What is a construction contract and do I need one..??

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One of the most common questions we hear from prospective clients is: “What is a construction contract and do I need one?”

 

So, what is a Building Contract..??

Put simply, a construction contract is a legally binding agreement between two parties on the details and cost of a construction project. It provides a clear set of express terms to which both parties agree prior to the start of the works. A contract will confirm when you should pay the builder, explain how to deal with changes (variations) to the works and what happens if the project takes longer than expected for any reason. It also helps you deal with any potential disputes and explains how the contract can be terminated in a controlled and managed way if that should be necessary.

 

Do I have to write it or can I buy one..??

The vast majority of contracts used are standard forms. For smaller works, bodies like the Federation of Master Builders (FMB) provide a contract for domestic customers as do the JCT. For larger projects there are a number of options. JCT provide a whole suite of Contracts and then there are the NEC forms and FIDIC provide contracts for larger works. Occasionally it may be necessary to draft your own contract. Unless you are suitably qualified we would recommend that you do not do this yourself but employ a ‘Specialist Construction Lawyer’.

 

But I have a good relationship with the builder…do I still need a contract..??

Building and Engineering works are often complex and usually involve many changes which can completely alter the price of the works as well as the length of the project. Construction projects can put strains on relationships. It is not unusual for both parties to have a very different view as to the affect of changes on the cost and duration of the works which can easily lead to a fall out between the client and contractor. In such situations the contract helps both parties to manage the changes and gives you a set of guidelines to follow.

What about Contract Administration..??

We would always recommend that the works are overseen by a Contract Administrator with a Quantity Surveying background. Sometimes architects take on this role but contract administration and cost control are not usually part of their skillset. A good contract administrator will act as a ‘neutral’ offering advice as to how the contract and works should be carried out and managing the effect of changes in a practical impartial way. In our experience a suitably qualified Contract Administrator will prove to be cost neutral and save his or her fees by managing the works in a cost effective way and offering prudent advice.

 

Dispute Resolution

Another advantage of a written contract is that it gives guidance as to how disputes are to be managed whether that be by mediation, adjudication or as a last resort litigation. And so if you do have a contract dispute, you can be guaranteed of a much less costly, straightforward resolution.

One of the biggest problems faced with non-written contracts is that each party’s respective memory of the agreement changes over time, especially if a dispute arises. If a large amount of money is at stake, having a written contract eliminates this issue, as both parties know their contracted agreements.

 

What If The Builder Doesn’t Want To Enter Into A Formal Contract?

Explain to your builder that a contract is there to protect both parties, and the implications of not having one is a job goes wrong are potentially enormous. Go through all the points covered in this blog post, reiterating that a construction contract is there to reduce the potential for disagreements in grey areas, hopefully making the project much more straightforward.

If your builder is still hesitant about signing a contract, it raises some suspicion – and you should think twice before agreeing to begin any work.

 

Speak & Mortlock and Specialist Construction Lawyers, Project Managers, Contract Administrators and Quantity Surveyors.

If you need and advice relating to contracts and how to manage a project efficiently, give us a call on 0845 838 7239

 

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