Standard Form Contracts Research Articles

NEC contracts for design–build–operate contracts

The NEC Engineering and Construction Contract (ECC) is a popular choice for construction and design-and-build contracts in the UK and South Africa. They are also increasingly by being used elsewhere in the world, for example in New Zealand and in Hong Kong. The NEC family of contracts is specifically designed for international use. The NEC Term Service Contract (TSC) is also increasingly being used for contracts to provide a service including, often, the operation and maintenance of an asset. Some clients are increasingly looking to appoint a contractor to design, build and operate an asset and so take a real interest in the operability and operating cost of the asset. This paper looks at key issues specific to design, build and operate contracts and explains how the NEC ECC and NEC TSC could be combined to form the basis of a design, build and operate contract. It is true that changes would be required, but with an NEC base to the contract, all parties would have the benefit of starting from what have become industry standard forms of contract, namely forms that are designed for clarity, flexibility and, most importantly, as a stimulus to good management.

The sustainability of MFIs in Uganda: the need for consumer protection while balancing stakeholders' interests

Microfinance has taken centre stage in the quest for poverty eradication in Uganda. Microfinance providers traverse the country, many with an objective of making a return on their investment, NGOs notwithstanding. The investment in the sector has grown to enormous proportions. This increased investment, however, has come with increased competition. Amid this increased investment and competition, consumers have taken the backseat to profit-making among many providers. Questionable means of recovery, high interest rates, non-transparent contracts, standard form contracts, cash collateral, fraud against clients, arrest, and committal to civil prison using ex parte judgments have become common phenomena. There is a need to change the legal framework to protect the consumer against the said abuses. Training of loans officers, increased monitoring, insurance, training microfinance clients, and formulating standard acceptable contracts with fair terms to be used by all providers seem to be the only solutions to consumer protection.

'Sticky' Arbitration Clauses?: The Use of Arbitration Clauses after Concepcion and Amex

We present the results of the first empirical study of the extent to which businesses have switched to arbitration after AT&T Mobility LLC v. Concepcion. After the Supreme Court’s decision in Concepcion, commentators predicted that every business soon would use an arbitration clause, coupled with a class arbitration waiver, in their standard form contracts to avoid the risk of class actions. We examine two samples of franchise agreements: one sample in which we track changes in arbitration clauses since 1999, and a broader sample focusing on changes since 2011, immediately before Concepcion was decided. Our central finding is consistent across both samples of franchise agreements: the use of arbitration clauses in franchise agreements has increased since Concepcion, but not dramatically, and most franchisors have not switched to arbitration. While our results necessarily are limited to franchise agreements and may not be generalizable to consumer and employment contracts, they nonetheless provide valuable evidence on how businesses are responding to Concepcion.Given our finding that only a handful of franchisors have switched to arbitration clauses since Concepcion, the next question is “why not”? We reexamine the assumptions underlying the predictions of a switch to arbitration ― that there is no reason for a business not to use an arbitral class waiver and that businesses readily and costlessly can and will modify their form contracts ― and find reason to question both. By using an arbitration clause, businesses do more than simply contract out of class actions: they contract for a bundle of dispute resolution services, including, for example, a very limited right to appeal. For businesses that perceive themselves as unlikely to be sued in a class action, these “bundling costs” may discourage them from using an arbitration clause. In addition, even standard form contracts might be sticky ― i.e., resistant to change even if change might be in the business’s best interest. We find empirical support for both possible explanations for why many franchisors have not begun using arbitration clauses after Concepcion.Finally, we consider the potential implications of the Court’s subsequent decision in American Express Cos. v. Italian Colors Restaurant for the future use of arbitration clauses. To the extent bundling costs deter the use of arbitral class waivers, we still would not expect all or most businesses to switch to arbitration even after Amex. Likewise, to the extent contract stickiness explains the limited switch to arbitration, Amex will have limited effect. In fact, Amex might actually make class action waivers that are not part of an arbitration clause more attractive than before. Although on its facts Amex addresses the enforceability of arbitral class waivers, much of the Court’s reasoning applies as well to non-arbitral class waivers, which avoid the bundling costs of an arbitral class waiver. Of course, even after Amex much legal uncertainty remains about the enforceability of non-arbitral class waivers. But on this broad interpretation, Amex on the margin increases the attractiveness of non-arbitral class waivers and might result in some uptick in their use (an increase that was occurring even before Amex, at least in franchise agreements).

