Terms and Conditions Update

There have been some key developments in the UK and global markets over the past year that have had a knock-on effect on the construction industry. There have also been some key legal developments with more to come very soon.

We think that it is important to consider whether to update your standard terms and conditions and/ or sub-consultancy agreements to reflect some of these changes as follows:

• War/ sanctions – Since the Russian invasion of Ukraine, war and sanctions drafting should be included which aligns with common PI insurance exclusions and provides a way out of the contract.
• Inflation – Given the current inflationary pressures, there should be an express right to review/ revise rates annually in accordance with the Office of National Statistics Consumer Prices Index or another appropriate index.
• Building Safety Act 2022 – With the BSA currently partially in force and with further key secondary legislation expected to be passed this year, consider whether change in law provisions should reference the BSA and a right to time and money if there are any delays in the Gateway process. Consider also aligning limitation periods with the BSA in sub-contracts so that they align with main agreements.
• Reasonable skill and care/ fitness for purpose – Following the LDC v Downing case (which held that clear words are needed for a duty of care to caveat/ qualify a strict obligation – see the full case, in particular paragraph 46, on Keating Chambers’ website here), an overarching duty of care and a fitness for purpose exclusion should be included, and any fitness for purpose obligations should be deleted to avoid ambiguity.
• Liability – Following the Lendlease Construction v AECOM judgment (which held that some limitation wording only provides a procedural bar and will not mean liability comes to an end – see the full case here), limitation periods should be drafted so that there is “no liability for a claim” after the relevant period, rather than “no action being commenced” after the relevant period.
• Exchange rate – As a result of current market conditions (including the Russian invasion of Ukraine and the continuing effects of Brexit), there should be a clear exchange rate adjustment mechanism if any fee is being paid in foreign currency.  
• Sustainability/ green drafting – Sustainability and climate change are central current issues which we are seeing more and more being reflected in contracts. Consider updating standard documents to reflect any internal policies and commitments relating to the increasing drive to net zero.  
• EDI – Bodies such as RIBA are now pushing consultants to have proper procedures in place in relation to ensuring equality, diversity and inclusion in the workplace. Consider seeking buy-in from clients and in particular sub-consultants to these policies.
• Insolvency – With rising rates of inflation and a general downturn of the economy, insolvency provisions are about to become relevant and will need to be drafted correctly in order to be CIGA 2020 compliant.
• Insurance – Given the hardened insurance market, there may have been updates in your insurance policy terms which need to be reflected in your terms and conditions, such as new exclusions, etc.

Please do get in touch if you would like to hear more, as we would be pleased to assist in preparing updates to your terms and conditions to reflect the above.