Building Contracts: Why Do We Need Them?

Haydon Construction
Building Contracts: Why Do We Need Them?

In an ideal scenario, any agreements made between clients and building contractors would be summarised in a detailed contract document which is signed and dated. In some cases however, this is not always practical.

However, even for the smallest of jobs, it’s crucial to ensure that both parties have their expectations met.

The basis for a contract is often known as ‘Mutual Ascent’, which revolves around the premise of ‘Offer and Acceptance’. This is where a contractor agrees to carry out a specific item of work for a specific sum of money and the client accepts this proposal and the work begins. At that point, a contract has been formed.

Although verbal agreements and quotations may form a formal contract, you should consider whether your project requires a written contract on top of this. This is because verbal agreements can often be difficult to enforce should a dispute occur half way through a construction project. In the event that a dispute does occur during the project, a written contract can often be referred back to, outlining each party’s responsibilities and duties. This can help preserve a good working relationship between parties, helping to amicably resolve disputes.

More importance will be placed on written contracts as a project becomes more complex, has staged payments across a lengthy duration, or bears a significant cost.

Your quotation will often form the basis of a contract from a cost perspective, but the contract will set out the specific terms in more detail. This can include for example:

  • The specification of works. For example, if you’re agreeing to a specific type of hard wood flooring being installed in your quote but don’t specify a brand in the contract, then your contractor could be within their rights to choose a brand or supplier which they see fit.
  • Design Information. This will include detailed construction drawings such as drainage layouts and foundation depths. You will need to provide a contractor with drawings that contain measurements and dimensions for them to install the work correctly. A contractor should advise you if there are any design issues that need to be rectified.
  • The contract sum (cost). This will be agreed by both parties and set out within a quote. The cost is normally fixed, meaning that the contractor will expect to be paid what has been agreed and you will not expect to pay anything extra. However, in the event that you change your mind about design details or specifications, you may be expected to pay an additional cost which covers the contractors cost.
  • The payment terms. This section will set out your responsibilities as a paying customer and will normally be agreed between you and the contractor based on what is feasible and practical. It is common to pay a deposit up front to enable a contactor to purchase material up front, or to cover labour and material up to a certain milestone of the project. For larger projects with a duration that last for months, you will normally pay your contractor stage payments and sometimes hold retention money from the contractor.
  • The contractor scope of work (responsibilities). Who will be responsible for providing skips? Who will clear away waste and excess materials? Who will be responsible for clearing debris from public footpaths? The scope of works sets out contractor’s responsibilities from the outset to ensure that there is no confusion about which party is responsible for what.
  • Your responsibilities. The contract will also set out your responsibilities as a client. By which date will you give site access to the contractor? Are you responsible for providing water and electric? Will you be responsible for site clearance and waste removal prior to the contractor starting their works? Again, this should be agreed beforehand to avoid disputes further down the line.
  • Variations. If there is a deviation away from the original design and specification on your behalf after a quote has been agreed and a contract signed, this could result in a variation cost. Contractors will normally require you to agree and sign off a variation prior to them carrying out the work. A variations clause will help set out the procedure for handling these situations
  • Defects. Contractors will often offer a guarantee on their work and/or materials. However, as mentioned earlier it may be wise to agree a retention amount that can be held on the account which will act as a reserve to rectify any defects. This must be managed correctly with clear timescales set out for returning retention monies back to the contractor upon completion of the job.

Summary

The discussion around the subject of contracts can unfortunately at times be seen as a taboo, as it implies mistrust between individuals. However, this is far from the case and contracts can actually preserve and maintain a good working relationship. An agreed contract can often be set aside and forgotten about throughout the duration of a project, but in the event that there is some confusion about party’s responsibilities during the project, the contract can act as a good reference point for resolving such issues. Contracts are designed to protect both parties and provide peace of mind that both individuals will fulfil their obligations.

For more information about how Haydon Construction can help you with your construction project, please feel free to contact us.

Interested In Our Services?

Contact Us