ABSTRACT
The allocation of risks to the various parties to a construction contract is one of many functions of the contract between them and should be based on one or more of four criteria that are identified and explained in this chapter.
The main criterion used in standard construction contracts is that of control, either of the probability of occurrence or over the consequences of a risk, if and when it eventuates. Once a risk is allocated to a party, it would be natural and logical for that party to bear its resultant consequences. However, it would also be logical for one of the parties to be in control of a risk, whilst having its consequences borne by another party, provided that the liability for these consequences is shifted to that other party through an indemnity provision.
The four criteria for risk allocation are identified and discussed in this chapter with reference to how courts have analysed and determined such risk allocation in a number of important cases.
