CIC warns against 'onerous' contract amendments

The Construction Leadership Council (CLC) is warning the construction sector to avoid amending contracts to include "onerous and/or difficult to insure" terms.

In a statement, the CLC urged clients to adhere to standard building, engineering, and professional services contracts with minimal amendments, arguing that excessive modifications create risks, drive up legal costs, and complicate the insurance process by imposing uninsurable or burdensome liabilities.

The CLC emphasised the importance of simplifying contractual liabilities and clarifying roles concerning fire safety design, to align with recommendations from the Grenfell Tower Inquiry's Phase 2 report. This approach also aims to shield contractors and consultants from covering losses disproportionate to their "fair share" in cases where a party lacks adequate Professional Indemnity Insurance (PII) or has gone into administration. The CLC notes that rising indemnity limits, paired with the lack of control clients have over contractors' ability to secure PII, exacerbates the disconnect between liability exposure and available insurance coverage.

The CLC's PII Working Group warned that amending standard terms often introduces liabilities beyond what contractors’ or consultants’ PII policies can support, leading to potential financial ruin for these parties and unresolved claims for clients. As a remedy, the Working Group recommends that clients and their legal teams explain necessary amendments and document them clearly within the contract, using strike-throughs for deletions and a rationale schedule for changes. This practice is particularly critical for SMEs that may lack the resources to evaluate complex modifications.

Samantha Peat, Chair of the CLC PII Working Group, advocates for a balanced approach to risk transfer within the supply chain, suggesting that responsibilities be assigned to appropriately qualified and resourced parties. 

"A sensible approach will simplify risk allocation, give clarity to the project team and their PII providers, and address the concerns for which the CLC PII Working Group was originally formed, namely, to address concerns about cost and efficacy of Professional Indemnity Insurance in Construction," she said. "It will also support the focus on accountability, competence and the need for better information management called for by Dame Judith Hackitt and enshrined within the Building Safety Act and the wider reform of the Building Regulations."

The full statement can be read here.