Assessing contractors’ understanding of standard forms of contract in south african construction industry.

Abstract

Standard forms of contract account for more than 99% of all contracts entered. In the South African Construction Industry, standard forms of contracts have been developed by independent professional bodies in order to provide some uniformity through standardization of the contractual terms and conditions. These contracts have been designed to specifically cater for the special circumstances relating to construction. Studies have shown that the lack of clarity in contract documents can lead to misunderstanding and disputes between parties.The complex design, structure and language usage of standard forms of construction contracts most commonly used in South Africa, result in the misunderstanding by building contractors of their rights, duties and responsibilities with negative impacts on their overall project performance and long- term business sustainability. This study attempts to assess the underlying causes of contractors poor understanding of the standard forms of contracts commonly used in the South African Construction Industry. The primary objectives of this study were: • To examine the effects of the lack of understanding of standard forms of contracts by contractors • To determine if the complex design, structure and language usage of standard forms of contracts make them difficult for the contractor to understand. • To determine if contractors know and understand their rights, duties and responsibilities. • To determine whether training in the use of standard forms of contracts will improve the performance and management of projects.

A quantitative research method was adopted where a questionnaire with closed-ended questions was distributed to conveniently sampled construction contractors in the KwaZulu-Natal province of South Africa. A total of 134 questionnaires were administered and 67 were returned, translating to a response rate of 50%. Findings from the study showed that respondents had experienced challenges with the understanding of standard forms of contract. Participants in the study reported high levels of agreement with the contributing factors to the lack of understanding of standard forms of contracts. Furthermore, the study confirmed that the complexity, structure and language use of the standard forms of contract make contractual agreements difficult to understand. Contractors perceived the contract forms as complex with too much legalese and ambiguity. The study revealed the difficulty of contractors to understand and interpret the contents of the contract which might likely have resulted in the misunderstanding of their contractual rights and duties. Training in the use of standard forms of contracts allowed the contractor to improve performance and management of projects. It was evident that the attributes associated with training in construction provided contractors with the opportunity to understand their obligations. This research focused on the construction industry and was limited to contractors in the KwaZulu-Natal province in South Africa. An extension of the study to other industries and contractors in other provinces is recommended. The possibility of obtaining accurate and thorough findings on the use of standard forms of contracts in South Africa will be increased, and comparative studies can be conducted.