Understanding building contracts can be a daunting task. Even a short building contract could be 30+ pages of carefully crafted legal language. Though it may seem tidier to ring someone up and offer them a pile of money to build you an addition, you won’t want to incur that much risk. A proper written contract will set out what is to be built, when, and for how much. It will also set out procedures for payment or alterations to your design and resolutions for any disputes that arise.
Do I really need a contract?
Now, before you cry foul and claim that I’m some shill for the legal industry and just trying to part you from your hard-earned money, remember this: you will probably have a contract no matter what. A contract need not be a written document, and verbal agreements can be considered a contract. If a homeowner and contractor have agreed on works to be done in exchange for money, then a court is likely to consider this a contract. Trouble may come, though, when attempting to prove what has been agreed. It is always best to have the details of what will be built and what will be paid written down.
So do I need a written contract?
The advantage of a written building contract is clarity. The language of a contract may seem daunting, but it will outline some important issues:
1) What will be built
2) How much it will cost
3) When building work will start
4) When building work will finish
It will also outline procedures for payment, changes to the design, any aspect of the design that the contractor is responsible for, or any delays and who is responsible for covering costs incurred by delays.
If your project is as simple as paying a plumber to fix a sink then a verbal contract should be enough, but for a project of any complexity it’s important to protect yourself with a written agreement.
Will I need a solicitor?
It’s unlikely. Big developers, investment funds, and contractors will have teams of solicitors writing and revising contracts. This is reserved for major developments. The construction trade would be an absolute madhouse if every building project required a bespoke contract. Fortunately, there are ‘standard’ forms of contract made by several organizations.
The advantages of standard forms of contract are that the organizations writing them will have teams of solicitors and that the terms of the contract will have been tested in court. This provides clarity and legal weight to the contract and can streamline the resolution of disputes.
So where do I get one of these standard forms of contract?
There are a few options. The Royal Institute of British Architects produce a suitable contract for residential work. The Joint Contracts Tribunal produce contracts for minor or intermediate works. The JCT even produce a contract for homeowners who don’t have a consultant overseeing construction. There are other sources for contracts, but these are the most common for homeowners.
One of these documents will form a part of your contract, but the drawings, designs, and specifications provided by your Architect and other consultants will also be included in the suite of contract documents. These will be referenced in the contract and will help to ensure that the building work is done as designed.
Importantly, the contract you use will almost definitely be what’s known as a ‘traditional’ contract. This form of contract is great at protecting the homeowner from incurring too much risk as it sets out what is to be done (in the form of the drawings and specification), when it is to be done (in the form of the contract beginning and end dates), and how much it will cost (in the form of the contract price). It will also prescribe methods for making payments and resolving delays and disputes which will help to streamline the process of building.
Traditional contracts are generally ‘lump sum’ contracts. This is to say that the works and the price are agreed beforehand and usually only official changes to the work (known as variations) may change the cost. If the builder fails to build within the given budget, they take on the liability as they cannot charge more money without a variation to the contract. Builders may wish to operate on a ‘cost-plus’ basis, in which they charge for the labour and materials (the cost) and the profit and overhead (the plus) for the proposed works, but this places a lot of liability on the homeowner and should be avoided.
So who makes sure the contractor is sticking to the contract?
In short, the contract administrator does. Traditionally your contract will be administered by your Architect, but it can be administered by another consultant or even by the homeowner themselves. This does not mean that the contract administrator will hover over the contractor’s shoulder and observe all of the works being done. Rather, the contract administrator will be responsible for issuing instructions for any changes to the building as designed and issuing certificates for interim payments or practical completion, amongst other contractual responsibilities.
This is really an area where it pays to know what one is doing, so while Grand Designs may make managing one’s own project look appealing, there is a big benefit to handing over contract administration to someone with experience. An understanding of contract administration will also form part of an Architect’s training, so it is well worth considering retaining your Architect to administer the project.