How to Write a Construction Contract

When you employ people to work on your project, it’s wise to put the agreement in writing so that everyone knows what’s involved. Here Tim Doherty takes a closer look at what to include in a contract
by Tim Doherty
9th February 2019

When you reach an agreement with a building contractor for works on your property, it’s deemed as a contract, even if it’s just verbal and there’s nothing in writing.

For instance, you might engage someone to cut your hedge but you’re unlikely to put it in writing, even though you’ll have agreed the hedge in question, how much is to be taken off, when it will happen and how much you’ll pay them.

Employing someone to work on your home construction project is no different to this, in principle.

Of course, the scope of works is likely to be more complex, take longer, could involve arranging material supply and payment might need to be in phases.

Typically, you’ll approach trades (if needed) by phone, text or email, leading to a meeting on site and quite possibly an exchange of documents.

You’ll define the work needed, when it will start, how long it will take to finish, any specific quality issues, how much it’s going to cost and when you are going to make payment.

Sometimes the above is agreed over several meetings and might have evolved from drawings, discussions on site, texts, emails and possibly a contractor’s quote.

Wise self builders will draw all these things together in a simple summary contract to try to eliminate ambiguity, record the agreement while it’s still fresh and ensure everyone has a document that can be referred back to in the event of a dispute further down the line.

The construction world is generally unregulated and full of disputes, so protect yourself against potential disappointment by having simple contracts to fall back on.

Contract with builders & consultants

If you’re working with professionals, the most important document will be the detailed specification and schedule of works (SSW).

This presents the logical progression for the build, which takes the target contractor through the project from start to finish and welds together details on the drawings with other requirements not yet documented.

This is given to several contractors to price up the works, which allows you to decide which one is best.

The successful party is usually selected after another round of adjustments to the first quote, possibly to trim costs. But the audit trail is clear as to how an eventual price has been calculated and these documents are included within the contract paperwork.

Read more: How to Get Realistic Quotes from Builders

The building industry has a range of standard contracts available that are able to be used for engaging a single contractor. These often include a contract administrator to act as a
sort of referee.

More complex projects will almost certainly have this level of formality, if not more.

Contracts with tradesmen for project managers

Many of the same principles can (and should) be used if you’re choosing to take on the role of project manager for your works.

If you break the build down you could have somewhere between 10 and 20 individual tradesmen appointments. In this case they are not sub-contractors because you are not a bonafide contractor.

From a health and safety point of view you will be positioning yourself as the Principal Contractor – note that if you’re not intending to live in the dwelling yourself then you may have tax obligations for HMRC.

From a contract angle you are engaging multiple trades, some of whom might be labour-only and others could be supplying materials.

Read more: How Much Should I Pay a Builder?

Start the process by putting as much detail together as you can about the work you want everyone to do in your own SSW. So if you’re tendering the carpentry, for instance, be specific about where their works should start and what’s included.

For instance, the roof structure may have been provided by a timber frame company, and the roof tiler will have allowed for felting and battening, but you want the carpenter to install the fascia, soffit and barge boards.

Or if there is timber cladding to fit, you might want to state it will be delicately nailed by hammer with lost head nails rather than using the easier nail gun approach that can give a less appealing finish.

List such individual requirements in your chosen contract form – the easiest way is by including your SSW as a contract document.

Building contracts types

In terms of getting the details written up, you’ve really got three options:

Engage a lawyer

The professional will prepare a set of documents for you. This is likely to be expensive and (in my view) probably unnecessary as there is standard contract paperwork available.

But having said that, you may feel more comfortable having some initial legal advice to help you source and complete a draft, as well as being clear about the process afterwards.

Use a standard contract

The Contract Store, Law Depot and the JCT (Joint Contracts Tribunal) are all good options for a pre-prepared contract for homeowners to appoint contractors.

The FMB (Federation of Master Builders) is another source, although paperwork is usually only available to their members.

The Law Depot is free, but the Contract Store and JCT will probably charge £25-£40 for drafts. JCT paperwork can only be used once, whereas the Contract Store can be used multiple times.

These drafts might look a bit scary to certain contractors and you may find smaller firms don’t want anything so formal, but they actually benefit both parties, as they contain terms of conditions which go beyond the what, where and how much.

Do it yourself

It’s possible to draw the paperwork together yourself in a summary appointment; ie your letter/email should recap the audit trail from initial architectural drawings, the SSW, the meeting(s), their quote(s) and any emails.

Ask them to acknowledge safe receipt and give their complete agreement to your summary.

Read more: Going Out to Tender – What You Need to Know

How to write a construction contract

Read some of the standard contract drafts so that you can see what they have included, but as a starting point, a robust draft will typically comprise 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 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.

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