RISKS EMANATING FROM THE CONSTRUCTION CONTRACT FORMATION PROCESS

Abstract

The construction process is normally commenced based on a contract that defines the relation between the Employer and Contractor, or Contractor and subcontractor. However, it is common in the construction industry that works commence before the formation of the contract. Also, sometimes other mismanagements could occur throughout the contract formation process. This thesis endeavors to tackle the mistakes in contract formation and the risks that reside within, in addition to simulation of scenarios related to the commencement in the execution phase of the construction contract formation timeline for the 1999 and 2017 FIDIC conditions. The method applied begins with going through the literature on contract formation, then the 1999 and 2017 FIDIC contract conditions pertaining to the construction contract formation are compared. Also, scenarios on the Advance Payment mechanism are simulated and studied. Furthermore, to gain a real-life insight on contract mismanagement, relative case laws have been examined to examine the risks that might be faced. The new FIDIC conditions seem to incur pressure on the Contractor in the timeline borders. However, contracts, and standard contract conditions whether amended or not, remain the pillar for proper contract formation and ensure the protection of the rights of the parties. Alternatively, a conclusive letter of intent in addition to the attentiveness of the contracting parties could spare them losses and expenses of disputes and litigation.