ABSTRACT
Chapter 4 considers the objectives and expectations of the parties in construction contracts, and how these relate to successful and unsuccessful contracts. Risk, in the sense of a chance of not achieving the contractual objectives, is central to the terms and operation of a contract. The scope of a Contract involves not only a definition of the extent of the obligations of each contractual party, but also considerations of time, cost and quality of contractual performance. Each of these characteristics entails risks that the contractual objectives will not be achieved. However, it is suggested that risk of non-performance can be reduced by clear definition of scope, on the assumption that the clearer the objective definition of the contractual scope, the closer the parties’ subjective expectations will be aligned with the contractual objectives. The extent to which a contract recognises and “allocates” risks, and the parties’ understanding of and management of risks may be a major factor in whether the Contract ultimately results in a dispute. The Abrahamson Principles are widely known as the basis of “fair” risk allocation. The central theme of this chapter is that contracts have a central role to play in risk minimisation.
