Hayley Steel (above left) is a partner and head of non-contentious construction, and Simone Protheroe is managing associate in the projects, infrastructure and construction team at law firm Foot Anstey<\/i><\/b><\/p>\n
Construction projects often include parties with differing interests entering into agreements with a developer. Examples of third party agreements (TPAs) will vary between projects and stakeholders but could cover finance, lease, development, sale or section 106.<\/span><\/p>\n All agreements relating to a project must operate collectively in terms of key project risks and stakeholder interests. Importantly, the developer will need to pass on risks contained in the relevant TPAs to the party who will be best placed to mitigate them, often the contractor.\u00a0<\/span><\/p>\n \u201cSome insurers are becoming increasingly wary of wide indemnity clauses\u201d<\/span><\/p><\/blockquote>\n Broadly speaking, there are two approaches to ensure the contractor understands and is bound to comply with the obligations set out in a TPA: a \u2018catch all\u2019 clause or a detailed \u2018flow down\u2019 review.<\/span><\/p>\n Perhaps the most comprehensive way to deal with TPAs is to review them carefully, extract all relevant obligations the developer will be expecting the contractor to be responsible for, and add these as express provisions within the building contract.\u00a0<\/span><\/p>\n This process can be time-intensive, requiring cross-checking between the building contract terms and those of the TPA and bespoke wording to pick up any \u2018gaps\u2019 between the two. It may also feel heavy-handed where the parties have a pre-existing working relationship.\u00a0<\/span><\/p>\n However, this approach has the advantage of generating a clear and bespoke set of obligations, reducing ambiguity on which risks the contractor is accepting. It can also allow for a more collaborative project, as a party can assess and respond to the other\u2019s needs and concerns from the outset.\u00a0<\/span><\/p>\n A catch-all clause is a brief and broad common clause which often simply refers to the contractor complying with any relevant TPA which has been, or will be, entered into by the developer. This can be helpful to a developer who is not yet aware of the nature of any obligations in potential TPAs, but wants the contractor to know that there might be relevant obligations that the developer intends to pass on. If no relevant TPA comes into existence, the obligations simply won\u2019t apply.\u00a0<\/span><\/p>\n However, there are some points to consider when taking this approach.<\/span><\/p>\n An experienced contractor spotting a catch-all clause will typically ask for copies of all relevant TPAs to avoid being bound by obligations they are not aware of. This might require obtaining the third party\u2019s consent, or the TPA may contain sensitive information which the developer prefers to keep confidential.\u00a0<\/span><\/p>\n A way around this, where possible, is to provide a redacted copy of the TPA with commercially sensitive information hidden.<\/span><\/p>\n If a potential breach by the contractor may expose the developer to material losses, the developer might oblige the contractor to indemnify the developer for any losses in this event.\u00a0<\/span><\/p>\n However, some insurers are becoming increasingly wary of wide indemnity clauses, and may seek to put a \u2018blanket ban\u2019 on any indemnity provisions, leading to longer negotiations\u00a0<\/span><\/p>\n If the TPA is complex and extensive, it is not realistic to expect the contractor to know what all the relevant provisions are simply by accepting a catch-all clause. Putting the contractor on the hook this way may not be commercially reasonable, especially in cases involving real, significant risks.<\/span><\/p>\n Ultimately, a developer\u2019s approach will depend on the project. A hybrid stance is often the way forward, expressly drafting key provisions into the contract alongside a catch-all to allow the parties flexibility during the works. Developers and contractors must collaborate, with clear discussions around who can control and mitigate certain project risks.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" Hayley Steel (above left) is a partner and head of non-contentious construction, and Simone Protheroe is managing associate in the projects, infrastructure and construction team at law firm Foot Anstey Construction projects often include parties with differing interests entering into agreements with a developer. Examples of third party agreements (TPAs) will vary between projects and …<\/p>\n","protected":false},"author":1,"featured_media":535599,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ep_exclude_from_search":false,"footnotes":""},"categories":[578,567],"tags":[],"class_list":["post-535622","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legal","category-opinion"],"yoast_head":"\nKey considerations<\/span><\/h3>\n