This topic has come up twice in the last few weeks, so its worth a comment online as food for thought. A contract/agreement defines the pricing, payments and how the various parties interact. Plus what happens when things go wrong, though they never go wrong do they. Most importantly, the contact describes the purchase or service which inevitably refers to ‘standards’ informal or formal, to emphasise the quality, consistently or operating conditions of the product or service. The challenge is often we ‘don’t know what we don’t know!’ To overcome this we include contract terms and conditions that are ‘catch-all’ or ‘belt-and-braces’ terms, a contract drafting professional believes will manage these ‘what we don’t knows’. The result can be far from what we might expect as these catch-all’s cause conflict when our purchase is not what we thought it was. Getting practical, the most recent example of this is Hojgaard Vs E-On energy from 2018 in the UK supreme court. Paraphrasing this convoluted case; E-On bought wind turbine foundations in the north sea, specified to last at least 20 years with no maintenance, from Hojgaard. E-On used a recognised industry standard as a reference. It was recognised this standard had shortcomings so E-On required Hojgarrad to make additional researches to assure the foundations would last. A mere two years later, the foundations began to fail and Hojgaard said they had delivered to the ‘standard’; E-On said what about those additional researches to enhance reliability? Avoiding the detail of the case itself, what can we learn from it:
1 – Technical specifications in contracts for products and services should be authored by a single person, or at least edited to a common vocabulary.
2- Recognise that international standards are the minimum, not the ideal.
3- Where a supplier is trusted/expected to go beyond/exceed a standard, that must be spelled out clearly and evidence of those additionals included before contact, or as a staged project milestone post contract.
4- Assume all standards, formal and informal, will conflict, then clearly prioritise their importance in whole in part.
5- Don’t use ‘catch-all’ or ‘belt-and-braces’ clauses in contracts, be accurate and specific through out. If is an extreme situation being anticipated, say so.
6- Getting lazy in drafting contracts is a risk; weariness to get something finished is a real risk to an operating agreement/relationship long-term
7- Remember no matter how complex a specification or contract is, ultimately a judge has to understand and interpret it (hopefully in your favour). So draft a contact imagining a judge will have to read it later.
Written agreements create the contractual commitments between the people and their organisations, and yes people matter here. They operate a relationship to set-out, and constrain, behaviours and practices that we want and don’t want. Standards can help that process but as the commercial world gets more complex, and ‘supply-chain-evidence’ grows in importance, Hojgaard Vs E-On energy is something we must learn from for the future.