One of the most important decisions for anyone involved in property refurbishment or development is selecting the right contract for your project

Why do you need a contract?

The first thing people have to do before selecting a contract is understand why they even need one

Property developing and refurbishment are part of the construction industry. The construction industry is notorious for disputes and projects going wrong with serious amounts of money being lost. These problems are not limited to large projects , but happen on a regular basis on even the smallest projects

Having a contract is the best way to protect your investment in the event that things go wrong

What should be in a contract?

Contracts can be as simple or as detailed as the project requires. At a minimum they should contain the following key details

  • Start/end dates of project
  • Scope of work to be carried out
  • Price to be paid for work carried out
  • Programme of project duration
  • Name of client
  • Name of contractor
  • Payment schedule
  • Method of agreeing variations to original scope
  • How variations will be valued

Who benefits from a contract?

Everyone benefits from a contract being in place on a project. The contract is designed to protect the builder as much as the client. It holds both parties accountable in the event of a dispute

How many contracts should there be on a project?

That depends on who is involved and how complex the project is. A client may have separate contracts with an Architect, a Project Manager, a builder and specialist subcontractors. The builder may have their own contracts with individual subcontractors

Where can you get contracts?

The most commonly known ones are JCT contracts. These are issued by the Joint Contracts Tribunal, however these are not the only ones

RIBA contracts are also widely used . These are issued by the Royal Institute of British Architects

Another widely used one is the FMB contract. These are issued by the Federation of Master Builders

Which are the best?

Its not simply a matter of one being better then the other, the important question is which one is most suitable? Each one of them has their own benefits for a particular project

JCT contract

How do you know which is the right contract to choose?

That is going to depend on the value, purpose and scope of the project. A refurbishment project on your own house is different to a refurbishment project as a commercial enterprise. A commercial to residential project is completely different to building 20 new houses. It also depends on the level of experience and understanding you have of contracts or if you are going to use a professional such as a Construction Consultant or Architect to manage the contract for you

Why do you need someone to run the contract?

Both the JCT and RIBA contracts are written with the assumption that there will be a Contract Administrator ( CA) in charge of the contract. There are exceptions to this such as homeowner contracts which work on the basis of the homeowner dealing directly with the builder. Sometimes people try and fill the role of CA themselves. This is only advisable if you have sufficient experience and understanding of construction contracts

Why shouldn’t you fill the role of Contract Administrator yourself?

Traditionally the CA is a 3rd party employed by the client. Although they are paid by the client , they are supposed to administer the contract in a fair and impartial way. If there is a contractual dispute between the client and builder the CA is supposed to intervene and decide who is in the right. They are supposed to protect the builders interests as much as the clients.

In the event that matters reach court, it may prove difficult to prove that the client had a disagreement with the builder and in their role as the CA treated the builder fairly

Also some versions of contracts can be quite complex. If you don’t fully understand it yourself you may end up losing a lot of money as you have not stuck to the contract, without realising it

Can I just sign the contract the builder gives me?

Some people do this but its not always advisable. If you are going to do this you may need to pay a solicitor to review it

What the JCT, RIBA and FMB contracts all have in common is something called “ standard forms”. The construction industry is notoriously difficult from a contractual point of view. Standard forms are terminology and clauses that all construction lawyers and the courts are familiar with. They fully understand what these terms and clauses mean and imply. Therefore it is easier to see who is in breach of contract

If you use one of the standard forms of contract can you alter it?

Sometimes the client or builder will ask for a bespoke clause to be inserted into a standard form contract. The problem is this could invalidate the whole contract. Again this would have to be looked at by a solicitor

Are there any other advantages of using standard form contracts?

A key feature that all standard form contracts have is a mechanism for dispute resolution. It is very unlikely that a bespoke contract will have this. Sometimes issues arise on a project that brings both parties into dispute. If this cant be resolved it could bring the whole project to a halt.

A mechanism for dispute resolution can deal with this problem separately while work continues on the rest of the project. A client with little experience in contractual matters can feel at a distinct disadvantage when dealing with a builder with extensive contractual experience. If the dispute goes to an official resolution service the client will have the support of an external person with extensive contract experience

I have heard about NEC contracts can I use them?

NEC stands for New Engineering contract. They are the most popular form of contract used on major infrastructure contracts in the same way that JCT contracts are the most popular in property refurbishment and developing projects. However there are some major differences between JCT and NEC contracts. NEC contracts are not suitable for property development or refurbishment projects. They are designed for use by experienced professionals

Summary

Having the right contract is a vital part of undertaking a successful project. There are many construction professionals such as Consultants, Architects and Quantity Surveyors who can offer advice on selecting the right contract for your project. In addition the JCT offer training courses.

If the worst happens on your project and you have the wrong or no contract to protect you then you could lose thousands or everything. Therefore spending a few hundred pounds on some contract advice is a good investment.

 

If you need help with choosing a contract for your project please contact us as we have extensive experience in Contract Administration

This is one of the many services we offer. Please get in touch to see how we can help you

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