Z clauses are used in the construction industry to amend standard form New Engineering Contracts, known as NEC contracts. In this final edition, we take a look at examples of Z clauses and consider the risks of getting Z clauses and other contract amendments wrong.
The construction industry, perhaps more than any other, relies on the use of standard form contracts, such as JCT contracts, FIDIC contracts and NEC contracts. NEC contracts are a suite of standard construction contracts intended to promote partnership and collaboration on particular projects.
Z clauses can be used and inserted into NEC contracts to allow the parties to agree additional terms and conditions, in order to cater for specific needs relating to a project and the terms of its delivery.
Z clauses are often used as the provisions of NEC contracts as these are not as extensive as some other standard form construction contracts. Parties therefore often seek to amend the core clauses of NEC contracts to add detailed provisions according to the particular requirements of the project.
A commonly used Z clause is one that introduces a general obligation on the contractor to comply with applicable laws, statues, codes of practice and regulations. Such obligation does not feature as a standard clause in NEC contracts, so employers will often seek to include it in order to provide a direct contractual remedy against contractors for any breach in this area. Another common Z clause is the addition of collateral warranties.
Whilst generally considered necessary for many projects, modifying clauses in standard forms of construction contract can change the balance of risk and create legal ambiguity. A poorly drafted Z clause can be problematic if it does not work effectively with the core clauses in the standard contract. For example, a Z clause which amends one part of the core clauses may impact upon other core clauses as there may already be a complex interaction between many of the terms.
Z clauses should therefore only be drafted by individuals with a good knowledge of NEC contracts and who understand both the intention of the parties and how the clauses will affect the rest of the contract.
As with all contract drafting and, in particular, amendments to established terms and conditions, it is important to consider the wider impact of the proposed changes on the remaining clauses and the contract as a whole. If additional clauses are required, they should complement existing contract terms and avoid any duplication or ambiguity.
Beverley Flynn