The question often arises why do parties not contract under the common law and why is it necessary to enter into a detailed and voluminous written construction contract?

In terms of the legal framework in South Africa one is allowed to contract out of the common law and reduce one’s reciprocal rights and obligations to writing in the form of a construction contract.  Nothing prevents the parties to conclude and execute a contract under common law but this in itself provides for complications that are best dealt with in a properly documented construction contract.

The common law does not recognize, for example, the principle of an extension of time, variation orders and interim payments.  The common law, as previously noted, also does not require a construction contract to be in writing (except under Clause 13.1(a), of Act No. 95, 1998 HOUSING CONSUMERS PROTECTION MEASURES ACT, 1998 requiring that “A home builder shall ensure that the agreement concluded between the home builder and a housing consumer for the construction or sale of a home by that home builder shall be in writing and signed by the parties“) but, on the other hand, provides that in the absence of an express agreement that a contractor only has to deliver the works within a reasonable time and a certain agreed price.  Just the concept of “reasonable time” may vastly differ, as a matter of opinion, between a contractor and an employer.

The parties to a contract, when contracting out of the common law, are however not allowed to contract out of the Constitution or other Status in South Africa.  Such example would be that the parties will not be allowed to contract on the basis that the Occupational Health and Safety Act or the Construction Regulations would not apply on the contract in question.  A proper construction contract would in any event provide, for example, that “the Contractor will be under an obligation to comply with all applicable laws, status, by-laws and regulations, etc. and must provide proof thereof, if requested by the Employer.”

Concluding contracts under a proper form of construction contract is therefore absolutely necessary to ensure both parties are protected in terms of the agreed price for delivering the works (and the form an manner in varying such price), the time for delivery of the works (and any changes to the time for delivery) and the frequency of payments until such time the works is completed.  A proper construction contract, in its appropriation of risk, also clearly identifies what is considered a contractor’s risk and employer’s risk and these issues, in itself, can become a minefield of disputes if contracted for under common law if the intentions and the basis of consensus are not clear from the construction agreement concluded between the parties.

However, if the parties have contracted out of the common law by way of a construction agreement and an issue arises under the contract for which no provision was made in the contract documentation itself, then the parties are entitled to “step into” the common law to find the appropriate remedy. An example would be that if the construction agreement is silent on the payment of interest on late payments, then that does not automatically mean that the Contractor is not entitled to the payment of interest on late payment. The common law default interest would then apply, also known as mora interest.

Another example would be if the construction agreement is silent on a penalty stipulation for late completion, the Employer under the agreement may be entitled to a claim for financial damages.

The recognized construction contracts in South Africa fully (and in sufficient detail) take care of the rights, obligations, remedies and risks associated with a construction project and are, in a nutshell, listed in the CIDB’s STANDARD FOR UNIFORMITY IN ENGINEERING AND CONSTRUCTION (August 2019) as follows:

1. Conditions of Contract as published by the International Federation of Consulting Engineers (FIDIC).
2. General Conditions of Contract for Construction Works as published by the South African Institution of Civil Engineering (GCC)
3. NEC3 Engineering and Construction Contract as published by the Institution of Civil Engineers
4. JBCC Series 2000 Agreement as published by the Joint Building Contracts Committee

*We note with interest that the NEC4 is not listed in the SFU of August 2019.