A modern contract: Developments in the UK and China

Abstract

The form of contract plays a significant role in the governance of relationships between parties. Recent research in project procurement emphasises relationships and cultural/behavioural issues. Such relationships operate within a formal (contractual) framework as well as an informal (interpersonal/social) framework since no contract is entirely transactional or entirely relational in nature. Sir Michael Latham suggested a cultural/behavioural change is required in the construction industry such that project participants should embrace a 'modern contract'. This paper examines the 13 Latham requirements of a modern contract in the latest edition of the NEC. The requirements are categorised, under what are labelled here as pillars of a modern contract, namely 'fairness', 'roles and functions of project participants', and 'payment operating mechanisms'. Developments in contracting practices in the Chinese construction industry, with a cultural tradition grounded in Confucian values of cooperation and sharing, are then examined and juxtaposed against the UK construction industry's movement towards a modern contract rooted in relational contracting. The developments show that China has nurtured a change towards the more formal, contractual, system of rights and obligations in their 'modernisation' of construction procurement in sharp contrast to the UK movement towards greater collaboration and cooperation.