It is not uncommon, when negotiating with consultants and with contractors, whether for large or small projects, to be reminded in tired statements, heavy with condescension, of the financial strength and fine reputation of the other contracting party.

In the current environment, this counts for little. Names like Barings Bank may now be tarnished with incompetence and corruption, but prior to their collapses, they were names that commanded trust and respect.  Similarly the recent collapses of Goldman Sachs, Bear Stearns and Lehman Brothers, and the apparently limitless underwrite accepted by the US Federal Government of Freddie Mac, Fannie Mae and the world’s biggest insurer (AIG) suggest that even the finest reputations can be worth little when the going gets tough.

It would be foolishly brave to suggest that we have the answers to events of such global impact, but there is a lot that can be done to improve practises and to reduce the risks in what is inevitably an uncertain industry.

This paper started life as a presentation at the New Zealand Law Society Intensive Seminar on Building and Construction Law on 6 & 7 November 2008.