International Construction Law Review
THE FOUR CRITERIA OF RISK ALLOCATION IN CONSTRUCTION CONTRACTS
NAEL G BUNNI
B Sc, M Sc, Ph D, C Eng, FICE, FIEI, FI Struct E, FCI Arb, FIAE, R Cons EI. Chartered Engineer, Conciliator and Registered Chartered Arbitrator Past President CI Arb Visiting Professor in Construction Law and Contract Administration at Trinity College Dublin.
1. INTRODUCTION
The construction contract is unique in many ways, the most important of which being the way it seeks to provide for a specific remedy in the event of any breach of the terms and conditions within its framework and/or in the event of a contractual entitlement in respect of specified events or perceived risks should they eventuate.1 The construction contract is also unique in that it has some intriguing characteristics, including2:
- Complexity.
- Highly technical with issues of varying expertise, requiring advanced methods of analysis and sophisticated methods of decision making.
- Involves large sums of money.
- A period of construction that spans over a number of years with a repeated happening of the four seasons.
- Viewed comparatively against other types of contract, the wording of a construction contract is more extensive, as it has to provide for and deal with detailed conditions in respect of the risks that might eventuate during the construction period and beyond.
- Capable of producing a multiplicity of disputes that: (a) take a long time to resolve; (b) need the examination of many more documents than other types of dispute; and (c) involve all three aspects of fact, law and quantum, where:
- the facts generally relate to events or circumstances that occur on, or off, the site of the project and in many cases involve highly specialised technical issues;
1 Nael G Bunni, The FIDIC Forms of Contract (Oxford: Blackwell Publishing, 3rd ed., 2005), see Chap 7 for the inherent characteristics of the construction contract and Chap 13 for some of the unique obligations contained in it.
2 Nael G Bunni and Humphrey LLoyd, QC, “Final Report on Construction Industry Arbitrations” [2001] ICLR 644. Also available from www.iccwbo.org, search words “construction industry”. See in particular paras. 10, 14, 24, 27, 33, 47.
Pt 1]
Risk Allocation in Construction Contracts
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