In the plant construction industry a lot of standard contracts are available: SIA, ORGLIME, FIDIC, and others. Quite often customers propose to use their own “Special” or “General Conditions” and to apply those standard contracts complementary. This may lead to situations where it gets really difficult (at least for a layman, but not only!) to understand the contractual basis of a deal.
Under such circumstances a checklist with some minimum legal standards to be followed may help to mitigate the risk to enter into a really bad contract. Based on experience such list may contain the following topics:
- No performance prior to signing / entering into force of a contract
- Warranty to be clearly defined: contents / time
- Indemnity obligations to be limited to negligence
- Overall liability has to be capped / limited and liability for consequential / indirect damages must be excluded
- Changes of law or by customer: Customer to bear risks and costs
- Force Majeure Clause is mandatory
- Liability for infringement of intellectual property should be limited
- Liability for soil condition and local infrastructure must be excluded
- One sided confidentiality clauses are not acceptable
- Arbitration instead of ordinary courts is recommended
Such list is of course dependent on the specific business but many years of experience show that the above topics are those who may create the most “headache” after signing of the contract. It is worthwhile to invest some thoughts in such checklist and to train employees accordingly.