An evaluation of the effectiveness of standard form contracts in meeting the expectations and needs of business users

It has long been recognised that business users pay limited attention to the content of the contracts they use and the process of forming and executing a contract. This is especially true of standard form contracts used across millions of business transactions daily. Two particular topics that have been identified as potential areas of concern that have generated previous empirical studies are those of contract formation and use of contracts in resolving disputes. The first of these is fundamental to achieving the framework for the transaction and agreement to the deliverable and the compensation, but is rarely seen to be a problem. The second of these should be one of the core reasons for entering a formal legal agreement, but business users prefer to use alternative means of resolving issues which they consider are more effective, quicker and more likely to retain business relationships. These issues are more relevant with standard form contracts, where there is no transaction specific detail and less effort exerted in concluding the formal legal requirements for either formation or resolution. This work is intended to review these issues in relation to standard form contracts, in the UK building services industry in the current environment. To achieve this, new empirical work is undertaken in two areas. Firstly, a survey of the knowledge and views of a sample of contract users from different companies and different specialisms provides a picture of the opinions of business. Secondly a sample of standard form contracts from the same segment is reviewed to assess whether the contracts align with these views and how they deal with the key issues identified in the survey. The results are evaluated against previous work on the subject and variances and consistencies identified with a view to understanding whether standard form contracts are effective and where not, what options are available. Ultimately, whether they satisfy a need for formal relationships and what is their relevance to business effectiveness.