Towards a modern construction contracts: parallel developments in the UK and China

Abstract

Disputes arise because of the opposition of interests, values or objectives when parties perceive that these are incompatible. In the construction industry, these differences in interests and objectives are illustrated by the multi-parties involvement in the project development process. These inherent potential conflicts are ideal for disputes to flourish and can be caused by poor communication and a lack of trust in the relationship between the parties. Most disputes arise out of the contract. The purpose of contract law is to formalise transactions. Contract planning accommodates this mechanism for dispute resolution and is viewed as a means of ‘gap-filling’ in the neo-classical contract system. The choice and form of contract can play a significant role in the governance of relationships between parties to a contract. Two processes are essential to contract planning, namely, defining goals (along with related costs of their attainment) and communication. It is suggested in the Latham Report of 1994, entitled “Constructing the Team” in the UK, that the construction industry should embrace a “Modern Contract”. The New Engineering Contract (“NEC”) is widely believed to include virtually all the principles of such a contract. This paper sets out the principle ingredients and changes made since Latham 1994 to demonstrate whether or not the NEC is truly compliant. This paper also reviews the parallel progress towards a modern contract in China, comparing such progress being made on the Chinese Model Contract with that of NEC. This paper also briefly identifies that steps are being taken to avoid adversarial standard forms of contract but, perhaps more importantly, touches on a common desire for culture change in the management of construction projects and may result in convergence between China and the UK.