FOSFA and GAFTA Standard Form Contracts and their Arbitration Systems

FOSFA and GAFTA Standard Form Contracts and their Arbitration Systems

Time At Large within the Common Law Legal System: Application to Standard Forms of Contract

AbstractTime is of extreme importance in the construction industry. The contractor has an obligation to complete the works within the time for completion. On the other hand, the employer should not impede the contractor in performing its obligations under the contract. If the contractor is prevented from completing a project by the date for completion for a reason for which the employer is responsible, and there is no right to extend time for completion or it is not properly extended, time becomes at large. Thus, the contractor is not obliged to complete the works within the original time for completion and the employer loses his entitlement to deduct liquidated damages for delay. This paper used a two-step research methodology where the time at large principle is explained within the context of the common law legal system and is consequently applied to various standard forms of contract. The list includes the Joint Contracts Tribunal (JCT) Design and Build Contract of 2011, the World Bank Conditions of C...

Coping with Uncertainty: The Role of Contracts in Russian Industry During the Transition to the Market

Russia's transition to the market was tortuous. The literature presents the 1990s as a period when contracts were largely irrelevant due to the inadequacies of the substantive law and the inability of courts to protect property rights. This article explores how contracts were, in fact, used by Russian industrial firms through a series of in-depth case studies. At all of the case study firms, management had developed standard form contracts. Their willingness to rely on them when problems arose was dictated primarily by the nature of their relationships with their trading partners, not by a lack of faith in the legal system. Where the relationships were grounded in personal trust, managers were reluctant to invoke their rights under the contract. Where relationships were grounded in calculative trust (mutual need intertwined with mutual suspicion), managers did not shy away from legalistic remedies. Enterprises that relied on in-kind exchanges had little need to rely on written contracts due to the ephemeral character of these transactions. The lack of reliable information about the credit-worthiness of prospective customers combined with the lack of reputational sanctions for contractual violations made life difficult for all of the case study firms.

Contract is Not a Fair Bargain: A Critical Study in English and Indian Contexts

We enter into contracts on day-to-day basis. Taking a seat in a bus, putting a coin in the slot of a weighing machine, taking food be it snacks or main course, all amount to entering into a contract. In such cases, we do not even realise that we are making a contract. In the case of people engaged in trade, commerce and industry, they carry on business by entering into contracts. Contract by its very elements of offer, acceptance, consideration, object and by virtue of being an agreement enforceable by law is by and large, seen as a fair bargain. However, like every coin, there are limitations arising due to several circumstances when contract cannot be termed as a fair bargain. This article will dwell on the negative side of contracts, i.e. contract is not a fair bargain. In other words, the prime exceptions of contract as fair bargain, i.e. inequality in bargaining power, doctrines of duress and undue influence and standard form contracts will be covered in this article.

Intellectual Property and the Law of Contract: The Case Against ‘Efficient Breach’

In general, sound general principles of contract law should carry over more or less seamlessly to the licensing of intellectual property. Those basic principles caution against attacks on standard form contracts that often contain liquidated damage provisions. This paper shows why over a broad range of cases involving two or more parties these liquidated provisions, properly calibrated, avoid the many disadvantages of using the theory of “efficient breach” to set damages. Chief among these difficulties are the high administrative costs of finding these damages, and the perverse incentives that they place on the defendant before breach and the plaintiff afterwards. Intellectual property licenses are not exempt from these basic principles, which implies that these clear damage rules are typically optimal in first avoiding breach and then in resolving post-breach disputes.

The Borat Problem in Negotiation: Fraud, Assent, and the Behavioral Law and Economics of Standard Form Contracts

Two parties reach an oral agreement. The first then presents a standard form contract, which the second signs without reading, or without reading carefully. When the second party later objects that the first did not perform according to the oral representations, the first party points out that the signed document includes different terms or disclaims prior representations and promises. I call this alltoo-common occurrence the “Borat Problem,” after litigation presenting this fact pattern that followed the 2006 movie of that name.

