Practical Law

The documents included in a building contract can be voluminous. In particular, the works may be described in numerous technical drawings, each of which is large and expensive to reproduce. Can parties save time and money by inserting electronic copies into a building contract, perhaps saved onto a CD-ROM?

The law

In principle, there is no reason why a contract cannot be formed by electronic correspondence or include a mixture of hard copy and electronic media, such as a CD-ROM. Even contract execution is possible via an electronic medium.

Evidentiary concerns

The main stumbling block when using electronic media is evidentiary, both in terms of possible fraud by one party and the risk of innocent confusion when the works commence. The construction industry is extremely sensitive about the possibility of contracts being formed with the wrong provisions or drawings. This is illustrated by the fact that:

• Parties often insist that every page of the contract bundle, including the drawings, is initialled by both parties.
• Many parties prefer that a contract is physically bound in a way that makes removing or inserting pages difficult.
• Even though the digital version of the JCT’s contract service allows parties to amend contract wording, the final printed document is not a conformed copy, but takes the form of a “track changes” version showing every alteration to the original wording.

The JCT’s position is instructive. To take one example, the JCT Standard Building Contract, 2011 edition (SBC11) allows parties to identify the drawings in the recitals and does not require hard copies. However, the JCT’s own guidance notes to the SBC11 “stress the need for proper identification of drawings”. They go on to state that even listing the drawings may not be adequate, concluding that:

“The fact that identifiers are not always changed to reflect the change in a drawing or document reinforces the desirability of initialling or signing the relevant documents for identification purposes.” (Paragraph 14, SBC11 guidance notes.)

It is difficult to compare the JCT guidance with other forms of contract, as many are silent or ambivalent on this point. For example, the NEC guide NEC3: how to write the ECC Works Information indicates that parties can use a “contents list or documents or both.”

Accessibility

Including a CD-ROM in a building contract also raises the question of how the information on it will be accessed. Will all the parties have access to software that can open the drawings? Does there need to be a contract term dealing with the format of electronic documents? Even in the computer age, many construction parties still operate at a relatively low technology level.

Taking the question of accessibility even further, will the drawings be accessible to other possible users, such as lawyers, adjudicators, arbitrators or judges? Even if the information is stored in an industry standard format, will it be so easy to access some years after practical completion, when technology has moved on?

Corruption of electronic media

The use of modern technology is increasing in construction, for example through building information modelling (BIM). However, even in BIM there is no suggestion that the original contract itself should not include hard copy drawings. In addition, the Construction Industry Council (CIC) BIM protocol includes limitations of liability protecting parties when communicating information electronically. Those limitations partly reflect worries about information being corrupted when communicated or stored. Regardless of who should bear that risk, parties have to acknowledge that it exists and is a concern for them and their insurers.

This leads to a conclusion that may seem perverse to technology-minded practitioners: the industry trusts roughly folded, often shoddily bound paper copies of drawings over those stored on an electronic medium.

Commercial decision

Overall, the factors mean that the decision to use a CD-ROM requires parties to weigh up the risk of confusion against the reward of saving money on photocopying. That means assessing:

• The party to the contract.
• The value of the project.
• The number and complexity of the drawings.
• The potential cost saving that can be achieved.
• The quality of any safeguards that can be found to avoid confusion.

Possible compromises

For all these reasons, using CD-ROMs or other permanent electronic storage media remains relatively infrequent despite the potential cost savings. However, that is not to say that it does not happen or that projects following that path are doomed to difficulty. In addition, there are half-way-house solutions that parties may wish to consider. For example, the parties might agree to:

• Include hard copies of key documents, while including less important documents on a CD-ROM (or even just listing them in the contract documents). Of course, this raises the problem of deciding what is important and what is not, a judgement that may be questioned if a dispute arises.
• Print hard copy drawings in a cheaper, reduced size for inclusion in the contract documents, knowing that the parties have access to the full size documents for the purpose of the works. This also raises some problems, including:
  • the tacit acknowledgement that the contractor will work from something different from what appears in the building contract, which may cause evidentiary problems of its own, especially if the two sets of drawings turn out to contain discrepancies; and
  • the fact that, unless done with care, reducing the size of drawings often distorts their scale. This will cause obvious problems if the documents are actually used for the works or even if they are referred to in a later dispute.

A wider question

With the rise of electronic technology, it may seem inevitable that electronically formatted documents will replace hard copies, but CD-ROMs have been around since the 1980s, so progress seems rather slow. That is because there are genuine reasons for a party to prefer hard copy drawings in its contract documents, even in the twenty-first century.

Despite this, there is room for disagreement, particularly if we expand the question to encompass other types of document. For example, why should a spreadsheet be printed in hard copy given that, unlike a conventional drawing, it is specifically designed for use via electronic media? Anyone who has ever printed off a complex spreadsheet will appreciate how little it adds to a contract bundle.

No doubt readers have their own views and we would be interested to hear them.