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construction contracts

8 June 2012

Whenever you undertake building works, it is important that you put in place the correct contractual documentation. This is not only so that those involved on the project know what they are required to build (or to pay), but so that if things go wrong - and sadly this happens more often than you might think - you have a document that clearly sets out your rights and remedies. So, whether you are one of the 261 schools that are to receive priority funding, or are spending a slice of the Devolved Formula Capital, Basic Need funding or the Capital Maintenance allocation, it is important that there is the right contractual framework for those works. We have considered some of the basic issues below.

What documents do you need for your construction project?

Whilst a construction contract is relatively simple in theory (a contractor agrees to construct a building for the owner for an agreed cost and within an agreed time), there are so many variants to this theme and other issues to consider (e.g. how will the works be priced? Who will be responsible for the design?) that typically a construction project involves more than one contract – and it is important to ensure that each of those contracts properly protects your interests.

For education related building works (excluding Building Schools for the Future projects), you will typically need to put in place the following contracts:

  • a building contract;
  • professional appointments for the design team (such as the architect, structural engineer and mechanical & electrical consultants); and
  • professional appointments for the Owner’s Agent (essentially your project manager or quantity surveyor who will administer the building contract) and CDM co-ordinator.

Construction contracts should be entered into as deeds (this requires certain formalities when entering and signed the contract). This gives an owner a 12 year period within which to make a claim for defects following completion of the work (as opposed to a six year period for a contract signed by hand). Do not confuse your right to make a claim for defects with the “defects liability period”! The latter is simply the defined period of time during which the contractor is obliged and entitled to return to amend defects; its expiry does not remove the owner’s right to claim for defects.

What form should your building contract take?

Your building contract sets out the basic requirements in terms of what is to be built as well as the time frame and cost for doing so. Many education establishments choose to use standard form contracts, often in the JCT form. Whilst this is preferable to no contract at all (which is sadly relatively commonplace), it is sensible to consider making amendments to any standard form for the following reasons:

- A standard building contract does not incorporate any safeguarding policies – meaning that this issue must be addressed via bespoke amendments.

- If you are using a JCT form:

  • this is relatively 'contractor friendly' – meaning that as an owner of the building you will have fewer rights and remedies than the market norm;
  • any design that is contained within the owner’s requirements will not be the responsibility of the contractor unless the contract is amended; and
  • there is no clear definition of practical completion.

We have also seen instances of parties using 2005 versions of the JCT forms. These contracts do not comply with recent legislation and so should not be used. We have also seen numerous parties make the mistake of thinking that the JCT Intermediate form of building contract with contractor’s design is a full design and build contract – it is not.

What form should your professional appointments take?

Standard forms of appointments published by the consultant’s professional bodies are available. However, these can be biased in favour of the consultant and include caps on liability and limitations on the owner’s ability to make a claim. Consequently, it is important to review these carefully and consider whether you need amendments or to put in place a bespoke form of appointment for each member of the professional team.

Do you need any collateral warranties?

A collateral warranty creates a direct contractual link between the owner and any sub-contractor or sub-consultant employed by a consultant or contractor on its behalf. This can be important, particularly if key elements of the works are sub-contracted, since it allows an owner to claim directly against the sub-contractor in the event of defective work. You will need to consider what form of warranty is appropriate and what happens if it is not provided.

Do you need a CDM Co-ordinator?

Depending on the scope of the works, the procuring body (such as the Academy, the Governing Body or Local Authority) is under a statutory obligation to employ a CDM Co-ordinator to perform duties under the Construction (Design and Management) Regulations 2007 as soon as is practicable after the initial design work has begun. This role might be carried out by the project manager or architect but there are separate consultants who specialise in this role.

Conclusion

Make sure you have a complete set of construction contracts in place that do the job you think they do – and protect your position properly! Browne Jacobson offers fixed prices for putting in place construction documents – so please pick up the phone and talk to us. Please also remember to make good use of our Quickcall helpline if you have any queries regarding the above.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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