Standard Form Contracts as Transnational Law: Evidence from the Derivatives Markets

This paper uses new research into the derivatives markets to develop our understanding of standard form contracts as transnational law and to show how transnational law theory may be usefully informed by empirical work. Traditionally, it has been assumed that international business communities seek to avoid the courts. However, the paper shows that the national courts play a prominent role in adjudicating disputes involving derivatives. Basing the discussion on the detail of these decisions by the English courts, the paper demonstrates that adjudication does not necessarily undermine widely used standard form contracts, and that it may even reinforce practices that underpin them. This is particularly the case where there is imperfect co‐incidence between a trade association's members and a standard form contract's users. Having explored recent cases, the paper reconciles its findings with a more open and imaginative account of the role of national courts within transnational law theory.

Sham Self-Employment in the Supreme Court

How are contracts for the provision of work typically negotiated? The answer to this question matters a great deal, and it was central to the Supreme Court’s elaboration of a broad sham doctrine in the context of contracts for personal employment in Autoclenz Limited v Belcher and Others (Autoclenz).1 One picture of typical contracting practice—let us call it the standard picture—was painted by Lord Hoffmann in Carmichael v National Power Plc., where he observed that it was not ‘untypical’ of employment contracts that they would be partly written, partly oral and partly established by a pattern of evolving conduct over time.2 In this situation, the court can draw inferences from a wide range of relevant evidence to ascertain what, in objective terms, was agreed between the parties. In recent years, this standard picture has appeared increasingly strained as a description of the reality of contracting practices. In an important article on the topic, Hugh Collins emphasised ‘a hitherto neglected change in the social practice of personal work contracts: the proliferation of standard form contracts. Employers have formalised the personal work contract by the introduction of substantial written contracts.’3

Set in Stone? Change and Innovation in Consumer Standard Form Contracts

This article studies the rate, direction, and determinants of change in consumer standard form contracting. We examine what changed between 2003 and 2010 in the terms of 264 mass-market consumer software license agreements. Thirty-nine percent of contracts materially changed at least one term, and some changed as many as fourteen terms. The average contract became more pro-seller as well as several hundred words longer. The increase in length is not due to the use of simpler language: contract readability has been constant: the average contract is as readable as an article in a scientific journal. Younger, larger, growing firms, and firms with in-house counsel were more likely to change existing terms and to introduce new terms to take advantage of technological and market developments. Contracts appeared to respond to litigation outcomes: Terms that were increasingly enforced by courts were more frequently used in contracts, and vice-versa. The results indicate that software license agreements are relatively dynamic and shaped by multiple factors over time. We discuss potential consumer protection implications as a result of the increased length and complexity of contracts over time.

Project delays and cost: stakeholder perceptions of traditional v. PPP procurement

PurposeThis paper aims to investigate the impacts on project delay from the perspective of construction stakeholders. Specifically, it aims to make a comparison between traditional procurement based on standard contract forms and private/public partnerships (PPPs), for the procurement of public sector projects in Scotland.Design/methodology/approachA structured questionnaire survey was used to elicit perceptions of seven delay impact groupings. Response data were analysed using hypothesis tests to observe perceived differences among these groupings, in respect of each procurement method. Follow‐up semi‐structured telephone interviews further explored stakeholders' views and broader issues.FindingsSignificant differences of perception were identified between the impacts of: client, contractor, designer, financial, labour and material related delay factors. These were felt to have greater “delay potential” under traditional vis‐à‐vis PPP procured projects. There was no significant difference among plant‐related factors. Preference for traditional procurement in achieving “project quality” and “value for money” was observed; but at the perceived risk of potentially encountering more delays. PPP was preferred for achieving best “time performance” and was the favoured procurement option “overall”.Research limitations/implicationsFindings add to the existing body of procurement‐choice knowledge generally and their relationship to project delays and associated costs, specifically.Practical implicationsPractitioners may wish to consider the perceived benefits of PPP procurement in better dealing with potential delay impacts.Social implicationsReduction in delay and construction cost holds potential benefit to all who procure constructed facilities.Originality/valueThe work is novel in the specific contexts of public sector stakeholders surveyed and their geographical location.

