Builders and Contractors Exchange
Weekly Bulletin: 8 feb 2008
Making Sense of ConsensusDocs
Standard form contracts are a necessary evil in the construction industry. Most participants in construction projects don't look for comprehensive legal advice every time they enter into a deal. Imagine the headache of having to hire a lawyer to draft the agreement each and every time you submitted a bid on a project. Although standard form contracts save time and expense, they are often used by parties who have unequal bargaining power and often generate the potential for liability, financial and otherwise. For every construction industry player who has ever felt uneasy signing his name on the dotted line, ConsensusDocs seem like an effective solution to the pitfalls of traditional standard form contracts.
According to the coalition of twenty industry groups that created them, ConsensusDocs are a complete set of over seventy standard construction contracts and forms, drafted with "extensive and exclusive participation from leading industry associations." ConsensusDocs differ from traditional standard form contracts in that they were drafted with across-the-board input and participation from owner, contractor, subcontractor and surety industry representatives. Noticeably absent from the list of groups praising ConsensusDocs are prominent affiliations of design professionals, including the National Society of Professional Engineers, the American Society of Civil Engineers, the American Council of Engineering Companies and the American Institute of Architects. For the most part, the ConsensusDocs approach eliminates the problem of perceived bias often encountered with traditional standard form contracts produced by individual construction associations. ConsensusDocs grew from document programs created by the Associated General Contractors of America and the Construction Owners Association of America. Although these forms served as the drafters' starting point, ConsensusDocs do not favor general contractors or owners (or any other entity) because each industry association "had a true seat at the drafting table" and "a full vote in deciding final contract terms." The new system is touted by its creators as "represent[ing] the best interests of the project, rather than a single party." ConsensusDocs are effective because they allocate risk fairly amongst parties. Parties benefit from contracts that yield better project results as well as fewer disputes.
A particularly interesting feature of ConsensusDocs is the considerable attention devoted to dispute resolution. The system not only focuses on reducing disputes, but also provides a more collaborative approach to dealing with those disputes that do arise. Direct communication and problem resolution are encouraged in each ConsensusDocs contract and form. When these processes fail and relationships between parties break down, the ConsensusDocs methodology is unique in that, unlike typical standard construction contracts, mediation is required, as a prerequisite even to arbitration. Another interesting aspect of ConsensusDocs is that they will be distributed only in electronic form, using a program called DocuBuilder. This may be an attempt to limit the potential for copyright violations that occur when unauthorized (i.e. unpaid) use of an organization's form is made, as is often the case with AIA or AGC documents.
ConsensusDocs debuted only a short time ago on September 28, 2007, so the full extent of their effect on construction relationships is yet unknown. While there is no substitute for specialized legal advice tailored to parties' individual and specific needs, sometimes circumstances make the use of standard form contracts unavoidable. Although their widespread adoption in the construction industry is still in its infancy, ConsensusDocs appear to be a sound alternative to traditional standard form contracts because of their evenhanded consideration of the needs of various parties. To learn more about ConsensusDocs, go to the following website: http://www.consensusdocs.org.
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This article is meant to bring awareness to this topic and is not intended to be used as legal advice.