Investigation of unfair terms in standard forms of contracts : the case of water supply projects in Sri Lanka

Abstract

Standard forms of contracts have acquired a vital place in the construction industry. The decision of selecting suitable forms of contracts for a construction project has become a challenging task faced by the industry. This is one of the most important decisions that a client has to make when selecting the most suitable contract for a specific project, since this decision paves the pathway to the success of a project. Professionals involved in water supply projects in Sri Lanka also must adhere to these forms of contracts as they strive to avoid possible claims and disputes and improve their process. However, most standard forms of contracts include unfair contractual terms which may impact one or more parties to a project. Most research reveals that unfair terms are generally included in standard forms of contracts. Therefore, several strategies are now being utilized in the construction industry to minimize claims and disputes. This study focuses on the impact of unfair contractual terms in standard forms of contracts on contractors in the case of water supply projects in Sri Lanka. Accordingly, a qualitative research approach should be conducted to achieve the above stated aim. A descriptive literature survey was first conducted to gather information. Expert opinion surveys were used to collect data for this research project. The gathered qualitative information was then analyzed through content analysis. Through the expert opinion survey, the impact on parties of the contract due to unfair contractual modifications were recognized, and strategies and recommendations were identified in order to minimize these issues. Different respondents presented different claims and disputes in the expert opinion survey, such as a breach or cancellation of the contract, the claim of a changed scope of work, etc. Also, they identified several reasons for changing the contract terms in the Forms of Contracts: according to this, resource-based factors (poor material selection, material storage problems, etc.) are the main reason for such changes. Then, respondents identified the impact of these cancellations on the contractor, due to unfair contractual terms in standard form of contracts. Unfair contractual modifications may occur due to misunderstandings among project parties due to the number of variation orders, nullifying of the contract, the parties never lawfully entering the contract, delay of construction work of project parties due to variation orders, loss of coordination between project parties, delay in the completion of a project, and so on.