Risks and common pitfalls in commercial contracts continues to be a hot topic of interest for our readers.
This year we began a series of articles to address some of the common issues in commercial contracts to provide our readers with practical tips to help them navigate this space. The first article in the series - Dealing with the unknown in contracts – frustration and force majeure - considers the doctrine of frustration and force majeure and its effect on the parties' contractual obligations to each other. Force majeure clauses are often overlooked in contract negotiations. Our article considers the importance of force majeure clauses and how they can be used to overcome the limited application of the doctrine of frustration. The second instalment in the series - Problematic Contract Issues - Insurance - considers insurance clauses when drafting and general insurance issues. Featuring a practical checklist of insurance issues for purchasers and key insurance law takeaways, this article is a must read for anyone keen to understand insurance as a vital component of the risk and liability matrix of the contractual relationship. We look forward to continuing this important series next year.
Often, the courts also provide us with timely reminders of the consequences of poorly drafted contract clauses. This year was no different. Our article Caution: Indemnity ahead – Court of Appeal overturns decision in favour of CSR – reported on the NSW Court of Appeal decision, CSR Limited v Adecco (Australia) Pty Limited [2017] NSWCA 121 – which served as an important reminder of the consequences of a poorly drafted indemnity clause. Indemnities are complex and can have significant consequences, and whilst they are often fiercely negotiated, are not always properly understood. Key lessons from the case include the importance of plain English drafting and using 'arising out of' and 'in connection with' to achieve a wide indemnity clause.
Another important lesson was learnt from the NSW Court of Appeal in the case of Port Macquarie-Hastings Council v Diveva Pty Limited (2017), summarised in our article Bad drafting leads to loss of chance damages in tender dispute with local council, which highlighted the importance of certainty in contracts and the dangers of ambiguous, imprecise drafting in contracts. The case is also an important decision in the context of damages for breach of contract, particularly loss of chance damages in relation to loss of future opportunities with a government tendering entity.
Key developments in procurement
There were two major developments in the procurement space this year: the release of the world's first International Standard for sustainable procurement, the ISO 20400: 2017 and the introduction of the Government Procurement (Judicial Review) Bill 2017 into Parliament which, if passed, will be Australia's first statutory regime for tender challenges. For a more detailed analysis on these developments, refer to our articles A new standard in procurement – a closer look at ISO 20400: 2017 and A new dawn for bid challenges and continue to watch this space for updates on both of these developments in the new year.
Areas of improvement in the construction and infrastructure industry
The security of payment regime continues to be an area of uncertainty for contracting parties in the building and construction industry, especially across jurisdictions. As outlined in our article, National Review of Security of Payment Laws - what can we expect in December? this led to the Federal Government announcing a national review of the security of payment laws - the Murray Review - aimed at addressing the ongoing issues and inconsistencies plaguing the security of payment regime. The final report of the Murray Review is currently being prepared for the Minister and we look forward to reporting on its findings in the new year.
Another development this year in the C&I space was Australian Standards' announcement that the AS11000 was to be abandoned with all work on the draft AS11000 to cease. Whilst not without its shortcomings, the AS11000 was a chance to create an updated, uniform industry standard that reflected current legislation, and clarified commonly disputed aspects of the contract and its governance that remained uncertain, as further discussed in our article AS 11000: General Conditions of Contract – opportunity lost? Now that its development has been put on hold (whether permanently or temporarily), parties who were awaiting its release (especially principals) should carefully review and improve their current contracts, or consider developing new or bespoke contracts.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.
