Why Construction Contracts Matter More Than We Think

By Tosin Ajakaiye

When people think about major construction projects, they often picture cranes, engineers, cement mixers and workers on site. Rarely do they think about contracts. Yet, behind every successful road, housing development, bridge, power plant or commercial building lies a carefully structured agreement that determines who carries risk, who gets paid, how that payment is made, how disputes are resolved and ultimately whether the project succeeds or fails.

Construction contracts may not attract public attention, but they quietly shape the delivery of infrastructure and investment across Nigeria. Unlike many commercial arrangements, construction projects involve significant technical complexity and multiple parties working toward a common objective. Developers, contractors, engineers, consultants, suppliers and financiers often operate within tight timelines and financial constraints. With so many moving parts, relying on verbal promises or informal understandings is simply not enough. This is why construction contracts are essential.

More importantly, the construction industry frequently relies on what are known as standard forms of contract. Standard forms are pre-developed contract frameworks prepared by independent professional bodies and refined over decades of industry practice. Rather than drafting every construction contract entirely from scratch, parties can adopt these tested frameworks and modify them where necessary to reflect project-specific requirements.

Among the most widely recognised forms are the Fédération Internationale Des Ingénieurs-Conseil (FIDIC) contracts, the New Engineering Contract (NEC), the Joint Contracts Tribunal (JCT) forms and various domestic contract templates used by government agencies and professional institutions. While these names may sound technical, their underlying purpose is straightforward: to provide a clear and balanced framework for delivering construction projects.

The popularity of standard forms is not difficult to understand. First, they save time. Preparing a construction contract from the ground up can be expensive and time-consuming. Standard forms allow parties to begin negotiations from an established framework rather than a blank page.

Second, they reduce transaction costs. Project development already involves significant expenditure in design, procurement and financing. A recognised contract form reduces legal uncertainty and minimises the cost associated with developing entirely bespoke agreements.

Third, they assist project procurement and bidding. Anyone familiar with construction procurement understands the sheer volume of documentation involved in tendering and contractor selection. Standard forms create a degree of predictability and consistency that helps both employers and contractors assess project obligations more efficiently.

Perhaps most importantly, these forms contain clauses that reflect years of practical industry experience. Construction disputes often arise from issues such as delays, variations, payment disputes, defective work, force majeure events and unclear risk allocation. Standard forms seek to anticipate many of these problems before they occur.

This does not mean they eliminate disputes entirely. Construction remains an inherently risky business. Ground conditions may differ from expectations. Material prices may rise unexpectedly. Design problems or delays may occur. However, standard forms provide mechanisms for managing such events and clarifying the rights and responsibilities of the parties involved.

In Nigeria, FIDIC and JCT contracts have historically enjoyed considerable popularity, particularly in infrastructure and building projects. Their appeal lies partly in familiarity and partly in flexibility. Take FIDIC, for example. Its contractual structure distinguishes between General Conditions, which provide standard provisions intended to apply broadly, and Particular Conditions, which allow parties to tailor provisions to suit project-specific circumstances. This means parties are not locked into a rigid framework. Instead, they can retain the benefit of internationally recognised drafting while still adapting the agreement to local realities and commercial objectives.

Nevertheless, standard forms are not without criticism. Some argue that they may favour particular industry participants or fail to fully capture unique project risks. Others contend that over-reliance on imported contractual models may not always reflect local construction practices or regulatory conditions.

These concerns deserve consideration. Indeed, as Nigeria continues to expand its infrastructure base, there is a strong argument for deeper engagement by legal professionals, engineers and policymakers in developing contract frameworks that respond more directly to domestic realities.

While contracts may appear distant from the physical structures we see around us, they form the invisible architecture that holds projects together. And whether a contract is based on a recognised standard form or drafted on a bespoke basis, one principle remains constant: no party should sign without fully understanding the obligations and risks involved. In construction, as in business generally, the details matter. Often, they matter more than we realise.

Ajakaiye is an infrastructure professional specializing in PPPs, energy project finance, and construction risk management.