The Relationship Between Regular Construction Contracts and Partnering Agreements Regarding Risk

Katrine Petersen

Student thesis: Master thesis

Abstract

The Danish construction industry is subject to general conditions known as AB92 or ABT93. The construction industry is subject to a great amount of risks, which is allocated between the constructor and the owner. The two sets of standard conditions is mostly identical but allocates risk differently depending on the choice of construction method. In design-bid-build the owner bears the risk of planning and coordination, this risk shift to contractor in design-build constructions. In recent years new methods of cooperation has surfaced in construction. Partnering is an agreement to cooperate on terms that focuses on the importance of joint utility maximization. Partnering effects the relation between the contractor and the owner and the parties are expected to accept cost to strengthen the cooperation.
According to AB 92 and ABT 93 the party who is closest to influence the risk and handle the consequences should bear that risk and force majeure risk should be allocated between the owner and the contractor.
The owner has the right to make changes in the work and due to that right the owner has the responsibility for the consequences of the changes. When the contractor is in a position where his position cannot be degraded, the changes will be considered as efficient from the Kaldor- Hicks and Pareto efficiency criteria’s.
Should a risk of force majeure incur the risk is distributed between the contractor and the owner. The contract allocated the risk of time to the owner and the economic risk to the owner. This can be considered efficient, when the contract value is maximized. The contract value can be maximized when the risk is borne by the party that most efficient can handle the consequences.
The contractors bears the risk of damage to the work, if the work has not been completed and transferred to the owner. When a contractors work this is considered to be efficient when the contractor is the party that can handle the risk less costly.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages87
SupervisorsPatrik Lindskoug