What is a Construction Contract & When Do You Need One? The Experts Answer Your Questions

What are different building contract options?

There are a number of standard construction contract formats, and the best one depends on the nature of your project. For self builders, the JCT (Joint Contracts Tribunal) contracts are some of the most used. There are a few different versions that can be tailored specifically to suit a variety of building situations:

• JCT Home Owner Contracts: designed for private clients who are employing a contractor for residential work, including self builds and renovations.
• JCT Intermediate or Standard Contracts: for more complex or larger building projects, often with input from a contract administrator.
• JCT Minor Works Contract: useful for smaller-scale domestic building projects and more formal than a simple written agreement.

These contracts are well structured and balanced. They’re widely recognised and can be customised if needed, but they do need professional help to put them into place correctly. There are alternatives to JCT, such as contracts provided by the FMB (Federation of Master Builders), RIBA or ContractStore. Warranty providers also offer a range of contract templates aimed at protecting domestic clients as well as their interests as insurers.

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Steve and Susanne Richardson won the reader-voted Build It Award for Best Self Build for their stunning and eco-friendly timber frame home in the Suffolk countryside. The couple took a hands-on approach, commissioning the timber frame (from Frame Technologies) as a shell and building it themselves. Photo: Matthew Smith

What does a construction contract cover?

Tim Doherty Tim Doherty is a self builder and chartered surveyour. He was the founding MD of the National Self Build & Renovation Centre as well as a founding member of NaCSBA. Tim now runs Dobanti Chartered Surveyors, a specialist surveying and building consultancy. The company provides support to both the residential and commercial sectors.

Read some of the standard building contract drafts so that you can see what they have included. But as a starting point, a robust building contract will typically cover the following details:

• Who the parties are. If there are two of you then make sure you are both listed and include the company number for the contractor.
• The description of the works in a concise summary.
• The documents that must be referred to. This is where you link to their quote, your specification and schedule of works (SSW), the drawings (make sure you add on any revised numbers) and any qualifying letters.
• Any design responsibilities the contractor has. Plumbers and electricians almost always have to take care of this, for instance, being the compliance experts. Make sure it is clear that you are engaging them to design and install things.
• Any compliance requirements, such as from planning, building control, party walls and utility companies.
• Site facilities, parking, welfare and health and safety. As the Principal Contractor you must tell those on site what you are providing as well as what you expect from them.
• Clarity on the price and schedule. Also include qualifications about weather, the inspection of the works and any reasonable preparation. The contract should have absolute clarity on the fees, but good drafts will also make it clear that the contractor has had an opportunity to see the site and carry out their own due diligence. Building in the winter will inevitably have periods of rain and frost, so this should be anticipated and not be an excuse for works not being completed.
• Payment terms and retentions. If you want to include a clause for the latter then the contractor should know this when being asked to price up the works. Doing this is quite common, but nonetheless it’s a delicate subject to agree, and you may find they just add this sum on to their price. The payment terms should be crystal clear so that both parties know what triggers either interim or final payments.
• Contract duration and Liquidated & Ascertained Damages (L&AD). If you have a specific completion date, it might be worth including L&AD. These are not penalties, but instead a demonstration of real costs for you if the project is delayed, such as on-going rent. They normally apply to main contractors who are clearly controlling the job but occasionally are used with individual trades in self-project managed schemes.
• Guarantees. If these are going to be applied then make them transparent.
• Insurance. Be clear about what you are providing and what you expect from the contractor’s policy.
• Site restrictions – neighbours, working hours, security, owner occupation etc. This is usually included in an SSW, but if it’s sensitive to your project then make it transparent in the paperwork.
• Disputes. Contracts should always present how these should be resolved. Construction normally favours adjudication, but there are other options beyond that.
• Conditions to help manage variations, agreeing extensions of time, insolvency, confidentiality, intellectual property, assignment and title of goods.

Won’t a construction contract put off trades?

This is where things get a little tricky and where some professionals will disagree. In my opinion, whilst contracts are essential for managing larger building projects, they will make some trades nervous, especially sole traders. In my experience, waving a JCT contract at a bricklayer or carpenter who’s quoting for a week’s worth of building work, is a proven way to get ghosted.

Brent and Linda Walker enlisted the help of local trades when self building their own house in Fife. “Using a local builder who was based in the village in which we were self building took a lot of pressure off us, especially as we weren’t around,” says Brent. “He had all the knowledge of sub contractors and how the area worked in terms of access, site limitations and such like.” Photo: David Barbour

For simpler or straightforward work, a more practical solution is to provide a written appointment (see box below) confirming what’s been agreed. A written appointment is not as formal as a building contract, but it still sets out the basis of your agreement and gives some protection if a dispute ever arises.

What happens if there’s a dispute and no contract in place?

If you fall out with your builder or a trade and there’s no written contract or clear appointment in place, you are left relying on memory, texts and emails to piece together what was agreed. This is a lawyer’s dream, and your worst nightmare.

In these cases, courts or adjudicators will try to work out what’s classed as reasonable. But this is a matter of opinion and therefore a grey area, and you could lose the argument and end up paying or losing money.

Adjudication & resolving contractual disputes

A big advantage of having a written contract is that it usually includes a clause for adjudication – a formal, structured way of resolving disputes without having to go to court. Adjudication is quicker and cheaper than litigation, and decisions are legally binding (at least until you challenge them in court). It’s a lifeline for self builders if a disagreement arises – especially over payment problems or avoidable delays.

If you’re running a self build, think carefully about how you’re making appointments. For main contractors, a proper building contract like a JCT is essential. It might feel like a faff, but it’s vital for protection and for setting adjudication protocols. With individual trades, presenting a clearly written appointment is usually enough to keep everyone on the same page and avoid disputes.

Remember, the key to reduce the risk of problems and disputes is to always confirm things in writing. The moment you get something down on paper, you’re putting yourself in a stronger position if anything goes wrong.

FAQ

Mike Hardwick Mike Hardwick has become a well-respected self build expert since completing his dream home. He is general manager of the National Custom & Self Build Association.

Can a building contract help you save money?

The overriding fear for anyone taking on a major domestic building project is the risk of the builder doing a poor job, overrunning by several months or continually asking for more money to complete the job. In the very worst cases it can be all three.

By entering into a watertight contract, there is very little wriggle room for the underperforming contractor. If what is being built simply doesn’t match the drawings, you can prove it. If you are running over, that will be clear from the target completion date agreed in the contract.

If more money is demanded, you have proof of the agreed price and drawing showing what was included, so unless the builder can justify additional money for work not originally covered by the contract, you can legitimately challenge their request. Of course, there will always be some ‘extra overs’ for unforeseen work, and your job is to keep these to a minimum.

If you have agreed hourly or daily rates for additional work within the contract, you can keep control of how much additional activity should cost, rather than being presented with an enormous and arbitrary bill at the end of the build with no way of challenging it.