The Case Against Statutory Menus in Corporate Law

There seems to be a virtual consensus among corporate law scholars that state legislatures should enable corporations to select governance terms from a menu of predefined statutory rules. In this Article, I challenge this view. The private sector has produced menus of contract terms, such as standard form contracts and model documents, long before the idea of statutory menus became fashionable. There is no evidence that the market for private menus has failed, and legislatures are unlikely to be efficient menu producers. Advocates of statutory menus have suggested a number of rationales, most notably considerations based on transaction costs, network and learning effects, bounded attention, or endogenous preferences. But at closer look, none of these justifications are plausible, if nothing else because they equally apply to private menus. The existing statutory menus do, however, clarify that certain governance terms are legal in cases where this would otherwise be uncertain. Yet that uncertainty should be reduced by other means than menus. For these reasons, menu production should be left to the private sector.

The 'Borat' Problem in Contract Law: Fraud, Assent, and Standard Forms

Two parties reach an oral agreement. The first then presents a standard-form contract, which the second signs without reading, or without reading carefully. When the second party later objects that the first did not perform according to the oral representations, the first party points out that the signed document includes different terms or disclaims prior representations and promises. I call this all-too-common occurrence the “Borat problem,” after litigation over the 2006 movie of that name based on this fact pattern. The Borat problem exists on the blurry border between tort and contract law. This article describes the doctrinal indeterminacy and the underlying normative problem of bilateral opportunism that has caused courts to respond to the problem in a variety of inconsistent and unsatisfying ways. It then makes the case that the costs of contracting can be minimized if parties who draft standard-form contracts are required to obtain “specific assent” from their counterparts in order to contradict or disclaim prior representations, and non-drafting parties are required to satisfy a heightened evidentiary standard before being permitted to challenge the enforceability of standard-form terms on the grounds of fraud or misrepresentation.

The Assessment of Applications for Extension of Time Claims in Malaysian Construction Industry

Extension of time (EOT) has become a common construction activity in many construction projects, particularly when standard forms of contract is applied; and it has been treated as an excusable delay in ordinary construction contract. Contractor and supervising engineer often spend substantial time to verify and assess the delays. A variety of techniques have been employed for such assessments. However, the effectiveness of techniques adopted has been a critical factor in attracting multinational organisation for their participations in construction industry in Malaysia. The purpose of the study was therefore to analyze different EOT evaluation techniques used in Malaysia, and to probe reasons for delays in the submission and assessment of EOT. Issues such as treatment of float time and concurrent delay, agreed programmes, scheduling software and late payment had also been pointed out. Conclusions and findings on the suitability of different techniques used were obtained from the analysis of literature review and questionnaire survey from a consolidation of practitioners. The outcome of the study provides recommendations for solution for EOT related issues as well as improving the contractual procedures.

Innovation in Standard Form Contracts: An Empirical Approach

Innovation in Standard Form Contracts: An Empirical Approach

Further Erosion of State Consumer Protection Remedies for U.S. Telecommunications: Flawed Federal Preemption Under At&T Mobility v. Concepcion

Further Erosion of State Consumer Protection Remedies for U.S. Telecommunications: Flawed Federal Preemption Under At&T Mobility v. Concepcion

Does Contract Disclosure Matter?

Disclosure has long been the preferred regulatory approach to prevent one-sided standard-form contract terms, but its efficacy is unclear. For disclosure to be effective, it must increase readership of contracts and, conditional on reading, affect decisions. I use clickstream data on software shoppers to test these two conditions in the online context. I find that the prominence of disclosure of a software license agreement has little effect on readership. Moreover, those who read the license are equally likely to purchase the product regardless of its one-sidedness. Mandatory online disclosure regimes thus seem unlikely to impose competitive pressure on sellers. (JEL: K12)

Replacement of traditional lectures with computer-based tutorials: a case study

This paper reports on a pilot project with a group of 60 second-year undergraduates studying the use of standard forms of contract in the construction industry. The project entailed the replacement of two of a series of nine scheduled lectures with a computer-based tutorial. The two main aims of the project were to test the viability of converting existing lecture material into computer-based material on an in-house production basis, and to obtain feedback from the student cohort on their behavioural response to the change in media. The effect on student performance was not measured at this stage of development.DOI:10.1080/0968776960040115