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Procurement and contracts

Reading contract amendments as a commercial risk

Nobody signs a standard form any more. The deal is in the amendments, and they arrive as an appendix nobody prices.

JCT amendments, and the equivalent under any other form, are where the commercial deal actually sits. The printed form allocates risk in a balanced way that reflects decades of industry practice. The amendments move it, usually in one direction.

That is legitimate. What is not workable is a process where the amendments are drafted by lawyers, priced by nobody, and read for the first time by the site team eighteen months later.

Amendments have a price

Every risk moved onto a contractor is priced by that contractor, either in the tender or later through change. A schedule of amendments transferring ground risk, weather risk, statutory risk and design risk is not free, whatever the tender total says.

Where the market is competitive, bidders price it. In cases where it is not, they qualify it, and the qualification comes back to the client anyway. Either way the client pays for the transfer.

The useful discipline is to ask bidders to price the amendments as a separate item, or at least to identify which ones they have qualified. That makes the trade visible instead of buried.

The amendments that matter most

Extension of time and loss and expense provisions. Narrowing the relevant events or making notice a strict condition precedent changes the contractor's exposure fundamentally.

Payment provisions and any attempt to modify the statutory regime, which has limits on what it permits.

Ground conditions and existing structures, where the printed forms allocate risk in a particular way and amendments frequently reverse it.

Design responsibility, including fitness for purpose obligations, which may not be insurable and therefore may be worth less than they appear.

Caps and limitations of liability, which decide what a client actually recovers when something serious goes wrong.

Fitness for purpose and the insurance gap

A common amendment raises the design obligation from reasonable skill and care to fitness for purpose. It sounds like better protection and it may be worth nothing.

Professional indemnity policies commonly exclude fitness for purpose obligations. Where the party carrying the obligation has no assets beyond their insurance, an uninsured obligation is an obligation against a company that cannot meet it.

Whether a particular obligation is insurable is a question for the party's brokers and their solicitors. What can be said commercially is that a warranty worth nothing is worse than a warranty that is honest, because the client thinks they are covered.

Reading them commercially

The exercise is not to interpret the clauses, which is legal work. It is to identify what has moved and to assess what that movement is worth in the context of this scheme.

A ground risk transfer matters enormously on a constrained urban site with no ground investigation and very little on a surveyed greenfield plot. The same amendment carries different value on different projects.

That assessment sits alongside the legal review rather than replacing it, and the two are considerably more useful together than either alone.

Amendments to subcontracts

Main contractors pass amendments down, and the terms a subcontractor accepts affect the main contractor's ability to perform. A supply chain squeezed on payment terms and risk allocation is a supply chain more likely to fail.

For a client that matters, because a subcontractor insolvency mid contract is disruptive regardless of where the contractual risk sits.

For a lender it matters more, and it is one of the things worth understanding at appraisal rather than after.

Timing

Amendments should be issued with the tender documents so bidders price the contract they will sign. Issuing them afterwards, or negotiating them post tender, removes the competitive pressure entirely.

That happens routinely because the legal work runs behind the technical work. The result is a client negotiating terms with a contractor who already knows they have won.

The cost of that is invisible and real. Where the schedule cannot be finalised in time, issuing a draft with the tender is far better than issuing nothing. The consequences of ambiguity are set out in contract interpretation disputes.

What this means for you

Read the amendments before the form, and ask what each one is worth on your scheme rather than in general.

Then issue them with the tender. A contract negotiated after selection is a contract negotiated without leverage, and every amendment traded away at that point is one the client is paying for twice. Our approach sits under tendering and procurement.

Have a schedule of amendments and no idea what it costs?

Send the contract and the amendments. We will tell you which risks have moved and what each one is worth.

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