have seldom risen in projects in which I have been participating in drafting the agreements. This thanks to my clients and their contractual parties, who have realised the importance of putting an effort into good contracts.
Building projects are complicated types of projects, usually with strict schedules making them even harder. When taking this and the amount of ongoing building projects into account, not many disagreements end in actual dispute resolution. On the other hand, then, there are a lot of disagreements that do not end in actual dispute resolution. Poorly drafted agreements partly contribute to these disputes. Each dispute costs the parties time that could be spent on the actual goal, namely a high-quality building construction in accordance with the contract. Therefore, one should pay adequate attention to the agreement drafting process as well as other tasks of the pre-building phase.
Below, I have listed some key issues that, if considered, will enhance the chances of a successful building project. The list does not only cover contractual issues, but more broadly matters that one always should consider before undertaking a building project. The list is in no way comprehensive, but it gives some clear guidelines.
The pre-building phase
- The client must have an organisation with due experience, who particularly knows how to see to the client’s interests in a planned building project.
- Knowledge and experience are decisive elements in the composition of the organisation. These can (only) be measured through reference buildings. The people and their experience are the relevant factors – not the references of their employers. People build – not the companies behind them.
- Agreements between the client and the experts shall be drafted and done with care. This is in the interest of both parties. Far too often one faces projects in which the actual building contract has been drafted very thoroughly, but other agreements connected to the project are very imperfect.
- The implementation model of the project cannot be chosen before one has adequate source information and a competent organisation supporting the decision making. The choice of implementation model has a crucial impact on how successful the project will be.
- The schedule of the project must be considered closely. Projects are far too often followed through in a manner dictated by the strict schedule, although there would, perhaps, be no need for this.
- Effort should be put into drafting, coordinating, and checking the plans.
- Generally, the client must understand that costs will occur not only form the actual building.
- Despite the implementation model chosen, one must always consider the competitive tendering of contractors carefully. Effort must be put into the invitation of tenders’ material, contract negotiations and their minutes. All issues must be written down clearly and so that both parties agree on the issues written down and their formulation.
- Effort must be put into careful drafting of the building contract. Established contract models [used in Finland] should be a starting point if there are no special reasons for departing from them. Specifications and changes must always be made into the models, and these must be discussed by the parties. The important thing is that both parties understand the conditions of the contract in the same way and that there are no ambiguities. If a party suggest that the building contract should be done using a new or heavily revised contract model, an expert should unquestionably be consulted for the assessment of the changes and their impact.
The building phase
- For the project to be followed through successfully, all parties involved must work closely together. One way of co-operation is to organize regular meetings between the parties. Depending on the implementation model chosen, there can be several different types of meetings, such as meetings for planning, meetings between contractors, construction site meetings, schedule meetings etc. It is essential that the parties are well prepared for the meetings, that the meetings are held regularly and according to an established agenda, and that there is an established way of taking the minutes. The minutes must be taken in a way that makes it possible to follow each state of each issue from the very beginning to a final decision. The minutes form a report of the ‘history’ of the project and are in case of a dispute usually the best evidence of the parties’ actions during the project. Hence, effort should be put into qualitative minutes.
- Giving the other party a notification of defects is also part of the co-operation. It is still very common that parties avoid giving a notification of defects, thinking that there is a risk of undermining a smooth co-operation between the parties. In reality, it is quite the opposite. As a matter-of-fact, well-timed and ‘neutrally’ given notification of defects is an essential part of a functioning co-operation. This is also necessary so that factors impeding the project can be settled with as small an impact as possible. It is essential that actions are taken due to the notification given. In practice, this means that the matter is settled as soon as possible in a way or another. If a final agreement cannot exceptionally be concluded, the parties must anyway limit its impact as much as possible. Heaping up disagreements and letting them wait for the final settlement of accounts is neither parties’ interest.
- Especially in large-scale projects the parties should consider the possibility of disputes being settled with the help of a third-party mediator. This type of procedure can be very swift and make it possible for the parties to focus on the project instead of the dispute.
- If the parties are not able to swiftly settle their disputes arising from the notification of defects during the project, it is important to make sure that all important facts and matters related to the case are well-documented. One must, in addition, make sure that claims are presented to the other party in an agreed manner. If the contractor presents claims against the client, the client has the right to request the contractor to specify its claims during the project in a manner agreed upon in the building contract.
The post-building phase
- The co-operation between the parties continues also after the building phase. Inspections and notifications of defects/lacks during the guarantee period must be done and given as agreed. Guarantee inspections (the same applies to acceptance inspection) must be sufficiently comprehensive.
- When it comes to post-guarantee period liability, it is crucial that that client constantly follows up the condition of the building and constantly takes appropriate care of the it, not forgetting to keep record thereof. If defects or lacks occur, which the contractor is liable for, notification must be given immediately.
In Finland, there has lately been lot of discussions regarding the quality of construction. The discussion has been very one-sided and blamed contractors. It always takes good co-operation between the client and the contractor for a building project to be followed through successfully. When requiring that the contractor is competent, one must also require the same for the client and other parties of the building project. For the client, this usually means that they must acquire this competence through experts. By putting an effort into the preparations, planning, drafting of agreements and supervision of the project the client will get the building they aimed for.