When you’re having building or refurbishment work done, one of the most important things is to make sure you have the right level of control over all of the pieces and people that make up your project team. All of these people need to be able to work together to make your project happen, which means they need to be clear on what is required of them.
To do that, you need a contract. And today we want to talk about what contracts are, the most popular types of contracts used in the industry, what they’re designed for and the broad differences between them.
In simple terms, a contract is a legally enforceable document where one party agrees to provide a product or service to the other party in return for payment. The contract itself outlines the terms of the agreement, including how the services should be delivered and when they should be paid for.
In the past, contracts were drawn up by solicitors tailored to the individual project and parties. In some cases that still happens today, but the need for legal representation to get every single contract drawn up would be expensive and inefficient for modern businesses. Soto make things easier, several industry bodies were created to develop standard contracts for the construction industry. These contracts have been created in consultation with representatives from all areas of the profession and customers, so that the terms are fair to all sides.
Enter the Joint Contract Tribunal, or JCT family of contracts. This is one of the most widely used form of contract in the construction industry, and it has a wide variety of standard contracts designed to deliver a range of types of projects. There are other industry bodies that provide similar products, but today we’re just focussing on the main JCT offerings, from the homeowner contract to large-scale design and build contracts.
As we go on to discuss contracts, the main difference between them to note is the processes available to manage and control the contract works for both cost and time.
The homeowner’s form of contract is generally the simplest form of contract to understand, and it was absolutely designed to be this way. It provides a good framework to support both parties in the contract, clearly outlining their responsibilities and what to do if there is a dispute.
It’s designed to be used and understood by the everyman, without the need for input from a construction professional but there is a version that allows for a construction professional to oversee the works if required. Even though it is easy enough to understand, we would still advise that you ask a construction professional to get the contract in place, as this will make sure it’s completed properly with reasonable and correct values have been included and agreed to. This also gives you the additional level of added value, and reassurance that having a third party getting the contract in place can have.
After all, the aim is to keep it simple, but still have a formal framework that can be relied on by everyone involved – including clients, contractors, surveyors and architects.
The next form of contract is called the Minor Works contract. It’s designed to work on small–scale projects, and can be used for extensions or small new build schemes, on a more traditional project basis where the employer is responsible for designing the works or appointing experts or advisors to complete it on their behalf.
The difference here is that the form of contract has more formal procedures and controls, but it’s still the simplest form in a non-residential context. The fact that it’s much more limited in scope and simpler to understand makes it easier to use and understand for smaller contractors who may tend to add extra costs to a quotation if they’re asked to complete works under a more complex form of contract. Most contractors will only add these fees to manage any risk they feel they need to account for – but the simpler contract tends to be less intimidating and gives them the peace of mind they may need.
When bigger projects have been placed under contract traditionally (where the client has appointed all of the major project members themselves), it’s usually managed under an Intermediate or Standard form of contracts, which will give you a much more formal and structured set of routines and duties.
This form of contract is fairly common for bigger projects, as it distributes risk more evenly around all parties. This approach has its pros and cons though. It tends to result in better initial costs for the client, but they are also more exposed to price increases if the details need to change, or if the design wasn’t fully developed so that contractors could provide an accurate cost from the start.
Then we have Design and Build contract. This is where the contractor is asked to undertake the development of the design and construction of projects, which is an increasingly popular approach across the country.
Traditionally, projects are developed up to the planning stage by one company, and then passed to a contractor to carry on with the development of the detailed design, making sure it’s compliant with building regulations and complaint to standards for a structural warranty if required. This approach gives the contractor more flexibility in how they approach the construction of the properties.
In the design and build model, they work on a fixed price to do the work on both design and delivery. However, problems do happen, and unforeseen issues can often result in extra cost for the contractor. An allowance for this potential additional cost gets bakes into the price, which makes it a more expensive solution overall for the client. But on the other hand, the client’s level of risk is greatly reduced, which is why they’ve become more popular in recent years.
Of course, there are other forms of contract for larger or more complex projects, or for projects with very specific needs, types of works or methods of pricing and cost control. There are also more bespoke development agreements you can have drafted by legal representatives, but this will add extra time and expense.
If you’re still a bit confused, or you need further advice or information about projects you might be planning, then please feel free to contact our friendly team here at Harrison Clarke on 02381 55 00 51. We would be happy to assist and guide you through the process, or just provide professional support to make sure your project goes smoothly.
We also have a range of videos talking through various aspects of surveying. You can access them via our website or our YouTube channel.
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