Blackstone Solicitors recognises that embarking on a construction project, whether a home extension or a large-scale development, can be an exciting yet daunting prospect. In this article, Building Contracts Explained, we will delve deeper into the subject.
Please click here to find out more about our Construction Law services
Free Initial Telephone Discussion
For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of Building contracts and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
What is a Building Contract?
A building contract is a legally binding agreement between a client (employer) and a contractor that outlines the rights and responsibilities of both parties throughout the construction project. It sets out the scope of the works to be undertaken, the timeframe for completion, the agreed price, and the quality standards expected. A well-drafted contract helps to manage risk, avoid disputes, and ensure a clear understanding of expectations for all involved.
Why Use a Building Contract?
While some smaller projects might be undertaken based on informal agreements, a formal building contract offers significant advantages for both homeowners and developers:
- Clarity and Certainty: The contract provides a clear reference point for all aspects of the project, including the works required, materials to be used, payment schedule, and completion deadline.
- Reduced Risk of Disputes: A well-drafted contract anticipates potential issues and outlines procedures for resolving disputes, minimising the need for costly legal action.
- Financial Protection: The contract specifies payment terms, including milestones for staged payments and potential deductions for delays or poor workmanship.
- Quality Assurance: The contract sets out the quality standards expected for materials and workmanship, ensuring the project meets the required specifications.
- Insurance Implications: Many insurance policies require a formal building contract to be in place.
Common Types of Building Contracts in England and Wales
There are several standard forms of building contracts used in England and Wales, each with its own advantages and disadvantages. The most suitable type of contract will depend on the specific project and the risk profile of both parties. Here’s a breakdown of three common types:
- Lump Sum Contract: This is a fixed-price contract where the contractor agrees to complete the works for a predetermined sum. The homeowner or developer knows exactly what the project will cost upfront, offering financial certainty. However, this places the risk of unforeseen costs (e.g., unexpected ground conditions) on the contractor. Lump sum contracts are well-suited for projects with a well-defined scope and minimal risk of change.
- Cost-Plus Contract: Under this type of contract, the homeowner or developer pays the contractor for the actual cost of labour, materials, and any agreed-upon profit margin. This approach offers flexibility for projects with a less defined scope or where changes might be anticipated. However, the homeowner or developer bears the risk of cost overruns. Cost-plus contracts are often used for complex projects or renovations where the final design may evolve during construction.
- JCT Contracts: The Joint Contracts Tribunal (JCT) publishes a suite of standard form contracts designed for various construction scenarios. These contracts offer a balance between risk allocation and flexibility, with different versions catering to different project types (e.g., design and build, traditional build). JCT contracts are widely recognised in the construction industry and offer a degree of certainty while allowing for some project adjustments.
Key Considerations When Choosing a Building Contract
- Project Scope: The clarity and detail of the project specifications will influence the type of contract most suitable. Lump sum contracts necessitate a more defined scope, while cost-plus contracts provide greater flexibility for evolving projects.
- Risk Allocation: Consider how risks associated with unforeseen circumstances (e.g., material price fluctuations, delays due to bad weather) will be addressed in the contract.
- Budget: Lump sum contracts offer upfront cost certainty, while cost-plus contracts require careful cost management.
- Project Management Expertise: The level of involvement required from the homeowner or developer will vary depending on the chosen contract type. Cost-plus contracts typically require greater client involvement in cost control.
Seeking Legal Advice
Building contracts can be complex documents with legal implications. Blackstone Solicitors recommends that both homeowners and developers seek legal advice from a solicitor experienced in construction law. A solicitor can help you:
- Understand the Different Contract Types: They can explain the different options available and advise on the most suitable contract for your specific project.
- Negotiate Contract Terms: A solicitor can negotiate the contract terms to ensure they are fair and protect your interests.
- Identify Potential Risks: They can help you identify potential risks associated with the project and ensure the contract addresses them appropriately.
- Resolve Disputes: In the event of a dispute with the contractor
How we can help
We have a proven track-record of helping clients deal with building contracts. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner and support and advise you with all the negotiations. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
Please click here to find out more about our construction legal services.
Deciding when (or whether) to incorporate, what kind of ownership How to Contact our Construction Solicitors
It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.
To speak to our Construction solicitors today, simply call us on 0345 901 0445 , or allow a member of the team to get back to you by filling in our online contact form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Comments are closed.
