Construction risk is a constant on every project. In Scottish construction projects, risk can arise from ground conditions, design development, programme delay, payment issues, supply chain pressure and funding challenges. The key issue is not whether risk exists, but where the construction contract places it.
But there is a constant in every project, regardless of scale or procurement route:
Construction risk never disappears. It transfers.
If it is not clearly allocated at the outset, it will land somewhere by accident, usually at the worst possible time. As construction lawyers, our job is not to eliminate risk, which is rarely realistic in the construction sector. Our role is to identify where it has landed and ensure it sits with the party best able to manage, price and, if necessary, insure it.
Most construction contract problems appear at crunch points
The real test of risk allocation in construction contracts does not necessarily come at tender stage. We see problems surface when ground conditions are not what was expected, when the design does not perform as assumed, when the programme slips, or when defects appear after completion. Those issues can be compounded by failures in contract administration, leading to missed notices and payment problems. In the current climate, the risk of insolvency disrupting the supply chain also looms. It is often only at these pressure points that parties discover what they have actually agreed, by which stage options are narrower and commercial flexibility is limited. That is why risk allocation deserves careful attention at the outset, not just when positions have hardened.
“Market standard” is not a construction risk strategy
We frequently hear the phrase “it is market standard”. Standard forms and commonly used amendments have their place. They provide structure and familiarity. But every drafting choice shifts risk somewhere. In practice, we regularly see:
- fitness for purpose obligations that move design risk beyond available professional indemnity cover
- ground condition provisions that quietly transfer significant subsurface risk to the contractor
- strict notice clauses which convert an otherwise valid entitlement into a loss
- liquidated damages provisions that are assumed to provide certainty until they are challenged
None of these removes risk. It simply displaces it, often to a party least able to manage it.
Understanding where construction risk has landed
Effective construction contracts are not about aggressive drafting, but about clear, coherent and commercially sensible risk allocation. The key questions are commercial:
- Who can actually control the risk on site?
- Who can price it with confidence?
- Is it insurable in the current market?
- Does the allocation align with the project’s funding and procurement structure?
Where those questions are addressed early, projects tend to run more smoothly. Where they are not, disputes often follow, whether through adjudication, litigation or other formal action, and almost always in strained commercial relationships that may damage future opportunities.
Prevention is cheaper than cure
Many of the more complex matters we become involved in begin with relatively modest drafting points:
- a mismatch between professional appointments and the building contract
- an assumption about reliance on site investigation information
- insurance wording that does not reflect current market realities
- administrative notice requirements that are difficult to comply with in practice
Or, sometimes, something even simpler. No one has properly read the contract.
The risk transfer check
Before signing, ask yourself:
| Where has this risk actually landed? | Not where we assume it sits — but where the drafting puts it. |
| Is the party carrying it genuinely equipped to manage and insure it? | If not, the problem has only been deferred. |
| What happens if the project comes under strain? | How will this clause operate when relationships tighten and money is at stake? |
The construction issues to tackle next
As the first blog in this series, they key principle is that construction risk does not disappear, it transfers. Subsequent blogs will consider some of the main pressure points we see across Scottish construction projects: design responsibility, ground conditions, delay and concurrent delay, payment notices and adjudication, collateral warranties, and prescription and latent defects under Scots law.
A final thought
Well-drafted construction contracts do not remove risk. A short review early on is often significantly more cost-effective than resolving the issue once the project reaches a crunch point. If you would like to review risk allocation in your construction contract, whether at procurement stage or during a live Scottish construction project, our construction lawyers can help identify where risk has transferred and where disputes may arise. Get in touch to have a conversation.
