Construction Contracts – The STX Deal

The STX deal has now been approved by parliament and a local STX affiliate has been registered in Ghana. The next stage of course is the construction phase. There are many important legal considerations that must be borne in mind in awarding contracts for the STX construction. The awarding company must consider whether to award a package deal contract or individual components contract. Different liability regimes come into play depending on the type of contract that is awarded. In a package deal contract, a main contractor is hired and the main contractor then hires sub contractors to perform various components of the construction. In the absence of specific contractual terms, the main contractor will be liable for all and any negligence of the subcontractors. In fact under common law, the main contractor will be liable for any defect in the project even if sub contractors exercised all professional care.
In an individual component contract, various contractors are hired by the awarding company to execute various components of the contract. In this type of contract, individual contractors will be held liable for any defect in their specific work. It is important to know that the construction business is so complex that it is impossible sometimes to determine who bears responsibility for a defect. For instance there are builders, designers, regulators and purchasers who are often involved in a construction deal. Each of these actors plays an important part to ensure the success of the construction deal. Their roles are also so intertwined that it becomes very difficult to untangle and apportion blame when there is a defect.
The international practice is that in most big contract such as the magnitude of the STX deal, a package deal contract is chosen. In an individual component contract, the awarding company or the owner of a facility may face the problem of suing multiple contractors/professional when there is a defect.