• What should they include?
• Do I need a construction contract?
• The role of contracts during disputes

What is a contract?

A contract is a legally binding document that sets out the terms of engagement between two parties – in this case, yourself and either the client or your subcontractors.

For a contract to gain recognition in court and make the document legally binding, it must include:

Offer: A clear proposition to enter into an agreement.

Acceptance: Each party accepts the terms of the agreement (acceptance can be expressed or implied in certain circumstances).

Consideration: An exchange of value between the parties. The court requires this exchange to enforce the promise.

Example: If you enter into a contract for a contractor to build an extension for £20,000. The consideration for you is the labour and materials for the build (ultimately providing you with an extension). The consideration for the contractor is the payment or promise of payment of £20,000. Both get something of value from the agreement.

Intention to create legal relations: A mutual agreement that the terms are legally binding. During commercial transactions, intention is normally presumed.

Certainty of terms: All the key terms in the contract are agreed and unambiguous between the parties.

What is a construction contract?

The Housing Grants, Construction and Regeneration Act 1996 provides a comprehensive definition of construction contracts. These agreements encompass:

• The execution of construction operations
• Arranging for others to carry out construction work e.g. sub-contractors
• Provision of labour for construction activities

Additionally, the Act includes agreements for architectural design, surveying, and consultancy services related to construction, engineering, and landscaping.

You can find more details about construction contract law through section 104 and section 105 of the Housing Grants, Construction and Regeneration Act.

The Act is detailed and broad to cover different types of contracts in the construction industry.

One example that falls outside the definition is employment contracts for construction workers. Although the nature of the employees’ work is within construction, this does not fall within the Act’s scope and Employment Law would apply.

What should a construction contract include?

A well-drafted construction contract should contain specific and detailed information about the whole job. The length of a contract can range from 15-70 pages depending on the contract type and terms.

In general, contracts should include the following essential elements:

• Project scope and specifications: A detailed description of the upcoming work, including plans, drawings, and technical specifications.
• Roles and responsibilities: Clear definition of the roles and responsibilities of all parties involved, including the owner, contractor, subcontractors, and design professionals.
• Payment terms: Provisions for when and how the contractor will receive payment, including milestones, retainage, and final payment requirements.
• Schedule: A detailed timeline for the project, including start and completion dates, plus any critical milestones or deadlines.
• Change order procedures: A mechanism for addressing changes to the project scope, schedule, or cost, and how to document and approve these changes.
• Warranties and guarantees: Provisions for the contractor to guarantee the quality of their work and materials for a specified period after project completion.
• Insurance: Specifications for the insurance required for the project, to protect all parties from potential risks and liabilities.
• Dispute resolution procedures: A clear process for resolving disputes that may arise during the project, including negotiation, mediation, arbitration, or litigation.
• Termination clauses: Provisions for terminating the contract under specific circumstances, such as breach of contract, or non-payment.
• Laws and regulations: Identification of the applicable laws, codes, and regulations that the project must comply with, including safety, environmental, and labour laws.

The contents of your contract will vary depending on the job and what you and the other parties agree on. You will likely have a back-and-forth with other parties to ensure everyone is happy with the terms.

Do I need a construction contract?

While not legally mandated, a well-drafted construction contract is an invaluable tool for risk management and dispute prevention. It provides clarity, sets expectations, and offers a framework for addressing issues that may arise during the project lifecycle.

A contract reduces risks and protects everyone’s interests in a construction project. It ensures a successful and legal completion by clearly stating the terms and conditions.

Having no contract in place during a dispute makes it difficult to gather evidence for your claim or defence.

The role of construction contracts during disputes

During a dispute, your contract serves as the primary reference point. A contract compliant with the Housing Grants, Construction and Regeneration Act will include provisions for adjudication, an efficient alternative to litigation.

The Adjudicators’ results are not legally binding but allow all parties to come to a temporary agreement so the project can move forward. The parties may decide they are happy with the result and no longer need to attend court, or they may decide to reopen the dispute once the project is complete.

This is an important aspect of construction contracts because it keeps projects moving and avoids major delays, ultimately saving time and money.

The role of a construction solicitor

At Britton and Time, our construction law specialists offer comprehensive support throughout the contract lifecycle. From drafting and negotiation to review and dispute resolution, we provide the expertise to protect your interests and ensure contractual compliance.

Our team is well-versed in various dispute resolution methods, including adjudication, arbitration, and litigation. We strive to offer practical, cost-effective solutions tailored to your specific needs and circumstances.