Well, this may not always be the case.
Today’s video talks about how contracts often make simple things a lot more complex than they need to be, and sometimes they can be out to trick you. A lot of the time you’re also given the most aggressive form of the contract.
Watch the video to find out about some of the hidden elements in contracts and what to be on the lookout for. Or have a quick read below.
The first thing is to look at the hierarchy of the construction industry.
At the top you have oil and gas, mining companies, developers, institutions, government, etc.
The goal of these companies is outcome. They want to build something so they go to large construction companies and tender for the work.
These large construction companies, or Tier 1s, are next on the food chain.
They’re tricky because, although they are in the construction game, they’re actually more like finance companies.
They get financed to do the work… but they usually end up subcontracting out all of the work.
Both the client and the big construction company have a legal team which is why the contract between the client and the contractor is almost always going to be tough.
They negotiate a contract that works for both of them.
This is where it gets tricky for subcontractors
It’s in the best interest of Tier 1s to push the risk down.
They want the contracts that they provide to be more aggressive than the one they’ve signed.
So aggressive contracts get pushed onto subcontractors…
And subcontractors usually sign the first contract they’re given.
This is one of the reasons why construction has the highest rate of insolvency than any other industry.
The game is they give you their worst contract.
Here are some things to be aware of in the contract negotiation game:
- You need to reduce your downside so you make more money
- There are certain clauses you must negotiate on
- Negotiating makes you look more professional and clued up
- Be aware of “standard contracts” (these can be country specific)
Standard contracts are tricky because they’re seen as the standard… and therefore people sign them without negotiating.
You need to be careful that they haven’t amended the standard contract template.
It may look like a standard contract but it’s not
Remember if it looks like a duck and walks like a duck, make sure it quacks like a duck too.
Make sure you look through contracts thoroughly.
Quantum Contract Solutions is here to help you check your contracts and make sure that you sign the least aggressive contract possible.
For more contractual advice, Quantum Contract Solutions is here to guide and assist you through everything contract related. Let’s reduce risk in your contracts and save time and money, just click this link to get our FREE case study to show you how clients just like you are doing it.